rickyp wrote: Please find a credible source for the "force used". All I've seen is this claim repeated in conservative blogs.
Until you can offer real proof, I fundamentally disagree. There was no force used, or ever required for them to create new lending requirements.

How about something like this. It is Secretary of Housing and Urban Development at a press conference where he announced a settlement with banks to afford money to high risk, low income borrowers to avoid discriminatory lending charges?

If this 50 second blurb isn't enough, here is an 8 minute youtube video that includes more of the press conference.

There is no slide telling mortgagees to sign papers they cannot afford. Who cares who makes the money from it? As long the act is not illegal (predatory), it is the faulty of the mortgagee.

Oy, vey! The misconceptions on here...

OK, let's rattle through some basic things:

People don't tend to take on mortgages they can't afford; they take on ones they can, or think they can, and then circumstances change (oil prices shoot up, jobs are lost, etc). Bankruptcy law means that once an settled, debts do not remain (although there are other penalties). Sub-prime does not mean 'unlikely' to pay back, it means less likely. Banks charge higher interest to sub-prime borrowers, and not all of them default (most do not) so overall they stood to profit as long as the risks were covered properly (which they were not when the CDS instruments were treated as assets and rated as AAA). Reaching a settlement is not 'forcing'.

Sure, mortgagees are responsible for their debts. But lenders sre also responsible for their lending and how they account for risk. Some borrowers failed, and more were put at greater risk than expected. As a result, the poor risk-management strategy in the banks led them to get close to failure, and had more than Lehmans been allowed to collapse, the ramifications would make the current economic climate look like a picnic in the park.

rickyp wrote:Steve

Why did banks make loans to people who couldn't afford them?

You havn't retained much in these discussions have you?

The days when a bank issued a mortgage and held onto it for the life of that loan ended long ago. Mortgages had become huge profit-generators for investment banks, which bought the loans from other banks and non-bank lenders, packaged them together, sliced them up, and sold them as securities. In theory, as long as homeowners paid their mortgages, these securitized loan investments, also known as structured products, were relatively safe. But, theory and practice were two very different things.
Among the Republican Party’s top 10 donors in 2004 was Roland Arnall. He founded Ameriquest, then the nation’s largest lender in the subprime market, which focuses on less creditworthy borrowers. In July 2005, the company agreed to set aside $325 million to settle allegations in 30 states that it had preyed on borrowers with hidden fees and ballooning payments. It was an early signal that deceptive lending practices, which would later set off a wave of foreclosures, were widespread.
then have a look at See Slide 5.4 in Boom Bust and Blame
Deregulation lead to MBSs and CD slide 4.3 which trading in made all those profits in 5.4

There's no slide saying anyone was forced to do any of this..

I've retained all of it.

Here's something else I've retained: skepticism of moronic claims. When you assert banks voluntarily make loans to people they previously would see as incapable of repaying them, I ask "Why?"

Your response is, to summarize, "the old rules didn't apply because homes were being flipped and derivatives spread the risk, thus minimizing loss and maximizing profits. "

Even if true, which I doubt, why did banks take this non-traditional approach?

I don't think you really want to start down the "Ameriquest road." democrats have their own proud tradition of corruption.

rickyp

How about something like this. It is Secretary of Housing and Urban Development at a press conference where he announced a settlement with banks to afford money to high risk, low income borrowers to avoid discriminatory lending charges

A small program in 1998, "forced" companies....most who weren't in the mortgage business in 1998, to begin selling sub prime and garbage mortgages ? And they didn't really start doing that till after all the deregulation that occurred that allowed into the business... Check the history on sub primes again. Slide 3.1 They didn't reach double figures till 2004. And the percentage of sub prime actually went down in 1999 over 1998. Some force.
If this "affirmative action plan" somehow forced companies into subprime...it sure took a helluva a lot of time for this suppossed force to have effect.
No one forced these companies to do business the way they chose to do business.
Another example: Banks in some jurisdiction cannot make loans of more than 10 to 12 times their capital reserves. In the US, regulations allowed them to go to 20 and 25 times their capital reseves.(Well reserves plus capital) One or two hedge funds were at 30 times.
This is very risky and very dangerous. But they chose to do so as soon as they were allowed to do so. No one forced them to do this either. They made conscious decisions to take that risk.
Because they were greedy Steve.

danivon wrote:People don't tend to take on mortgages they can't afford; they take on ones they can, or think they can, and then circumstances change (oil prices shoot up, jobs are lost, etc). Bankruptcy law means that once an settled, debts do not remain (although there are other penalties). Sub-prime does not mean 'unlikely' to pay back, it means less likely. Banks charge higher interest to sub-prime borrowers, and not all of them default (most do not) so overall they stood to profit as long as the risks were covered properly (which they were not when the CDS instruments were treated as assets and rated as AAA). Reaching a settlement is not 'forcing'.

Sure, mortgagees are responsible for their debts. But lenders sre also responsible for their lending and how they account for risk. Some borrowers failed, and more were put at greater risk than expected. As a result, the poor risk-management strategy in the banks led them to get close to failure, and had more than Lehmans been allowed to collapse, the ramifications would make the current economic climate look like a picnic in the park.

I understand that not all sub-prime loans are going to fail. Of course they are more likely.

I also understand the current laws concerning bankruptcy. My OPINIONS above are because the government is using money to support Fannie and Freddie because loans were not paid back. If the monies need to be paid back via bankruptcy regardless of timeframe or amount.

If you sign the mortgage papers, you are responsible for the debt until it is paid. The same should be said about Student Loans or loans for the TV you just have to get! If Banks make poor risk loans, it is not the responsibility of the government to bail it out for it's poor choices. I do not support companies over people or vice versa. I expect people AND companies to pay their debts regardless,

Ideally, we should not have to bail out. In reality we had little choice and still are not in a position to pull the rug now.

How about a Jubilee?

Brad

I see 3 reasons for the bubble:
1. People overextending and buying a house they cannot afford
2. Bank greed
3. Freddie and Fannie's unlimited funding

That's about right.

As I wrote in another thread a while ago, Wall Street banks built the instrument of financial destruction: a giant financial nuclear reactor that completely melted down. Fannie Mae and Freddie Mac provided the fuel: atomic liquidity without which the nuclear reactor would not have worked.

There's enough blame to go around, but in my view, Fannie & Freddie were as culpable as the ore you dig out of the ground to fuel a flawed reactor, and about as smart. Wall St. built the reactor, figured out how to enrich the uranium thorough leverage and put it to work.

rickyp wrote:Among the Republican Party’s top 10 donors in 2004 was Roland Arnall. He founded Ameriquest, then the nation’s largest lender in the subprime market, which focuses on less creditworthy borrowers. In July 2005, the company agreed to set aside $325 million to settle allegations in 30 states that it had preyed on borrowers with hidden fees and ballooning payments. It was an early signal that deceptive lending practices, which would later set off a wave of foreclosures, were widespread..

I told you this was problematic and since I know you "love" proof:

Party Records Total % of Overall
Democrat 210 $1,562,999 32.50%
Republican 163 $1,191,924 24.79%
Nonpartisan 1 $1,000 0.02%
Third Party 0 $0 0.00%
Ballot Measures 20 $2,052,992 42.69%

And, Arnall was such a partisan! Why just look at his relationship with liberal governor of MA, Deval Patrick . . .

From 2004 to 2006, he served on the board of directors of ACC Capital Holdings, the parent company of Ameriquest and Argent Mortgage. He joined the board at the request of Ameriquest's founder Roland Arnall.[17] Deval Patrick was one of five board members of ACC Capital Holdings until he resigned in 2006. During his tenure on the board, Ameriquest and Argent originated over $80 billion dollars in subprime mortgages.

Please stop while you're behind.

OWS now out to harass shoppers. Yeah, they're the 99%

ON NOV. 25th: OCCUPY LARGE CHAINS AND PUBLICLY TRADED RETAIL. Hit the 1% where it hurts – in the wallet.

BLACKLISTED Retail Stores to Occupy (Boycott) on Black Friday

Keep in mind that we are not occupying small businesses or hardworking people — we must make a distinction between the businesses that are in the pockets of Wall Street and the businesses that serve our local communities.

We are NOT anti-capitalist. Just anti-crapitalist.

Below is a shortlist for publicly traded large businesses to Occupy or to boycott on Black Friday. Luckily, most of them don’t have good presents anyway. If you want to see the top 100 retail businesses for 2010 to boycott, click here.

On Black Friday, Occupy or boycott:

- Abercrombie & Fitch
- Amazon.com (yes, we have to stay away from Amazon, too!)
- AT&T Wireless

- Burlington Coat Factory

- Dick’s Sporting Goods (I was surprised, too!)
- Dollar Tree
- The Home Depot

- Neiman Marcus
- OfficeMax
- Toys R’Us
- Verizon Wireless
- Wal-Mart

Solidarity!

Mainstream?

Democratic-Party approved.

Unbelievable.

danivon wrote:Ideally, we should not have to bail out. In reality we had little choice and still are not in a position to pull the rug now.

How about a Jubilee?

RS Rule #314: Atheists are forbidden from using the Bible against theists.
_____________

The banks were suppose to have been seized. They were bailed out so they could turn around and foreclose. That's the root of the perversity fueling these protests, the love of money as a cultural poison. Not to mention a Christianity morally bankrupted with 'Dominionism' and the 'Gospel of Prosperity'.

I have said from the beginning that we should have not bailed anyone out. As to "not being in the position to pull the rug"; to heck with that. A painful adjustment now is much better than a larger one later. How much more difficult is it going to be to correct a debt of 15 trillion (currently) than a debt of 10 trillion (2008). Perhaps we should wait until we have a 20 trillion debt and try to correct that.

The line of thinking that we should keep piling the debt on and correct the imbalance in the future is what has gotten us into trouble already. Both parties are to blame. Both are driving toward the cliff, and not willing to stop. The contention between them is who is driving faster! Now this debt reduction panel of 12 fails (no surprise there...) and the debts keep building. I would have loved to seen a 20% reduction in every budget item if the committee failed that is not able to be rescinded.

Perhaps that would have had enough teeth to make people work together.

BTW, RS Rule #3:16 Theists will not use science to bolster Theistic arguments.

danivon wrote:Ideally, we should not have to bail out. In reality we had little choice and still are not in a position to pull the rug now.

How do you determine when you are in a position to pull the rug? In the US context, you are saying that 9% unemployment / 15% underemployment is too high relative to deficits of $1.5 trillion. How low should be the unemployment rate or how high do deficits have to go before you are comfortable tugging at the rug?

bbauska wrote:I have said from the beginning that we should have not bailed anyone out. As to "not being in the position to pull the rug"; to heck with that. A painful adjustment now is much better than a larger one later. How much more difficult is it going to be to correct a debt of 15 trillion (currently) than a debt of 10 trillion (2008). Perhaps we should wait until we have a 20 trillion debt and try to correct that.

Try to think through the consequences of collapsing banks.

When they go bankrupt, they cannot repay their debts (by definition). They cease to exist and the debts are never repaid. Who do banks owe money to? Largely to each other and to other financial institutions and to savers. Savers are usually protected up to a certain amount (by eevill gubmint legislation). Any tax owed will be picked up by a government that puts itself at the head of the queue of creditors. So what happens to the rest? They will (eventually) get cents on the dollar of what is owed. But if they themselves are in danger, the market will pick up on this loss of asset and 'correct' accordingly, meaning that they themselves are at heightened risk of collapse. So you get a chain of dominoes including massive banks, AIG etc etc.

It's true that we should not have allowed that situation to develop. But having got to that point, the argument that I'd make in response is that instead of a 6% recession, a 10% unemployment rate and deficits going up to $1.4T, it could easily have been a 12% recession, 20% unemployment and who knows what kind of deficit. We'd be far worse off now, even with the 'clean-slate' of allowing collapses. This is what happened up to and including the 1930s crashes.

As much as we can idealise about how it would be better if debtors were always going to pay back their debts, reality means that they don't, particularly in the kind of circumstances that we saw, and we have to live with the facts of life. The essence of bankruptcy is that all available assets are used to pay off the creditors, and in most cases the debts are not completely paid off, so the remainder is written off. It passes to the creditors in the form of a lost asset, which means that they may be more likely to have problems later on, and so on and so on.

While we may like the idea of perpetual liens to catch every penny, of maintaining zombie corporations designed to keep alive the debts of predecessors, I think it would be a massive problem after a while, would soak up a huge number of lawyers and accountants and ultimately fail.

The line of thinking that we should keep piling the debt on and correct the imbalance in the future is what has gotten us into trouble already. Both parties are to blame. Both are driving toward the cliff, and not willing to stop. The contention between them is who is driving faster! Now this debt reduction panel of 12 fails (no surprise there...) and the debts keep building.

I would agree that both parties have been part of the problem. Steve's response about the donor exemplifies it. Rather than being a defence of Republican complicity, it's an acceptance that both parties were up to their necks in it all. And frankly, I doubt that either of them have extricated themselves since, as much as they may both mouth platitudes and play to different popular galleries.

Ray Jay wrote:How do you determine when you are in a position to pull the rug? In the US context, you are saying that 9% unemployment / 15% underemployment is too high relative to deficits of $1.5 trillion. How low should be the unemployment rate or how high do deficits have to go before you are comfortable tugging at the rug?

I'd use GDP and it's growth as a measure, along with the cost/benefits of taking back the support. GDP has just about recovered to what it was pre-crash, and recovery is still weak. As that's a measure of the overall economy, and I'm concerned more with the overall economy than with the government's account-book, that's what I'd go with.

This feeds into both of your measures. Economic growth will reduce unemployment (well, it should do), and it will also reduce deficits, which undoes the pressure on debt.

Doctor Fate wrote:

rickyp wrote:Among the Republican Party’s top 10 donors in 2004 was Roland Arnall. He founded Ameriquest, then the nation’s largest lender in the subprime market, which focuses on less creditworthy borrowers. In July 2005, the company agreed to set aside $325 million to settle allegations in 30 states that it had preyed on borrowers with hidden fees and ballooning payments. It was an early signal that deceptive lending practices, which would later set off a wave of foreclosures, were widespread..

I told you this was problematic and since I know you "love" proof:

Party Records Total % of Overall
Democrat 210 $1,562,999 32.50%
Republican 163 $1,191,924 24.79%
Nonpartisan 1 $1,000 0.02%
Third Party 0 $0 0.00%
Ballot Measures 20 $2,052,992 42.69%

And, Arnall was such a partisan! Why just look at his relationship with liberal governor of MA, Deval Patrick . . .

From 2004 to 2006, he served on the board of directors of ACC Capital Holdings, the parent company of Ameriquest and Argent Mortgage. He joined the board at the request of Ameriquest's founder Roland Arnall.[17] Deval Patrick was one of five board members of ACC Capital Holdings until he resigned in 2006. During his tenure on the board, Ameriquest and Argent originated over $80 billion dollars in subprime mortgages.

Please stop while you're behind.

And, no, contra a jackass, I am not approving this. I am saying those who believe their side is as pure as the driven snow are kidding themselves.