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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 iliveonramen View Post
    Sure...I don't think their size in the market implies guilt. Let's say hypothetically ....that half the market had standards imposed on what was bought and sold in the secondary market and half the market had very low or nearly non-existent standards. Then yes....it's enitrely possible that entities that historically make up a larger share of the market had nothing to do with the mortgage bubble.
    So when the anomoly in the process is greater government involvement and a questionable social program that changed lending standards, your hypothetical is that the market itself is the only culrpit?

    You just pointed out that a little under half the market had nothing to do with GSEs....

    GSEs were not the only institutions bundling mortgages. As your stat shows GSEs made up a little over half of the secondary mortgage market. The rest were financial institutions such as investment banks. Nearly half of all mortgages bundled did NOT have to meet GSE standards because they were never sold to a GSE.
    CDS's and derivatives are regulated. If you want to toss some real blame, go look at S&Ps and Moody's who overvalued the bundles and the layered mortgages.


    I'm saying they had a risk dump. Firms like Goldman Sachs were making tons of money off the bundling of mortgages and providing the same role GSEs generally do. GSEs were not the only game in time...in fact they were making up an increasingly shrinking part of the game.
    Except Goldman Sachs was selling them off as quickly as they could to GSEs and anyone else that was buying them. As part of the leverage and asset retention required they kept them on the books for longer than they wanted. Thats what sunk them, they were leveraged harder than the valuation of their entire company. Its also what sunk AIG, they were insuring all of the mortgages.

    As for bolded, its categorically FALSE. If you are going to make things up we dont have much to talk about.

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

    Quote Originally Posted by OpportunityCost View Post
    Kush cmon. You know as well as I do that the primary targets of CRA loans were those that were not financially viable for mortgage loans before CRA regulation. Im not sure how you ignore the primary purpose of the CRA program, but you seem to be doing so
    How many times does this have to be explained? CRA required banks and S&L's that took federal deposit insurance to make honest efforts to meet the credit needs of the communities they took deposits from. They could take deposits alright, but they had to take credit applications as well and then actually read them. That's all CRA did. CRA did not require that a single loan be written. Only that an effort be made to find qualified local neighborhood borrowers.

    Quote Originally Posted by OpportunityCost View Post
    CRA loosened mortgage regulations across the board because those lower income mortgage were bundled and sold off with implied government backing or partial direct government underwriting. You know this, Im pretty sure. They allowed for lower standards because they were still selling off the mortgage bundles at the same rate.
    Total blather and off-the-wall nonsense. Banks and S&L's did the underwriting of all their own loans, just as they always had. CRA did not affect any loan terms whatsoever. Like many with no knowledge, you further assume that low-income borrowers equate to low creditworthiness. In fact, nearly half of the applicants uncovered through CRA compliance were qualified at prime terms, and nearly all the rest were at Alt-A, the level just below prime. It is easy to make a fair profit by lending into such a community, and that's exactly what CRA institutions did. CRA loans issued through the 1990's performed better than industry averages. Meanwhile, property values in CRA-covered neighborhoods were rising, and investment in community infrastructure was increasing. Keep in mind that these people had been getting all their credit through the predatory finance companies (Household, Beneficial, etc.), so a loan from a traditional lender was like new money in the bank to them. It turned out that CRA was both good policy and good business.

    And of course, whether done one loan at a time (as was once the case) or as a hundred loans in a bundle, the sale of mortages into secondary markets as mortgage-backed securities is plain vanilla finance. It is how primary lenders recapitalize. There is nothing exotic or risky about it.

    Quote Originally Posted by OpportunityCost View Post
    GSEs gave the release valve for the risk, the regulation itself was not the problem but the semblence of coverage from government and opening of markets was responsible.
    Fact Check: The garbage loans were not securitized through the the GSE's, but through the private-label shops of Wall Street. Paper had to meet minimum underwriting standards for the GSE's to purchase it. Not so on Wall Street. They would buy and resell anything. That's where the junk that caused the credit crisis came from. Cowboy capitalists stripping off profit and selling off risk. They knew what they were doing. They knew the paper they were selling would fail once interest rates rose. They didn't care. They just wanted co collect their big fat profts and bonuses.

    Scroll back to that handy little chart in Post-261. That red line is the credit crisis being built...

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

    Quote Originally Posted by Fenton View Post
    I understand completely what the CRA regulations were for. It was to fight redlining and redlining is basically proving someone can pay back aa loan. Its what they did to me when I bought my last home. You know, check my credit, insist on 20% down, make sure Im employed.
    If this is complete understanding, the moon really is made of green cheese. Redlining is the practice of denying credit to a group of people based on street addess. Traditional lenders simply would not take or consider an application from anyone in neighborhoods they had drawn red lines around on a local map. Bill Gates could have lived there and no one would have taken his credit application. These LMI (low- and moderate-income) neighborhoods were simply consigned to the rapacious finance companies for all their credit needs. That's what redlining was.

    What you are talking about is called underwriting. The due diligence and sound business practice of checking the financial situiation and capacity of a credit applicant. This is what lenders would NOT do for applicants living in redlined neighborhoods. Those folks just got a big fat NO right off the bat regardless.

    You appear of course to be somewhat confused as to what relevant loan standards actually are. You think "employed" should be a criterion simply because you are. Why wouldn't assets be as important as income? If I have $100K in your bank, do I become a risky borrower of $50K from your bank? What do you do about people with lumpy incomes, like real estate agents and seasonal workers? And a 20% down payment is a relic from an ancient and bygone era. It simply throws young people out of the homebuying market even though they could quite easily afford to make the monthly payments. That's as discriminatory as redlining was.

    Quote Originally Posted by Fenton View Post
    Its about liberalism and your twisted world beliefs because you fail to look sny further back than 2002 and insist its Bushs fault when in fact Bush warned the Congress in 2000 and tried to regulate the GSEs in 2005 to no avail.
    There was no path to a credit criss until the failure of Bush's tax cuts for the rich prompted the Fed to rush in as backstop and freeze interest rates at 1%, thereby causing institutional investors to go on a hunt for yield. That was the trigger, It happened in 2002.

    Bush's only plan for the GSE's was to shut them down and "privatize the mission" by turning the whole ball of wax over to Wall Street. Same thing he wanted to do with Social Security. It was all a scam. Real estate and financial markets were meanhwile growing and changing. The GSE's were getting bigger because the country, the economy, and the residential real estate market were getting bigger. Everyone recognized a need for GSE reform to establish safety-and-soundness controls and limits in this expanding world. Bush didn't care about any of that at all. He just wanted to chop the GSE's up and hand all the pieces over to Wall Street. That was the extent of his program. There was nothing more to it than that.

    Your reference to 2005 is of course to the failed S.190 bill that proposed draconian caps on the volumes that the GSE's could hold at any given time in their own portfolios. Those caps would have forced the GSE's out of market share and out of emerging product lines. Guess where that business would have gone. S.190 was just another attempt at giving free gifts for Wall Street. And of course as the right-wing propagandists never tell you, the bill ultimately failed because even Republicans wouldn't vote for it. A bill was needed, but that wasn't it. Meanwhile on the House side, Michael Oxley had passed a safety-and-soundness related companion bill. The Bush administration torpedoed it because it didn't do enough to put the GSE's out of business. They had done the same thing in 2003.

    Quote Originally Posted by Fenton View Post
    Hell even the NYT in 1999 warned of the ever increasing size of the GSEs.
    Reactionary fear of big numbers. As noted, the GSE's were growing because the nation, the economy, and the residential real estate market were growing. A smarter President would have spent less time worrying about the GSE's and more time guarding against the excesses of Wall Street rather than aiding and abetting them. But we didn't get much of a smart guy out of that mess of 2000.

    Quote Originally Posted by Fenton View Post
    Being stupid is one thing, but being selectively ignorant to defend a corrupt position is much worse and you and Cardinal do that on a daily basis. Then again maybe you two just dont possess the cognitive abilities to understand the SubPrime issue in totality. Thats not my problem, and no amount of your isolated diversions are going to wipe the slate clean of all of the damage the democrats under Clinton did to our long term economy.
    LOL! People who don't even know what the words mean still pretend to know what they are talking about. Pump out nothing but the standard, long-ago debunked right-wing swill, and you can only expect to be slapped down for it. Low-grade is low-grade, after all.
    Last edited by Cardinal Fang; 01-17-13 at 08:38 AM.

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

    Quote Originally Posted by Fenton View Post
    Credit default swaps and derivitives are two seperate things and are nothing new. You cant blame this on derivitives if the GSEs themselves relied on bundling and selling those MBSs to fund the secondary market.
    A credit default swap IS a derivative. The first one was invented by Blythe Masters at JP Morgan in 1994 in the wake of the Exxon Valdez oil spill. A credit default swap is simply a promise to pay in the event that someone else does not. An MBS on the other hand is a participation in an income stream or pool -- just like a share of stock.

    Quote Originally Posted by Fenton View Post
    Credit Default Swaps HAD to be purchased by investment banks as collateral for those derivitives.
    CDS's have no underlying asset value. They are insurance hedges that move risk off a lender's books, usually so that the lender will not have to set aside reserves against an newly created outstanding position. It appears that many here don't know anything at all about how this actually works.

    Quote Originally Posted by Fenton View Post
    That was per Govt regulations that existed prior to the sub prime debacle.
    Why don't you inform us further on these supposed regulations.

    Quote Originally Posted by Fenton View Post
    You wont get Kushinator to agree to any of the facts surrounding the collapse because he doesn't possess the integrity to be objective.
    Integrity is too typically non-existent on the right-wing, and scarcer still is any recognition or comprehension of what the facts and issues actually were and what the lot of that might actually have meant. Tall tales and phony stories get invented and passed around as if the right-wing were nothing but a bunch of old-time housewives gossipping over the back fence.

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

    Quote Originally Posted by Cardinal Fang View Post
    How many times does this have to be explained? CRA required banks and S&L's that took federal deposit insurance to make honest efforts to meet the credit needs of the communities they took deposits from. They could take deposits alright, but they had to take credit applications as well and then actually read them. That's all CRA did. CRA did not require that a single loan be written. Only that an effort be made to find qualified local neighborhood borrowers.
    Banks that wanted to make an aquisition, merge or be aquired by another banks had to have a green light on CRA rating to move forward with any of that. Thats the force part of the equation.


    Total blather and off-the-wall nonsense. Banks and S&L's did the underwriting of all their own loans, just as they always had. CRA did not affect any loan terms whatsoever. Like many with no knowledge, you further assume that low-income borrowers equate to low creditworthiness. In fact, nearly half of the applicants uncovered through CRA compliance were qualified at prime terms, and nearly all the rest were at Alt-A, the level just below prime. It is easy to make a fair profit by lending into such a community, and that's exactly what CRA institutions did. CRA loans issued through the 1990's performed better than industry averages. Meanwhile, property values in CRA-covered neighborhoods were rising, and investment in community infrastructure was increasing. Keep in mind that these people had been getting all their credit through the predatory finance companies (Household, Beneficial, etc.), so a loan from a traditional lender was like new money in the bank to them. It turned out that CRA was both good policy and good business.

    And of course, whether done one loan at a time (as was once the case) or as a hundred loans in a bundle, the sale of mortages into secondary markets as mortgage-backed securities is plain vanilla finance. It is how primary lenders recapitalize. There is nothing exotic or risky about it.
    Really? The financial crisis we are discussing says otherwise. Of course they performed better in the 90s. No one really knew about how much money could be made and the streamlined underwriting to the GSEs wasnt in place. After it was, in about 2000, the process gathered steam and GSE involvement increased.


    Fact Check: The garbage loans were not securitized through the the GSE's, but through the private-label shops of Wall Street. Paper had to meet minimum underwriting standards for the GSE's to purchase it. Not so on Wall Street. They would buy and resell anything. That's where the junk that caused the credit crisis came from. Cowboy capitalists stripping off profit and selling off risk. They knew what they were doing. They knew the paper they were selling would fail once interest rates rose. They didn't care. They just wanted co collect their big fat profts and bonuses.

    Scroll back to that handy little chart in Post-261. That red line is the credit crisis being built...
    I think you need to scroll back and see the GSE involvement of the market rising and rising. Thats the risk release valve for the finance companies--insuring losses through AIG or repackaging and selling to GSEs. They had over half the market and in 2006 they were the only ones doing any volume of underwriting and buying. You are buying the greed line entirely too much. The greed was in part because the belief was firmly placed that real estate could not go down appreciably. Government bought up and backed the market for the same reasons.

    Ive got to ask, do you feel this is all due to Wall Street greed?
    I think there is plenty of blame to go around but you seem to be overly apologetic about government involvement in this whole mess and it seems to color your views on who shares the blame. I think its pretty much everyone. You seem to think its just the banks and wall street. Thanks in advance for clarification.

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

    Quote Originally Posted by OpportunityCost View Post
    13 trillion dollar mortgage lending market since 2000 and GSEs held 7.5 trillion of it and they had nothing to do with it? How are we supposed to begin to buy that?
    A good start would be learning at least the first thing or two about the history of the problem.

    Quote Originally Posted by OpportunityCost View Post
    Lenders changed practices to meet GSE standards to resell or bundle those mortgages -- or banks would not be making them because they would have to endure the risk.
    GSE standards changed very little. What changed was the massive capacity for simply bypassing the GSE's and their actual standards that was built out by Wall Street. In the beginning of course, the percentage of garbage going through even the private-label shops was relatively small, but soon enough everyone who wanted and actually qualified for a new mortgage already HAD one. In order to maintain the astronomical profits and bonuses that had been going on, more original mortgages were needed. So unscrupulous brokers simply started writing paper that they knew at the time was junk. Then they sold it off through Wall Street. Then it started to fail. Then we had a credit criris. Then we had the Great Bush Recession.

    Quote Originally Posted by OpportunityCost View Post
    On the one hand you want to say banks took on these loans and government regs had nothing to do with it. On the other hand, Im saying banks would never had made the loans to comply if they didnt have a risk dump via GSEs and to have that valve they needed to meet regs on lending practices.
    LOL! Fannie Mae was created in 1938 for the express purpose of being such a "risk dump" and has been functioning as one ever since. It purchases loans from originating banks, thereby providing the cash needed to make more loans. That was going on already as of 75 years ago. But the GSE's will purchase only conforming loans. Conforming means that certain basic underwriting standards have been met. The loans that met such standards would have been eligible for purchase by the GSE's. The rest went off to Wall Street.

    Active CRA enforcement meanwhile ended the day Bush took office. He spent his time trying to exempt banks and S&L's from coverage. And while the oomph behind CRA lending was ebbing, the Russian and Asian financial crises of the late 1990's had decimated the finance companies. Half of what had been the ten largest companies went out of business, This created a credit vacuum in LMI neighbohoods and markets, and guess who was primed to rush in and fill that void. Why it was our good friends at Countrywide, Ameriquest, New Century Financial and the rest of the unregulated private broker hooligans who did so much the dig the ditch that the Bushies then drove us into. Those folks were the crap originators and Wall Street was the "risk dump" where they got rid of that otherwise unmarketable crap. All the while knowing full well what they were doing and what the implications were.

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

    Quote Originally Posted by Cardinal Fang View Post
    A good start would be learning at least the first thing or two about the history of the problem.
    Take the arrogance and stick it. We disagree about a lot of particulars, dont make it personal and dont bait.


    GSE standards changed very little. What changed was the massive capacity for simply bypassing the GSE's and their actual standards that was built out by Wall Street. In the beginning of course, the percentage of garbage going through even the private-label shops was relatively small, but soon enough everyone who wanted and actually qualified for a new mortgage already HAD one. In order to maintain the astronomical profits and bonuses that had been going on, more original mortgages were needed. So unscrupulous brokers simply started writing paper that they knew at the time was junk. Then they sold it off through Wall Street. Then it started to fail. Then we had a credit criris. Then we had the Great Bush Recession.
    Im not sure how you are missing the massive increase in GSE inclusion in backing this process but you are missing it.


    LOL! Fannie Mae was created in 1938 for the express purpose of being such a "risk dump" and has been functioning as one ever since. It purchases loans from originating banks, thereby providing the cash needed to make more loans. That was going on already as of 75 years ago. But the GSE's will purchase only conforming loans. Conforming means that certain basic underwriting standards have been met. The loans that met such standards would have been eligible for purchase by the GSE's. The rest went off to Wall Street.

    Active CRA enforcement meanwhile ended the day Bush took office. He spent his time trying to exempt banks and S&L's from coverage. And while the oomph behind CRA lending was ebbing, the Russian and Asian financial crises of the late 1990's had decimated the finance companies. Half of what had been the ten largest companies went out of business, This created a credit vacuum in LMI neighbohoods and markets, and guess who was primed to rush in and fill that void. Why it was our good friends at Countrywide, Ameriquest, New Century Financial and the rest of the unregulated private broker hooligans who did so much the dig the ditch that the Bushies then drove us into. Those folks were the crap originators and Wall Street was the "risk dump" where they got rid of that otherwise unmarketable crap. All the while knowing full well what they were doing and what the implications were.
    The regulation ended when Bush took office? If you believe what you typed that I bolded, I dont know how you can believe both things. Thats you buying into political propaganda. You are incorrect in credit growth as well. The increase in credit occurred because of the legislation allowing commercial and neighborhood banking to merge. It changed the entire leverage and margin picture for commercial and retail banking and was a primary source of problems that we are still trying to disentangle today. Thats part of what Dodd/Frank was supposed to address.

    I see you are more interested in playing the blame Bush game. Which is what I suspected all along. You want to blame bankers and Bush while simultaneously claiming government had little blame. Thats about as contradictory as it gets. Dem pushback on GSE regulation was gigantic. As I have said repeatedly, there is plenty of blame to go around and it covers almost everyone involved. You are interested in political finger pointing, not the truth of what really occurred. Oh well.

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

    Quote Originally Posted by Fenton View Post
    The GSE's bought, bundled and sold to investment banks to fund the secondary markets.
    Oh boy. The GSE's serve as a middleman. They are the back end of the primary market, purchasing loans from original lenders. They are then the front end of the secondary market, packaging those mortgages and selling them to institutional investors. These include national and international banks. insurance companies, pension and money market funds, charitable and university endowments, and others with large amounts of capital to invest. The GSE's sold packages of loans that had met their underwriting standards to these institutional investors with their own agency guaranty.

    The GSE's made a good profit doing this, and Wall Street saw a chance, starting in 2002, to get in on that act. They couldn't offer a guaranty, but with demand for MBS's going into overdrive as the result of central bank rates being frozen at 1%, they were able to ramp up their ability to buy and securitize mortgage loans into the secondary markets, and they had more than willing suppliers of original mortgage paper in this new and unscrupulous breed of private broker that was already writing plenty of paper that the GSE's wouldn't touch. Wall Street gobbled all that up, then dressed it up to look like high-grade paper even as the actual quality of the mortages being bundled was continuing to decline dramatically. While barely looking at it, bond rating agencies kept marking the bulk of this stuff AAA and investors kept right on buying it. That turned out to be a problem.

    Quote Originally Posted by Fenton View Post
    You think Goldman Sachs and other investment banks wanted to get stuck with massive amounts of junk securities ? Investment banks earn money on throughput and because of the way those MBS were bundled there was no way to value them.
    No way to value them? Why not? A bundle is just a collection of individual mortgage loans. Are you saying that the bond ratings agencies were simply too busy, lazy, or stupid to look at the actual loan composition of the bundles they were rating?

    Quote Originally Posted by Fenton View Post
    The GSEs in 2000 were compelled by HUD to increase their sub-prime originations and by no means werea shrinking part of the game.
    In a clarification that you have seen before but prefer not to pay any attention to, what was raised in late 2000 was the affordable housing target for 2001. It had been unchanged at 42% since 1997, and the GSE's were already hitting 48% and 49% with ease so it was set to 50% going forward.

    Quote Originally Posted by Fenton View Post
    In 1992 Fannie commited 1 trillion toward the sub-prime fiasco...
    LOL! Where were they going to spend that kind of money? A total of $25 billion in subprime mortgages was written in 1993. Even by 2001, the number had risen only to $175 billion. The GSE's bought 11% of that -- a whole $20 billion -- skimming off the cream of the crop as usual.

    Quote Originally Posted by Fenton View Post
    CRA was given regulatory power in the early 90s to lower underwriting standards for low income lendees.
    The farce continues. There was no regulatory power created anywhere in CRA, nor did the act so much as reference credit terms or underwriting standards. It called for all actual terms and provisions of the act -- such as making efforts to meet the credit needs of the communities they took deposits from -- to be carried out consistent with safe and sound operations. There is also no such thing as a "lendee".

    Quote Originally Posted by Fenton View Post
    That was the true impetus that perpetuated the massive growth of sub-prime mortgages.
    There's not a grain or shred of truth in anything claimed here. It is all manufactured rot produced from rubbish and confusion.

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

    Quote Originally Posted by Cardinal Fang View Post
    Oh boy. The GSE's serve as a middleman. They are the
    back end of the primary market, purchasing loans from original lenders. They are then the front end of the secondary market, packaging those mortgages and selling them to institutional investors. These include national and international banks. insurance companies, pension and money market funds, charitable and university endowments, and others with large amounts of capital to invest. The GSE's sold packages of loans that had met their underwriting standards to these institutional investors with their own agency guaranty.

    The GSE's made a good profit doing this, and Wall Street saw a chance, starting in 2002, to get in on that act. They couldn't offer a guaranty, but with demand for MBS's going into overdrive as the result of central bank rates being frozen at 1%, they were able to ramp up their ability to buy and securitize mortgage loans into the secondary markets, and they had more than willing suppliers of original mortgage paper in this new and unscrupulous breed of private broker that was already writing plenty of paper that the GSE's wouldn't touch. Wall Street gobbled all that up, then dressed it up to look like high-grade paper even as the actual quality of the mortages being bundled was continuing to decline dramatically. While barely looking at it, bond rating agencies kept marking the bulk of this stuff AAA and investors kept right on buying it. That turned out to be a problem.


    No way to value them? Why not? A bundle is just a collection of individual mortgage loans. Are you saying that the bond ratings agencies were simply too busy, lazy, or stupid to look at the actual loan composition of the bundles they were rating?


    In a clarification that you have seen before but prefer not to pay any attention to, what was raised in late 2000 was the affordable housing target for 2001. It had been unchanged at 42% since 1997, and the GSE's were already hitting 48% and 49% with ease so it was set to 50% going forward.


    LOL! Where were they going to spend that kind of money? A total of $25 billion in subprime mortgages was written in 1993. Even by 2001, the number had risen only to $175 billion. The GSE's bought 11% of that -- a whole $20 billion -- skimming off the cream of the crop as usual.


    The farce continues. There was no regulatory power created anywhere in CRA, nor did the act so much as reference credit terms or underwriting standards. It called for all actual terms and provisions of the act -- such as making efforts to meet the credit needs of the communities they took deposits from -- to be carried out consistent with safe and sound operations. There is also no such thing as a "lendee".


    There's not a grain or shred of truth in anything claimed here. It is all manufactured rot produced from rubbish and confusion.
    Cardinal, the poster who's not supporting agenda and who's liberal apology is as pure as the driven snow.

    Not a grain or truth huh ? How would you know ? You being the arbiter of truth is like Bill Clinton being the arbiter of ethics.

    Everything I claim is true, you rebuke it because it proves that everything you represent is a lie or based on a lie.

    Tell us again how this all started in 2002 and was Bush and the banks fault. Or yet again brag about the 3% GDP numbers but forget to tell us that most of that came from massive federal spending with borrowed dollars.

    And what was the GSEs total sub-prime originations by the end of 2008 ?

    Over a trillion ? Because they promised in the early 90s at least that.

    Also a credit default swap in comparison to the MBSs they were insuring WERE TWO SEPERATE THINGS...

    Are you suffering from a head injury ?

    That makes you rattle off liberal nonsense without the cognitive process needed to stop when you've been exposed ?

    The CRA making sure FDIC Banks catered to the communities they served meant lowering standards under threat of massive fines....Wells Fargo.

    Your basing your arguments using GSE data from the 90s and 2000s when they were corrupt to the core bundling and selling worthless loans with good ones and selling them off at AAA scores.

    No investment banks didn't have time to go through everyone of those "AAA" Securities. A good investment bank doesn't hold onto securities, they pass them through....quickly......

    They were stuck with massive losses that were at that time worthless. They bought the "package"

    Are you saying they can go through now, extract the trillions of dollars in GSE backed sub prime loans and just throw them out ?

    Jeesus Christ, whats wrong with you ?

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

    Quote Originally Posted by OpportunityCost View Post
    So when the anomoly in the process is greater government involvement and a questionable social program that changed lending standards, your hypothetical is that the market itself is the only culrpit?
    Well, considering that none of what you suggest actually happened, pointing at Wall Street becomes pretty easy. The GSE's had been performing their function for decades. Every administration had sought to expand home ownership for decades. No big deal until along came these unregulated brokers, private-label securitizers, and regulators who believed that markets were wise enough to regulate themselves. That's where all the problems came from.

    Quote Originally Posted by OpportunityCost View Post
    CDS's and derivatives are regulated.
    Some are and some aren't. Your blanket statement has holes in it. Big ones.

    Quote Originally Posted by OpportunityCost View Post
    If you want to toss some real blame, go look at S&Ps and Moody's who overvalued the bundles and the layered mortgages.
    They certainly earned their share. They claim they couldn't help it. The crooked appraisers who kept cranking their reports of home values up higher and higher are due some of the blame as well. They claim they couldn't help it either. But the driver of the whole shebang was Wall Street. It was their game, and it was their refusal to cut back on profits and bonuses and stop writing crap paper that had no future but failure that sent things careening out of control.

    Quote Originally Posted by OpportunityCost View Post
    Except Goldman Sachs was selling them off as quickly as they could to GSEs and anyone else that was buying them. As part of the leverage and asset retention required they kept them on the books for longer than they wanted. Thats what sunk them, they were leveraged harder than the valuation of their entire company. Its also what sunk AIG, they were insuring all of the mortgages.
    Well, yeah. You have to sell MBS's off in order to get cash to buy more original paper and earn more profits and bonuses. Meanwhile, particularly after 2006 -- by which time the die had already been cast on all this -- the GSE's began acquiring private-label paper for three reasons. First, they couldn't meet their affordable housing targets -- now cranked up to 55% by Bush -- because LMI markets had been sat on and gobbled up by predatory brokers leaving less and less that the GSE's could buy directly. Second, they needed to acquire some high-income paper if they were to satisfy the growing cries of private investors. Third, their primary market share had shrunk to 25% and their secondary market share to 40%. After enduring a restatement of earnings, they needed to get back on the board.

    Quote Originally Posted by OpportunityCost View Post
    As for bolded, its categorically FALSE. If you are going to make things up we dont have much to talk about.
    LOL!!! Better check your facts. Starting in 2002, the GSE's became less and less of a factor in primary and secondary mortgage markets as the wild-man private-label securitization shops built out by Wall Street pushed into more and more of the market until it was too late. If you didn't know that much, you knew very little indeed!

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