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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]

    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.
    You are arguing out of both sides of your mouth. You claim Bush cranked up GSE involvement then argue that the GSEs had nothing to do with it. Im done debating with someone whose base argument is dishonest.

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

    Quote Originally Posted by Cardinal Fang View Post
    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.


    Some are and some aren't. Your blanket statement has holes in it. Big ones.


    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.


    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.


    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!
    Who cranked the GSEs targets on sub prime mortgages up to 55% ?

    Who cranked them up to 40% ? 30% ?

    Why was it so easy to obtain credit in the first place ?

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

    Quote Originally Posted by OpportunityCost View Post
    You are arguing out of both sides of your mouth. You claim Bush cranked
    up GSE involvement then argue that the GSEs had nothing to do with it. Im done debating with someone whose base argument is dishonest.
    THATS Cardinal in a nut shell. He so determined to villify Bush he'll eventually contradict himself and rebut his own argument.

    Liberals ALL debate from a point of dishonesty. Otherwise they wouldn't have anything to say.

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

    Quote Originally Posted by OpportunityCost View Post
    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.
    Force? LOL! That was Clinton swagger. There is nothing in CRA that says anything at all about enforcement or about acquisitions or interstate operations. Even under deregulation, the latter did require a federal checkoff, so Clinton implied that banks with intentions in those areas better have an acceptable CRA rating if they expected their applications to be acted on expeditiously. There are no penalties of any sort included in CRA. There are no means of enforcing anything. What prompted expanded operations in previously underserved communities was the carrot of proven nice profits, not the stick of anything the feds could actually have done.

    Quote Originally Posted by OpportunityCost View Post
    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.
    More aimless staggering. The LMI cat was well out of the bag by 1997 and more than just CRA-covered institutions were getting their feet wet in that new market. LMI and subprime are of course not synonymous, but as for non-conforming loans, Fannie Mae began experimenting with credit models in 1999. The conforming model of course defined the credit instruments that ruled in prime markets, and the GSE's expected that the same would come to be he case in subprime markets. The instrument they were designing and testing was 30-year fixed-rate loan with front-loaded fees that a borrower could earn his way out of with consistent performance. But smelling profit, Wall Street had other ideas, and they and their private broker henchmen pulled an end-around. Before the GSE model could be fine-tuned and rolled out to originators, the Big Bypass had been built out and brokers were writing and pushing all sorts of exotic instruments that generated a lot of short-term profit and a lot of long-term risk. It was unfortunatley these low-doc, adjustable-rate, teaser-loans that came to dominate even in some prime tiers as sucker borrowers were lured into signing paper that they really shouldn't have.

    If by "streamlined underwriting" at the GSE's, you are referring to Desktop Underwriter, a new version was indeed rolled out in 2000, but it was version 5.0. We are currently on version 9.0. This was not a new thing, but DU (and Freddie's LP equivalent) were much used to get quick purchase decisions for qualified loans. Some of those crooked storefront brokers would try to resubmit a rejected loan five or six times, hoping for a different outcome, but mostly the stuff that DU spat out simply got sent off to Wall Street. They didn't care about standards.

    Quote Originally Posted by OpportunityCost View Post
    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.
    The GSE's have had mortgage market involvement for 75 years, and as the population and market grew, guess what else did. You are perhaps meanwhile confusing "finance companies" with "investment banks"? The GSE's one-time 70% share of the primary market had sunk to below 25% by late 2006. And while AIG made quite the dunce of itself playing around in MBS markets, that was their own private party. They eventually got themselves pinched in the twin vises of CDS's that they hadn't hedged a nickel on, and short-term assets swapped for longer-term notes that were suddenly non-marketable. They owed cash to everybody, everybody wanted their money back, and the company didn't have a dime. Their abject stupid behavior made them a house of straw in a forest fire alright, but AIG didn't create the forest fire. That was Wall Street.

    Quote Originally Posted by OpportunityCost View Post
    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.
    You are making me laugh. No one in the Wall Street loop thought they were doing the right thing. They all knew they were cheating by creating and selling notes that would fail. I'll be gone, you'll be gone. It will all be somebody else's problem. Strip off the profit, sell off the risk. The one thing they failed to anticipate was how long the opaque tentacles of systemic risk they were creating would turn out to be. When it all started to go wrong, the smart boys were left holding the short end of their own stick.

    Quote Originally Posted by OpportunityCost View Post
    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.
    Blame belongs with those who earned it, and this blanket, well, we all contributed in some way or other is a big bunch of baloney. Tax cuts for the rich were a disaster. These were an automatic decrease in aggregate demand. The Fed announcing that it was freezing interest rates in the long-term was a disaster. Interest rates and asset prices are inversely related. What did anyone think would happen to housing prices? The Fed and SEC doing nothing as Wall Street started sopping up and passing on all that hopped-up paper from Countrywide et al. was a disaster. By late 2003, articles in scholarly and trade journals were already warning of a crisis when interest rates rose which of course they did between 2004 and 2006. Nobody paid any attention. Bush took leverage limits off of Wall Street and raised affordable housing targets again. What was he thinking? Greenspan said he was keeping a close eye on particularly the subprime situation and would take any appropriate action. Hah! They all stood around and encouraged the whole mess, and you wonder why analysts blame them?

    The people who left their fingerprints on this mess were the Bushies who created the conditions for it, those who took knowing advantage of those conditions -- including brokers, the Wall Street Big Five, a bunch of appraisers who rightly felt they had to go along to get along if they were ever going to get work again, and the stupid bond rating agencies whose response to escalating demand was escalating shortcuts that provided no actual rating of securities at all. And then there were those in front of whom all this played out, and yet they did nothing. That would be the Bushies yet again.

    Not responsible at all meanhwile were homeowners, homebuyers (including speculators), Carter, Clinton, Dodd, Frank, Pelosi, CRA, GLB, or CFMA. The GSE's we can point to a little bit, though late in the game and long after the horses were already out of the barn.
    Last edited by Cardinal Fang; 01-17-13 at 07:23 PM.

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

    Quote Originally Posted by OpportunityCost View Post
    Take the arrogance and stick it. We disagree about a lot of particulars, dont make it personal and dont bait.
    You've been passing around nonsense as if you knew what you were talking about. Don't expect a lot of charity over that. It won't be forthcoming.

    Quote Originally Posted by OpportunityCost View Post
    Im not sure how you are missing the massive increase in GSE inclusion in backing this process but you are missing it.
    Increase? The GSE's were progressivly being cut out of the game. The Big Bypass was sucking up more and more business as private brokers pushed more and more high-cost, high-profit paper into the system. Bush was hitting the GSE's over the head trying to break them up into little pieces. His GSE czar scheme failed, and his cripple their portfolios scheme failed, but he finally did get them by discovering "questionable" accounting practices and having the SEC force them to redo their books. Would that Wall Street had gotten such attention. The result was that GSE market shares on both sides fell from early in the decade right through the ultimate debacle.

    Quote Originally Posted by OpportunityCost View Post
    The regulation ended when Bush took office?
    Active enforcement of CRA ended when Bush took office.

    Quote Originally Posted by OpportunityCost View Post
    If you believe what you typed that I bolded, I dont know how you can believe both things. Thats you buying into political propaganda.
    Terms defining a conforming loan were eased only slightly. This infuriated great American heroes such as Angelo Mozilo of Countrywide who was threatening Fannie Mae with taking all his prime business off to Wall Street as well if the GSE's didn't lower standards and start buying more garbage.

    Quote Originally Posted by OpportunityCost View Post
    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.
    GLB was passed in 1999 and it changed two sections of Glass-Steagall, the net results of which was that banks, brokers, and insurance companies could all be operated under the same roof, and officers could serve in more than one such entity without automatically being guilty of a conflict of interest. Banks and brokerages had actually been operating under the same roof since the mid1980's. A year before the law changed, Citicorp and Travelers Insurance merged in direct violation of the law, and promptly received a Fed waiver for the deal. GLB may not have been a good idea, and it certainly contrbuted to the wave of rigged IPO's that shortly followed, but it was essentially a case of the law catching up with an already existing reality of a blended rather than a compartmentalized financial services sector. There was nothing here that led to the credit crisis of 2007. And the two sides by the way are are commerical banking and investment banking.

    Quote Originally Posted by OpportunityCost View Post
    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.
    Bush in actual fact screwed up a long list of things. History books will be blaming him for all this for centuries. You don't get a free pass for leaving town. You want him let off a hook or two? Point to a reason why he should be.

    Quote Originally Posted by OpportunityCost View Post
    Dem pushback on GSE regulation was gigantic.
    There was no Bush proposal for GSE regulation. All he wanted to do was kill them. There were bipartisan bills drafted in congress to modernize the safety-and-soundness regulation of the GSE's, but Bush killed them. The Federal Housing Finance Reform Act of 2005 (H.R. 1461) had passed the Republcian House by a vote of 331-90. It got the "one-finger salute" from the White House as Mike Oxley (Republican Chair of the Financial Services Committee) famously put it. The bill died. In the other chamber, the notorious S.190 "kill the GSE's" Bush bill was going nowhere at the time -- because there were not nearly enough Republican votes to pass it, even though they held a 55-45 majority. That's your Republican pushback in action there.

    Quote Originally Posted by OpportunityCost View Post
    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.
    I'm interested in who screwed up what, and that was virtually all Republicans all the time. I am not interested in any counter-factual, oh-be-reasonable, blame-shifting scheme that tries to take blame away from where it actually belongs and put it where it actually doesn't belong. You've been rather active in this latter area.

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

    Quote Originally Posted by Fenton View Post
    Cardinal, the poster who's not supporting agenda and who's liberal apology is as pure as the driven snow.
    Yes, your clock has been cleaned again. Poor fellow.

    Quote Originally Posted by Fenton View Post
    The CRA making sure FDIC Banks catered to the communities they served meant lowering standards under threat of massive fines....Wells Fargo.
    LOL!!! Wells Fargo entered a settlement agreement for having discriminated against tens of thousands of minority credit applicants in violation of the Equal Credit Opportunity Act and the Fair Housing Act. These were not CRA-related loans. They were simply loans that blacks and hispanics had applied for. Do you really want to stand up for that kind of racism in America?

    Otherwise, your rant and blah-blah isn't impressing me at all.

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

    Quote Originally Posted by OpportunityCost View Post
    You are arguing out of both sides of your mouth. You claim Bush cranked up GSE involvement then argue that the GSEs had nothing to do with it. Im done debating with someone whose base argument is dishonest.
    You're done because you lack the factual and conceptual background needed to continue. Bush did indeed crank up affordable lending targets. That's a simple historical fact. Here is that history...

    GSE_affordable_goals_1993-2008.jpg

    Was that a clever idea to be calling for more and more low-income loans with a credit crisis already in progress? A lot of people would file that in the same folder as cutting leverage limits on the Wall Street Big Five in 2004. Not the brightest move ever.

    But the GSE's still did not cause the crisis. That was born, grew up, and became termially ill between 2002 and 2006 as the rersult of more and more toxic waste being dumped into secondary mortgage markets by the Wall Street combine. The housing market peaked in the Spring of 2006, the rest was already a done deal. Home prices began to fall. Interest-rate triggers were kicking in all over town thanks to those exotic broker-driven loan terms. Defaults were on the rise and would soon lead major banks all over the world to take tens and hundreds of billions of mark-to-market losses as the global financial system threatened to unravel before our eyes. That's what Bush and the cowboy capitalists accomplished. The GSE's were bit players by comparison.

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

    Quote Originally Posted by Fenton View Post
    Who cranked the GSEs targets on sub prime mortgages up to 55% ?
    Bush-43

    Quote Originally Posted by Fenton View Post
    Who cranked them up to 40% ?
    Clinton

    Quote Originally Posted by Fenton View Post
    30% ?
    Bush-41

    Quote Originally Posted by Fenton View Post
    Why was it so easy to obtain credit in the first place ?
    There were several reasons, an important one among them having been the Fed's decision to freeze interest rates at 1% after Bush's tax cuts for the rich didn't work.

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

    Quote Originally Posted by Fenton View Post
    THATS Cardinal in a nut shell. He so determined to villify Bush he'll eventually contradict himself and rebut his own argument. Liberals ALL debate from a point of dishonesty. Otherwise they wouldn't have anything to say.
    So many right-wing diatribes end in exactly this manner. Get your pants beat off, hurl some vague personal insult, declare victory, and then run away...

    run_away.gif

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

    Force? LOL! That was Clinton swagger. There is nothing in CRA that says anything at all about enforcement or about acquisitions or interstate operations. Even under deregulation, the latter did require a federal checkoff, so Clinton implied that banks with intentions in those areas better have an acceptable CRA rating if they expected their applications to be acted on expeditiously. There are no penalties of any sort included in CRA. There are no means of enforcing anything. What prompted expanded operations in previously underserved communities was the carrot of proven nice profits, not the stick of anything the feds could actually have done.
    Yeah, shut up, stop spreading complete disinformation. Im going to quote the FRBSF.org website directly.

    4. The federal banking agencies enforce the CRA by examining the CRA record of a bank, issuing a written report with a rating, and taking the bank’s CRA record into account when considering the bank’s application to expand its business.
    As part of their regulatory function, the federal banking agencies periodically send examiners to a bank to determine whether it is in compliance with the banking laws, including the CRA. At the end of the CRA examination, the agency issues a written report describing its findings and containing one of four ratings: outstanding record of meeting community credit needs; satisfactory record; needs to improve; and substantial non-compliance. In addition to these periodic examinations, the federal banking agencies also evaluate certain bank expansion applications to ensure that the bank is capable of expanding and qualified to do so. One of the issues the agencies consider when a bank applies to expand its business is the bank’s CRA record. An agency may deny an application
    10. Several other laws complement the CRA, including the Fair Housing Act and the Equal Credit Opportunity Act.
    The Fair Housing Act7 (FHA) and the Equal Credit Opportunity Act8 (ECOA) are two important laws relating to lending in minority applicants and predominantly minority communities. They complement and supplement the CRA in coverage and enforcement. The FHA and ECOA are broader than the CRA in that they cover all lenders, not just banks. They also differ in the characteristics they protect: while the CRA focuses on income, the FHA and the ECOA protect against discrimination based on race, gender, and disability, among other characteristics. The CRA and ECOA cover all forms of credit, while the FHA covers housing-related credit transactions. Finally, while it is very difficult to enforce the CRA in court, the FHA and ECOA mandate strict penalties for violations, including monetary damages, and both can be enforced in court by private individuals or groups and by government agencies at the behest of private parties.
    The teeth of CRA compliance had already moved to the courts and with suits brought by local community groups.

    Secondly you argue both that the GSEs were decreasing in involvement and that Bush increased their targets, increasing their involvement.

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