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Thread: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by AdamT View Post
    The problem with your theory is that it doesn't hold water. Fannie & Freddie were, in fact, dragged into the subprime market by the private lenders who were sucking up all the new loans. As far as I can tell you've provided no explanation for the mechanism by which an expanding F&F led to housing inflation. Are you suggesting that home sales were depressed before that because of insufficient liquidity? Before F&F grew, people just couldn't find a lender to help them purchase a home? I don't see any support for that, if that's what you're trying to say.

    Certainly you haven't addressed my point that housing prices actually fell for nearly have the period when F&F were growing so quickly.
    Hugely false. Again, it started in 1997. See Cuomo in the video, in his own words.

    Fannie did not start to lose market share until the bubble was near to 1/3rd inflated. That is not being "sucked in". That they then chose to change their own lending practices, to erode them to the level that the private sector had, only garnered them back the marklet share they had lost. The bubble was inflating regardless. Others were going to make those loans regardless.

    Your argument lacks merit.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by AdamT View Post
    The problem with your theory is that it doesn't hold water. Fannie & Freddie were, in fact, dragged into the subprime market by the private lenders who were sucking up all the new loans. As far as I can tell you've provided no explanation for the mechanism by which an expanding F&F led to housing inflation. Are you suggesting that home sales were depressed before that because of insufficient liquidity? Before F&F grew, people just couldn't find a lender to help them purchase a home? I don't see any support for that, if that's what you're trying to say.

    Certainly you haven't addressed my point that housing prices actually fell for nearly have the period when F&F were growing so quickly.
    Look at the graph I posted yesterday folks (a page or two back). What you see are regular cycles of housing prices moving gradually above, and then gradually below, the base inflation line. I submit that is to be expected with any such curve that is following normal market dynamic.

    But with the last upswing, actually beginning as far back as about '96-97, it left the basic gyrations, and kept going. I already pointed out the three "perfect storm" factors that were present at that time that were not present in any of the other prior gyrations.

    1) Expansion of Fannie and Freddie to underwriting 50% of every new loan by the late 90's. This was part of a 9-fold increase in the size of FF from '91-06. Being able to get FF to underwrite your loan creates a moral hazard.

    2) The court-mandated issuance of more sub-primes, again underwritten by FF, which pumped new demand into the market. Simple supply and demand. This is evidenced by the beginnings of the bubble by 1998, and coincides exactly with government policy at the time (see Cuomo).

    3) Artificially low interest rates, courtesy the Fed.

    All government doing what government had not done before.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    I got your "Mommy and Daddy" right here.
    Hehe...I was giving you hard time man
    The fact is that it is the Democrats and liberals who demonize the private sector, and will do all in their power to shift blame away from government, and onto the rich and Wall Street and Capitalism in general. It is a consistent theme with Obama and his class warfare reelection campaign, with moonbats like the Occutards in the Obamavilles nationwide, and with morons spokespeople for the liberals such as Wasserman Schultz.
    Sure, Dems will put all the blame on the private sector and the Republicans will put all the blame on the Government. The truth is probably somewhere between those two.

    At the end of the day...no one put a gun to investment firms head telling them they should hold 500% debt on whatever assets they own, nobody held a gun to AIG's head telling them to insure trillions in CDO's, no one held a gun to the head of investment banks telling them they need to buy bundled mortgages based on ridiculous loan standards. They all did that, they all basically brought us to the brink while raking in cash and rolling in inflate stock prices and they all were bailed out and are paying those that did those things massive bonuses.

    So...the loser? American tax payer...winner? Wall Street.

    Edit: then ask yourself this, what kind of society are we living in where we have a group of firms that hold a lot of political clout and also when they **** up can say that the economy depends on their survival.

    As Thomas Jefferson said "Banking instititutions are more dangerous than standing armies".

    I know you constitutionalists love to quote the founders...they were deeply distrustful of banking instititutions and did everything they could to limit their power.
    Last edited by iliveonramen; 01-12-12 at 12:47 PM.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by Eighty Deuce View Post
    Look at the graph I posted yesterday folks (a page or two back). What you see are regular cycles of housing prices moving gradually above, and then gradually below, the base inflation line. I submit that is to be expected with any such curve that is following normal market dynamic.

    But with the last upswing, actually beginning as far back as about '96-97, it left the basic gyrations, and kept going. I already pointed out the three "perfect storm" factors that were present at that time that were not present in any of the other prior gyrations.

    1) Expansion of Fannie and Freddie to underwriting 50% of every new loan by the late 90's. This was part of a 9-fold increase in the size of FF from '91-06. Being able to get FF to underwrite your loan creates a moral hazard.
    You still haven't explained why F&F taking a bigger share of the market increased home prices. And of course home prices did not increase for nearly half the time the expansion was occurring. You haven't explained that either.

    2) The court-mandated issuance of more sub-primes, again underwritten by FF, which pumped new demand into the market. Simple supply and demand. This is evidenced by the beginnings of the bubble by 1998, and coincides exactly with government policy at the time (see Cuomo).
    So now you're trying to make the CRA argument that you earlier said you weren't making. This has been refuted so many times it's beyond ridiculous.

    3) Artificially low interest rates, courtesy the Fed.
    This I will agree with wholeheartedly.

    All government doing what government had not done before.
    And that is nonsense. Of all the factors you list, only the loose money supply had a material impact on increased housing demand.

    I could go into a lengthy recitation of what really happened, but it's well explained in the Wiki article I linked above. I'll summarize:

    1. Loose money supply and tax cuts create excess liquidity;

    2. Other changes to tax laws (capital gains and interest deductions) encourage home buying;

    3. Bank deregulation creates opportunity for private lenders to issue huge number of loans while offloading the risk on investors, who are misled into thinking that there is little risk.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by iliveonramen View Post
    Hehe...I was giving you hard time man

    Sure, Dems will put all the blame on the private sector and the Republicans will put all the blame on the Government. The truth is probably somewhere between those two.

    At the end of the day...no one put a gun to investment firms head telling them they should hold 500% debt on whatever assets they own, nobody held a gun to AIG's head telling them to insure trillions in CDO's, no one held a gun to the head of investment banks telling them they need to buy bundled mortgages based on ridiculous loan standards. They all did that, they all basically brought us to the brink while raking in cash and rolling in inflate stock prices and they all were bailed out and are paying those that did those things massive bonuses.

    So...the loser? American tax payer...winner? Wall Street.

    Edit: then ask yourself this, what kind of society are we living in where we have a group of firms that hold a lot of political clout and also when they **** up can say that the economy depends on their survival.
    All of the above go to "too big to fail", and other basic regulations. There are those that argue that all of them should be allowed to fail, and there rae some good merits there. However, we used TARP to bail them out, did we not ? Is not TARP now about 90% paid back ? But what institutions were not covered by TARP, but got hundreds of billions in bail-outs, are still getting tens of billions, will keep getting tens of billions, and won't be paying any of it back ? Ever ?

    Fannnie and Freddie. Because in the end, it was government at the bottom of this massive moral hazard that was created. Until the bubble burst, folks made stupid loans because they were profitable, and FF then bought your risk from you. When government is underwriting 30-40-50-60% of the stupidity, you are gonna get a lot of stupidity. And we did. At every level, which is what you note.

    As Thomas Jefferson said "Banking instititutions are more dangerous than standing armies".

    I know you constitutionalists love to quote the founders...they were deeply distrustful of banking instititutions and did everything they could to limit their power.


    The Founders said a few things about big government too, did they not ? Since you chose Mr. Jefferson ....

    - I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.

    - Was the government to prescribe to us our medicine and diet, our bodies would be in such keeping as our souls are now.

    - I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it.

    - The policy of the American government is to leave their citizens free, neither restraining nor aiding them in their pursuits.

    - When the people fear their government, there is tyranny; when the government fears the people, there is liberty.

    - I am not a friend to a very energetic government. It is always oppressive.

    - Most bad government has grown out of too much government.

    - A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor and bread it has earned. This is the sum of good government.
    There are many more

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by AdamT View Post
    You still haven't explained why F&F taking a bigger share of the market increased home prices. And of course home prices did not increase for nearly half the time the expansion was occurring. You haven't explained that either.
    I submit that FF is a moral hazard. FF underwriting sub-primes is a moral hazard, in that lenders are now doing what they would otherwise not have done based on basic risk-reward capitalism that had governed prior markets. A bigger FF meant a bigger moral hazard.

    So now you're trying to make the CRA argument that you earlier said you weren't making. This has been refuted so many times it's beyond ridiculous.
    No, I am not. In the end, while the Cuomo lead HUD may have used the CRA to initiate their lawsuits, the fact is that the "settlement" involved the use of FF to make everyone happy. Otherwise, I do not believe the CRA by itself, without the settlelment that the lenders agreed to, would have amounted to much. The expansion of FF ninefold, and to where it had 50% of all new loans in its portfolios, dwarfs anything remotely CRA.

    And that is nonsense. Of all the factors you list, only the loose money supply had a material impact on increased housing demand.

    I could go into a lengthy recitation of what really happened, but it's well explained in the Wiki article I linked above. I'll summarize:

    1. Loose money supply and tax cuts create excess liquidity;

    2. Other changes to tax laws (capital gains and interest deductions) encourage home buying;

    3. Bank deregulation creates opportunity for private lenders to issue huge number of loans while offloading the risk on investors, who are misled into thinking that there is little risk.
    Wikipedia

    1. The Bush tax cuts had far less of an economic impact than the dot-com boom. Loose money was all based with the Fedregardless.

    2. Lame.

    3. The "bubble" was supported by folks buying houses at inflated rates. You can call them all "misled" for not renting instead, or you can realize that everyone rode the wave. At every level. "Investors" were no more misled than someone who bought a home that is now underwater.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by Eighty Deuce View Post
    I submit that FF is a moral hazard. FF underwriting sub-primes is a moral hazard, in that lenders are now doing what they would otherwise not have done based on basic risk-reward capitalism that had governed prior markets. A bigger FF meant a bigger moral hazard.
    FF were no more of a moral hazard than Bank of America, Countrywide, and all of the private lenders. FF's share of the mortgage market was shrinking rapidly at the height of the bubble.


    1. The Bush tax cuts had far less of an economic impact than the dot-com boom. Loose money was all based with the Fedregardless.
    Nonsense. Did you forget about the dotcom bust? Large tax cuts almost always lead to asset bubbles, and this was no exception.

    2. Lame.
    Well that was certainly a completely lame non-refutation.

    3. The "bubble" was supported by folks buying houses at inflated rates. You can call them all "misled" for not renting instead, or you can realize that everyone rode the wave. At every level. "Investors" were no more misled than someone who bought a home that is now underwater.
    I was thinking specifically of the people and institutions that purchased mortgage backed securities. In many cases the underlying assets were hugely risky, but the credit rating agencies nonetheless gave them AAA ratings -- as safe as can be. Given the fact that the derivatives market was -- by law -- unregulated, that was all invstors had to go on. Without investors willing to by all that worthless MBS, the bubble would not have occurred.

    In addition, however, many unsophisticated home buyers were also misled as to the terms of their contracts. That was facilitated by the OCC which specifically preempted the states from enforcing their own consumer protection laws in the mortgage market.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by j-mac View Post
    Oh, well I wasn't aware that you were trying to help me not make mistakes...by all means then, I will immediately do the job of congressional staff so that we on a message board don't make any mistakes, fore millions of homeowners depend on this lone truckers opinion....


    J-mac

    Sent from my PC36100 using Tapatalk
    What are you talking about?

    AUSTAN GOOLSBEE: I think the world vests too much power, certainly in the president, probably in Washington in general for its influence on the economy, because most all of the economy has nothing to do with the government.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by Goldenboy219 View Post
    From the same source: We do not find evidence that their crash was due much to government housing policy or that they had an essential role in the development of the subprime mortgage-backed securities market, which occurred outside of the normal mortgage origination channels and which was funded by non agency or “private label” securities (PLS).
    Well, don't focus on that part. it doesn't support the narrative being advanced.

    AUSTAN GOOLSBEE: I think the world vests too much power, certainly in the president, probably in Washington in general for its influence on the economy, because most all of the economy has nothing to do with the government.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    All of the above go to "too big to fail", and other basic regulations. There are those that argue that all of them should be allowed to fail, and there rae some good merits there. However, we used TARP to bail them out, did we not ? Is not TARP now about 90% paid back ? But what institutions were not covered by TARP, but got hundreds of billions in bail-outs, are still getting tens of billions, will keep getting tens of billions, and won't be paying any of it back ? Ever ?
    Via AIG the companies that had insurance on their CDO's are getting those payments. You make it seem as if very low interests loans of billions from the government is no big deal. It's a huge deal. Having access to a bottomless treasury during an economic downturn means that you don't have to worry about insolvency. Not worrying about insolvency means that you aren't compelled to worry about the risk of over leveraging.

    Let's also talk about the profits made from that free money pumped into those companies. Go figure, when they have 10's of billions in capital pumped into their coffers they come back with billions in profit. They purchased competitors. Now instead of a super bank with 6% of GDP we have banks that have 14% of GDP. What ever problems we had before (moral hazard, too big to fail ect) are magnified.

    The Founders said a few things about big government too, did they not ? Since you chose Mr. Jefferson ....
    Ok...that sounds rational. You worry about some government takeover while financial institutions run our political and economic system.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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