Trump takes charge: 45th president vowing 'robust' first 100 days

Incisor · Jan 30, 2017

j-mac said:
video clip

Whatever imaginary GSE reform you think there was that could have stopped the crisis, it was Bush who blocked it in 2003, not Democrats. In fact, the 2003 GSE reform (again, this reform would not have stopped the mortgage crisis) had opposition from Bush:

In the 108th Congress, the House Financial Services Committee reached an agreement to markup legislation originally scheduled for October 8, 2003. However, on October 7, 2003, the Treasury Department announced its opposition to this agreement, killing progress on GSE reform. (Congressional Research Service, "Improving the Effectiveness of GSE Oversight: Legislative Proposals in the 108th Congress.")

That markup had broad consensus (which means Democrats supported it). Bush killed it.

But again, even if Bush hadn't killed it, this reform would not have stopped the subprime bubble from spiking because that was done by non-bank lenders, not GSE's.

j-mac · Jan 30, 2017

Incisor said:
Whatever imaginary GSE reform you think there was that could have stopped the crisis, it was Bush who blocked it in 2003, not Democrats. In fact, the 2003 GSE reform (again, this reform would not have stopped the mortgage crisis) had opposition from Bush:

In the 108th Congress, the House Financial Services Committee reached an agreement to markup legislation originally scheduled for October 8, 2003. However, on October 7, 2003, the Treasury Department announced its opposition to this agreement, killing progress on GSE reform. (Congressional Research Service, "Improving the Effectiveness of GSE Oversight: Legislative Proposals in the 108th Congress.")

That markup had broad consensus (which means Democrats supported it). Bush killed it.

But again, even if Bush hadn't killed it, this reform would not have stopped the subprime bubble from spiking because that was done by non-bank lenders, not GSE's.

My feeling is what I already expressed....Look, to a common man such as myself, I saw it....Owned a house in the 90s when they were increasing values at ridiculous rates, and handing out money like it was no tomorrow....This is because the CRA shook these banks down and told them YOU WILL lend money, no doc, no verification, etc....Now you want to blame the cause on Bush? What a joke.

OpportunityCost · Jan 30, 2017

Incisor said:
Ahhhh, but the Bush Tax Cuts were supposed to grow the economy and they didn't. So there needed to be a jolt of growth in the economy in order to prevent the inevitable backlash in the 2004 election against those failed economic policies. That jolt was subprime lending, which spiked starting the same year Bush was up for re-election. Coincidence?

Theories are ok. But I have asked you to show some proof of your conspiracy theory. Until then, I'll treat it as just another crack potted idea.

OpportunityCost · Jan 30, 2017

Incisor said:
You don't find the bad ratings if you're not looking for them, either. Which was the case from 2004-7 as Bush's regulators made regulation of the mortgage industry "low priority". So yes, you're right in that the regulators work by sample. What you're not right about was that any regulation was actually occurring (or it was deemed low priority, which was also the case). The standards were "dramatically weakened" in 2004-7, and that could only be done in collusion with the regulators. You just got done arguing that the volume for securities peaked in 2004, which means that there would not have been as many mortgages to regulate as there were from 1993-2003. So what happened in 2004?

They didn't just stop regulating. You are talking absolute absurdity now.

Of course. No one is debating that. What is being debated is why were there so many subprime loans issued from 2004-7 that were securitized and then sold in the secondary mortgage market. It's obvious that they were issued so they could be sold in the secondary mortgage market to fill the demand coming out of 2004.

You aren't paying attention. The secondary market started slowing down in 2004. It peaked in 2003. That's when the bubble started to pop, but it usually doesn't happen overnight, it takes time. After all, the market took the decreased buying in stride and continued to grow for another 2 or 3 years.

There are only a small handful of ratings agencies...and these ratings agencies are in the same boat as the banks were. And Bush cheered it along because the subprime loans were leading to an increase of housing construction, which was creating jobs.

And a Democrat wouldn't have done a damned thing differently.

OpportunityCost · Jan 30, 2017

Incisor said:
The GSE's were prohibited from purchasing risky subprime loans per Clinton's 2000 HUD rule. Bush reversed that HUD rule in 2004, and the GSE's resumed buying risky subprimes. But it didn't matter anyway...the GSE's had a diminishing share of the market from 2004-7. Bush reversed that HUD rule to keep them competitive, and keep the market growing.

False.

https://www.huduser.gov/publications/pdf/subprime.pdf

Subprime lending originating mortgages to relatively risky borrowers expanded during the 1990s. Market analysts estimate that lenders originated about $160 billion worth of subprime loans in 1999, up from $40 billion in 1994. A number of factors accounted for this growth: federal legislation preempting state restrictions on allowable rates and loan features, the tax reform act of 1986, increased demand for and availability of consumer debt, and an increase in subprime securitization. It is noteworthy that subprime lending grew in the 1990s largely without the assistance of Fannie Mae and Freddie Mac, the two Government-sponsored enterprises (GSEs) which purchase and securitize mortgage loans. This pattern will change. Both Fannie Mae and Freddie Mac have announced that they plan to increase their subprime mortgage purchases.

Though the GSEs currently only purchase about 14 percent of subprime loans originated, market analysts expect that within the next few years the GSEs could purchase as much as 50 percent of the overall subprime mortgage volume. The GSEs are increasing their business, in part, in response to higher affordable housing goals set by the U.S. Department of Housing and Urban Development (HUD) in its new rule
established in October 2000. In the rule, HUD identifies subprime borrowers as a market that can help Fannie Mae and Freddie Mac meet their goals, and also help to establish more standardization
in the subprime market.

Here is another building block in the destruction: https://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000

What did it do?

The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that officially ensured modernized regulation[1] of financial products known as over-the-counter derivatives. It was signed into law on December 21, 2000 by President Bill Clinton. It clarified the law so that most over-the-counter (OTC) derivatives transactions between "sophisticated parties" would not be regulated as "futures" under the Commodity Exchange Act of 1936 (CEA) or as "securities" under the federal securities laws. Instead, the major dealers of those products (banks and securities firms) would continue to have their dealings in OTC derivatives supervised by their federal regulators under general "safety and soundness" standards. The Commodity Futures Trading Commission's (CFTC) desire to have "Functional regulation" of the market was also rejected. Instead, the CFTC would continue to do "entity-based supervision of OTC derivatives dealers."[2] These derivatives, including the credit default swap, are a few of the many causes of the financial crisis of 2008 and the subsequent 2008–2012 global recession.[3]

Why, its as if the regulators COULDNT investigate one of the principle causes.

Incisor · Feb 1, 2017

OpportunityCost said:
False.

So what you're doing here is arguing using innuendo. You are conflating the subprime loans from the 90's (default rates between 5-7%) with the subprime loans from 2004-7 (default rates between 21-23%). Your argument hinges on the mistaken belief that all subprimes are equally bad. They're not. And yes, GSE market share diminished from 2004-7 as the subprime market grew:

You see that in 2003, GSE's represented about 50% of all mortgage originations. The next year saw GSE market share decline from 50% down to 30%. It would decline further from 2005-7 before coming back thanks to the subprime bubble bursting. So what accounted for the GSE market share to be nearly cut in half in just a year if not for a surge in non-GSE backed lending???

It's important to also know the timing of the link you posted...from 2002. It's estimation was completely wrong based on the actual numbers in the chart, wouldn't you say?

The CFMA has nothing to do with the dramatic weakening of underwriting standards for subprime loans beginning in 2004 and extending to 2007.

Basically, the argument you are making is that Conservatives could not be trusted to manage something as fragile as the housing market. And I would agree with that, which is why I don't trust Conservatives today. So bad on Clinton for handing something so fragile that the ham-fisted Conservatives would inevitably shatter with their clumsiness and sloppiness. Lesson learned, I guess.