Wow! Jobs should now fall from the sky!

[LookingForResults]

[QUOTE=dphindawg;1070941]

The housing bubble was entirely set in motion by Democrats Barney Frank and Chris Dodd declaring that everyone had a "right" to own a home. Their pressure on Fannie and Freddie is the direct cause of the disaster and both should be serving time rather than serving another "term." Bush emphasized that he wanted to use taxpayer dollars to assist with the down payment for otherwise "qualified buyers." The democrats, in one-up-man-ship, extended that idea to "anyone who desired to buy."


I agree with most of the things that LFR posts, but this isnt correct. Fannie and Freddie did have to pick up the bill on alot of loans that went bad they had insured. The main problem with the housing crisis was the marketing of mortgage back securities. It was a case of supply not meeting demand. Everyone was investing in them due to they were a traditionally safe investment. There was such a huge demand for them finance compaines, banks and brokers did a poor job of underwriting the loans. The people actually making the initial loan were not doing their due diligence due to they were just selling these mortgages. Payment opiton loans, stated income loans, and countless other loan products were developed that have no government backing. They created these products to fill the demand for mortgages that would go into securitization pools. People who had no business buying a home were signing up for mortgages they were unable to afford. There were companies all over the country building slopily built tract homes as fast as they could to keep up with the demand. Predatory lenders were booking anything and everyting they could. The loans that where going into these privately and publicly traded comodities where full of loans that fannie and freddy mac wouldnt touch with a fourty foot poll.
Once everything fell apart and these securities failed the investors look to companies like AIG who had sold credit swaps pretty much as insurance on thes secuirties. But according to loopholes in the securities laws AIG could sell these products without having the cash on hand since it wasn't technically a insurance policy. The amount of claims was much more than AIG could cover leaving them to default on these debts leaving banks all over the world to collapse. This leads to the goverment bailing out AIG.

The goverment has taken some steps to making sure this doesn't happen again(licensing process for all mortgage brokers except those who are under FDIC, but they may also have to go through this in the future). Another way this problem will be avoided is that the companies packaging these securities are requiring loans to meet criteria closer to federal requirements.

The main reasons for the housing bubble collapse was corporate greed and poor goverment regulations. Both parties are guilty. In all honesty it's a great example of Wall Street greed at its worse.

Sorry, but I what I said is correct. You completely ignore the behind-the-scenes, and overt, pressure that was being exerted by Wahington spearheaded by Franks/Dodd. The debacle became a complex interweaving of government policy and corporate greed. But it all started in Wahsington and leaving Franks/Dodd out of the explanation is the more egregious omission.

[dphindawg]

Greed by AIG? Probably. Like you said, they didn't have enough reserves to back all the default swaps (and weren't required to have those reserves). But who would have ever imagined that so many people would foreclose on their homes at the same time? They didn't think they were being risky at all. It was "easy money" to insure mortgages. But, the government also made default swaps legal in 1999.

So that leaves only ignorance and poor judgement. Easy money leads to greed. Look at the amount of these products AIG issued before the changing of CEO's. AIG had only 2 CEO's before the early 2000's. Once the new management group took over they nearly increased the number of default swaps 10 fold. What was a small part of their business became a very large quickly.

Goverment did pressure financial institutions to make it easier for people to buy a home, but there was alot of mortgage products that developed for no other reason other than to create mortgages to be sold. The problem led to a seperation of responsibility from the lender. They would make the loans to met minimal criteria that would be securitarized immediately. The servicing rights would be sold off to to whatever company the organizers of the pool chose. Financial institutions that actually keeping there mortgages require large down payments or willing only to finance a certain perctange of the home.

Goverment interference helped cause some of the problems, but it was not the only reason. The reasons that large corportations donate tons of money to politicians from both parties is so they can get there way. Take a goverment program and using it as a reason to make poor lending decisions isn't much of an excuse.

[T_Won]

So that leaves only ignorance and poor judgement. Easy money leads to greed. Look at the amount of these products AIG issued before the changing of CEO's. AIG had only 2 CEO's before the early 2000's. Once the new management group took over they nearly increased the number of default swaps 10 fold. What was a small part of their business became a very large quickly.

Goverment did pressure financial institutions to make it easier for people to buy a home, but there was alot of mortgage products that developed for no other reason other than to create mortgages to be sold. The problem led to a seperation of responsibility from the lender. They would make the loans to met minimal criteria that would be securitarized immediately. The servicing rights would be sold off to to whatever company the organizers of the pool chose. Financial institutions that actually keeping there mortgages require large down payments or willing only to finance a certain perctange of the home.

Goverment interference helped cause some of the problems, but it was not the only reason. The reasons that large corportations donate tons of money to politicians from both parties is so they can get there way. Take a goverment program and using it as a reason to make poor lending decisions isn't much of an excuse.

It was ignorance on AIG's part. (they didn't realize they were being set up by the government). It was one financial executive's decision, and he worked in France or London (Joseph Cassano). I think he has since gone into hiding.

The mortgage products were made BECAUSE of the new regulation by the government. They were faced with the prospect of issuing bad loans, and how best to do that to prevent foreclosure. They invented all kinds of shit to get people in houses, but even THAT didn't work. These loans had never been offered before and would have never been offered now, if not for the pressure from the US government to do so. They hated taking on the bad risk, but they did enjoy to possible benefits if the poor were actually abel to make the payments.

You need to break down "what came first, the chicken or the egg" and I think it will make more sense to you.

[longdawgview]

I'm done. There is no way to even respond to that statement.

To say that subprime lending or people buying houses that can't afford cause the recession is being naive.

All I am saying is that the severity of the recession was due to the financial crisis that put our whole financial system at risk. The treasury dept was taking a hands off approach until Lehman Brothers collapsed, Do you ever see Cramer yelling on CNBC "They have no idea whats going on"
The credit freeze, the stock market tanking and the massive layoffs begin in early September 2008 when Goldman, AIG were on the verge of collapse. Foreclosure had already began to rise 2006 and real estate prices were already declining in 2007.


There is enough blame to go around to both parties. Is the community reinvestment act a good law? No.
Some would argue that the Gramm-Leach act allowed the investment banks to create these "financial weapons of mass destruction"

[Bigdog13]

To say that subprime lending or people buying houses that can't afford cause the recession is being naive.

All I am saying is that the severity of the recession was due to the financial crisis that put our whole financial system at risk. The treasury dept was taking a hands off approach until Lehman Brothers collapsed, Do you ever see Cramer yelling on CNBC "They have no idea whats going on"
The credit freeze, the stock market tanking and the massive layoffs begin in early September 2008 when Goldman, AIG were on the verge of collapse. Foreclosure had already began to rise 2006 and real estate prices were already declining in 2007.


There is enough blame to go around to both parties. Is the community reinvestment act a good law? No.
Some would argue that the Gramm-Leach act allowed the investment banks to create these "financial weapons of mass destruction"

To say it didn't play a part in it is equally naive. It was a perfect storm of several issues.

[dphindawg]

http://www.mcclatchydc.com/2008/10/1...ot-fannie.html

This is a pretty good article talking about sub prime ledning in the private sector.
There is a graph that shows the top 15 sub prime lenders in parenthesis is the name of the parent company or the company that would later buy them out. (such as Country wide was took over by bank of america)