Finally Some Good News, Grand Jury Refuses To Indict McDonald's Guy

Quote from Ricter:

Ok, some other form of government non-intervention in the free market was the principal cause, thank you.
Your claim about FNM and FRE has been thoroughly debunked. They don't even make the top 25 list for biggest players.
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FNM/FRE set the standard. They lowered the bar drastically when they saw increased competition in subprime cutting into their profits. And please don't repeat your clearly erroneous claim that they didn't get into subprime.

To paraphrase George Will, you are like the Occupy morons because you feel the cure for corrupt and incompetent regulation is...more regulation.

The great irony of the entire debacle is none of the so-called reforms would have prevented it. You have to somehow have two things: One, a basic level of common sense in financial markets. When banks are being encouraged by the government to make non-recourse mortgages at >100% of asset value to illegal aliens with no jobs and no assets, that test is failed. The government has had its hand on the scale for decades, with CRA and redlining prosecutions. It doesn't matter how big a percent those loans were. They set a tone of encouraging irresponsible lending.

Two, some responsibility when things go bad. Bailing out the big banks and letting the vast majority of the senior execs not only avoid prosecution but keep their jobs and bonuses, fails the second. Instead Obama's serial bailouts left taxpayers with the bill and created a gargantuan moral hazard.
 
Quote from AAAintheBeltway:

FNM/FRE set the standard. They lowered the bar drastically when they saw increased competition in subprime cutting into their profits. And please don't repeat your clearly erroneous claim that they didn't get into subprime.
More...

They weren't even in the game until it was nearly up, and their contribution was small. The private sector owns 95% of this.

Edit: Will's long been an idiot, beholden to a certain constituency, so all reason has to be tortured to satisfy them. Lately, he has been moving left a bit, the data being hard to argue with. At any rate, if he's implying that the solution to (let's change terms to illustrate) the wrong medicine is no medicine, then he's an idiot.

Edit: Ok, the actual percentage is about 83.

"Here's a fresh reminder from Forbes Magazine (of all places) as to who the real villains are in the current recession:

" It is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it. More than 84 percent of the sub-prime mortgages in 2006 were issued by private lending. These private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. Out of the top 25 subprime lenders in 2006, only one was subject to the usual mortgage laws and regulations. The nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations."

I agree with your views on the bailouts, and moral hazard, with a small caveat having to do with the difference between the subprime lenders and "bank".
 
Quote from Ricter:

They weren't even in the game until it was nearly up, and their contribution was small. The private sector owns 95% of this.

Edit: Will's long been an idiot, beholden to a certain constituency, so all reason has to be tortured to satisfy them. Lately, he has been moving left a bit, the data being hard to argue with. At any rate, if he's implying that the solution to (let's change terms to illustrate) the wrong medicine is no medicine, then he's an idiot.

Edit: Ok, the actual percentage is about 83.

"Here's a fresh reminder from Forbes Magazine (of all places) as to who the real villains are in the current recession:

" It is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it. More than 84 percent of the sub-prime mortgages in 2006 were issued by private lending. These private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. Out of the top 25 subprime lenders in 2006, only one was subject to the usual mortgage laws and regulations. The nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations."

I agree with your views on the bailouts, and moral hazard, with a small caveat having to do with the difference between the subprime lenders and "bank".
More...

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And this too. So easy to blame the minorities or the low income people to feed hate.




"For example, if the CRA was to blame, the housing boom would have been in CRA regions; it would have made places such as Harlem and South Philly and Compton and inner Washington the primary locales of the run up and collapse. Further, the default rates in these areas should have been worse than other regions.

CRA were less likely to default than Subprime Mortgages — Source: University of North Carolina at Chapel Hill

What occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The tiny suburbs and exurbs of South Florida and California and Las Vegas and Arizona were the big boomtowns, not the low-income regions. The redlined areas the CRA address missed much of the boom; places that busted had nothing to do with the CRA.

snip

Nonbank mortgage underwriting exploded from 2001 to 2007, along with the private label securitization market, which eclipsed Fannie and Freddie during the boom.

Check the mortgage origination data: The vast majority of subprime mortgages — the loans at the heart of the global crisis — were underwritten by unregulated private firms. These were lenders who sold the bulk of their mortgages to Wall Street, not to Fannie or Freddie. Indeed, these firms had no deposits, so they were not under the jurisdiction of the Federal Deposit Insurance Corp or the Office of Thrift Supervision. The relative market share of Fannie Mae and Freddie Mac dropped from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent as the bubble was developing in 2005-06.

>

Nonbank mortgage underwriting exploded from 2001 to 2007, along with the private label securitization market, which eclipsed Fannie and Freddie during the boom – Source: University of North Carolina at Chapel Hill
>

•Private lenders not subject to congressional regulations collapsed lending standards. Taking up that extra share were nonbanks selling mortgages elsewhere, not to the GSEs. Conforming mortgages had rules that were less profitable than the newfangled loans. Private securitizers — competitors of Fannie and Freddie — grew from 10 percent of the market in 2002 to nearly 40 percent in 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006

>
Subprime Lenders were (Primarily) Private

Only one of the top 25 subprime lenders in 2006 was directly subject to the housing laws overseen by either Fannie Mae, Freddie Mac or the Community Reinvestment Act — Source: McClatchy
>

These firms had business models that could be called “Lend-in-order-to-sell-to-Wall-Street-securitizers.” They offered all manner of nontraditional mortgages — the 2/28 adjustable rate mortgages, piggy-back loans, negative amortization loans. These defaulted in huge numbers, far more than the regulated mortgage writers did.

Consider a study by McClatchy: It found that more than 84 percent of the subprime mortgages in 2006 were issued by private lending. These private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. And McClatchy found that out of the top 25 subprime lenders in 2006, only one was subject to the usual mortgage laws and regulations.

A 2008 analysis found that the nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations."

http://www.ritholtz.com/blog/2011/1...ow-the-facts-of-the-economic-crisis-stack-up/
 
"The results of the Clayton analyses were not disclosed to investors buying the loan pools. Instead, Wall Street firms used the information to pressure the lenders issuing the most troubled loans to accept a lower price for them, according to prosecutors who have investigated these cases.

A more proper procedure, analysts said, would have been for lenders like these — New Century Financial and Fremont Investment and Loan among them — to buy back the problem loans and replace them with higher-quality mortgages. But because these companies did not have enough capital to do that, they were happy to sell the troubled mortgages cheaply to the brokerage firms.

Since Wall Street firms were paying lower prices for the troubled loans, they could have passed along those discounts to customers, reducing investor risk. But Wall Street charged investors the same high prices associated with better-quality loans, thereby increasing their own profits on the problematic securities, according to a law enforcement official and executives with Wall Street companies. To be sure, the prospectuses detailing the types of loans in these pools contained brief warnings that some of the mortgages might not meet stated underwriting standards. But few investors probably realized that huge portions of the pools had failed to meet the benchmarks.

The Clayton figures took into account only small samples of the loan pools that were sold to investors. The 911,000 loans Clayton analyzed over the 18-month period were roughly 10 percent of the total number of mortgages in the securities it was contracted to review.

As a result, it is very likely that many of the loans that were not sampled also failed to meet underwriting standards but were packaged into the securities anyway."

http://www.nytimes.com/2010/09/27/business/27ratings.html?_r=2&sq=morgenson financial crisis clayton&st=cse&adxnnl=1&scp=2&adxnnlx=1323378149-ZLTiA+wnU0eIn2nJ5NM+NQ
 
Quote from Ricter:

They weren't even in the game until it was nearly up, and their contribution was small. The private sector owns 95% of this.

Edit: Will's long been an idiot, beholden to a certain constituency, so all reason has to be tortured to satisfy them. Lately, he has been moving left a bit, the data being hard to argue with. At any rate, if he's implying that the solution to (let's change terms to illustrate) the wrong medicine is no medicine, then he's an idiot.

Edit: Ok, the actual percentage is about 83.

"Here's a fresh reminder from Forbes Magazine (of all places) as to who the real villains are in the current recession:

" It is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it. More than 84 percent of the sub-prime mortgages in 2006 were issued by private lending. These private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. Out of the top 25 subprime lenders in 2006, only one was subject to the usual mortgage laws and regulations. The nonbank underwriters made more than 12 million subprime mortgages with a value of nearly $2 trillion. The lenders who made these were exempt from federal regulations."

I agree with your views on the bailouts, and moral hazard, with a small caveat having to do with the difference between the subprime lenders and "bank".
More...

I don't have time to trawl through all this, but I note the Forbes article says these firms "made" subprime loans. Obviously, FNM/FRE do not "make" any loans, they buy them in the secondary market and securitize them, or as a disastrous alternative, hold them on their own balance sheets.

I believe the article is making a distinction between shopping mall mortgage "bankers" and federally regulated banks.
 
Quote from AAAintheBeltway:

I don't have time to trawl through all this, but I note the Forbes article says these firms "made" subprime loans. Obviously, FNM/FRE do not "make" any loans, they buy them in the secondary market and securitize them, or as a disastrous alternative, hold them on their own balance sheets.
More...

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

"Securitization accelerated in the mid-1990s. The total amount of mortgage-backed securities issued almost tripled between 1996 and 2007, to $7.3 trillion. The securitized share of subprime mortgages (i.e., those passed to third-party investors via MBS) increased from 54% in 2001, to 75% in 2006.[85] A sample of 735 CDO deals originated between 1999 and 2007 showed that subprime and other less-than-prime mortgages represented an increasing percentage of CDO assets, rising from 5% in 2000 to 36% in 2007.[104] American homeowners, consumers, and corporations owed roughly $25 trillion during 2008. American banks retained about $8 trillion of that total directly as traditional mortgage loans. Bondholders and other traditional lenders provided another $7 trillion. The remaining $10 trillion came from the securitization markets. The securitization markets started to close down in the spring of 2007 and nearly shut-down in the fall of 2008. More than a third of the private credit markets thus became unavailable as a source of funds.[105][106] In February 2009, Ben Bernanke stated that securitization markets remained effectively shut, with the exception of conforming mortgages, which could be sold to Fannie Mae and Freddie Mac."

http://en.wikipedia.org/wiki/Conforming_loan
 
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