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Thread: U.S. sues S&P over subprime ratings

  1. #111
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    Re: U.S. sues S&P over subprime ratings

    Quote Originally Posted by Grant View Post
    No, the CRA went largely unnoticed until the early 90's when Barack Obama, acting for ACORN, sued Citibank for discriminating against minorities. Of course at the time even Black owned banks were discriminating against these people because they were risks.


    You are missing the point.



    You can look up Barrack Obama sues Citibank in Chicago which forced banks to lend money to credit risks. It's all a matter of record and if you genuinely want to see something, as you say, just do some research. No one can spoon feed you.
    As I quoted in post #85, at least three posters on this thread claimed that the CRA forced banks to give loans to unqualified borrowers.

    I'm not asking about court cases, and their results. I want to see the proof that the CRA forced banks to give loans to unqualified borrowers.

    No one can show us the actual legislation or regulation that requires banks to give out loans to unqualified borrowers, yet they can find the time to post long posts with irrelevant assertions.

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    Re: U.S. sues S&P over subprime ratings

    To make it easier for our anti-CRA posters, I am providing a link to a document summarizing the CRA which includes the modifying legislation over the years. It even addresses criticisms of the CRA, which strangly enough, does not include "forces banks to loan to unqualified borrowers."

    This section address the issue of community groups and lawsuits:

    "1. In practice, community and local activist groups have often protested the
    applications of depository institutions and their holding companies on
    CRA grounds in an apparent effort to hold up the transaction until certain
    demands are met. On occasion, such protests have caused institutions or
    holding companies seeking regulatory approval for a transaction to modify
    particular business practices in order to satisfy such groups and/or the
    federal bank regulator, or even to agree to provide a protesting group with
    financial support for its particular projects. More often, however, the
    federal regulators have rejected these sorts of protests and proceeded to
    approve an institution’s or a holding company’s application.

    2. When federal bank regulators have approved applications notwithstanding
    CRA protests, community groups have occasionally sued the regulator to
    block the approval. The courts, however, thus far have dismissed these
    actions on the ground that CRA protesters suffer no constitutional “injury”
    necessary to invoke federal jurisdiction."

  3. #113
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    Re: U.S. sues S&P over subprime ratings

    Quote Originally Posted by Hard Truth View Post
    As I quoted in post #85, at least three posters on this thread claimed that the CRA forced banks to give loans to unqualified borrowers.

    I'm not asking about court cases, and their results. I want to see the proof that the CRA forced banks to give loans to unqualified borrowers.

    No one can show us the actual legislation or regulation that requires banks to give out loans to unqualified borrowers, yet they can find the time to post long posts with irrelevant assertions.
    I agree with you, the righties in this thread post no facts with backup, they just state erroneous opinions.

    I read the CRA from 1996 and I will tell you what I think it says. If anyone disagrees, come back with your proof.

    The problem dating back to the CRA original passage in 1977 was that banks set up in low income areas, took their deposits, but would not give them loans, so the inner city continued to decay. Banks used a process called red lining to exclude minorities by zip code. The 1977 bill disallowed red lining.

    Then banks went to credit scores that nobody in the inner city could qualify for, and still no loans in the inner city and still it decayed.

    In 1996, Clinton passed a new set of rules that said:
    - if you have a bank in the inner city, the ratio of loans you grant should match the demographics of the area you serve, so if 80% of the residents are black, then 80% of the loans should go to black families. They said do banking the old way, get to know your customers and give loans to the ones with steady jobs and character you trust.
    - if you don't meet the requirement, you can sell the bank, or you will not be allowed to open another bank in that state.

    Technically, you did not HAVE to grant a loan to anyone, especially if you were ok with the consequences. For a local bank, say a family bank, there were NO consequences, assuming you didn't want to expand.

  4. #114
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    Re: U.S. sues S&P over subprime ratings

    Quote Originally Posted by finebead View Post
    In 1996, Clinton passed a new set of rules that said:
    - if you have a bank in the inner city, the ratio of loans you grant should match the demographics of the area you serve, so if 80% of the residents are black, then 80% of the loans should go to black families. They said do banking the old way, get to know your customers and give loans to the ones with steady jobs and character you trust.
    - if you don't meet the requirement, you can sell the bank, or you will not be allowed to open another bank in that state.

    Technically, you did not HAVE to grant a loan to anyone, especially if you were ok with the consequences. For a local bank, say a family bank, there were NO consequences, assuming you didn't want to expand.
    So the government forced banks to "alter" lending standards to comply with demographic quotas, a decade and a half later the economy crashes due to large-scale default on mortgages, and the two are completely unrelated. And I'm a racist for implying a connection.

    I've learned much in this thread.

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    Re: U.S. sues S&P over subprime ratings

    Quote Originally Posted by StringBean View Post
    So the government forced banks to "alter" lending standards to comply with demographic quotas, a decade and a half later the economy crashes due to large-scale default on mortgages, and the two are completely unrelated. And I'm a racist for implying a connection.

    I've learned much in this thread.
    No one has provided evidence on this thread that banks were forced to alter lending standards in a way that required lending to unqualified borrowers.

    From my reading and learning about the history, the consensus opinion (from those who don't have an anti-CRA or general anti-regularity bias) on the major causes of the mortgage crisis is that it was largely caused by the widespread use of derivatives and related deception and/or lack of diligence involved with their sales. Many parties played a part by investing with the assumption that the steady increase in housing prices that was happening at the time would continue forever.

    What is interesting is that some people find it hard to believe that a significant number of people working within these business sectors would use deception to make a profit. It is my experience that a good portion of any group of people will do unethical acts for profit if they think they can get away with it. I find it easier to believe that lax regulations gave some people an opportunity to get rich at other's expense, than to believe that laws against redlining and racial discrimination caused the problem.

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    Re: U.S. sues S&P over subprime ratings

    Quote Originally Posted by Hard Truth View Post
    Until you can show us the actual laws/regulations that forced banks to lower
    lending standards you have no credibility.
    The last few post, especially the one which tries to pin the blame on Bush 10 years after the HUD and CRA initiatives were signed, 8 years after Clinton allowed these loans to be securitized is a great explanation of how Obama could have won twice.

    A cancer of ignorance, low intelligence and ideology has metastisized to the point where the dumbest of our electorate now determine our path.

    Just the thought that private lending institutions had the regulatory power to first free up massive amounts of credit and second to manipulate Govt backed loans should set off a spark of disbelief at least.

    But supposed "educated " people here have embrased the narative of the Liberal Democrats completely. The very simplistic and obviously wrong acusations against Bush, who in 2003 tried to reign in the GSEs massive aquisition of sub-prime debt, and the banks who didn't even hold a marginal amount of sub-prime debt when the house of cards fell.

    Over 85% of sub-prime debt wound up on the books of Government Financial Entities.

    Links have been posted for you "Hard Truth ".

    Your foray into calling posters racist is not without irony though. Its the very trigger that initiated the enforcment of CRA and HUD regulations that nearly collapsed our economy.

    I judge people by their actions, not by their skin color. You want to call people racist because you cant argue the merits of your counter position be my guest. Trust me, most Conservatives really could care less if their considered racist for criticizing the policies that brought us to such a perilous point in our countries history.

    It been a term used so often without merit that its now lost its denigrating effect.

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    Re: U.S. sues S&P over subprime ratings

    Quote Originally Posted by StringBean View Post
    So the government forced banks to "alter" lending standards to comply with demographic quotas, a decade and a half later the economy crashes due to large-scale default on mortgages, and the two are completely unrelated.
    The fact of the matter is that the vast majority of CRA subject banks did business PROFITABLY. Yes, if you get to know your customer, look him in the eye, know his job stability, and do your banking the old fashioned way, you can succeed. I never heard of ONE bank that pulled out of the inner city because of CRA. They made money. That is why the CRA did not cause the financial crisis.

    Lehman Bros. was an early and enthusiastic backer of subprime lending. It purchased the mortgages and used pools of the loans to back complex bonds, many of which were sold overseas. Merrill Lynch came onto the scene later.

    After the late-1990s meltdown in the subprime securitization business, Lehman stepped in with funds and other services that enabled First Alliance of Irvine to continue business in 1999 and 2000 despite lawsuits filed by state attorneys general, consumer groups and AARP.

    A 2003 decision by a Santa Ana federal jury, later upheld on appeal, found Lehman liable for aiding and abetting a carefully scripted First Alliance fraud targeting elderly and financially strapped homeowners. Plaintiffs’ attorneys had focused on internal memos, especially a Lehman due-diligence report that said First Alliance required its employees “to leave your ethics at the door.
    Lehman was big, early supporter of subprime - Los Angeles Times

    First Alliance was not a bank, therefore not controlled by CRA.

    A fairly implemented CRA would not have produced these results. Corporate predatory practices targeting people who were not sophisticated are what caused this.
    Some economists, politicians and other commentators have charged that the CRA contributed in part to the 2008 financial crisis by encouraging banks to make unsafe loans. Others however, including the economists from the Federal Reserve and the FDIC, dispute this contention. The Federal Reserve and the FDIC holds that empirical research has not validated any relationship between the CRA and the 2008 financial crisis.[56][57]

    Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charges the Federal Reserve with ignoring the negative impact of the CRA.[51] In a commentary for CNN, Congressman Ron Paul, who serves on the United States House Committee on Financial Services, charged the CRA with "forcing banks to lend to people who normally would be rejected as bad credit risks."[58] In a Wall Street Journal opinion piece, Austrian school economist Russell Roberts wrote that the CRA subsidized low-income housing by pressuring banks to serve poor borrowers and poor regions of the country.[59] Jeffrey A. Miron, a senior lecturer in economics at Harvard University, in an opinion piece for CNN, calls for “getting rid” of Fannie Mae and Freddie Mac, as well as policies like the Community Reinvestment Act that “pressure banks into subprime lending.”[60]

    However, others dispute the involvement of the CRA in the crisis. San Francisco Federal Reserve Bank Governor Randall Kroszner has stated that no empirical evidence had been presented to support the claim that "the law pushed banking institutions to undertake high-risk mortgage lending".[56] In a Bank for International Settlements ("BIS") working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust," relying partly on evidence that the housing bust has been a largely exurban event.[61] Others have also concluded that the CRA did not contribute to the current financial crisis, for example, FDIC Chairman Sheila Bair,[62] Comptroller of the Currency John C. Dugan,[63] Tim Westrich of the Center for American Progress,[64] Robert Gordon of the American Prospect,[65] Daniel Gross of Slate, and Aaron Pressman from BusinessWeek.[66]

    Some legal and financial experts note that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton,[67][34] stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made "perhaps one in four" sub-prime loans, and that "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[68] According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made risky "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis.[69] A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.[70] Emre Ergungor of the Federal Reserve Bank of Cleveland found that there was no statistical difference in foreclosure rates between regulated and less-regulated banks, although a local bank presence resulted in fewer foreclosures.[71]
    Community Reinvestment Act - Wikipedia, the free encyclopedia

    I also showed proof in post 107 of President Bush's leadership role in 2002, expanding home ownership for minorities. This was led by Bush, and I have shown the proof.
    Last edited by finebead; 02-09-13 at 10:08 PM.

  8. #118
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    Re: U.S. sues S&P over subprime ratings

    Quote Originally Posted by Fenton View Post
    The last few post, especially the one which tries to pin the blame on Bush 10 years after the HUD and CRA initiatives were signed, 8 years after Clinton allowed these loans to be securitized is a great explanation of how Obama could have won twice.

    A cancer of ignorance, low intelligence and ideology has metastisized to the point where the dumbest of our electorate now determine our path.

    Just the thought that private lending institutions had the regulatory power to first free up massive amounts of credit and second to manipulate Govt backed loans should set off a spark of disbelief at least.

    But supposed "educated " people here have embrased the narative of the Liberal Democrats completely. The very simplistic and obviously wrong acusations against Bush, who in 2003 tried to reign in the GSEs massive aquisition of sub-prime debt, and the banks who didn't even hold a marginal amount of sub-prime debt when the house of cards fell.

    Over 85% of sub-prime debt wound up on the books of Government Financial Entities.

    Links have been posted for you "Hard Truth ".

    Your foray into calling posters racist is not without irony though. Its the very trigger that initiated the enforcment of CRA and HUD regulations that nearly collapsed our economy.

    I judge people by their actions, not by their skin color. You want to call people racist because you cant argue the merits of your counter position be my guest. Trust me, most Conservatives really could care less if their considered racist for criticizing the policies that brought us to such a perilous point in our countries history.

    It been a term used so often without merit that its now lost its denigrating effect.
    Irrelevant links have been posted, but no links or quotes have been posted showing where the law requires loaning to unqualified buyers. On the other hand, Finebead (in post#117) and others have presented good evidence that the claim is false. It is a myth and/or lie.

    If you review my posts I have not called out any particular political party or politician for the economic crisis. There is definitely enough blame to go around for both parties. (although one party is more to blame for deregulation and lax enforcement)

    I have not made any arguments in favor or opposing any particular regulation, except to challenge the myth that the CRA forced lenders to offer loans to unqualified borrowers.


    I did not call any poster a racist, I said that those who oppose the CRA are racist and/or oppose regulation. I feel especially confident in this assertion since no one can show where the law or regulations require anyone to give loans to unqualified buyers. However, if anyone on this thread appears to be racist, it is the one person who claims that that there has never been a problem with redlining and racism in loans. If that isn't racist, it is awfully ignorant.
    Last edited by Hard Truth; 02-09-13 at 10:53 PM.

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    Re: U.S. sues S&P over subprime ratings

    Quote Originally Posted by Hard Truth View Post
    To make it easier for our anti-CRA posters, I am providing a link to a document summarizing the CRA which includes the modifying legislation over the years. It even addresses criticisms of the CRA, which strangly enough, does not include "forces banks to loan to unqualified borrowers."

    This section address the issue of community groups and lawsuits:

    "1. In practice, community and local activist groups have often protested the
    applications of depository institutions and their holding companies on
    CRA grounds in an apparent effort to hold up the transaction until certain
    demands are met. On occasion, such protests have caused institutions or
    holding companies seeking regulatory approval for a transaction to modify
    particular business practices in order to satisfy such groups and/or the
    federal bank regulator, or even to agree to provide a protesting group with
    financial support for its particular projects. More often, however, the
    federal regulators have rejected these sorts of protests and proceeded to
    approve an institution’s or a holding company’s application.

    2. When federal bank regulators have approved applications notwithstanding
    CRA protests, community groups have occasionally sued the regulator to
    block the approval. The courts, however, thus far have dismissed these
    actions on the ground that CRA protesters suffer no constitutional “injury”
    necessary to invoke federal jurisdiction."
    Look at their pro-bono work. Covington & Burling LLP | Publications

    About halfway down. Bleeding heart liberals through and through, I wouldnt trust their judgement in anything but to wring billable hours out of it. You pick a DC law firm out of thin air or did google do it for you?

  10. #120
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    Re: U.S. sues S&P over subprime ratings

    Quote Originally Posted by finebead View Post
    The fact of the matter is that the vast majority of CRA subject banks did business PROFITABLY. Yes, if you get to know your customer, look him in the eye, know his job stability, and do your banking the old fashioned way, you can succeed. I never heard of ONE bank that pulled out of the inner city because of CRA. They made money. That is why the CRA did not cause the financial crisis.

    Lehman was big, early supporter of subprime - Los Angeles Times

    First Alliance was not a bank, therefore not controlled by CRA.

    A fairly implemented CRA would not have produced these results. Corporate predatory practices targeting people who were not sophisticated are what caused this.

    Community Reinvestment Act - Wikipedia, the free encyclopedia

    I also showed proof in post 107 of President Bush's leadership role in 2002, expanding home ownership for minorities. This was led by Bush, and I have shown the proof.
    So WaMu.....
    Huge bailouts of AIG and BofA.
    Its worth noting that among industry leaders WaMu and BofA had very high CRA compliance ratings. So I guess thats just cioncidence and not causality.

    How about this?
    Background & Purpose
    ■The CRA requires that each insured depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution's application for deposit facilities, including mergers and acquisitions. (See CRA Ratings) CRA examinations (see Exam Schedules) are conducted by the federal agencies that are responsible for supervising depository institutions: the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS).
    I guess Im just blowing smoke.....

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