By using this site, you agree to our Privacy Policy and our Terms of Use. Close
Kasz216 said:
Final-Fan said:
mrstickball said:
Final-Fan said:

The way I remember it is that the loans I believe you're referring to didn't fail at the rate you're implying and that the actual problem was securitizing all the loans until banks had no idea WTF they were even trading and couldn't effectively renegotiate to avoid defaults.  I guess you could blame government for allowing them to do that. 

You could also blame the governments for:

  1. Artificially inflating demand since the Community Reinvestment Act started & various acts in 1994 which not only drove up home ownership, but the price of homes as well (more demand = higher prices)
  2. Slashing the prime interest rate from 9% in 2000 to 4% in 2001, creating a culture ripe for all-time low interest rates
  3. Successively increasing rates from 4% to 8% from 2004 to 2005... Therefore when ARMs were re-negotiated (usually around 3 or 5 years), added on significant costs to homebuyers, making costs too high for them to continue the mortgages
  4. Fannie Mae & Freddie Mac which are government sponsored and were responsible for nearly 50% of home loans in 2008.

Government and business went hand in hand through the whole crisis. To ascribe 100% of the blame to lenders or the securitization of loans is crazy. It was a 50/50 proposition of government priming the pumps, businesses diving in and hiding toxic assets due to securitization tricks, and then stupid people buying into ARMs hook, line, and sinker.

I didn't mean it was 100% due to securitization, just that you are overweighting the impact of the CRA loans.  (Highly, I'd say.)  I agree on the rest of it, although you say 50/50 but name three things ...

Banks still new what they were trading.  The thing was, they were all banked on their not being a nationwide and in some cases global housing downturn, basically because there never had been in history.  Except maaaaaaybe the great depression but research tends to lean on the side of "not happened" from what I can tell.

The CRA loans ended up creating that global housing downturn, which the collapse.

The government made a seemingly impossible situation possible and it caused mass default.

This prompted me to do a little poking around on the Internet, and what I've found is that the CRA is more responsible than I thought, but much less responsible than you say. 

What I gather from what I read here is that the CRA didn't really do much harm directly, but when people pressured the government to lower lending standards (to get poor people more CRA loans), it resulted in lots of bad loans, not just at the CRA level but across the board. 

It seems to me that my earlier view, that it wasn't bad CRA loans any more (perhaps even less) than bad middle class or upper middle class loans that caused the crisis; but the CRA played more of a role in the creating of that situation than I thought, because of CRA-related activism. 

Feel free to show me better sources. 



Tag (courtesy of fkusumot): "Please feel free -- nay, I encourage you -- to offer rebuttal."
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
My advice to fanboys: Brag about stuff that's true, not about stuff that's false. Predict stuff that's likely, not stuff that's unlikely. You will be happier, and we will be happier.

"Everyone is entitled to his own opinion, but not his own facts." - Sen. Pat Moynihan
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The old smileys: ; - ) : - ) : - ( : - P : - D : - # ( c ) ( k ) ( y ) If anyone knows the shortcut for , let me know!
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
I have the most epic death scene ever in VGChartz Mafia.  Thanks WordsofWisdom!