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Thread: House, Senate leaders finalize details of sweeping financial overhaul

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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    Quote Originally Posted by Goldenboy219 View Post
    What law forced banks to give loans to people that could not afford them? Have any evidence to back up such statements?
    Yeah, I'd love to know what law forced banks not covered by CRA regulations to give loans to people with no income.

    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][113] 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"
    Community Reinvestment Act - Wikipedia, the free encyclopedia

    http://financialservices.house.gov/h...barr021308.pdf

    Hmmm. That fact seems to get in the way of "BLAME DEMOCRATS" so let's just pretend it's not true. After all, honesty is not a trait valued here.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  2. #52
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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    Quote Originally Posted by Goldenboy219 View Post
    What law forced banks to give loans to people that could not afford them? Have any evidence to back up such statements?
    Well... since you asked, here's a bit of a good idea of what went down, in case no one answered your question:

    Until the Clinton years, CRA compliance wasn’t a difficult matter for banks, which could get an A for effort simply by advertising loan availability in certain newspapers. Then the Clinton Treasury Department changed matters in 1995, requiring banks that wanted “outstanding” CRA ratings to demonstrate statistically that they were lending in poor neighborhoods and to lower-income households. But this new era of strict enforcement came about in response to conditions that no longer existed. The bank deregulation of the 1980s—initiated not by Republicans, but by the Carter administration’s federal Depository Institutions Deregulation and Monetary Control Act—paved the way for sharp competition among mortgage lenders. “The CRA may not be needed in today’s financial environment to ensure all segments of our economy enjoy access to credit,” argued a 1999 Dallas Federal Reserve Bank paper called “Redlining or Red Herring?”

    But banks, engaged in a frenzy of mergers and acquisitions, soon learned that outstanding CRA ratings were the coin of the realm for obtaining regulators’ permission for such deals. Further, nonprofit advocacy groups—including the now famous Acorn and the Neighborhood Assistance Corporation of America (NACA)—demanded, successfully, that banks seeking regulatory approvals commit large pools of mortgage money to them, effectively outsourcing the underwriting function to groups that viewed such loans as a matter of social justice rather than due diligence. “Our job is to push the envelope,” Bruce Marks, founder and head of NACA, told me when I visited his Boston office in 2000. He made clear that he would use his delegated lending authority to make loans to households with limited savings, significant debt, and poor credit histories. The sums at his group’s disposal were not trivial: when NationsBank merged with Bank of America, it committed $3 billion to NACA. The housing arm of Acorn received a $760 million commitment from the Bank of New York.

    Sizable pools of capital came to be allocated in an entirely new way. Bank examiners began using federal home-loan data—broken down by neighborhood, income, and race—to rate banks on their CRA performance, standing traditional lending on its head. In sharp contrast to the old regulatory emphasis on safety and soundness, regulators now judged banks not on how their loans performed, but on how many loans they made and to whom. As one former vice president of Chicago’s Harris Bank once told me: “You just have to make sure you don’t turn anyone down. If anyone applies for a loan, it’s better for you just to give them the money. A high denial rate is what gets you in trouble.” It’s no surprise, then, that as early as 1999, the Federal Reserve Board found that only 29 percent of loans in bank lending programs established especially for CRA compliance purposes could be classified as profitable.
    And where do the GSE's play in?

    Was there a high enough level of CRA-related lending to spark our current crisis? Not on its own, of course. The crucial link was the extension of CRA-type thinking and regulation to the secondary mortgage markets through the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which buy loans from banks in order to provide liquidity. Beginning in 1992, the Department of Housing and Urban Development pushed Fannie and Freddie to buy loans based on criteria other than creditworthiness. These “affordable housing goals and subgoals”—authorized, ironically, by the Federal Housing Enterprises Financial Safety and Soundness Act—became more demanding over time and, by 2005, required that Fannie and Freddie strive to buy 45 percent of all loans from those of low and moderate income, including 32 percent from people in central cities and other underserved areas and 22 percent from “very low income families or families living in low-income neighborhoods.” As one former Fannie Mae official puts it: “Both HUD and many advocates in the early 2000s were anxious for the GSEs to extend credit to borrowers with blemished credit in ways that were responsible.”
    The Financial Crisis and the CRA by Howard Husock, City Journal 30 October 2008


    Was all of this "on the dems". No it wasn't. It was all on the GOV'T being used to promote political needs into the markets. Anyone that tells you differently is playing partisan hackery games.
    Climate, changes. It takes a particularly uneducated population to buy into the idea that it's their fault climate is changing and further political solutions can fix it.



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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    I think i have a better idea of what "went down" than you ever will. Try and pay attention to the language we all agreed upon. No bank was forced to make loans to anyone they did not want to. At best, you can make a case that certain lenders were incentive. It does say volumes when we consider the focus of risk management.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    Moderator's Warning:
    House, Senate leaders finalize details of sweeping financial overhaulEnough of the calling people ignorant and other such crap. Stick to the issue or there will be penalties.
    We became a great nation not because we are a nation of cynics. We became a great nation because we are a nation of believers - Lindsey Graham

    Quote Originally Posted by Fiddytree View Post
    Uh oh Megyn...your vagina witchcraft is about ready to be exposed.

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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    Quote Originally Posted by Goldenboy219 View Post
    I think i have a better idea of what "went down" than you ever will. Try and pay attention to the language we all agreed upon. No bank was forced to make loans to anyone they did not want to. At best, you can make a case that certain lenders were incentive. It does say volumes when we consider the focus of risk management.
    But banks, engaged in a frenzy of mergers and acquisitions, soon learned that outstanding CRA ratings were the coin of the realm for obtaining regulators’ permission for such deals. Further, nonprofit advocacy groups—including the now famous Acorn and the Neighborhood Assistance Corporation of America (NACA)—demanded, successfully, that banks seeking regulatory approvals commit large pools of mortgage money to them, effectively outsourcing the underwriting function to groups that viewed such loans as a matter of social justice rather than due diligence. “Our job is to push the envelope,” Bruce Marks, founder and head of NACA, told me when I visited his Boston office in 2000. He made clear that he would use his delegated lending authority to make loans to households with limited savings, significant debt, and poor credit histories. The sums at his group’s disposal were not trivial: when NationsBank merged with Bank of America, it committed $3 billion to NACA. The housing arm of Acorn received a $760 million commitment from the Bank of New York.
    I'll leave you to ponder the bold part.
    Climate, changes. It takes a particularly uneducated population to buy into the idea that it's their fault climate is changing and further political solutions can fix it.



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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    Quote Originally Posted by MrVicchio View Post
    I'll leave you to ponder the bold part.
    So there was no legislation that forced banks to make risky loans, only a consumer advocacy group or two making demands. Like i said before, fascinating.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    Quote Originally Posted by Goldenboy219 View Post
    So there was no legislation that forced banks to make risky loans, only a consumer advocacy group or two making demands. Like i said before, fascinating.
    Look, you want to be "fascinated" by all means be so. I bet you won't admit that Janet Reno, AG at the time did this either?

    Under the Clinton administration, federal regulators began using the act to combat “red-lining,” a practice by which banks loaned money to some communities but not to others, based on economic status. “No loan is exempt, no bank is immune,” warned then-Attorney General Janet Reno. “For those who thumb their nose at us, I promise vigorous enforcement.”

    The Clinton-Reno threat of “vigorous enforcement” pushed banks to make the now infamous loans that many blame for the current meltdown, Richman said. “Banks, in order to not get in trouble with the regulators, had to make loans to people who shouldn’t have been getting mortgage loans.”

    This threat combined with the government backing of Fannie and Freddie set the stage for the current uncertainty, because the “banks could just sell the loans off to Fannie or Freddie,” who could buy them with little regard for negative financial outcomes, Richman said.
    CNSNews.com - Financial Meltdown: Where Does the Buck Stop?

    See for every "fascinating" moment you have, I reveal more of the story, the onion as it were, peels back each layer to show that in the end, Gov't demands forced behavior through rules, laws and regulations banks and lending institutions to act in a manner that was politically, not financially beneficial.
    Climate, changes. It takes a particularly uneducated population to buy into the idea that it's their fault climate is changing and further political solutions can fix it.



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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    Dude, you have nothing. Nobody was forced to do anything, regardless of the stick rattling of Reno. Denying a particular community credit based on proper risk management models is not illegal, never was illegal, and was incentivized by specific government agencies to offer lower income communities credit. Hate to break it to you, but not every bank became infested with sub prime paper, and residential real estate is only a portion of a banks balance sheet (the majority is tied up in various commercial ventures).
    Last edited by Kushinator; 06-27-10 at 05:10 PM.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    Quote Originally Posted by Dittohead not! View Post
    Seriously? You must remember how the lack of regulation led to mortgage brokers giving out "creative" loans to people who could not pay them back, then selling the papers as good investments, don't you? Does the term "toxic assets" ring a bell? That is the sort of thing that happens when banks are allowed to gamble with other people's money. Government regulation should prohibit such practices.

    I'm not sure that the government can be absolved of its involvment, or lack thereof. It was lack of oversight that led to the housing crash and the resulting recession, pure and simple.

    I have no idea whether the financial reform that is being proposed is going to solve the problem or not, and you don't either. The particulars are not public as yet.
    Quote Originally Posted by obvious Child View Post
    Easy. No regulation on banks on verification to get a loan. Banks didn't have regulation over that aspect of their business. Banking regulation deals more with what type of assets they can/must have and what their ratios are.

    And there was little regulation on derivatives. AIG had CDS that total liability easily exceeded its total assets and equity. There was no way they could ever pay even a fraction if those derivatives went bad.

    And you can explain this with actual facts and not partisan propaganda in actual economics terms? Or are you just another person RightinNyc is describing as effectively ignorant?
    Here is a very good explanation of how government policies contributed to the financial crisis.

    http://mercatus.org/sites/default/fi...dInMind(1).pdf

    And here is a perfect illustration of why this crisis was caused primarily by something policy makers cannot control, that is, excessive household debt.




    Bad policy and the aggregation of individual stupidity was the cause of this crisis. The "invisible hand" worked as expected, it was merely distorted by the government "solutions" to previous financial disasters. Just my opinion, of course.

    P.S. - Obvious Child, your posting style is unnecessarily abrasive. Please refrain from insinuating that I'm "effectively ignorant".

  10. #60
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    Re: House, Senate leaders finalize details of sweeping financial overhaul

    Quote Originally Posted by Goldenboy219 View Post
    I think i have a better idea of what "went down" than you ever will. Try and pay attention to the language we all agreed upon. No bank was forced to make loans to anyone they did not want to. At best, you can make a case that certain lenders were incentive. It does say volumes when we consider the focus of risk management.
    I've said it at least three times. The real problem was complete disregard by banks of conservative best banking practices.

    I'm still waiting for someone to show how it was regulation forced AIG to issue CDS that it had no possibility of ever even paying a fraction if they came due.

    But I won't get an honest answer from partisans here.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

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