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

Podimer · Apr 29, 2009

ok, you got the video from Fox News, whilst they are "fair and balanced", it seems as if a lot of what they are proposing was taken out of context, using a phrase here and there from 6 or 8 years ago now, with the smugness of perfect 20/20 hindsight.
anyway, at the time, Fannie and Freddie were not in trouble and were profitable until the fourth quarter of 2007( ROE still positive until the then.) the greenspan comment came after the bubble had the sizeable straw cleverly inserted by George W. in the form of the Zero down payment initiative.
this, from an article put out with a distinct optimism in Jan. 2004 by the slightly more objective source of a government agency, the HUD.
http://www.hud.gov/news/release.cfm?content=pr04-006.cfm

<<Offering FHA mortgages with no down payment will unlock the door to homeownership for hundreds of thousands of American families, particularly minorities," said HUD's Acting Secretary Alphonso Jackson. "President Bush has pledged to create 5.5 million new minority homeowners this decade, and this historic initiative will help meet this goal." >>

and then, six months later,

http://www.hud.gov/local/co/news/2004-06-04.cfm

<<In June 2002 President Bush announced a plan to close the homeownership gap and create 5.5 million new minority homeowners by 2010.

The President's budget for the coming year would provide developers with nearly $2.4 billion in tax credits to build new homes or rehabilitate existing structures. We have two goals: to create homeownership opportunities in distressed neighborhoods, and to revitalize these neighborhoods through increased homeownership. >>

By the end of 2005, the Nat'l Association of Realtors reported that more than four out of every 10 recent first-time home buyers financed their purchases with no-down-payment loans.
it also goes on to say that a great percentage of GDP growth during those Bush years was directly linked to the housing market. Well, that growth is our current contraction, and then some.

By the end of 2005, the Nat'l Association of Realtors reported that more than four out of every 10 recent first-time home buyers financed their purchases with no-down-payment loans.

I am more inclined to agree with Ghostdog that the problem was caused largely by greed and stupidity on the parts of the mortgage companies, banks, house flippers and the folks that believed they could buy a $250,000 house on the salary of a Shell cashier (well, it was really $210k but we did it with our home in Florida so I guess our greed is part of the problem too;-)

regarding Fox News, as the wise sage, Flavor Flave says, "don't believe the hype."

skylr33 · Apr 29, 2009

Quote from Podimer:

ok, you got the video from Fox News, whilst they are "fair and balanced", it seems as if a lot of what they are proposing was taken out of context, using a phrase here and there from 6 or 8 years ago now, with the smugness of perfect 20/20 hindsight.
anyway, at the time, Fannie and Freddie were not in trouble and were profitable until the fourth quarter of 2007( ROE still positive until the then.) the greenspan comment came after the bubble had the sizeable straw cleverly inserted by George W. in the form of the Zero down payment initiative.
this, from an article put out with a distinct optimism in Jan. 2004 by the slightly more objective source of a government agency, the HUD.
http://www.hud.gov/news/release.cfm?content=pr04-006.cfm

<<Offering FHA mortgages with no down payment will unlock the door to homeownership for hundreds of thousands of American families, particularly minorities," said HUD's Acting Secretary Alphonso Jackson. "President Bush has pledged to create 5.5 million new minority homeowners this decade, and this historic initiative will help meet this goal." >>

and then, six months later,

http://www.hud.gov/local/co/news/2004-06-04.cfm

<<In June 2002 President Bush announced a plan to close the homeownership gap and create 5.5 million new minority homeowners by 2010.

The President's budget for the coming year would provide developers with nearly $2.4 billion in tax credits to build new homes or rehabilitate existing structures. We have two goals: to create homeownership opportunities in distressed neighborhoods, and to revitalize these neighborhoods through increased homeownership. >>

By the end of 2005, the Nat'l Association of Realtors reported that more than four out of every 10 recent first-time home buyers financed their purchases with no-down-payment loans.
it also goes on to say that a great percentage of GDP growth during those Bush years was directly linked to the housing market. Well, that growth is our current contraction, and then some.

By the end of 2005, the Nat'l Association of Realtors reported that more than four out of every 10 recent first-time home buyers financed their purchases with no-down-payment loans.

I am more inclined to agree with Ghostdog that the problem was caused largely by greed and stupidity on the parts of the mortgage companies, banks, house flippers and the folks that believed they could buy a $250,000 house on the salary of a Shell cashier (well, it was really $210k but we did it with our home in Florida so I guess our greed is part of the problem too;-)

regarding Fox News, as the wise sage, Flavor Flave says, "don't believe the hype."

Yeah, just like we see fair and balanced reporting on Republicans from liberal, douche bag, Obama cock sucking networks like NBC, MSNBC, CNBC, ABC, CNN, and CBS. Fox is the only network that's not afraid of Obama, tells it like it is, and doesn't have it's tongue buried up the dictator-in-chief's asshole~~~.

Trader666 · Apr 30, 2009

If what Jack wrote here is really true, maybe all the Hershey traders blowing their accounts caused the meltdown.

Quote from jack hershey:

Around 1990 there was a fairly good accounting of how many people were keeping three ring binders. It was over 10,000 and we lost track.

Podimer · Apr 30, 2009

Quote from skylr33:

Yeah, just like we see fair and balanced reporting on Republicans from liberal, douche bag, Obama cock sucking networks like NBC, MSNBC, CNBC, ABC, CNN, and CBS. Fox is the only network that's not afraid of Obama, tells it like it is, and doesn't have it's tongue buried up the dictator-in-chief's asshole~~~.

CNBC is the only one of those i watch and seemed to me that Jim Cramer, Larry Kudlow, Rick Santelli, etc., all of whom have good, informed opinions but weren't exactly Obama fans.

Just wondering, with these references to blowing Obama and then anal tongue darts (or perhaps your MO is vice versa or alternating?), have you sent him a letter to let him know your feelings? Perhaps you might try sublimating these impulses as well as similar ones towards Sean Hannity and Bill O'Reilly to something more productive, like making money trading.

Best of luck bro:-D

Ghostdog · Apr 30, 2009

You chose to walk thru the door no matter what the strip club sign said outside the door. I dont care what they advertised.

Let the buyer beware..If I put a sign on a bridge saying free amusement ride (which entailed jumping off the bridge) would you do it and then have your relatives file suit when you are dead. If you are saying that you are not responsible for your actions due to the fact you are clinically proven to have a mental disorder which prohibits you from making your own decision without mom's help, then Im on your page. Otherwise you are just another complainer that refuses to take any responsibility for their own actions... and there.. you will find why we are in a mess...

I cant believe you are saying that you have no culpability.. anyone with a calulator or 6th grade math can do the math on those deals and find out they are bad.... Geez!

Quote from Scataphagos:

Disagree. I'll say "we the borrowers" are about 2% responsible... Government the rest.

If "mortgage lending = strip club"... and the strip club changed its policies to "no cover charge, no drink minimum, no dress code, no age restrictions", then it wouldn't be the patrons' "fault" if they took advantage of the ridiculous "no entry requirements".

The borrowers took advantage of the irresponsible lending laws and practices. The government had it FULLY within their control to prevent this mess 100%... and they mucked it up for political greed.

The same Democrat party which initiated this mess is now almost 100% in control of the government (final nail in the coffin comes when they have a filibuster-proof Senate, likely in 2010).

THAT's what's wrong...

Greg Richards · Apr 30, 2009

Quote from Ghostdog:

You chose to walk thru the door no matter what the strip club sign said outside the door.

Borrowers have responsibility, and many people still have too much debt and too little equity in their homes. Add to that a mountain of credit card debt combined with the 2005 bankruptcy law changes (making it harder to clear credit card debt), and many people wonât see daylight in their lifetimes. Yes, they could have been more responsible (but see below).

Tavakoli talks about personal responsibility in her book DEAR MR. BUFFET, and hereâs one example:

âSuppose there is an unemployed man with no source of other income other than his representation that he is a successful Internet day trader. Up until now, he has not been very successful at anything. He has a poor credit history, and he wants to buy a home he could not previously afford. Fortunately, he says he has a flair for gamblingâI meanâday trading, on the Internet. He does not wish to provide documents verifying his success because the key to his successful formula is that is must remain confidential. Furthermore, he does not want to make a down payment on a home since his capital is tied up in his successful Internet day trading strategy, which he says is more profitable than the housing bubbleâI mean housing investment. Why tie up money in a down payment when he can use that money to gambleâI meanâincrease his fortune?â

âFortunately, a mortgage broker, who is completely objective, since his income depends solely on the fees he generates by making mortgage loans, is willing to overlook the absence of documentation. The Internet day trader can state his income, and that is good enough for the mortgage broker. The mortgage lender helpfully informs the day trader that there have been mortgages made to people who apparently cannot afford them other than the fact that they are willing to state an income which suggests they can make the paymentsâso climb on board.â

But she also talks about predatory lending and illegal deceptive practices. She maintains most of our woes could have been nipped in the bud if the SEC had shut down phony securitizations at investment banks, because the imploded private mortgage lenders got their money supply from investment banks to keep the fee generation train running. The rating agencies were complicit. Not to mention lax sophisticated investors, monoline bond insurers and other culprits. Combine value destroying securitizations that can only go down in value with excessive leverage, and you create a bubble followed by a financial nightmare.

Given the extraordinary allegations in her book DEAR MR. BUFFETT, it is remarkable that Warren Buffett invited her to sign copies at the Annual Meeting on May 2 (its on her web site). But her documentation and notes are bullet-proof.

She documents everything and gives example after example and names deals. She looked at all of Merrillâs 2007 CDOs and all of them were compromised at the âAAAâ rated level, around $32 billion in notional amount. All of the I-banks were involved to greater or lesser degrees, including Goldman Sachs Alternative Mortgage Products with residential mortgage backed securities.

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texrex2002 · Apr 30, 2009

Quote from Greg Richards:

That is not what it is about, so you would be in for a surprise. You might try listening to the beginning at least. Tavakoli talks about Bush's issues, and expands on that in her book: Dear Mr. Buffett. He rewarded the former CEO of predatory lender, Ameriquest, and pushed the housing agenda. But Frank and Dodd pushed lower lending standards. She says it is a bi-partisan problem, among other problems.

ok, fair enough. guess I need to jumpt to conclusions a little less...

I'll watch it this weekend.

Scataphagos · Apr 30, 2009

Quote from Ghostdog:

"... I cant believe you are saying that you have no culpability.. anyone with a calulator or 6th grade math can do the math on those deals and find out they are bad.... Geez!

Of course the deals were bad. But you are missing the point.

The responsibility for the problem and all of its offshoots lies in the government (Democrats specifically) CHANGING the ground rules for getting a mortgage loan.

Up to this beginning of Affirmative Action Lending, the requirements were different...

1. Collateral or other down payment (or if not, PMI).

2. A maximum limit on the loan payment to a reasonable percentage of income... and even that could be scaled down if the borrower had other obligations like car payment, credit card payments, child support and alimony... in other words EVIDENCE the borrower was financially sound and could service the loan.... No such thing as "no doc".

3. The loans were UNDERWRITTEN... lenders wanted to feel as sure as possible the loan would be repaid... after all, they were lending depositors' money.

And mortgage loans SHOULD have been "full recourse"... no "walk aways" with impunity.

Those were prudent and responsible rules*... and would have prevented all of these bad loans because non-qualified potential borrowers would not have been able to get loans.

We had most of these conditions for many years. Even fostered the securitized mortgage investment we came to know as the Ginnie Mae.

But the Government took ALL of these conditions (and more) away. Had they not done so, NONE OF THIS COULD HAVE HAPPENED... and that's my argument for why Government and specifically the Democrats deserve nearly 100% of the blame.

Of course, one could write a thesis on who did/didn't do what following... and lots of culprits....

Recall the saying...
"For want of a nail, a shoe was lost
For want of a shoe, a horse was lost
For want of a horse, a battle was lost
For want of a battle, a war was lost
For want of a war, a country was lost"

Well, the government/Democrats were the "nail".

* I recall my first house. Though I was a veteran applying through the VA, the bank declined my application because I was "self-employed".

So I said, "screw you... I'll just pay cash!" Thinking better of their previous rejection (and wanting to make the juicy 3 points, I'm sure), they relented and granted the loan.

libertad · Apr 30, 2009

Scataphagos....

Of course the deals were bad. But you are missing the point.

The responsibility for the problem and all of its offshoots lies in the government (Democrats specifically) CHANGING the ground rules for getting a mortgage loan.

Up to this beginning of Affirmative Action Lending, the requirements were different...

1. Collateral or other down payment (or if not, PMI).

2. A maximum limit on the loan payment to a reasonable percentage of income... and even that could be scaled down if the borrower had other obligations like car payment, credit card payments, child support and alimony... in other words EVIDENCE the borrower was financially sound and could service the loan.

3. The loans were UNDERWRITTEN... lenders wanted to feel as sure as possible the loan would be repaid... after all, they were lending depositors' money.

And mortgage loans SHOULD have been "full recourse"... no "walk aways" with impunity.

Those were prudent and responsible rules... and would have prevented all of these bad loans because non-qualified potential borrowers would not have been able to get loans.

We had most of these conditions for many years. Even fostered the securitized mortgage investment we came to know as the Ginnie Mae.

But the Government took ALL of these conditions (and more) away. Had they not done so, NONE OF THIS COULD HAVE HAPPENED... and that's my argument for why Government and specifically the Democrats deserve nearly 100% of the blame.

................................................................................................

In answering the question....

One could examine the issue as to what changed versus the past financial practices....

The point being that the changes were in the "legal arena" which points towards the Senate and House....

Thus the figurehead catalysts should be held accountable for which there are clearly specific individuals responsible....

This approach regarding "legal ease" is a correct approach....

As there are several cogs in the wheel.....and without all of the cogs....the wheel cannot roll....

The legal cog, both regarding lending impositions and the means of grantor distribution via the rating agencies/nonbank venues
were causal....

And you are 1000% correct in that specific individuals are cumulatively responsible....

Clinton, Frank, Bush, Greenspan....and many others....
................................................................................

The real core problem is the two party lobbyist/advertising system itself....

Greg Richards · Apr 30, 2009

Quote from texrex2002:

ok, fair enough. guess I need to jumpt to conclusions a little less... I'll watch it this weekend.

Texrex2002, I did too, at first. I was pleasantly surprised, especially by the book.

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