Bush's Place in History.

[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were trying to make more of these high risk lousy loans to the point where they were lobbying to have lending limits repealed.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]

I think your logic is flawed!

When I point out flaws in your logic, I bother to provide details.

You are making a vague statement that avoids the question by not making any specific criticism, but instead a fuzzy generality that can't be debated in any meaningful way.

And you continue to refuse to answer questions that are asked of you, or even express why you think those questions are bad.

Before you accuse someone of committing a "categorical refusal to consider a proximate cause and only deal with the after effects" you really ought to consider some serious introspection.