Who REALLY Caused The Financial Meltdown... and who tried to stop it

[tmarket]

Quote from pspr:

This story pretty much sums up what went wrong, how and who managed to steer the boat to near collapse.

http://www.independent.co.uk/opinio...are-all-over-the-financial-crisis-949653.html

Asking an English conservative to explain American politics is usually an exercise in futility. This is what Dominic Lawson claimed...
"In September 2003 the Bush administration launched a measure to bring Fannie Mae and Freddie Mac under stricter regulatory control....." and that some how Barney Frank stopped Bush. Does anybody seriously think that a president that started a war in the middle east pretty much single handedly could have been stopped by Barney Frank in the minority party?

This is the composition of the 108th congress, with GW Bush as president :
108th United States Congress

United States Capitol (2002)

Duration: January 3, 2003 – January 3, 2005

President of the Senate: Dick Cheney
President pro tempore: Ted Stevens
Speaker of the House: Dennis Hastert
Members: 100 Senators
435 Representatives
5 Non-voting members
Senate Majority: Republican Party
House Majority: Republican Party

 

[HotTip]

I'm surprised so little blame is on the ratings agencies, who put their stamp of approval on these crappy products. Their AAA ratings made it possible for governments, municipalities, pension funds and other regulated institutional investors to buy this stuff and create the insatiable demand for Wall St. to securitize increasingly more mortgages. They could've prevented the entire mess by merely changing their unrealistic assumption that real estate was going to increase 6%/yr ad infinitum.

Admittedly it's not as sexy as blaming the greedy bankers or the corrupt politicians, but you can't understate the importance of attaching an investment grade rating on those products to the marketability and demand for those products.

 

[Misthos]

Do that many people still think that this is really a mortgage crisis? The mortgage issue is but a small component. A mere symptom.

 

[krazykarl]

Quote from Scataphagos:

Part of it did, you're correct. Reagan had his sins, Bush had his. But that doesn't absolve the Democrats for their part in pushing for loans to non-qualified borrowers and the consequences which followed.

^this.

To the Dems: home ownership is not a right, it's a privilege earned from work.

 

[Misthos]

Quote from krazykarl:

^this.

To the Dems: home ownership is not a right, it's a privilege earned from work.

I was in the mortgage biz. Those poor people CRA loans were full doc, though forgiving with credit. The loan amounts were small because poor people live in poor neighborhooids.

So for the poor people bashers, where is the bashing of white middle class upper class wanabees that took out ALTA and Option ARMS? That's where the real blowups are.
Those loans were creatures of Wall Street, not Congress.
And how do you explain prime full doc defaults that are growing? Gee, maybe something else is going on?

 

[Scataphagos]

Quote from Misthos:

I was in the mortgage biz. Those poor people CRA loans were full doc, though forgiving with credit. The loan amounts were small because poor people live in poor neighborhooids.

So for the poor people bashers, where is the bashing of white middle class upper class wanabees that took out ALTA and Option ARMS? That's where the real blowups are.
Those loans were creatures of Wall Street, not Congress.
And how do you explain prime full doc defaults that are growing? Gee, maybe something else is going on?

Well, if someone was "full doc", but could only "qualify" for the loan if it was a "gimmick".... then couldn't not afford the loan when it reset to "reality".... of course there would be defaults.

Gimmick loans should have been an option ONLY for those who had the financial strength to qualify properly... a proper down payment and enough income to service the loan at "the going rate"... not those who could only afford to service the loan at a gimmick rate.

One should view the mortgage loan from the "old school".... Before when you applied for a loan, first words out of the banker's mouth were, "What do you have for collateral?.. after all, I'm lending the depositors' money, and I NEED to get it back". A "proper" loan would include a down payment or other collateral, income ability to service the loan along with other debt, and an honest appraisal.

ALL reduced [gimmick] requirements to make the loan "easier" also made it more risky.... in other words, "politicizing the home loan mortgage" is responsible for starting all of this mess.

 

[Mnphats]

Quote from Misthos:

I was in the mortgage biz. Those poor people CRA loans were full doc, though forgiving with credit. The loan amounts were small because poor people live in poor neighborhooids.

Its all relative.

So for the poor people bashers, where is the bashing of white middle class upper class wanabees that took out ALTA and Option ARMS? That's where the real blowups are.
Those loans were creatures of Wall Street, not Congress.
And how do you explain prime full doc defaults that are growing? Gee, maybe something else is going on?

Poor people bashers. LOL

Couldn't agree more on ALTA and Arms. It all comes down to jobs. No jobs and the charade is up.

 

[Misthos]

Quote from Scataphagos:

Well, if someone was "full doc", but could only "qualify" for the loan if it was a "gimmick".... then couldn't not afford the loan when it reset to "reality".... of course there would be defaults.

Gimmick loans should have been an option ONLY for those who had the financial strength to qualify properly... a proper down payment and enough income to service the loan at "the going rate"... not those who could only afford to service the loan at a gimmick rate.

One should view the mortgage loan from the "old school".... Before when you applied for a loan, first words out of the banker's mouth were, "what do you have for collateral?.. after all, I'm lending the depositors' money, and I NEED to get it back". A "proper" loan would include a down payment or other collateral, income ability to service the loan along with other debt, and an honest appraisal.

ALL reduced [gimmick] requirements to make the loan "easier" also made it more risky.

I agree, but the gimmick loans were really geared towards middle upper middle class folk that wanted Mcmansions. That's where the big bucks were, especially after securitization of those pools. Those loans paid the best returns for Wall Street. And those are the ones causing the most damage.

Poor people have very low loan amounts. The real money was found in monster loans for wannabees living in Mcmansions.

 

[Scataphagos]

Quote from Misthos:

I agree, but the gimmick loans were really geared towards middle upper middle class folk that wanted Mcmansions. That's where the big bucks were, especially after securitization of those pools. Those loans paid the best returns for Wall Street. And those are the ones causing the most damage.

Poor people have very low loan amounts. The real money was found in monster loans for wannabees living in Mcmansions.

That's correct. It's just as wrong to facilitate over-reaching for a McMansion for not-properly-qualified as to allow smaller loans to non-qualified, lower income borrowers.

Once the policy of "easy mortgage loans to non-qualified borrowers" was established, such loans were also allowed for all levels of over-reaching... and all wrong.

It's not a matter of "who" got the loan... poor or over-reaching wannabes.... it's a matter of economic law.... either you prudently qualify for the loan or you do not. That concept was ignored by political greed.

 

[brokershopping]

Neither republicans or democrats had the political will to do anything about this. The republicans would never stand in the way of the massive profits of the financial sector, and the dems would never interfere with the lower-middle classes improving their standard of living. You can try to blame it on one side or the other, but neither was jumping up and down or pounding their fist, warning of the impending doom. (Ron Paul is an exception) In any case, if either side would have made a serious effort to do something, the public would have scathed them. (so we also are collectively to blame)

That said, intellectual honesty requires you take a critical look at the facts. The republican party held all the political power during the period of greatest expansion of the subprime boom. You can try to blame it on a democratic initiative to expand housing for the poor, and maybe it was the catalyst, but it wasn't the cause. It's unrealistic to think the investment banks were operating against their own interests by getting involved in the subprime business. They weren't reluctantly bowing to political decisions, they were making huge profits. At best, the early democratic decisions merely created the loophole that the financial sector gladly jumped through and expanded. The republicans had ample opportunity to intervene if they had been concerned.

I am not anti-republican, but you need to accept reality. Irrational thinking won't solve problems, and clinging to ideological dogma without using common sense is what is weakening the party. By basing arguments on false-cause and distortion of the truth, the Hannity /Limbaugh mentality is turning the republican party stupid. Smart people are becoming embarrassed to admit they are conservative, which is too bad because the country needs their voice. And less of the Fox news version of republicanism.