Bush's Place in History.

[DuncanONeil]

You absolutely refuse to consider the fact that Congressional action REQUIRING banks to lend in areas where the residents could not meet the standard of being an acceptable risk.
This categorical refusal to consider a proximate cause and only deal with the after effects is disingenuous at best.

http://seekingalpha.com/article/7126...tion-gone-wild

This is a partial list of some of the policies that led to the too big to fail situation that caused the bailouts.

It starts with the 1982 Garn -St. Germain Depository Institutions Act.

As the eighties wore on the economy appeared to grow. Interest rates continued to go up as well as real estate speculation. The real estate market was in what is known as a "boom" mode. Many S&L's took advantage of the lack of supervision and regulations to make highly speculative investments, in many cases loaning more money then they really should. Not because they were required to, but motivated by profits.

When the real estate market crashed, and it did so in dramatic fashion, the S&L's were crushed. They now owned properties that they had paid enormous amounts of money for but weren't worth a fraction of what they paid. Many went bankrupt, losing their depositors money. This was known as the S&L Crisis. In 1980 the US had 4,600 thrifts, by 1988 mergers and bankruptcies left 3000. By the mid 1990's less than 2000 survived.

The S&L crisis cost about 600 Billion dollars in "bailouts." This is 1500 dollars from every man woman and child in the US. This was the February 1989 bailout under the first Bush.

Despite this deregulation causing a huge crash and bailout, the process of deregulation was continued leading to the repeal of the Glass-Steagal act by 1998 (After 25 attempts and $300 million in lobbying).

In the spring of 1987, the Federal Reserve Board votes 3-2 in favor of easing regulations under Glass-Steagall Act, overriding the opposition of Chairman Paul Volcker. Thomas Theobald, then vice chairman of Citicorp, argues that three "outside checks" on corporate misbehavior had emerged since 1933: "a very effective" SEC; knowledgeable investors, and "very sophisticated" rating agencies. Volcker is unconvinced, and expresses his fear that lenders will recklessly lower loan standards in pursuit of lucrative securities offerings and market bad loans to the public. For many critics, it boiled down to the issue of two different cultures - a culture of risk which was the securities business, and a culture of protection of deposits which was the culture of banking.

Volcker had it right, but this opposition led to him being replaced by Alan Greenspan.

The problem was the banks owned too much property. Why? Because people removed the regulations preventing it. It's not one or two property acts that are trying to limit discrimination that caused the problems.

If the banks were giving out loans they knew in advance were bad, they never would have appealed to have more and more restrictions reduced. They were giving out loans they thought they could make money on, and were leveraged beyond belief. Yet the record shows the continuously appealed to the government to let them leverage more and more.

It's no surprise that the first to go was Bear Stearns, one of the first to lobby for and get limits removed.

http://newsmine.org/content.php?ol=c...ngency-fee.txt

CHICAGO -- In a CNSNews (www.CNSNews.com) nationally-syndicated story published on Monday, Illinois Republican National Committeeman Bob Kjellander once again defended the $800,000 contingency fee he received earlier this year from Bear Stearns, the bond house that handled Governor Rod Blagojevich's $10 billion mortgage to balance Illinois' FY 2004 budget.

It's also a matter of fact that the lobbyists for Bear Stearns and the deregulation involved in the matter were active republican party members.

So yes, it does correspond to the facts to blame the republican party for this. It just doesn't correspond to your personal world view.

[SadisticNature]

You absolutely refuse to consider the fact that Congressional action REQUIRING banks to lend in areas where the residents could not meet the standard of being an acceptable risk.
This categorical refusal to consider a proximate cause and only deal with the after effects is disingenuous at best.

You categorically refuse to consider the fact that the institutions that failed were trying to make more of these high risk lousy loans to the point where they were lobbying to have lending limits repealed.

You blame government for businesses making bad loans when the entirety of the evidence on record says those businesses wanted to make those loans, to the point of spending $300 million on lobbying to repeal regulations preventing them from making risky loans.

I've also addressed the evidence you and others have presented on this point repeatedly. The only categorical denial occurring here is the one you are making.

[DuncanONeil]

Were it true that lenders "wanted to make those loans" there would have been no need for legislation to require lenders to grant loans to those they had determined were high risk! Because it happened after said legislation has no bearing on how it came about!

Your choice to refuse to consider the underlying legislation is troubling. Seems as if you, like others, are inclined to demonize a specific entity for some specific purpose.

The head of GMAC (controlled by the Government) received a compensation package exactly the same as, I believe, head of Smith Varney. Yet The head of Smith Varney was excoriated for his salary. Not one word about the head of GMAC, even though it is hemoraging money in the smae fashion!

You categorically refuse to consider the fact that the institutions that failed were trying to make more of these high risk lousy loans to the point where they were lobbying to have lending limits repealed.

You blame government for businesses making bad loans when the entirety of the evidence on record says those businesses wanted to make those loans, to the point of spending $300 million on lobbying to repeal regulations preventing them from making risky loans.

I've also addressed the evidence you and others have presented on this point repeatedly. The only categorical denial occurring here is the one you are making.

[SadisticNature]

Again, more dodging the question and inaccuracies. I don't refuse to consider the underlying legislation, I have read and addressed your concerns. You refuse to consider any arguments why these legislations aren't relevant to the issue.

In particular, you ignore evidence that the CRA is not at fault. Namely subprime mortgages were almost entirely driven by investment banks NOT SUBJECT TO THE CRA.

In 1977 it might have been true that the lenders were not making these loans at appropriate rates. However, by 2007 the situation was largely changed. I consider the most important information here to be:

(I) The 1968 Fair Housing Act is not actually relevant to the situation.

(II) The 1977 Community Reinvestment Act does not actually cover investment banks who were by far the largest dealers in subprime mortgages.

Your coverage of these laws is highly inaccurate. Nothing says anything about refusing an individual loan without regard to reason. Furthermore, conditions of the CRA are only a condition for mergers and takeovers. The CRA does not have any enforcement powers except when the bank is trying to reduce competition in the marketplace. I personally believe it is not unreasonable to test whether a community is being served adequately when considering reducing competition in a market. Particularly one with such limited competition as the banking sector.

Were it true that lenders "wanted to make those loans" there would have been no need for legislation to require lenders to grant loans to those they had determined were high risk! Because it happened after said legislation has no bearing on how it came about!

Your choice to refuse to consider the underlying legislation is troubling. Seems as if you, like others, are inclined to demonize a specific entity for some specific purpose.

The head of GMAC (controlled by the Government) received a compensation package exactly the same as, I believe, head of Smith Varney. Yet The head of Smith Varney was excoriated for his salary. Not one word about the head of GMAC, even though it is hemoraging money in the smae fashion!

[DuncanONeil]

Investment banks are not prime generators of notes. They deal in the secondary markets enabling the lenders to have their capital at hand.

Again, more dodging the question and inaccuracies. I don't refuse to consider the underlying legislation, I have read and addressed your concerns. You refuse to consider any arguments why these legislations aren't relevant to the issue.

In particular, you ignore evidence that the CRA is not at fault. Namely subprime mortgages were almost entirely driven by investment banks NOT SUBJECT TO THE CRA.

In 1977 it might have been true that the lenders were not making these loans at appropriate rates. However, by 2007 the situation was largely changed. I consider the most important information here to be:

(I) The 1968 Fair Housing Act is not actually relevant to the situation.

(II) The 1977 Community Reinvestment Act does not actually cover investment banks who were by far the largest dealers in subprime mortgages.

Your coverage of these laws is highly inaccurate. Nothing says anything about refusing an individual loan without regard to reason. Furthermore, conditions of the CRA are only a condition for mergers and takeovers. The CRA does not have any enforcement powers except when the bank is trying to reduce competition in the marketplace. I personally believe it is not unreasonable to test whether a community is being served adequately when considering reducing competition in a market. Particularly one with such limited competition as the banking sector.

[SadisticNature]

Investment banks bought up all the subprime loans, even if they weren't the prime generators of the notes, they did create the market for them.

The point about the CRA still stands, as only one bank applied for CRA credit for their subprime mortgage loans. If the CRA was driving these loans more banks would have applied for CRA credit as a result of making subprime loans.

Also secondary markets can easily drive primary markets. It's fair to say the investment banks were the main players in the subprime crisis because they were the ones buying up bad loans at incredible rates.

The reasons the initial lenders didn't care about making bad loans is they knew they could sell the toxic capital at a profit. As long as they aren't left holding toxic assets and made money at some point along the process they would continue to make these loans.

In summary, initial lenders made bad loans because there was a market for them, not because they had to under some policy. These loans were sold at a profit to investment banks, who believed these instruments to be profitable (which they were until the housing prices underwent cascade failure).

The problem was the investment banks were allowed to leverage exorbitantly. Previous caps of 5 to 1 leveraging under regulation were replaced by exemptions allowing 50 to 1 leveraging. This meant a hugely profitable company that forms a critical part of the banking sector could be instantly bankrupt due to a small price drop in the housing market (If one is leveraged 50 to 1 on an asset that drops 5% one is bankrupt twice over).

This leveraging process allowed the investment banks to continue to "free up capital" to buy excessive amounts of subprime loans, and with the market for loans available, banks continued to make them. Bundled instruments ended up preventing a lot of examining of the quality of individual loans by investors, and as such the initial lenders got away with having frighteningly bad standards for loans. Again, this was a sound business practice because they were able to sell these loans at a profit easily, not dealing with the consequences of them being bad loans.

Investment banks are not prime generators of notes. They deal in the secondary markets enabling the lenders to have their capital at hand.

[DuncanONeil]

I think your logic is flawed!

Investment banks bought up all the subprime loans, even if they weren't the prime generators of the notes, they did create the market for them.

The point about the CRA still stands, as only one bank applied for CRA credit for their subprime mortgage loans. If the CRA was driving these loans more banks would have applied for CRA credit as a result of making subprime loans.

Also secondary markets can easily drive primary markets. It's fair to say the investment banks were the main players in the subprime crisis because they were the ones buying up bad loans at incredible rates.

The reasons the initial lenders didn't care about making bad loans is they knew they could sell the toxic capital at a profit. As long as they aren't left holding toxic assets and made money at some point along the process they would continue to make these loans.

In summary, initial lenders made bad loans because there was a market for them, not because they had to under some policy. These loans were sold at a profit to investment banks, who believed these instruments to be profitable (which they were until the housing prices underwent cascade failure).

The problem was the investment banks were allowed to leverage exorbitantly. Previous caps of 5 to 1 leveraging under regulation were replaced by exemptions allowing 50 to 1 leveraging. This meant a hugely profitable company that forms a critical part of the banking sector could be instantly bankrupt due to a small price drop in the housing market (If one is leveraged 50 to 1 on an asset that drops 5% one is bankrupt twice over).

This leveraging process allowed the investment banks to continue to "free up capital" to buy excessive amounts of subprime loans, and with the market for loans available, banks continued to make them. Bundled instruments ended up preventing a lot of examining of the quality of individual loans by investors, and as such the initial lenders got away with having frighteningly bad standards for loans. Again, this was a sound business practice because they were able to sell these loans at a profit easily, not dealing with the consequences of them being bad loans.

[SadisticNature]

You absolutely refuse to consider the fact that Congressional action REQUIRING banks to lend in areas where the residents could not meet the standard of being an acceptable risk.
This categorical refusal to consider a proximate cause and only deal with the after effects is disingenuous at best.

This statement is outright false. I have addressed why those legislations are not the problem. Your attempt to blame select legislation on flimsy and inaccurate evidence so that you can avoid the actual source of blame is disingenuous at best. The fact is deregulation caused these problems, not specific regulations you point to, which don't even apply to INVESTMENT BANKS, the actual organizations pushing subprime mortgages.

You refuse to even address any of the issues I raised as relevant to the cause. I'd suggest taking a long hard look at the quality of your sources.

Relying on information presented by the only "NEWS" organization to win a Whistleblower case (on appeal) on the basis of "falsifying the news is not a crime" is problematic at best.