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Thread: Job growth cools slightly, recovery grinds on [W:225]

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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by Fenton View Post
    It was affirmitive action lending and it tanked the economy.
    Again. CRA loans were less likely to default than non-CRA loans of similar risk.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by Kushinator View Post
    A rather small subset of all subprime loans were CRA related (not to mention the default rate for CRA loans was lower than other non-CRA loans of similar risk). I notice you failed to mention the commercial housing bubble.

    Fail!
    The problem I have with that line of logic is that the higher the CRA approval rate was among banks, the higher their default rate became. WaMu and BofA being the 2 stringest examples of that--they had very high CRA ratings from regulators but also had high default rates. I cant help but draw the conclusion that the 6% number is either false or gamed in some way. Im interested in another conclusion but Im not seeing it.

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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by OpportunityCost View Post
    I cant help but draw the conclusion that the 6% number is either false or gamed in some way. Im interested in another conclusion but Im not seeing it.
    How so?

    Also, what caused the commercial real estate bubble? Surely you will not make the claim that the CRA had anything to do with it!
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by Kushinator View Post
    How so?

    Also, what caused the commercial real estate bubble? Surely you will not make the claim that the CRA had anything to do with it!
    I just gave you the how so. The better the CRA rating of the bank, the more unstable they were. Im not sure how else to explain that. Im welcome to whatever theory you have. Im not being at all sarcastic, Im really open to whatever can be presented. I have found no other explanation.

    The commercial real estate bubble was for some of the same reasons as the regular one---banks were given an outlet to dump toxic assets through the government, specifically GSEs. If risk cannot be securitized or sold, it won't be taken on. The mechanisms for getting rid of regular market risk were extended to the commercial market.

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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by OpportunityCost View Post
    The better the CRA rating of the bank, the more unstable they were.
    This does not make sense given that CRA justification was not a deterministic factor in regards to stability. As stated, there is no relationship between CRA rating and bank stability.

    The commercial real estate bubble was for some of the same reasons as the regular one---banks were given an outlet to dump toxic assets through the government, specifically GSEs. If risk cannot be securitized or sold, it won't be taken on. The mechanisms for getting rid of regular market risk were extended to the commercial market.
    Pick your poison! In one hand you blame CRA provisions and in another you blame ulterior risk motives. You cannot have it both ways (without plaguing yourself with partisan subjectivity)!
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by Kushinator View Post
    This does not make sense given that CRA justification was not a deterministic factor in regards to stability. As stated, there is no relationship between CRA rating and bank stability.



    Pick your poison! In one hand you blame CRA provisions and in another you blame ulterior risk motives. You cannot have it both ways (without plaguing yourself with partisan subjectivity)!
    It doesnt make sense, but it was a factor. The greater the compliance rating, the greater the instability. Only thing I can find is that they were examined less on other issues or given greater access to dumping risk to GSEs.

    You misunderstand. Without the safety valve route provided by GSEs, ostensibly for CRA loans, they had nowhere to dump the high risk commercial. Im not blaming CRA, Im saying CRA provided the mechanisms to allow risk to be passed and banks naturally used it. Without a way to dump risk, it would never have been taken on.

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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by OpportunityCost View Post
    It doesnt make sense, but it was a factor. The greater the compliance rating, the greater the instability. Only thing I can find is that they were examined less on other issues or given greater access to dumping risk to GSEs.

    You misunderstand. Without the safety valve route provided by GSEs, ostensibly for CRA loans, they had nowhere to dump the high risk commercial. Im not blaming CRA, Im saying CRA provided the mechanisms to allow risk to be passed and banks naturally used it. Without a way to dump risk, it would never have been taken on.
    Given that institutions that created the majority of Subprimes loans were not subject to the CRA regulations (Countrywide for example which was bought by BOA) and those institutions were securitising the loans they made with the same ease as the institutions that were subject to CRA regulations, does it not make more sense that the securitization and dumping of risk from the loans was a more significant factor in the growth of subprime loans then the CRA
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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by Lord Tammerlain View Post
    Given that institutions that created the majority of Subprimes loans were not subject to the CRA regulations (Countrywide for example which was bought by BOA) and those institutions were securitising the loans they made with the same ease as the institutions that were subject to CRA regulations, does it not make more sense that the securitization and dumping of risk from the loans was a more significant factor in the growth of subprime loans then the CRA
    Yes but they were securitizing them to the GSEs as well. Im arguing more that the method of securitizing was done through the government that allowed the unchecked risk to continue to grow. Im not sure how to separate CRA and GSE risk control but we need to, or rather, we need to control it better than we have been.

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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by OpportunityCost View Post
    Yes but they were securitizing them to the GSEs as well. Im arguing more that the method of securitizing was done through the government that allowed the unchecked risk to continue to grow. Im not sure how to separate CRA and GSE risk control but we need to, or rather, we need to control it better than we have been.
    Of course

    But to my knowledge the CRA has nothing to do with risk control or securitization.

    It is the securitization which promoted the dramatic increase in Subprime loans (when state regs allowed it) (Texas regs were very tight and did not allow for many bad loans)
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    Re: Job growth cools slightly, recovery grinds on [W:225]

    Quote Originally Posted by Lord Tammerlain View Post
    Of course

    But to my knowledge the CRA has nothing to do with risk control or securitization.

    It is the securitization which promoted the dramatic increase in Subprime loans (when state regs allowed it) (Texas regs were very tight and did not allow for many bad loans)
    Im glad you get that Im not advocating that CRA was responsible but rather the system it brought rise to that loosened regs and allowed securitization through or by GSEs. The mortgage system has a lot of moving parts, its tough to nail down one factor or another that is "responsible" but looser regs are usually going to be a bad idea as is government sponsored risk mechanisms.

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