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

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

    Quote Originally Posted by OpportunityCost View Post
    Its really simple if you could follow logic in any sort of process.

    Banks needed a mechanism to insure themselves against risk from the types of loans they needed to make to be in compliance with CRA. The government provided that with GSE underwriting, CDS legislation, legalzation of mortgage deriviative formulas that were not sound, approval of the rating system being used at the time, legalization of increased leverage, ever higher GSE targets---all of which occurred across 2 administrations and began in yet a third.

    Its not a Dem problem or a Rep problem, its a DC establishment problem. They opened the door by creating mechanisms that allowed it to take place, then refused to regulate it before it crashed. Popular policy doesnt mean GOOD policy.
    We're getting closer to agreement here, except for one significant phrase: "risk from the types of loans they needed to make to be in compliance with CRA." Compliance with the CRA did not require banks to lower their lending standards to comply. There seems to an assumption amongst the anti-CRA folks that ending racial discrimination and redlining results in higher risk loans. That is not factually correct and seems to be based on racist assumptions. The CRA requires evaluating potential borrowers as individuals, not as members of an ethnic group or residents of a particular neighborhood. If anyone could point to any CRA legislation or regulation that mandates lower standards then I would not be harping on this point.

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

    Quote Originally Posted by iguanaman View Post
    Why is that the reason and not the money
    they made from selling those bad
    loans? In your world, bankers don't care about money? Only about fulfilling some toothless Govt. program who's supporters are not even in power? You must think bankers are fools.
    The majority of the money "made" off those bad loans was made by the GSEs who used it to buy more bad loans.

    It was the primary funding for the secondary market.

    The same GSEs that were put under regulatory pressure to buy more sub prime debt in the mid ninetees by HUD.

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

    Quote Originally Posted by Fenton View Post
    Its NOT the fault of the derivitives or the CDSs,which are nothing new.

    Its when those derivitives are a bundle of good and junk mortgages and then passed off to investors with no way to assess their true value.

    Dont blame the gun, blame the dhooter.
    I see that point, I don't necessarily oppose all uses, or types, of derivatives. The "shooter" I blame is the people who bundled the bad loans, those who gave them good ratings (which gets us back to the S&P lawsuit) and lax/corrupt regulators and legislators (who I acknowledge come from both political parties) who allowed it to happen. There is still no reason or proof for the belief that banning racial discrimination and redlining (ie. the CRA) is the cause-it was greed, corruption and laziness.

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

    Quote Originally Posted by Fenton View Post
    Wow....

    They FINANCED the bubble. Bought the debt, bundled the mortgages, good with bad and sold them off to investment banks as derivitives.

    Derivitives filled with rotten loans.
    No on so many levels. The crap that caused the crisis could not be sold to Fannie and Freddie because they did not meet their requirements.....you have read too much of the GOP talking points.. Fannie and Freddie did NOT cause the financial crisis.. it was private sector predatory lending and greed that caused it.
    PeteEU

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

    Quote Originally Posted by PeteEU View Post
    No on so many levels. The crap that caused the crisis could not be sold to Fannie and Freddie because they did not meet their requirements.....you have read too much of the GOP talking points.. Fannie and Freddie did NOT cause the financial crisis.. it was private sector predatory lending and greed that caused it.
    FNF owned half the mortgage paper at the end of 2007. Youre going to tell me they had no bad loans? Even you cant be that gullible.

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

    Quote Originally Posted by Hard Truth View Post
    I see that point, I don't necessarily oppose all uses, or types, of derivatives. The "shooter" I blame is the people who bundled the bad loans, those who gave them good ratings (which gets us back to the S&P lawsuit) and lax/corrupt regulators and legislators (who I acknowledge come from both political parties) who allowed it to happen. There is still no reason or proof for the belief that banning racial discrimination and redlining (ie. the CRA) is the cause-it was greed, corruption and laziness.
    ugh.
    All the processes that were abused were created to make CRA compliance easier. Do I need to say it a million times before you dem water carriers will get it?

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

    Quote Originally Posted by PeteEU View Post
    No on so many levels. The crap that caused the crisis could not be sold to Fannie and
    Freddie because they did not meet their requirements.....you have read too much of the GOP talking points.. Fannie and Freddie did NOT cause the financial crisis.. it was private sector predatory lending and greed that caused it.
    LOL !!!

    They were mandated, put under a quota system to buy the "crap" in the early 90s, forced to increase the share of the crap in the mid ninetess.

    They owned 66% of the "crap" by the end of 2008 and 80 % of the "crap" was on the books of Govt Financial entities when it all fell apart.

    Hillarious. How could anyone be so ignorant.

    By the mid 2000s the GSEs were offering no money down ARMS for people with no credit and questionable work history.

    Buzz off dude. Grown-ups are discussing inportant issues.

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

    Quote Originally Posted by Hard Truth View Post
    I see that point, I don't necessarily oppose
    all uses, or types, of derivatives. The "shooter" I blame is the people who bundled the bad loans, those who gave them good ratings (which gets us back to the S&P lawsuit) and lax/corrupt regulators and legislators (who I acknowledge come from both political parties) who allowed it to happen. There is still no reason or proof for the belief that banning racial discrimination and redlining (ie. the CRA) is the cause-it was greed, corruption and laziness.
    All the greed, corruption and laziness in the world couldn't prior to the 90s force banks to lower their lending standards.

    So, it had to be institutionalized. Regulated through Govt programs that started off with good intentions but were corrupted by politicians.

    Stopping racism/discrimination is a good thing but letting a powerful agency extend draconian measures to a industry that relies on "discrimination" to function without going bankrupt is what the CRA and HUD reformers of the 90s are guilty of.

    CRA had been around since 1977. What politian(s) forced major changes and forced a quota system on the GSEs and private lenders using the backing and enforcment of those agencies ?

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

    A loan officer told me you need to know 3 things to make a good loan.

    Will He Pay ( credit history )
    Can He Pay ( income / employment )
    If He Doesn't Pay Can I Make Him Pay ( Collateral )

    If you get a yes on those three questions then make the loan.

    What part of that age old standard I just mentioned is racist ?

    And were anx of those 3 things "tweaked" during the sub-prime disaster ?

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

    Quote Originally Posted by OpportunityCost View Post
    ugh.
    All the processes that were abused were created to make CRA compliance easier. Do I need to say it a million times before you dem water carriers will get it?
    I know that is what you think, but it still has not been proven by you or anyone lese that complying with the CRA requires lowering lending standards. This is a HUD statement that Fenton posted that seems much more credible "Mortgage industry participants appear to have been drawn to encourage borrowers to take on these riskier loans due to the high profits associated with originating these loans and packaging them for sale to investors."

    Business people seek the highest possible profits, corporation are required to do so by charter. So why is it easier to believe that anti-discrimination laws are the cause of the problem rather than profit seekers using loopholes in the law.

    That is a problem I have with conservatives in general, they tend to consider the most powerless people (the poor and minorities) to be incredibly powerful and malicious and they assume that all attempts to help the needy by ending discrimaination are the cause of all problems rather than the age-old universal human tendency to act greedily when given an opportunity (such as a loophole in the law).

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