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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 Cardinal Fang View Post
    Fannie Mae agreed to a $440 billion commitment (not an actual transaction) to purchase loans made to minorities over an unspecified period of time. This was no great leap on their part as at the time they expected to purchase more than that amount over the next several years. Subprime was THE market in 2002, and the GSE's expected that they would serve and dominate that market just as they did the prime market. They had better than a 70% share of the primary market at the time and weren't expecting anything else in subprime. Things turned out differently of course.

    From the Bush point of view, this was all just political bells and whistles as he tried to rehabilitate his image among minority voters prior to the 2004 election. He wasn't happy with the words "affordable housing goals" so he papered them over with the more race-specific term Minority Housing Initiative. Minority home ownership had been rising anyway, and it continued to rise through 2004. Then things got ugly. Interestingly perhaps to some, the one minority subclass where home ownership rates held firm all the way to 2008 was foreign-born immigrants, many of whom of course do not have papers.


    CRA included plenty of subprime loans and those loans included extra points or fees or slightly higher interest rates to balance prospective returns against a rated perception of slightly elevated risk. Such CRA loans however were much less likely to fail than subprime loans written by non-CRA lenders to similar borrowers in similar neighborhoods because CRA lenders were interested in putting borrowers into loans they could afford to service, while private brokers were interested in putting borrowers into loans that generated a lot of up front fees and profits to brokers, and who the hell cared what might happen to the borrower or the eventual noteholder down the road anyway.
    Just how many of those no money down loans that Bush sold to Fannie Mae were actually sold to minorities and how many resulted in them actually owning a home today?
    The subprime housing bubble caused a huge market in home "flipping" that resulted in many subprime loans being sold to mid and higher income buyers, many of them who were "caught" when the music stopped.
    I doubt very much the Bush would have pushed those loans if the bankers did not push him to do so. Reselling those bad loans immediately was an important part of their scheme. I think you are being too generous, I have seen no evidence that Bush was worried about the level of minorities that owned homes before OR after the program.
    In fact he claimed he wanted to "rein in" Fannie Mae just one year later.

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

    Quote Originally Posted by Fisher View Post
    The economy was starting to trend down by the time Bush took office and the G-S repeal that wrecked the economy was the result of Clinton, and the mass exodus of jobs was because of Clinton policies. But hey, don't let anything jeopardize your campaign for the Presidency of the Post hoc ergo propter hoc school of economics.
    Don't try and rewrite history. Deregulation was a long standing policy of Republicans. They prided themselves on never seeing a regulation they did not want to end. John McCain's middle name was "Mr. Deregulator" Republicans in congress wrote and introduced the bills that deregulated the banks and then cajoled Clinton and the Dems in Congress to go along. Clinton signed the last banking bill as a lame duck after Bush was declared his successor. Refusing to sign that bill would have not only broken with tradition but would have been futile as it would have been simply reintroduced and signed by Bush anyway. But you are rightabout one thing, Clinton's biggest mistakes were when he went along with the Republican majority in Congress.

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

    Quote Originally Posted by pbrauer View Post
    President Bush pushing his "ownership society"






    Bush drive for home ownership fueled housing bubble
    By Jo Becker, Sheryl Gay Stolberg and Stephen Labaton
    Published: Sunday, December 21, 2008


    WASHINGTON — "We can put light where there's darkness, and hope where there's despondency in this country. And part of it is working together as a nation to encourage folks to own their own home."

    - President George W. Bush, Oct. 15, 2002

    The global financial system was teetering on the edge of collapse when Bush and his economics team huddled in the Roosevelt Room of the White House for a briefing that, in the words of one participant, "scared the hell out of everybody."

    It was Sept. 18. Lehman Brothers had just gone belly-up, overwhelmed by toxic mortgages. Bank of America had swallowed Merrill Lynch in a hastily arranged sale. Two days earlier, Bush had agreed to pump $85 billion into the failing insurance giant American International Group.

    The president listened as Ben Bernanke, chairman of the Federal Reserve, laid out the latest terrifying news: The credit markets, gripped by panic, had frozen overnight, and banks were refusing to lend money.

    Then his Treasury secretary, Henry Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history. Bush, according to several people in the room, paused for a single, stunned moment to take it all in.

    "How," he wondered aloud, "did we get here?"

    Eight years after arriving in Washington vowing to spread the dream of home ownership, Bush is leaving office, as he himself said recently, "faced with the prospect of a global meltdown" with roots in the housing sector he so ardently championed.

    There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.

    But the story of how the United States got here is partly one of Bush's own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.

    From his earliest days in office, Bush paired his belief that Americans do best when they own their own homes with his conviction that markets do best when left alone. Bush pushed hard to expand home ownership, especially among minority groups, an initiative that dovetailed with both his ambition to expand Republican appeal and the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

    Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. The president spent years pushing a recalcitrant Congress to toughen regulation of the companies, but was unwilling to compromise when his former Treasury secretary wanted to cut a deal. And the regulator Bush chose to oversee them - an old school buddy - pronounced the companies sound even as they headed toward insolvency.

    As early as 2006, top advisers to Bush dismissed warnings from people inside and outside the White House that housing prices were inflated and that a foreclosure crisis was looming. And when the economy deteriorated, Bush and his team misdiagnosed the reasons and scope of the downturn. As recently as February, for example, Bush was still calling it a "rough patch."

    The result was a series of piecemeal policy prescriptions that lagged behind the escalating crisis.

    ...

    Morals of the story. Not everyone is meant to own a home, and the government usually screws things up.

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

    Quote Originally Posted by Cardinal Fang View Post
    Taking shelter from the storm, eh? So much easier to type meaningless nothingnesses than to come up with any sort of concrete or tangible response. You posted a stream of lies and errors. You shouldn't have done that if you weren't willing to be called on it. Don't do the crime if you can't do the time.
    Right. We have your opinion. No source data whatsoever. Your statement could just as easily be turned on you as me. You have gone so far as to say the actual stautes dont say what they say. Spinning bull**** doesnt make it anything more bull****.

    Arrogance about being correct doesnt make you correct, source your crap or quit talking it.

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

    Quote Originally Posted by Fisher View Post
    The economy was starting to trend down by the time Bush took office and the G-S repeal that wrecked the economy was the result of Clinton, and the mass exodus of jobs was because of Clinton policies. But hey, don't let anything jeopardize your campaign for the Presidency of the Post hoc ergo propter hoc school of economics.
    Just the usual recycled nonsense. There is always a period of business caution prior to a Presidential election, particularly when a change in administration is coming either way. This pause was evidenced as expected in a softening in gross private domestic investment over the second half of 2000. But things started to ramp up to a level beyond caution as the radical economic proposals of this legacy candidate from Texas started to become more clear. He was basically threatening to overturn the whole apple cart that had served so many so well for so long. And then the bumpkin actually got elected -- sort of -- and started acting out his campaign fantasies. Welcome to the First Bush Recession. It was essentially an escalating crisis of confidence in a man who was so unsuited to be at the top. It would take 9/11 to shake us out of that and give us all something more important to think about for a while.

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

    Quote Originally Posted by iguanaman View Post
    Just how many of those no money down loans that Bush sold to Fannie Mae were actually sold to minorities and how many resulted in them actually owning a home today?
    Bush didn't sell any loans to anybody. Fannie Mae said, oh sure, over the next few years, we'll buy $440 billion worth of mortgages issued to minority borrowers. Because they were planning on doing that anyway, and it gave the President something to say in a speech. But keep two things in mind in all this -- the vast majority of subprime loans did not fail, and at least through late 2006 when they did begin to get desperate, the GSE's were acquiring the choicest morsels from among them. Critics claim that the lowest slices of the GSE "near-prime" or "A-minus" program purchaes were indistinguishable from subprime, but the truth in that is merely definitional. The worst loan that the GSE's acquired was obviosuly indistinguishable from the best loan that they did not acquire. The rest were more and more plainly superior the higher up the list you went. Compare and contrast to the absolute junk that Wall Street was buying up and securitizing. In any case, Bush was merely posturing and showboating here, and while there aren't any records to examine, it's almost impossible to believe that large numbers of minority borrowers whose loans were acquired by the GSE's in and around 2002 did not in fact weather the storm and are still living happily in the homes they purchased a decade or so ago.

    Quote Originally Posted by iguanaman View Post
    The subprime housing bubble caused a huge market in home "flipping" that resulted in many subprime loans being sold to mid and higher income buyers, many of them who were "caught" when the music stopped.
    Speculators are a specialized sort of investor, and they are a part of almost every market, and in some, a necessary part. They are typically well-heeled and sophisticated players. Rising home prices allow real estate speculators to do what they do more easily and more quickly, but their numbers remained entirely insignificant everywhere but in the media. Keep in mind the extent to which what you call "the bubble" was fed by mortgage refinancing. That is, an owner flipping his house to himself. Keep in mind as well the portion that was second mortgages (equity loans and lines), not original mortgages at all. If there is a case to be made for "flippers" driving any part of the market, I've never seen it. It's certainly not apparent in any of the numbers.

    There is no question on the other hand that mortgage brokers put a great many borrowers who were qualifed for prime terms into high-cost, high-profit subprime paper and that such actions in fact ruined a great many lives. That had nothing to do with market speculators however. These unscrupulous brokers were merely being self-serving crooks. Many enough were making a fat-cat living off of yield-spread premiums that provided incentives to squeeze a borrower for absolutely every penny they could.

    Quote Originally Posted by iguanaman View Post
    I doubt very much the Bush would have pushed those loans if the bankers did not push him to do so. Reselling those bad loans immediately was an important part of their scheme. I think you are being too generous, I have seen no evidence that Bush was worried about the level of minorities that owned homes before OR after the program.
    There was no big scheme here. This was Bush making PR hoopla out of the GSE's publicly agreeing to do what they had intended to do anyway. And at the time, the relatively new subprime market was making everyone a lot of money while the pretty much saturated prime market sort of sat there like a lump. Selling loans is meanwhile how lenders recapitalize. It is a necessary part of supporting the market. All Bush's touting of the GSE pledge did was send a message to front-line lenders that they would indeed be able to sell loans made to minority borrowers. And of course to other low- and moderate-income borrowers as well.

    Quote Originally Posted by iguanaman View Post
    In fact he claimed he wanted to "rein in" Fannie Mae just one year later.
    You're surprised at Bush's having been two-faced? Bush's overall design was to kill the GSE's outright and "privatize the mission" by turning the whole ball of wax over to Wall Street. Same vision he had (and his heirs still have) for Social Security. In 2003, he sent Treasury Secretary Snow up to Capitol Hill with a grand plan to create a new GSE czar within Treasury who would report to Bush and who could overrule any action taken by any GSE officer, thus having the power to strangle them. That plan fell on its face, but there would be more where that one came from.

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

    Bluster bluster bluster. Nothing to back up your rhetoric.

    http://research.stlouisfed.org/confe.../gse/White.pdf

    Fannie Mae and Freddie Mac are where they are because they were run as the largest
    hedge fund on the planet. A little calculation illustrates their business model.
    Suppose that we offered you the following opportunity: We will invest $1, you lend us
    $39. With this $40, we will buy bank-originated pools of mortgages that are not easy to sell and
    face significant long-term risks. Although we’ll attempt to limit that risk by using sophisticated
    financial hedging instruments, our models have large error and uncertainty. We’ll invest 15% of
    the funds in low-quality mortgages that households will be unable to pay in a recession or a
    severe housing downturn. And to make it even more interesting, we’ll become the largest
    financial institution in terms of assets that are related to mortgages and together buy around
    $1.7 trillion worth, making us truly too-big-to-fail.
    But it doesn’t stop here. We’re going to offer insurance on a whole lot more mortgages
    taken out in America, say $3.5 trillion (together), and guarantee them against default. We don’t
    want much for offering this insurance -- maybe around 20 cents per $100 of mortgage -- but
    that will provide us with $7 billion in profits per year (assuming absolutely zero foreclosures).
    As a lender to us, you might be worried how much capital we’ll hold as a buffer against all future
    defaults: for every $100 that we guarantee, we’ll hold only 45 cents. And because we want as big
    a market share as possible, we’re going to backstop some dicey mortgages.
    For this type of risky investment, we know that you are expecting a big return. However,
    we are only going to pay you the yield on government bonds plus a little extra. You would think
    our investment pitch was crazy and reject the deal outright. But if we came along and whispered
    to you that we have a wealthy uncle – his name is Sam – that will make you whole on the money
    that you lent us no matter what happens, do you care about the risk? If you believe that Sam will
    be there, you’ll give us your money freely.
    This, of course, is a description of the business model of Fannie Mae and Freddie Mac.
    Consider the scale and complexity of the problem. The government cannot simply
    default on the GSE debt with the intention of passing losses onto creditors. About 50% of this
    debt is held by financial institutions and about 20% by foreign investors, who also own the
    majority of government debt. Due to their size and interconnectedness, the GSEs cannot simply
    be unwound in the ways that have been successful for smaller financial firms. We are dealing
    with $3.5 trillion mortgage guarantees, a $1.7 trillion mortgage portfolio, and a $2.2 trillion
    position in derivatives. Not only does the unwinding from the GSEs have to be handled well, the
    Federal Reserve also has to plan its own exit from the $1.5 trillion position of GSE debt and
    GSE-backed securities that it accumulated as part of the rescue package for the economy. It is
    clear thus that any resolution to the problem of the GSEs will likely involve several years, if not
    decades, of careful crafting and execution.
    Fannie and Freddie are the poster children of governmentrelated
    institutions, often set up with an initially limited and worthwhile mandate, but grown far
    beyond their initial purpose into uncontrollable and systemically risky behemoths.

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

    As its over-the-top tone should certainly have suggested to serious readers, the above is NOT a product of the FRB of St. Louis at all. It is a paper that was presented at a 2010 conference sponsored by that institution. This and the AEI paper presented after it apear to have constituted the these days mandatory whacko-corner of the event. They were the last two papers to be presented, leaving attendees the option of realizing that the real stuff had all been done already and then getting out of there at 2:00 to beat the traffic.

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

    Quote Originally Posted by Cardinal Fang View Post
    As its over-the-top tone should certainly have suggested to serious readers, the above is NOT a product of the FRB of St. Louis at all. It is a paper that was presented at a 2010 conference sponsored by that institution. This and the AEI paper presented after it apear to have constituted the these days mandatory whacko-corner of the event. They were the last two papers to be presented, leaving attendees the option of realizing that the real stuff had all been done already and then getting out of there at 2:00 to beat the traffic.
    How's things in the cheap seats? Where you dont present any sources, any cites and just call everything everyone else presents as whacko and false. Thats why you are full of crap--you just keep presenting the same damn argument with nothing to back it up. Thats not debating, thats arguing. Let me know when you want to debate.

    Btw just to keep things in perspective the authors and their credentials:
    Viral V. Acharya, Professor of Finance, NYU Stern School of Business, NBER and CEPR
    Matthew Richardson, Charles E. Simon Professor of Applied Financial Economics, NYU Stern School of Business and NBER
    Stijn Van Nieuwerburgh, Associate Professor Finance, NYU Stern School of Business, NBER and CEPR
    Lawrence J. White, Arthur E. Imperatore Professor of Economics, NYU Stern School of Business
    Here is another AEI Author for you to denigrate instead of examining his ideas and conclusions, because you know the absolute evidence of being right is attacking the messenger.

    Hey, Barney Frank: The Government Did Cause the Housing Crisis - Peter Wallison - The Atlantic


    Then we have Cardinal Fang's opinion and obvious bias. So hard to pick which one might be more reliable.

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

    Quote Originally Posted by Cardinal Fang View Post
    Bush didn't sell any loans to anybody. Fannie Mae said, oh sure, over the next few years, we'll buy $440 billion worth of mortgages issued to minority borrowers. Because they were planning on doing that anyway, and it gave the President something to say in a speech. But keep two things in mind in all this -- the vast majority of subprime loans did not fail, and at least through late 2006 when they did begin to get desperate, the GSE's were acquiring the choicest morsels from among them. Critics claim that the lowest slices of the GSE "near-prime" or "A-minus" program purchaes were indistinguishable from subprime, but the truth in that is merely definitional. The worst loan that the GSE's acquired was obviosuly indistinguishable from the best loan that they did not acquire. The rest were more and more plainly superior the higher up the list you went. Compare and contrast to the absolute junk that Wall Street was buying up and securitizing. In any case, Bush was merely posturing and showboating here, and while there aren't any records to examine, it's almost impossible to believe that large numbers of minority borrowers whose loans were acquired by the GSE's in and around 2002 did not in fact weather the storm and are still living happily in the homes they purchased a decade or so ago.


    Speculators are a specialized sort of investor, and they are a part of almost every market, and in some, a necessary part. They are typically well-heeled and sophisticated players. Rising home prices allow real estate speculators to do what they do more easily and more quickly, but their numbers remained entirely insignificant everywhere but in the media. Keep in mind the extent to which what you call "the bubble" was fed by mortgage refinancing. That is, an owner flipping his house to himself. Keep in mind as well the portion that was second mortgages (equity loans and lines), not original mortgages at all. If there is a case to be made for "flippers" driving any part of the market, I've never seen it. It's certainly not apparent in any of the numbers.

    There is no question on the other hand that mortgage brokers put a great many borrowers who were qualifed for prime terms into high-cost, high-profit subprime paper and that such actions in fact ruined a great many lives. That had nothing to do with market speculators however. These unscrupulous brokers were merely being self-serving crooks. Many enough were making a fat-cat living off of yield-spread premiums that provided incentives to squeeze a borrower for absolutely every penny they could.


    There was no big scheme here. This was Bush making PR hoopla out of the GSE's publicly agreeing to do what they had intended to do anyway. And at the time, the relatively new subprime market was making everyone a lot of money while the pretty much saturated prime market sort of sat there like a lump. Selling loans is meanwhile how lenders recapitalize. It is a necessary part of supporting the market. All Bush's touting of the GSE pledge did was send a message to front-line lenders that they would indeed be able to sell loans made to minority borrowers. And of course to other low- and moderate-income borrowers as well.


    You're surprised at Bush's having been two-faced? Bush's overall design was to kill the GSE's outright and "privatize the mission" by turning the whole ball of wax over to Wall Street. Same vision he had (and his heirs still have) for Social Security. In 2003, he sent Treasury Secretary Snow up to Capitol Hill with a grand plan to create a new GSE czar within Treasury who would report to Bush and who could overrule any action taken by any GSE officer, thus having the power to strangle them. That plan fell on its face, but there would be more where that one came from.
    i think you are omitting the predatory nature of the "new" subprime loans the banks devised. Your portrayal of the subprime bubble as merely an extension of policies in place before the deregulation of the banks is disingenuous. Not only were these loans sold to unqualified borrowers, their "ballooning" interest made it very unlikely they could be paid off as written anyway. You do understand that they were written that way to provide "investors" with high interest mortgage backed bonds and were misrepresented by the banks as low risk. To characterize the whole thing as a misguided attempt at "fair housing" for minorities misses the entire "purpose" of the invention of the subprime loan. Which was to provide a new and lucrative income stream for the Commercial banks that took advantage of the relaxed bank regulations. Add to that the fact that the banks could also use CDS's to "bet" against the loans they KNEW would fail and you have a windfall of profits that enabled over $80 billion in Banker bonuses during the bubble years.
    GW Bush not only kickstarted the bubble for the banks he also used Federal power to stop the States from using their own laws to regulate the predatory mortgages.
    Eliot Spitzer - Predatory Lenders' Partner in Crime
    Last edited by iguanaman; 01-20-13 at 02:13 PM.

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