OT - Worth a read ... then cry.

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notbob wrote:

Uh, sorry. The current mess was created, not by under-regulation - or even over-regulation - but by the wrong regulations. The Community Development Act of 1977 was tweaked by the Clinton administration in 1995 to REQUIRE banks and lending institutions to serve "disadvantaged markets." The only way to do that was to make loans that violated every sound lending principle.
This worked as long as there was a strong housing market. When the five-year balloon payment came due, people living in a $250,000 house and making payments of $300/month simply re-financed their home that had almost doubled in value in the intervening five years.
This Ponzi scheme collapsed when anybody who could take two consecutive breaths had a house.
You think I jest about serving disadvantaged communities? Drive through the worst part of your town. The only retail establishments you'll see are hookers and a branch of Washinton Mutual or Wells Fargo. Do you think Bank of America actually wants a branch where the only thing in the night depository is urine?
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A 'pivotal moment' when all things still had a chance to be kept under control happened here: (from the article)
"So the top five investment banks got together on April 28th of that year and with the helpful assistance of then-Goldman Sachs chief and future Treasury Secretary Hank Paulson made a pitch to George Bush's SEC chief at the time, William Donaldson, himself a former investment banker. The banks generously volunteered to submit to new rules restricting them from engaging in excessively risky activity. In exchange, they asked to be released from any lending restrictions."
The rest is history.
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Yer point being?

Yer point being?
nb
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notbob wrote:

You seem to be a smart person. Perhaps you can extrapolate what happens when many banks make many loans to large numbers of people who will not, under any reasonable circumstances, be able to repay those loans. Now, include the additional fact that the government has guaranteed those loans through Fannie Mae & Freddie Mac. For extra credit, include the unintended consequences of what happens to the whole housing market when that large number of buyers starts buying limited numbers of homes. Finally, describe the end state when that large number of people who were not going to be able to afford those mortgages finally start defaulting.
This should be a relatively simple exercise since all of these actions have occurred in very recent history.
--
If you're going to be dumb, you better be tough

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And what happened after the collapse of the condo market during the crisis of the early 80s? After a few years all was resolved, and the housing market (and the savings and loans) were back on their feet. It was executed at the detriment of the taxpayer (but only temporarily) and some individual S&Ls and some individual condo owners. I fully expect that to happen again, but it will take more than a couple of years, and much ore (temporary?) sacrifice.
Requiring banks to reverse red-lining IMNSHO does not require maing bad loans, and both banks and people entering into stupid loan agreements should be punished. Unfortunately, it is defining those characteristics that is open to interpretation, and humans are fickle. The current extreme reluctance to spend is as bad as the extreme profligance of the earlier years. But hey, boom and bust is a capitalist society's characteristic (you didn't think I would hide, did you?). Again, individual responsibility is required on both sides. And, as Madoff and other schemers have again proven, if it sounds too good to be true, it probably ....
--
Best regards
Han
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Seems we've cut right to the crux of the problem. Why the Hell did these banks make these loans in the first place?

Again, what's your point? Seems obvious to me. The GOV subsidizes bad loans. DUH!

....and we end up in the seemingly foreseeable the pile of crap we are currently in.

Simple for me. What's your problem?
nb
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On Sat, 21 Mar 2009 08:39:34 -0500, Swingman wrote:

My opinion includes the fact that I believe those in Congress no longer think of what is best for America. They are driven by who will contribute the most to their campaigns to keep them in office. I believe that most, if not all, who run for office, only do so because it will led to a greater financial gain for themselves.
As far as the American people go, it is my belief that most have been so brainwashed that they believe that they have to put up with anything that the government throws at them. A good example is at the airports with the security demands. I, myself, no longer fly, unless I am traveling overseas. Here is the U.S. I drive or take a bus or train. I guess you could say that is my method of stating my opposition to the airport security. I do wish that the people would stand up and say "that is enough". But, I know that is never going to happen.
Paul T.
--
The only dumb question, is the one not asked

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I wanna say, "DUH", for your stating the obvious, but I guess I shouldn't make dispariging comments about someone I agree with. Well said, PHT.

Again, agreed. I'm a major rail fan. I took a plane about 3 yrs ago. What a freak'n nightmare. Not the security, which was trivial, but the insane accomadations! A one and a half hour flight of contemplating my kneecaps was an unacceptable nightmare compared to the return 40 hr train trip back to my org desto. Another example of deregulation.
nb
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I always try to examine other sides. For instance, this is Phil Gramm's comment about the current financial mess.
http://online.wsj.com/article/SB123509667125829243.html
"The 1992 Housing Bill set quotas or "targets" that Fannie and Freddie were to achieve in meeting the housing needs of low- and moderate-income Americans. In 1995 HUD raised the primary quota for low- and moderate-income housing loans from the 30% set by Congress in 1992 to 40% in 1996 and to 42% in 1997."
"The results? In 1994, 4.5% of the mortgage market was subprime and 31% of those subprime loans were securitized. By 2006, 20.1% of the entire mortgage market was subprime and 81% of those loans were securitized."
"In reality the financial "deregulation" of the last two decades has been greatly exaggerated. As the housing crisis mounted, financial regulators had more power, larger budgets and more personnel than ever. And yet, with the notable exception of Mr. Greenspan's warning about the risk posed by the massive mortgage holdings of Fannie and Freddie, regulators seemed unalarmed as the crisis grew. There is absolutely no evidence that if financial regulators had had more resources or more authority that anything would have been different."
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Points out that greed on all* sides, rather than prudent financial calculations, was a primary cause. I.e., human failure.
*Borrowers, banks, legislators, investors, and maybe more sides.
--
Best regards
Han
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