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>We were running another bubble then. Doesn't follow - if the banks were forced, as you say, to make loans, the bubble should have started then. >The posted l

>We were running another bubble then. Doesn't follow - if the banks were forced, as you say, to make loans, the bubble should have started then. >The posted link wasn't the CRA, but a policy that applied to every company that made/makes home loans. That's fine, but there is no indication, in the actual mortgage data, that banks were being forced to issue subprime mortgages. The data shows that it was mainly mortgage companies were issuing subprimes, then offloading them for packaging into CDOs by Wall Street. If you want to make that argument, it isn't enough to produce a document - the data has to support the argument and it doesn't. >Also, you're ignoring the role of Fannie/Freddie. A large fraction of loans are made to be sold. As the largest buyer, Fannie/Freddie have a huge effect. Not true - Fannie/Freddie were late to the subprime game and had lost marketshare. In 2006, they got started buying subprimes. Bottom line, Fannie/Freddie had an impact, but they were not the driving force behind the housing bubble. "Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble. During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data." http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1cvYnjvcB http://www.mcclatchydc.com/2008/10/12/53802/private-sector-l...

anamax 15y ago
> Doesn't follow - if the banks were forced, as you say, to make loans, the bubble should have started then. The housing price data shows a run-up then. Like I said, there were other factors, but without the "encouragment" to issue subprime, things would likely have been different. > That's fine, but there is no indication, in the actual mortgage data, that banks were being forced to issue subprime mortgages. The data shows that it was mainly mortgage companies were issuing subprimes, "banks" in this context is shorthand for anyone offering mortgages, which includes, by definition, mortgage companies. (It doesn't include banks that didn't do mortgages.) The policy cited explicitly said that.
- inthewoods 15y ago
  >The housing price data shows a run-up then. Price data isn't what we're looking at here - we're looking at subprime mortgage origination. >Like I said, there were other factors, but without the "encouragment" to issue subprime, things would likely have been different. It is a bit laughable that you think companies like Countrywide had to be forced or encouraged into issuing subprime. Nothing could further from the truth - they were issuing the loans hand over fist, and constantly pushing the boundaries of acceptable loan documentation (such as giving loans to illegal immigrants). No one forced these guys to give loans - they did it because they were making a ton of money. But let's say what your saying is true - show me documentation that shows banks actually being forced to give loans where they didn't want to. What you have is a document outlining a policy, but no data or evidence showing that it actually happened. You really need to read this: http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html http://www.washingtonpost.com/business/what-caused-the-finan...
  - anamax 15y ago
    I've read it. Did you? It's interesting that you think that the fed isn't part of govt and that repealing Glass-Steagall isn't either. Also, the ratings monopoly is also a govt creation. (Yes, folks could consider other things, but their ratings determine what counts for "assets" for regulated entities.) Most items in the list in that article have govt's fingerprints all over it, and it's hardly complete. For example, it ignores fannie and freddie, the various efforts to encourage home ownership, and the like. > What you have is a document outlining a policy, but no data or evidence showing that it actually happened. Are you really arguing that regulated entities don't follow the rules? If so, you don't get to argue that different rules would have made a difference.
    - inthewoods 15y ago
      >I've read it. Did you? Yes. >It's interesting that you think that the fed isn't part of >govt and that repealing Glass-Steagall isn't either. Also, >the ratings monopoly is also a govt creation. (Yes, folks >could consider other things, but their ratings determine >what counts for "assets" for regulated entities.) When did I ever say that the Fed isn't part of the government or that repealing G-S doesn't matter? And the rating agencies were definitely part of the problem. But here's the problem - your basic argument is that the government promoted subprime mortgages. For evidence, you cite a document which purports to say that banks and mortgage companies were forced to lend, thus causing the subprime bubble. This idea, of course, isn't backed up by the data (as I've shown). Now if you want to move the goal posts and talk about G-S, or the Fed, I'm all ears - they definitely contributed to the subprime bubble. But the idea that the government forced banks and mortgage companies to make loans is just crap. In fact, it is the lack of government regulation that really caused the bubble. If the Fed had just required confirmation of income, then the bubble would have been stopped in its tracks - but Greenspan refused to make the modifications. When Obama came in, it was among the first regulations put into place. >Most items in the list in that article have govt's >fingerprints all over it, and it's hardly complete. For >example, it ignores fannie and freddie, the various >efforts to encourage home ownership, and the like. Again, you have not presented evidence that Fannie and Freddie caused the subprime bubble. They were, in fact, losing marketshare during the bubble, while Wall Street took over the function of securitization. Are Fannie and Freddie messed up? Yes, but they didn't cause the subprime bubble. >Are you really arguing that regulated entities don't >follow the rules? >If so, you don't get to argue that different rules would >have made a difference. Of course I can - it's called enforcement. Some laws are enforced, other are effectively ignored. So it's a combination of both rules + enforcement. Witness the SEC not enforcing rules on Wall Street banks. Just today, a judge rejected the settlement offer from the SEC to Citibank, while pointing out that Citibank has repeatedly broken the law, and yet the SEC had not done anything about it - even though they knew Citibank had broken the law. Under Bush, the SEC become a toothless entity - it's gotten somewhat better under Obama, but it is still a captured agency in my mind.

anamax 15y ago

> Doesn't follow - if the banks were forced, as you say, to make loans, the bubble should have started then. The housing price data shows a run-up then. Like I said, there were other factors, but without the "encouragment" to issue subprime, things would likely have been different. > That's fine, but there is no indication, in the actual mortgage data, that banks were being forced to issue subprime mortgages. The data shows that it was mainly mortgage companies were issuing subprimes, "banks" in this context is shorthand for anyone offering mortgages, which includes, by definition, mortgage companies. (It doesn't include banks that didn't do mortgages.) The policy cited explicitly said that.

inthewoods 15y ago
>The housing price data shows a run-up then. Price data isn't what we're looking at here - we're looking at subprime mortgage origination. >Like I said, there were other factors, but without the "encouragment" to issue subprime, things would likely have been different. It is a bit laughable that you think companies like Countrywide had to be forced or encouraged into issuing subprime. Nothing could further from the truth - they were issuing the loans hand over fist, and constantly pushing the boundaries of acceptable loan documentation (such as giving loans to illegal immigrants). No one forced these guys to give loans - they did it because they were making a ton of money. But let's say what your saying is true - show me documentation that shows banks actually being forced to give loans where they didn't want to. What you have is a document outlining a policy, but no data or evidence showing that it actually happened. You really need to read this: http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html http://www.washingtonpost.com/business/what-caused-the-finan...
- anamax 15y ago
  I've read it. Did you? It's interesting that you think that the fed isn't part of govt and that repealing Glass-Steagall isn't either. Also, the ratings monopoly is also a govt creation. (Yes, folks could consider other things, but their ratings determine what counts for "assets" for regulated entities.) Most items in the list in that article have govt's fingerprints all over it, and it's hardly complete. For example, it ignores fannie and freddie, the various efforts to encourage home ownership, and the like. > What you have is a document outlining a policy, but no data or evidence showing that it actually happened. Are you really arguing that regulated entities don't follow the rules? If so, you don't get to argue that different rules would have made a difference.
  - inthewoods 15y ago
    >I've read it. Did you? Yes. >It's interesting that you think that the fed isn't part of >govt and that repealing Glass-Steagall isn't either. Also, >the ratings monopoly is also a govt creation. (Yes, folks >could consider other things, but their ratings determine >what counts for "assets" for regulated entities.) When did I ever say that the Fed isn't part of the government or that repealing G-S doesn't matter? And the rating agencies were definitely part of the problem. But here's the problem - your basic argument is that the government promoted subprime mortgages. For evidence, you cite a document which purports to say that banks and mortgage companies were forced to lend, thus causing the subprime bubble. This idea, of course, isn't backed up by the data (as I've shown). Now if you want to move the goal posts and talk about G-S, or the Fed, I'm all ears - they definitely contributed to the subprime bubble. But the idea that the government forced banks and mortgage companies to make loans is just crap. In fact, it is the lack of government regulation that really caused the bubble. If the Fed had just required confirmation of income, then the bubble would have been stopped in its tracks - but Greenspan refused to make the modifications. When Obama came in, it was among the first regulations put into place. >Most items in the list in that article have govt's >fingerprints all over it, and it's hardly complete. For >example, it ignores fannie and freddie, the various >efforts to encourage home ownership, and the like. Again, you have not presented evidence that Fannie and Freddie caused the subprime bubble. They were, in fact, losing marketshare during the bubble, while Wall Street took over the function of securitization. Are Fannie and Freddie messed up? Yes, but they didn't cause the subprime bubble. >Are you really arguing that regulated entities don't >follow the rules? >If so, you don't get to argue that different rules would >have made a difference. Of course I can - it's called enforcement. Some laws are enforced, other are effectively ignored. So it's a combination of both rules + enforcement. Witness the SEC not enforcing rules on Wall Street banks. Just today, a judge rejected the settlement offer from the SEC to Citibank, while pointing out that Citibank has repeatedly broken the law, and yet the SEC had not done anything about it - even though they knew Citibank had broken the law. Under Bush, the SEC become a toothless entity - it's gotten somewhat better under Obama, but it is still a captured agency in my mind.