U.S. 'Pretty ****ed' - Former TARP Inspector

Republic Now! said:

What deregulation was this? I don't think the banking industry has ever stopped being regulated since the great depression.

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well the banking industry was slightly deregulated under reagan,deregulated heavily under clinton to levels that caused the recession,slightly reregulated under bush(shame on him,he saw the writing on the wall,shrugged his shoulders and said oh well)and has remained nearly the same under obama.2 different presidents have seen the damage clintons deregulation have caused,and both bush and obama made half hearted attempts at fixing it.

sawyerloggingon said:

Be glad to. This is just a sample from a site that explains the whole thing, do yourself a favor and check the link out, you may learn something.

"But the Clintons and many other Democrats apparently believed such economic nonsense. To remedy the alleged racism at banks, they strengthened the "anti-redlining" regulations of the Community Reinvestment Act (CRA), which had originally been passed during the Carter years, and they instituted an aggressive campaign that forced lenders to abandon their established underwriting criteria and drastically lower their standards to accommodate minorities who would not otherwise qualify for a home loan."

"Key figures in the matter were Attorney General Janet Reno and her Deputy, none other than Eric Holder. They aggressively intimidated banks with threats of prosecution, lawsuits, stiff fines, and regulatory roadblocks to expansion and mergers. They paid little attention to actual lending practices and underwriting criteria, focusing instead on the end results in terms of percentages of minority loans approved. It mattered not whether the lenders were actually discriminating on the basis of race or whether minorities in general simply had worse credit histories (statistics show that they do). It was classic "affirmative action" for home loans."

How Democrats Wrecked the Economy and Successfully Blamed Republicans


Or google it yourself, theres a plethora of sites that go into great detail on this, broaden your horizons.

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Try as you might, there is no bit of evidence that suggests any regulator forced a bank to give out loans to people who cannot afford them. Secondly, the CRA only applied to FDIC insured institutions, meaning that lenders like Countrywide, Ameriquest, and New Century were free to make loans as they seen fit. Oddly enough, they are among the originators with the absolute highest default rates.

Why?

Because the subprime crisis had little (if anything) to do with the CRA.

Kushinator said:

Try as you might, there is no bit of evidence that suggests any regulator forced a bank to give out loans to people who cannot afford them. Secondly, the CRA only applied to FDIC insured institutions, meaning that lenders like Countrywide, Ameriquest, and New Century were free to make loans as they seen fit. Oddly enough, they are among the originators with the absolute highest default rates.

Why?

Because the subprime crisis had little (if anything) to do with the CRA.

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Obviously you didn't read the entire site I posted not to mention Fannie and Freddie and their role in this.

Kushinator said:

Try as you might, there is no bit of evidence that suggests any regulator forced a bank to give out loans to people who cannot afford them. Secondly, the CRA only applied to FDIC insured institutions, meaning that lenders like Countrywide, Ameriquest, and New Century were free to make loans as they seen fit. Oddly enough, they are among the originators with the absolute highest default rates.

Why?

Because the subprime crisis had little (if anything) to do with the CRA.

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Try this site, it has some good info you need to learn

Weaknesses of the Precrisis Model

Despite the potential beneficial effects of federal involvement in the secondary mortgage market, the rules and market structure under which Fannie Mae and Freddie Mac operated before conservatorship--referred to in this study as the precrisis model--had numerous weaknesses. Those weaknesses included the following:
Adverse effects from the implicit federal guarantee of the two GSEs (such as a concentration of market power, risks to the stability of the larger financial system, incentives for excessive risk taking, and a lack of transparency about costs and risks to the government);
Limited effects on affordable housing;
Lax regulation; and
Tensions in trying to balance competing public and private goals.

The implicit federal guarantee concentrated market power in Fannie Mae and Freddie Mac by giving them lower funding costs than potential competitors in the secondary market. As a consequence, the GSEs grew to dominate the segments of the market in which they were allowed to operate. Because of their size and interconnectedness with other financial institutions, they posed substantial systemic risk--the risk that their failure could impose very high costs on the financial system and the economy. The GSEs’ market power also allowed them to use their profits partly to benefit their other stakeholders rather than exclusively to benefit mortgage borrowers.

The implicit guarantee created an incentive for the GSEs to take excessive risks: Stakeholders would benefit when gambles paid off, but taxpayers would absorb the losses when they did not. (Financial institutions that lack the benefit of a federal guarantee have less incentive to take risks because doing so can increase their financing costs, although some still act imprudently at times.) One way that Fannie Mae and Freddie Mac increased risk was by expanding the volume of mortgages and MBSs held in their portfolios, which exposed them to the risk of losses from changes in interest or prepayment rates. Over the past decade, the two GSEs also increased their exposure to default losses by investing in lower-quality mortgages, such as subprime and Alt-A loans.

Because the federal guarantee was implicit rather than explicit, the costs and risks to taxpayers did not appear in the federal budget. That lack of transparency made it more difficult for policymakers to assess and control the GSEs’ costs and risks. Lack of transparency also made it difficult for policymakers to evaluate whether the GSEs were effectively and efficiently meeting their affordable-housing goals; several studies have questioned the effectiveness of the GSEs’ affordable-housing activities.


CBO | Fannie Mae, Freddie Mac, and the Federal Role in the Secondary Mortgage Market

VanceMack said:

Shocking...the partisan union shill 'liked' your comment... :lamo

The Carter/Clinton post was a gentle 'dig' at your need to bookend your blame with two republicans. Sorry you couldnt see that. You might note that in the very SAME thread I did indeed assign 'blame' squarely where it belongs...on BOTH parties. Of course...if you noted that, it would be hard to maintain the partisan line.

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When you bookend something, it includes all the crap in between. I can't believe it has to be explained once again. It's only partisan shills that make mountains out of molehills and you and Opportunity Costs have done a great job demonstrating that.

Kushinator said:

Try as you might, there is no bit of evidence that suggests any regulator forced a bank to give out loans to people who cannot afford them. Secondly, the CRA only applied to FDIC insured institutions, meaning that lenders like Countrywide, Ameriquest, and New Century were free to make loans as they seen fit. Oddly enough, they are among the originators with the absolute highest default rates.

Why?

Because the subprime crisis had little (if anything) to do with the CRA.

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Countrywide, Ameriquest, and New Century got quite rich on the commissions. That's what they wanted and care about as the debts were passed off to the banks who created neat little bundles of fail in CDOs.