The true story behind the financial crisis.

[PSGator66]

This spells it all out.......................

http://freebeacon.com/the-true-story...ancial-crisis/

[dangolegators]

I'll read the link later, but this should be good.

[baygator1]

Similar lessons are about to be learned with the federal student loan program. Another classic bubble taking shape...government subsidy artificially inflates value, increasing costs and debt load for consumers who are more and more ill-equipped to repay.

[Minister_of_Information]

[tegator80]

Didn't break any real ground. But I am afraid that the warning of impending disaster is a little bit too late. The cattle are happily in the pens and they don't want technical details, they want toys.

[G8trGr8t]

Originally Posted by baygator1

Similar lessons are about to be learned with the federal student loan program. Another classic bubble taking shape...government subsidy artificially inflates value, increasing costs and debt load for consumers who are more and more ill-equipped to repay.

ding ding ding we have a winner...

not everybody deserves to own a home and not everybody deserves to go to college and both liberal fantasies generated giant bubbles. there is now more student loan debt than credit card debt. this is why oblamer wanted the feds to take over student loans so that the gubmnt (taxpayers) could forgive loans that private sector never would. rape and pillage future generations some more by borrowing more money to forgive loans of people that had no business going to college to begin with.

from the link

The government created Fannie Mae and Freddie Mac to buy home mortgages from banks in order to free up capital at those banks and permit more loans. And according to a 1992 piece of legislation, 30 percent of the home mortgages that Fannie Mae and Freddie Mac bought had to be from individuals at or below the area’s median income level.

The 1992 legislation also gave the Department of Housing and Urban Development the power to raise the requirement. By 2005, 55 percent of all mortgages bought by the two government-owned mortgage-backing institutions were for low-income individuals .

While Fannie and Freddie could meet the initial 30 percent requirement without too much trouble, the steadily increasing requirement forced the two institutions to lower their underwriting standards for mortgages. They reduced the minimum FICO credit score and began accepting mortgages with no down payment—two of the most important indicators for the quality of a mortgage.

“Over time, these poor quality mortgages stacked up in the financial system,” Wallison said. Half of all mortgages in the United States—28 million out of 55 million—were subprime or very low quality by 2008. And of these 28 million loans, three quarters were on the federal government’s books.

A housing bubble had been building since 1997, Wallison said, and when the bubble began to deflate, many of these low-quality mortgages defaulted. Many financial institutions that had bought so-called “mortgage-backed securities” began to struggle.

[wgbgator]

This seemed out of place in the story:

“Look, this is one of the most thoroughly researched topics out there, and every piece of the government-did-it thesis has been refuted,” Krugman fumed.

Did some funny guy just insert that in there? Because its placement is just bizarre and kinda out of context with the rest of the piece, but funny.

[gatorman_07732]

Originally Posted by baygator1

Similar lessons are about to be learned with the federal student loan program. Another classic bubble taking shape...government subsidy artificially inflates value, increasing costs and debt load for consumers who are more and more ill-equipped to repay.

That sucker is going to blow and it's not going to be pretty

[reformedgator]

That conclusion has been out there for awhile, but I thought he did a good job of explaining it to the masses. It was a political screw up resulting in massive & long lasting damages.

[dangolegators]

Krugman debunked this a week or 2 ago. To get the numbers they want to show, they have created a second category for 'high risk' loans (not subprime loans) and lumped it in with subprime loans. Why? Because Freddie/fannie backed a lot of high risk loans but not a lot of subprime loans. The high risk loans weren't an issue, the delinquency rate on high risk loans was close to the national average, around 9 or 10%. The delinquency rate on the subprimes was around 28%. The vast majority of subprime loans were not backed by Freddie/Fannie, they were completely private and quickly sold off to suckers on Wall St. This is just more of conservatives being deceitful.

So why would they lump 'high risk' loans in with subprime loans? I think we all know why.

[gatorman_07732]

Originally Posted by dangolegators

Krugman debunked this a week or 2 ago. To get the numbers they want to show, they have created a second category for 'high risk' loans (not subprime loans) and lumped it in with subprime loans. Why? Because Freddie/fannie backed a lot of high risk loans but not a lot of subprime loans. The high risk loans weren't an issue, the delinquency rate on high risk loans was close to the national average, around 9 or 10%. The delinquency rate on the subprimes was around 28%. The vast majority of subprime loans were not backed by Freddie/Fannie, they were completely private and quickly sold off to suckers on Wall St. This is just more of conservatives being deceitful.

So why would they lump 'high risk' loans in with subprime loans? I think we all know why.

See this is garbage because sub-prime loans were high risk loans. This is a case of redefining things to make a political point.

[dangolegators]

Originally Posted by gatorman_07732

See this is garbage because sub-prime loans were high risk loans. This is a case of redefining things to make a political point.

No, there were 'high risk' loans that weren't subprime and there were 'high risk' loans that were subprime loans. Freddie/Fannie didn't have much to do with the subprime loans but they had plenty of non subprime high risk loans on their books (because that's what they are there for). The subprime loans were the problem, and the vast majority of them were not backed by Freddie/Fannie.

[gatorman_07732]

Originally Posted by dangolegators

No, there were 'high risk' loans that weren't subprime and there were 'high risk' loans that were subprime loans. Freddie/Fannie didn't have much to do with the subprime loans but they had plenty of non subprime high risk loans on their books (because that's what they are there for). The subprime loans were the problem, and the vast majority of them were not backed by Freddie/Fannie.

Sounds like a bunch of garbage and that you don't know what a sub-prime loan is. You need to peddel that Friedman stuff somewhere else.

http://financial-dictionary.thefreed...prime+Mortgage

Subprime mortgage
Subprime refers to higher the risk. These are mortgages that are issued to individuals who are often not qualified. That is, the long term monthly mortgage payment is more than their income. Often, these mortgages are issued on the expectation that the homeowners income will rise in the future. These mortgages are often made feasible by teaser rates. This means that the rate might be very low for the first few years but then rise steeply. In periods of weakness in the housing market or the economy in general, these mortgages are the first to run into trouble.

[dangolegators]

Originally Posted by gatorman_07732

Sounds like a bunch of garbage

To you, I'm sure it does.

[dangolegators]

Originally Posted by gatorman_07732

Sounds like a bunch of garbage and that you don't know what a sub-prime loan is. You need to peddel that Friedman stuff somewhere else.

http://financial-dictionary.thefreed...prime+Mortgage

Yes, we all understand that subprime loans are high risk loans. Do you understand that there were also high risk loans that weren't subprime loans?

[Row6]

Freddie and Fannie were late comers to the sub-prime market, which was developed and dominated by private mortgage companies not subject to FDIC rules. CRA loans performed way above the private market. Add to that the fact that what killed the economy and set off a worldwide financial calamity was the bundling of these loans into packages traded on Wall Street. A $1.5 trillion dollar problem screwed up a $50 trillion market. The only government complicity in this was in not holding a tighter leash on the boy wonders on Wall Street.

"Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

- More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

-Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

-Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

...Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.

In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.

...These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.

In a speech last March, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked the notion that the push for affordable housing created today's problems.

"Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans," she said. "The CRA has increased the volume of responsible lending to low- and moderate-income households."

In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, "that this new lending is good business."

Read more here: http://www.mcclatchydc.com/2008/10/1...#storylink=cpy

[108]

had to laugh at this quote:

“Anyone in the financial industry will tell you it wasn’t financial deregulation,”

as for the article, its Wall St propaganda, and you conservatives love you some of it. Anything to take the blame off of the private sector and place blame on the public sector.

"We didn't do it, they forced us"

Several independent studies have taken place since the crash, and there is little evidence that the 92 initiative had much to do with what took place afterwards....Fannie and Fredie really didn't even start picking up these subprime loans until very late, and that was to keep pace with the private sector market. They had a far less % of them comparatively.

[gatorman_07732]

This is amazing how people try to redefine things for political purposes. You have been called out and exposed but continue by all means to follow your hero from the NY Times (we all know they set your agenda and you follow lock step). Right "not all" sub-prime loans were high risk.

[dangolegators]

Originally Posted by gatorman_07732

This is amazing how people try to redefine things for political purposes. You have been called out and exposed but continue by all means to follow your hero from the NY Times (we all know they set your agenda and you follow lock step). Right "not all" sub-prime loans were high risk.

What? Who said that? You got it backwards, not all high risk loans were subprime.

[ncgatr1]

I thought the financial crises was caused by GW Bush when he ran the New York Fed and got paid to look the other way as Wall Street ran their elaborate credit default swap Ponzi scheme.......no wait, wrong person.