• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

I think I need to ask you why you are pursuing excuses for shrinkage of the LFPR that cannot be measured, while ignoring the Occam's Razor (simple and obvious) explanation ?

The average household lost 20% of its net worth with this recession. A recession caused 100% by government, btw. Not Wall Street. Not predatory lenders. Just plain Government. For folks to voluntarily leave the labor force, that is to forego earning a paycheck, the only positive reason would be that things are so good that the average American household is well-off enough for the wife to stay at home, kids go to college instead of working, take a vacation instead of working, take early retirement instead of working, etc. We know for a fact that the cumulative effects of the bad economy worked against all those scenarios. Nothing of leisure was enabled by this recession.

It is that simple. The shrink of the LFPR is all linked to a bad economy. It is a statistical anomaly that helps keep a terrible situation from appearing terrible on paper. But its still terrible at everyone's dinner table.

I call bull.

This recession was caused by all of us, not just the government.

Greed, from most of America and even some other parts of the world, caused this recession. People spending money they didn't have. Regular people and the government and even businesses, then getting screwed when that money started to become, at least in small parts. And the banks and others that loaned that money share some of the blame because they should have known those people couldn't pay back that money that was being borrowed. In some cases, they were counting on the people not being able to pay it back.
 
Since several have thrown out this notion that the housing bubble was due to under-regulation, a reminder or two for those who care to research it.

1) The "bubble" was the foundation of all things "collapse" with housing. If there was no bubble, there's no trouble. The bubble was the unnatural creation of government, beginning in the late 90's, with both the emergence of Fannie and Freddie as the overwhelmingly largest players in the mortgage market (50%), and our own Federal Government suing the major lenders to take-on more sub-primes. All of that is exceedingly well-documented. Once inflation in housing was off and running (the bubble), then everyone got a finger in the pie, which is completely to be expected ! They did not create the wave though. They only rode what government created.

2) Fannie and Freddie were exempted from oversight by Dodd-Frank.

Now the government, which caused the problem, says that they are the cure. And many liberals agree. :roll:

The bubble was NOT the trouble. The trouble was over leveraged banks and financial institutions that were on the bring of collapse and were too big to fail. Bubbles have been happening since market economies have existed. We had the Junk bond bubble in the 80's and the .com bubble at the end of the 90's. We had the railroad bubbles in the late 1800's, we had credit bubbles that led to the market collapse in 1929. Going back further the first recorded bubble was the Dutch Tulop bulb bubble in the 1600's. If our financial sector cannot weather a bubble which occurs in any market system then it's structrually unsound.

I agree with you in part....Government has pushed home ownership but you laying the full blame at the government for the bubble is not true. I'm not going to get into all the details because they've been posted countless times and honestly...regarding Frank-Dodd it's irrelevant.
 
I call bull.

This recession was caused by all of us, not just the government.

Greed, from most of America and even some other parts of the world, caused this recession. People spending money they didn't have. Regular people and the government and even businesses, then getting screwed when that money started to become, at least in small parts. And the banks and others that loaned that money share some of the blame because they should have known those people couldn't pay back that money that was being borrowed. In some cases, they were counting on the people not being able to pay it back.

My friend. "Greed" is a constant. "Greed" is as simple as you wanting a better tomorrow for yourself, and your family, than you have today. "Greed" is as old as dirt, and will be here so long as dirt is as well. And OBTW, "Greed" is such as OWS protesters wanting their college loans forgiven. "Greed" is agreeing with Obama's class war that those with more money than you should pay a higher rate than you, and not just the same rate.

Let me remind all you liberals. For everyone that bought a house as the bubble grew, let's assume at 20% more than it was valued at one year prior, or 40% more than 2 years prior, or even double 5 years prior, the selling owner reaped those profits. For every American homeowner that ended up underwater, there are one are more Americans who sold before the bubble burst on that property, and made those profits.

You note "predatory lending" (my paraphrase). So what of it ? 25% of all homeowners are underwater. If you include foreclosed and short-sales, almost 40% of our housing market has a note on it that is more than the current value of the property. That is a bubble bursting. That is not predatory lending. Are you going to say that the bubble was not going to burst ? It was a bubble. And bubbles burst.

Otherwise, folks buying houses that you claim they could not "afford" is simply one component of normal capitalism. It is no different from folks in a home that they bought in 1999 and owe $200K on, which from 2001 to 2006 the house rose in value to $400K, and so they take out a second mortgage in 2006 for $150K to put Junior in the best college and take that dream vacation. Figuring that in a worse case scenario, they can still sell their house for a profit, or re-fi again. Now they are woefully in over their head. It is millions of stories like that which are the root of the recession. Not some yahoo who bought a home that he probably could not afford, but who also had the same expectations of it going up in value, which is what fueled everything.

And lastly, it matters not who was the last one holding the mortgage, whether it was a bank, S&L, mortgage company, Merrill Lynch in a bundle, and all other machinations that had to do with the repeal of Glass-Steagle. Cause someone was going to be holding it, and be facing a huge loss.

So blame greed. You might as well blame the sun rising in the east.
 
My friend. "Greed" is a constant. "Greed" is as simple as you wanting a better tomorrow for yourself, and your family, than you have today. "Greed" is as old as dirt, and will be here so long as dirt is as well. And OBTW, "Greed" is such as OWS protesters wanting their college loans forgiven. "Greed" is agreeing with Obama's class war that those with more money than you should pay a higher rate than you, and not just the same rate.

Let me remind all you liberals. For everyone that bought a house as the bubble grew, let's assume at 20% more than it was valued at one year prior, or 40% more than 2 years prior, or even double 5 years prior, the selling owner reaped those profits. For every American homeowner that ended up underwater, there are one are more Americans who sold before the bubble burst on that property, and made those profits.

You note "predatory lending" (my paraphrase). So what of it ? 25% of all homeowners are underwater. If you include foreclosed and short-sales, almost 40% of our housing market has a note on it that is more than the current value of the property. That is a bubble bursting. That is not predatory lending. Are you going to say that the bubble was not going to burst ? It was a bubble. And bubbles burst.

Otherwise, folks buying houses that you claim they could not "afford" is simply one component of normal capitalism. It is no different from folks in a home that they bought in 1999 and owe $200K on, which from 2001 to 2006 the house rose in value to $400K, and so they take out a second mortgage in 2006 for $150K to put Junior in the best college and take that dream vacation. Figuring that in a worse case scenario, they can still sell their house for a profit, or re-fi again. Now they are woefully in over their head. It is millions of stories like that which are the root of the recession. Not some yahoo who bought a home that he probably could not afford, but who also had the same expectations of it going up in value, which is what fueled everything.

And lastly, it matters not who was the last one holding the mortgage, whether it was a bank, S&L, mortgage company, Merrill Lynch in a bundle, and all other machinations that had to do with the repeal of Glass-Steagle. Cause someone was going to be holding it, and be facing a huge loss.

So blame greed. You might as well blame the sun rising in the east.

Greed can be controlled. It just takes a little self control. Not nearly the same as blaming a sun rise.
 
The bubble was NOT the trouble. The trouble was over leveraged banks and financial institutions that were on the bring of collapse and were too big to fail. Bubbles have been happening since market economies have existed. We had the Junk bond bubble in the 80's and the .com bubble at the end of the 90's. We had the railroad bubbles in the late 1800's, we had credit bubbles that led to the market collapse in 1929. Going back further the first recorded bubble was the Dutch Tulop bulb bubble in the 1600's. If our financial sector cannot weather a bubble which occurs in any market system then it's structrually unsound.

I agree with you in part....Government has pushed home ownership but you laying the full blame at the government for the bubble is not true. I'm not going to get into all the details because they've been posted countless times and honestly...regarding Frank-Dodd it's irrelevant.

All due respect. Look to the bubbles you cited. Look to the comparative net-worth lost when those bubbles popped, as comparred to this bubble. Look at the comparative trillions lost with this bubble.

Yes, bubbles happen in a market economy. But we had not had a housing bubble of this magnitude ever. Any bubble of this magnitude, unless one wants to compare the original tipping that began the Depression. The reason we had never had a bubble such as this in housing is because government was never able to interfere in basic capitalism in that market as they were able to this time. Government ordering banks to make riskier loans, loans they never would have made, while at the same time agreeing to underwrite every loan via FF. It was the biggest moral hazard in the history of our market.
 
Last edited:
Greed can be controlled. It just takes a little self control. Not nearly the same as blaming a sun rise.

The cause of the bubble was greed for power in politics. Yes, that can be controlled, but it isn't done by making government larger, and more powerful. :roll:
 
The cause of the bubble was greed for power in politics. Yes, that can be controlled, but it isn't done by making government larger, and more powerful. :roll:

The greed was from everyone. People greedy for houses and other things they couldn't afford. Banks and other financial institutes greedy for the money they would make from other people's greed to get the money right "now". Politicians greedy for political power. Companies too greedy to raise pay so people could actually afford those extra things.
 
The greed was from everyone. People greedy for houses and other things they couldn't afford. Banks and other financial institutes greedy for the money they would make from other people's greed to get the money right "now". Politicians greedy for political power. Companies too greedy to raise pay so people could actually afford those extra things.

Again, "greed" is what motivates us all to improve. The basic controlling factor should be that you are able to decide for yourself where you put your resources (your money and effort). You may still be ripped off, or make bad choices, but that is the playing field in which we seek to improve ourselves. It was government that came in and manipulated the rules, the field, the umpires, the ball. Everything. They warped capitalism, and they created the moral hazard. They removed the basic accountability that governs capitalism, which in this case were the dynamics of lending money.

You can fight "greed" all you want, but are you ready to tell me that had you bought a house in 1995 for $100K, and then were ready to move in 2005 to another state, and your house was appraised at $250K, that you were going to say something akin to "Nope, $150K is fair. I do not want to be greedy" ?
 
Last edited:
My friend. "Greed" is a constant. "Greed" is as simple as you wanting a better tomorrow for yourself, and your family, than you have today. "Greed" is as old as dirt, and will be here so long as dirt is as well. And OBTW, "Greed" is such as OWS protesters wanting their college loans forgiven. "Greed" is agreeing with Obama's class war that those with more money than you should pay a higher rate than you, and not just the same rate.

So blame greed. You might as well blame the sun rising in the east.

 
Again, "greed" is what motivates us all to improve. The basic controlling factor should be that you are able to decide for yourself where you put your resources (your money and effort). You may still be ripped off, or make bad choices, but that is the playing field in which we seek to improve ourselves. It was government that came in and manipulated the rules, the field, the umpires, the ball. Everything. They warped capitalism, and they created the moral hazard. They removed the basic accountability that governs capitalism, which in this case were the dynamics of lending money.

You can fight "greed" all you want, but are you ready to tell me that had you bought a house in 1995 for $100K, and then were ready to move in 2005 to another state, and your house was appraised at $250K, that you were going to say something akin to "Nope, $150K is fair. I do not want to be greedy" ?

I was 15 in '95.

If I can't afford the house, I'm not going to buy it.

I also wouldn't turn down a family to buy my home for less than the $250K if I knew I only paid $100K for it. I would probably work something out with the family and what they could afford. Sure making a profit is ok, but expecting to make that much of a profit is wrong.

The biggest problem I see with our country and the way we do housing now is the banks own most of the houses. People should own their houses, not the banks.

Hell, I was just talking about this with my husband the other day. I wish more people were able to work out more "rent to own" housing arrangements, instead of getting money from the bank and hoping nothing happens that decreases a family's income.
 
Government ordering banks to make riskier loans, loans they never would have made, while at the same time agreeing to underwrite every loan via FF. It was the biggest moral hazard in the history of our market.

They did not order them to make riskier loans. The Community Reinvestment Act only affected 1 out of 25 lenders. Only 6% of subprime loans were handed out by CRA lenders. There was no suing for non compliance. The CRA has been completely blown out of proportion.

Community Reinvestment Act loans outperformed other "subprime" mortgages, and GSE mortgages performed better than private label securitizations
Competition and Crisis in Mortgage Securitization by Michael Simkovic :: SSRN

Fannie and Freddie were private organizations with US government mandate to provide loans. The CEO's were charged for lieing about the extent of their exposure to sub prime loans.

The Financial Crisis Inquiry Commission reported in 2011 that Fannie & Freddie "contributed to the crisis, but were not a primary cause." GSE mortgage securities essentially maintained their value throughout the crisis and did not contribute to the significant financial firm losses that were central to the financial crisis. The GSEs participated in the expansion of subprime and other risky mortgages, but they followed rather than led Wall Street and other lenders into subprime lending

NIVA and NINA loans were not created by the government. ARM loans were not pushed or created by the government. Interest only loans were not pushed by the government. The government did not rate CDO's AAA.

But beyond that...back to the question of whether or not we have structural problems...companies becoming highly leveraged fueld the bubble. It was a supply side bubble which you obviously agree with since you blame the government (which in on the supply side). The funding from the bubble came from the private sector, from overleveraged financial firms.

Edit: I would like to add though I think Fannie and Freddie...private institutions that have the implicit banking of the federal government is the dumbest idea ever. I remember thinking that when learning about the structure of it in a Banking Insititutions class in college.

I also thing the implicit guarantee of bank bailouts for too big too fail institituons is the dumbest idea ever as well.
 
Last edited:
They did not order them to make riskier loans. The Community Reinvestment Act only affected 1 out of 25 lenders. Only 6% of subprime loans were handed out by CRA lenders. There was no suing for non compliance. The CRA has been completely blown out of proportion.

Community Reinvestment Act loans outperformed other "subprime" mortgages, and GSE mortgages performed better than private label securitizations
Competition and Crisis in Mortgage Securitization by Michael Simkovic :: SSRN

I did not cite the CRA. I cited the moral hazard that was Fannie and Freddie. FF ended up underwriting 50% of the entire market by about 2002. That's not one out of 25, or 6%, etc. When government will buy your risk. Buy your exposure to risk, that is a moral hazard to take on risk that you otherwise would not. That is what created the bubble.

Fannie and Freddie were private organizations with US government mandate to provide loans. The CEO's were charged for lieing about the extent of their exposure to sub prime loans.

The Financial Crisis Inquiry Commission reported in 2011 that Fannie & Freddie "contributed to the crisis, but were not a primary cause." GSE mortgage securities essentially maintained their value throughout the crisis and did not contribute to the significant financial firm losses that were central to the financial crisis. The GSEs participated in the expansion of subprime and other risky mortgages, but they followed rather than led Wall Street and other lenders into subprime lending

NIVA and NINA loans were not created by the government. ARM loans were not pushed or created by the government. Interest only loans were not pushed by the government. The government did not rate CDO's AAA.

But beyond that...back to the question of whether or not we have structural problems...companies becoming highly leveraged fueld the bubble. It was a supply side bubble which you obviously agree with since you blame the government (which in on the supply side). The funding from the bubble came from the private sector, from overleveraged financial firms.

Edit: I would like to add though I think Fannie and Freddie...private institutions that have the implicit banking of the federal government is the dumbest idea ever. I remember thinking that when learning about the structure of it in a Banking Insititutions class in college.

I also thing the implicit guarantee of bank bailouts for too big too fail institituons is the dumbest idea ever as well.

Hey, we have now bailed out FF to the tune of about $300 B ? And they still are sitting on millions of mortgage notes that are underwater.

As to all the other vehicles which you cite, the ARMS, etc., here is what you have to include in those considerations. Crazy loans were made bacause of the moral hazard, and the bubble. If you could sell a home to anyone, and your risk was mitigated by a) FF underwriting it; and/or b) a property that was going to be worth 20% more in a year, which would cover any default and foreclosure and resale, then maybe everyone can understand why loans went crazy. While it was a bubble, the only one who gets burned is the last one holding the mortgage when it pops. Until it pops, or so long as you are not the last one, it was 100% predictable as to what would happen.

Note that in about 2002 FF was actually losing market share, as others scrambled to take advantage of the bubble and moral hazard which had created it. Inflation was covering all risk. So FF changed its rules, to enable them to make even crazier loans too. Precisely because the inflation of the bubble made it less risky. A bubble that FF started. What a racket they had going.
 
They did not order them to make riskier loans............

OBTW, yes they did. They most certainly did.



I wish I could find the original full video, just of Cuomo. But if you listen until the Q&A, Cuomo is asked if these lenders are not now being compelled to make riskier loans. Listen from 2;10 to 2:30. At least he is honest in answering "Yes" ! Then at about 3:10 he also acknowledges that there will be higher default rates. Enjoy.

What Cuomo does not say is that as a part of the settlement, FF will also be underwriting the risk. He instead postures like he has won some major political victory for the little guy. What a racket.
 
I was 15 in '95.

If I can't afford the house, I'm not going to buy it.

I also wouldn't turn down a family to buy my home for less than the $250K if I knew I only paid $100K for it. I would probably work something out with the family and what they could afford. Sure making a profit is ok, but expecting to make that much of a profit is wrong.

I am going to try to compel you to think about your words a little bit more. I did not say that you had a right to "expect" anything. If you used a realtor, your realtor would do the customary analysis to see what it was worth. You may discount it from that, but the question I ask you to rconsider is if you discount so as to make a quicker sale ? Or do you do it to be something other than capitalist ?

The biggest problem I see with our country and the way we do housing now is the banks own most of the houses. People should own their houses, not the banks.

Hell, I was just talking about this with my husband the other day. I wish more people were able to work out more "rent to own" housing arrangements, instead of getting money from the bank and hoping nothing happens that decreases a family's income.

It is a system that has worked fine for centuries. You do not have to go to a bank if you have the money to pay full price. Or a rich relative.

You list yourself as slightly conservative. OK, tell a realtor friend, or any friend who owns a business, of your plan on how you would sell your house. See what they say.

And finally, do you see merit in this statement "From each according to their abilities. To each according to their needs". Your housing sale plan brought that to mind. ;)
 
Last edited:
I cited the moral hazard that was Fannie and Freddie. FF ended up underwriting 50% of the entire market by about 2002. That's not one out of 25, or 6%, etc. When government will buy your risk. Buy your exposure to risk, that is a moral hazard to take on risk that you otherwise would not. That is what created the bubble.
Fannie and Freddie have been around since the late 30's for the former and the 70's for the latter. Once again...as mentioned in the "Financial Crises Inquiry Comission" Fannie and Freddie followed the private market...they did not cause the bubble and the explosion of sub prime. An article in the 90's discussing the loss of market share controlled by fannie and freddie in the subprime market and them deciding to follow the private market into subprime. Going Subprime: Fannie Mae and Freddie Mac consider the subprime loan market, by Allen Fishbein

In fact the peak of Fannie and Freddie owning the largest % of subprime was in 2002. They lost market share (drastically) to private companies. Fannie/Freddie Market Share Plummeted During Boom | The Big Picture

Chart showing the huge increase in private companies share of the mortgage market. As you can see...only at the end does Fannie and Freddie start gaining market share.

As to all the other vehicles which you cite, the ARMS, etc., here is what you have to include in those considerations. Crazy loans were made bacause of the moral hazard, and the bubble. If you could sell a home to anyone, and your risk was mitigated by a) FF underwriting it; and/or b) a property that was going to be worth 20% more in a year, which would cover any default and foreclosure and resale, then maybe everyone can understand why loans went crazy. While it was a bubble, the only one who gets burned is the last one holding the mortgage when it pops. Until it pops, or so long as you are not the last one, it was 100% predictable as to what would happen.

This is due to impromper rating. The fact is Fannie and Freddie have been in business for decades. They actually bought a very small portion of exotic loan types "Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble."

Read more here: Private sector loans, not Fannie or Freddie, triggered crisis | McClatchy

Note that in about 2002 FF was actually losing market share, as others scrambled to take advantage of the bubble and moral hazard which had created it. Inflation was covering all risk. So FF changed its rules, to enable them to make even crazier loans too. Precisely because the inflation of the bubble made it less risky. A bubble that FF started. What a racket they had going.

This makes no sense 82nd. If the moral hazard was Fannie and Freddie existing and backing sub prime mortgages then that moral hazard did not exists for loans made outside of Fannie and Freddie. Loans made outside of Fannie and Freddie did not have the gaurantee of Fannie and Freddie. When large investment firms were securitizing loans at larger rate it had nothing to do with Fannie and Freddie and everything to do with the belief that a bundled mortgage broken into tranches virtually eliminated any risk.
 
I wish I could find the original full video, just of Cuomo. But if you listen until the Q&A, Cuomo is asked if these lenders are not now being compelled to make riskier loans. Listen from 2;10 to 2:30. At least he is honest in answering "Yes" ! Then at about 3:10 he also acknowledges that there will be higher default rates. Enjoy.

What Cuomo does not say is that as a part of the settlement, FF will also be underwriting the risk. He instead postures like he has won some major political victory for the little guy. What a racket.
You are aware that mortgages sold under Cumo and Clinton had low default rates right?
 
NIVA and NINA loans were not created by the government. ARM loans were not pushed or created by the government. Interest only loans were not pushed by the government. The government did not rate CDO's AAA.

What's this?

Alternative Mortgage Transaction Parity Act - AMTPA

Alternative Mortgage Transaction Parity Act (AMTPA) Definition | Investopedia

An act from 1982 that over-rode many state laws that prevented banks from using mortgages other than conventional fixed-rate mortgages. This act allowed for the total costs of loans to become obscured, and led to the availability of various new mortgages such as adjustable rate mortgages (ARMs), interest only mortgages, and ballon payment mortgages.
 
What's this?

Alternative Mortgage Transaction Parity Act - AMTPA

That's not created by the government. That a Reagan initiative to deregulate the banking system. It didn't create those loan types or give them out, it provided the legal ability to do it.

Let's remember here....this is a chain of responses where I stated the need to regulate the banking and financial industry. We've gone so far into the weeds and off topic that you're posting something that supports my main point in order to disprove something else I said.
 
................... This makes no sense 82nd. If the moral hazard was Fannie and Freddie existing and backing sub prime mortgages then that moral hazard did not exists for loans made outside of Fannie and Freddie. Loans made outside of Fannie and Freddie did not have the gaurantee of Fannie and Freddie. When large investment firms were securitizing loans at larger rate it had nothing to do with Fannie and Freddie and everything to do with the belief that a bundled mortgage broken into tranches virtually eliminated any risk.

It makes all the sense in the world when one looks at what happened, and the timelines. FF created the moral hazard that then increased demand, which began the bubble. Once the bubble got going, the very inflating of the bubble, ie. hyper-inflation in the housing market, then covered many risks, as I explained. You could make a loan that had higher risk of default, as inflation would cover your losses. So FF got back into the market by creating these same higher risk mechanisms that it had enabled others to make.

Further, all this rubbish to try to minimize FF, how they had "been around for decades", all avoids the facts that mattered here.

Here is a government report, by the Office of Federal Housing Enterprise Oversight (OFHEO). from 2006, before the bubble burst:

Another way to look at this unconstrained growth is that during the last 15 years, the
nation’s GDP doubled, the mortgage market tripled, Fannie Mae’s and Freddie Mac’s (the
Enterprises) guarantees quadrupled and their portfolios grew ninefold
(Chart 1).

Obviously, risks come with such rapid growth. The risk at Fannie and Freddie is
compounded because by law they cannot spread their risk through diversification. They
have all their eggs in one basket. They kept adding eggs rapidly, but they chose not to
maintain and strengthen their baskets. As a result, the unwatched baskets broke and so did
many eggs. The baskets represent internal controls, accounting systems, corporate culture
and governance and risk management. They were so poorly maintained that many systems
will need replacement or total rebuilding. They have made some progress, but it will take
several years.

read more: http://www.fhfa.gov/Default.aspx/webfiles/reports/webfiles/js/webfiles/2206/gsereform71906.pdf

From 1991 to 2006, FF's portfolio's grew NINEFOLD !!

I cannot make it more clear or more obvious. You can believe the facts, or you can believe the politicians who want more power. Fannie and Freddie, and that ninefold increase, and the government interference in subprimes, created the bubble, beginning in 1998, that became as a beast we had never seen before. Agin, if there is no bubble, then nothing bad follows. Nothing. It was the bubble that then enabled all the trouble.
 
You are aware that mortgages sold under Cumo and Clinton had low default rates right?

Which matters not a hill of beans. The bubble created all this mess. Bubbles must pop. Even if not a single home-owner defaulted, the bubble was going to pop. Trillions in wealth was going to be lost. 30% of all homeowners were going underwater. And then a bunch of them were going to default, out of common sense.
 
That's not created by the government. That a Reagan initiative to deregulate the banking system. It didn't create those loan types or give them out, it provided the legal ability to do it.

Let's remember here....this is a chain of responses where I stated the need to regulate the banking and financial industry. We've gone so far into the weeds and off topic that you're posting something that supports my main point in order to disprove something else I said.

Except that such as Dodd Frank does not regulate Fannie and Freddie, as already mentioned. It was government's use of FF to manipulate the normal lending market that created this mess. Not banks. Not the financial industry. They rode the unnatural and artificial moral-hazard wave created by government.

While we would agree agree that government has a role, when it came to the Housing bubble, and so much more that ails us, government is the problem, not the solution.
 
Except that such as Dodd Frank does not regulate Fannie and Freddie, as already mentioned. It was government's use of FF to manipulate the normal lending market that created this mess. Not banks. Not the financial industry. They rode the unnatural and artificial moral-hazard wave created by government.

While we would agree agree that government has a role, when it came to the Housing bubble, and so much more that ails us, government is the problem, not the solution.

And how did government use F&F to manipulate the normal lending market?
 
I believe there is consensus in this position on both sides of the isle, but I could be wrong.

Consensus on what exactly? I'm sure most would agree that we could pare down some regulations. It all depends on which ones and how we do it. But to make broad generalizations without looking at any specifics would be fool hardly, and too often wrong and inaccurate.
 
Further, all this rubbish to try to minimize FF, how they had "been around for decades", all avoids the facts that mattered here.
It's not rubbish...if an institution has been around for decades there has to a catalyst or change that caused the housing crises. If by existing they caused the housing crises which is what you're saying then the amount of time they've been around is relevant.

It makes all the sense in the world when one looks at what happened, and the timelines. FF created the moral hazard that then increased demand, which began the bubble. Once the bubble got going, the very inflating of the bubble, ie. hyper-inflation in the housing market, then covered many risks, as I explained. You could make a loan that had higher risk of default, as inflation would cover your losses. So FF got back into the market by creating these same higher risk mechanisms that it had enabled others to make.
If the moral hazard of fannie and freddie were the cause of the housing bubble...the housing bubble was depending on that implicit government backing. When that implicit government backing is not there then there should be no or less demand for securitized mortgages.


The value of a CDO is the interest on the mortgage. When you buy a CDO you purchase it expecting those interests payments for the life of the CDO. If they default and housing prices are rising sure you can recoup some loss but you still are out a lot of money.

The CDO was completely based on the idea that foreclosures would not rise to even medium high foreclosure rates. It's no different than bundling junk bonds in the 80's. The whole system was dependent on normal bankruptcy rates among junk rated companies. This is not the first time Wall Street has misvalued risk.
I cannot make it more clear or more obvious. You can believe the facts, or you can believe the politicians who want more power. Fannie and Freddie, and that ninefold increase, and the government interference in subprimes, created the bubble, beginning in 1998, that became as a beast we had never seen before. Agin, if there is no bubble, then nothing bad follows. Nothing. It was the bubble that then enabled all the trouble.

We have seen this beast before...margin trading in the 1920's a tulip bulb worth more than a house.
 
Which matters not a hill of beans. The bubble created all this mess. Bubbles must pop. Even if not a single home-owner defaulted, the bubble was going to pop. Trillions in wealth was going to be lost. 30% of all homeowners were going underwater. And then a bunch of them were going to default, out of common sense.

The value of CDO's is entirely predicated on the foreclosure rate....
 
Back
Top Bottom