The irony of course is that while stocks are back to their late 1990's levels with a few financials/banks at zero, home prices in even the most beleaguered markets are all the way back to ...gasp... their 2003 prices.
Who REALLY Caused The Financial Meltdown... and who tried to stop it
- Thread starter Scataphagos
- Start date
Sad part is, many Americans and certainly the Government cannot "afford" even a modest retracement.
And as for stocks, back at nominal levels. Much below REAL levels...
If I were the professor and you the student, you would not get a passing grade for this.
The Community Reinvestment Act is a United States federal law that requires banks and savings and loan associations to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as "redlining." The purpose of the CRA is to provide credit, including home ownership opportunities to underserved populations and commercial loans to small businesses.
The CRA was passed into law by the 95th United States Congress in 1977 as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community. The CRA mandates that each banking institution be evaluated to determine if it has met the credit needs of its entire community.
In 1995, as a result of interest from President Bill Clinton's administration, the implementing regulations for the CRA were strengthened by focusing the financial regulators' attention on institutions' performance in helping to meet community credit needs.
These revisions with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans.
These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for seven years. Thus in 2002, the regulators opened up the regulation for review and potential revision.
Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 by Bear Stearns. The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.
Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market. Thus leading us to the problems of today.
And let's not talk about the repeal of the Glass-Steagal act in 1999.
BTW, Reagan and Bush were "kids" compared to the Roosevelt-Johnson Debts.
The CRA was passed into law by the 95th United States Congress in 1977 as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community. The CRA mandates that each banking institution be evaluated to determine if it has met the credit needs of its entire community.
In 1995, as a result of interest from President Bill Clinton's administration, the implementing regulations for the CRA were strengthened by focusing the financial regulators' attention on institutions' performance in helping to meet community credit needs.
These revisions with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans.
These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for seven years. Thus in 2002, the regulators opened up the regulation for review and potential revision.
Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 by Bear Stearns. The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.
Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market. Thus leading us to the problems of today.
And let's not talk about the repeal of the Glass-Steagal act in 1999.
BTW, Reagan and Bush were "kids" compared to the Roosevelt-Johnson Debts.
With all due respect, the point is people want to blame the government and of course I am generalizing because everyone isnt a whiner, this is not a black and white issue though I feel strongly that more people got caught up in this mania then did not.
First off, anyone that trusts the government understands anything about the market and especially the global market, is a bit off base to begin with. Governements... and that is all governments are reactive by nature. Sure they will come to the rescue after the mess has happened to try and cloean it up, Katrina, S&L, Housing, Credit but dont expect them to anticipate and solve the problem before it gets too large to contain. That's not what they do even remotely well.
Second, Im not sure who puts those folks in office but Im guessing that it is a majority vote that puts them in which would certainly make a good deal of those people to blame before the knuckleheads they voted into power.
Thirdly, was what AIG did wrong, sure, did we care when everyone was making money on the Bull side.. Hell know.. Did we care when the Credit Default Market rose from 3 trillion in 2003 to 59 trilion in 2007... Nope... Did we care about the guy who was getting a 500K mortgage when he only made 40K a year combined.. That deal is upside down day 1 and I know everyone of us knew someone that did that. Did we care when Bill Clinton changed how we calculated unemployment or CPI? Did people care when their paid accountants were telling them that their statements from Madoff didnt make sense.... Nope, So why are we all so suprised? Because when the party is going on and its a good party no one wants to call the police to end it early. But now we want to blame those same people we voted into office.. its a joke for us to think that these poiticians understand ecomomics to begin with. They are high priced shoe salesmen when it comes to the economy
As I said, no one is to blame and eveyone is to blame. Pretty much everyone got overextended to some degree.. some more and some lesser than others. Bottom line is deal with it. If you didnt like the market when it was going down then get out. The people that lost money on the way down thought the party which was outta control already was never going to stop.. and it was attributed to either some degree of greed or stupidity or both that had them keep buying dips.
If anything has come of this its the simple fact that there are a lot of money managers out there that just dont know anything about money management. Do I feel sorry for the people that had their money in their mutual funds with managers.. yes and no... Of course their guy didnt handle it well and that sucks for them but they also had a chance to take their money out, move it to cash or even their mattress if they elected to do so. But the herd rules in times like this and its very difficult to break away from the herd because you dont want to be the one that was wrong. Problem is this time.. they were wrong... and wrong big.
What is the lesson to learn. Despite the rises of socialism, we are in a time where you cant count on other people to do that job for you. You need to take an active interest in what is happening with your money or suffer the consequences.
Wilderman, Im not completely disagreeing with you but you ask, "when is enough too much"? When you start to ask that question, you are probably a little early or just a little late which either way is better then where we are now.
Ghostdog
First off, anyone that trusts the government understands anything about the market and especially the global market, is a bit off base to begin with. Governements... and that is all governments are reactive by nature. Sure they will come to the rescue after the mess has happened to try and cloean it up, Katrina, S&L, Housing, Credit but dont expect them to anticipate and solve the problem before it gets too large to contain. That's not what they do even remotely well.
Second, Im not sure who puts those folks in office but Im guessing that it is a majority vote that puts them in which would certainly make a good deal of those people to blame before the knuckleheads they voted into power.
Thirdly, was what AIG did wrong, sure, did we care when everyone was making money on the Bull side.. Hell know.. Did we care when the Credit Default Market rose from 3 trillion in 2003 to 59 trilion in 2007... Nope... Did we care about the guy who was getting a 500K mortgage when he only made 40K a year combined.. That deal is upside down day 1 and I know everyone of us knew someone that did that. Did we care when Bill Clinton changed how we calculated unemployment or CPI? Did people care when their paid accountants were telling them that their statements from Madoff didnt make sense.... Nope, So why are we all so suprised? Because when the party is going on and its a good party no one wants to call the police to end it early. But now we want to blame those same people we voted into office.. its a joke for us to think that these poiticians understand ecomomics to begin with. They are high priced shoe salesmen when it comes to the economy
As I said, no one is to blame and eveyone is to blame. Pretty much everyone got overextended to some degree.. some more and some lesser than others. Bottom line is deal with it. If you didnt like the market when it was going down then get out. The people that lost money on the way down thought the party which was outta control already was never going to stop.. and it was attributed to either some degree of greed or stupidity or both that had them keep buying dips.
If anything has come of this its the simple fact that there are a lot of money managers out there that just dont know anything about money management. Do I feel sorry for the people that had their money in their mutual funds with managers.. yes and no... Of course their guy didnt handle it well and that sucks for them but they also had a chance to take their money out, move it to cash or even their mattress if they elected to do so. But the herd rules in times like this and its very difficult to break away from the herd because you dont want to be the one that was wrong. Problem is this time.. they were wrong... and wrong big.
What is the lesson to learn. Despite the rises of socialism, we are in a time where you cant count on other people to do that job for you. You need to take an active interest in what is happening with your money or suffer the consequences.
Wilderman, Im not completely disagreeing with you but you ask, "when is enough too much"? When you start to ask that question, you are probably a little early or just a little late which either way is better then where we are now.
Ghostdog
this is the exact reason we needed regulation. someone has to stand at the line and say to both the borrower and the lender no you cant cross this line.
Years ago, we had that. But it was done away with for political greed.
As the rubberband stretches all the way to one side now it will strecth all the way to the otherside. Neither view is right. Paraphasing Hegal, Truth lies in the center of two extremes. Again, political factions never get this right as well, because they are to busy being politicians.
excessive regulation always rises from the after effects of lax regulation.
