[BamSaitinypap]

I guess this is good counter to the "deregulation killed it all" tripe.

[Brutton]

Deregulation didn't help, let's be honest. The government can't legislate business, or shouldn't. Supply and demand will carry the day.

[rolex-buy]

The main difference in democrats and rebublicans, here, is that democrats will absolutely not acknowledge the good points of the "other side". You try to make it so black and white, and it's not.

[Serereids]

OP is really grasping at straws. Amazes me how people will still fall for this partisan bullshit.

[RooldpalApata]

What's the point? Your just going to believe whatever the hell you want to believe. My words would be wasted on you.

[Effofqueeno]

Originally posted by Naked Gents Rut


This is not a very persuasive counter-argument. From the first story:
If they were not making mortgages cheaper and were creating risks for the taxpayers and the economy, what value were they providing? The answer was their affordable-housing mission. So it was that, beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to grow. Subprime and Alt-A originations in the U.S. rose from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period the quality of subprime loans also declined, going from fixed rate, long-term amortizing loans to loans with low down payments and low (but adjustable) initial rates, indicating that originators were scraping the bottom of the barrel to find product for buyers like the GSEs.

The strategy of presenting themselves to Congress as the champions of affordable housing appears to have worked. Fannie and Freddie retained the support of many in Congress, particularly Democrats, and they were allowed to continue unrestrained. Rep. Barney Frank (D., Mass), for example, now the chair of the House Financial Services Committee, openly described the "arrangement" with the GSEs at a committee hearing on GSE reform in 2003: "Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing." The hint to Fannie and Freddie was obvious: Concentrate on affordable housing and, despite your problems, your congressional support is secure

So, what is it that the Democrats were opposing? from what I understand, it was tightening rules on the credit people had to have to get mortages. This means of course that Democrats wanted to encourage cheap credit to people who shouldn't have gotten home loans. I can see whay they would do that, given the huge prices homes were going for, making the "aim of home ownership" (an American economic obscession I don't get) difficult without cheap credit. Was this responsible on the part of Democrats? Of course not.

but last time I looked the problem comes from the fact that these bad loans were then bundled with other mortages and bonds issued based on this bad debt. The story says nothing about this bill that would have made doing that harder. And then buyers bought insurance on these bad loans, and then those intruments get sold, then bought on credit, then even more credit, and so forth.

So, as far as I can see, the problem in the financial markets hitting banks is not that Freddie and Fanny were allowed to make bad loans freely, but that everyone on Wall Street, KNOWING that many of these loans were bad, did not complain but instead went to town selling, reselling, repackiging all these things on credit, making a quick buck, and for some assenine reason thinking that doing all this on a foundation of bad loans was okay. That choice to ingore the underlying quality of these loans is what got people other than Freddie Mac and Fanny Mae in trouble- after all, couldn't the investment banks have looked at the rules, said , hey, you guys are lending to bad creditors, so we won't trade this junk! They didn't. How is that the fault of Democrats?

[tearidrusydet]

but last time I looked the problem comes from the fact that these bad loans were then bundled with other mortages and bonds issued based on this bad debt. The story says nothing about this bill that would have made doing that harder. And then buyers bought insurance on these bad loans, and then those intruments get sold, then bought on credit, then even more credit, and so forth. You don't really understand the financial crisis, then. The securitization of subprime loans is what allowed the bursting of the housing bubble to bring down Wall Street, but the root cause of all of this was the issuing of dumb mortgages to high risk borrowers who couldn't keep up with their payments. This is exactly what the Democrats decided not to stop. If they had acted in 2005 when they had the chance, there would have been far fewer subprime mortgages out there and the damage to the financial system would have been lessened, if most likely not averted entirely.

So, what is it that the Democrats were opposing? from what I understand, it was tightening rules on the credit people had to have to get mortages. This means of course that Democrats wanted to encourage cheap credit to people who shouldn't have gotten home loans. I can see whay they would do that, given the huge prices homes were going for, making the "aim of home ownership" (an American economic obscession I don't get). Was this responsible on the part of Democrats? Of course not. You would've been better off just stopping after that. The Democrats weren't responsible and now the American financial system is paying the price.

[Toivaluadiora]

dp

[Corryikilelet]

Originally posted by Riesstiu IV
What's the point? Your just going to believe whatever the hell you want to believe. My words would be wasted on you. Not that I agree or disagree with his point, since I think the issue is much more complicated than a single point, but I will attempt to explain his point to you. I believe his point is that the GOP is being blamed for this situation because of their general support for deregulation when in actuality it was the Dems who favored deregulation of Fannie Mae and Freddie Mac while the GOP opposed it.

I believe his point would also qualify for the irony thread.

Asserting that someone's opinion is wrong simply because you say it is or because it would be a waste of time to explain why they are wrong or to accuse them of "believing whatever they want" without actually explaining why they are wrong is not a very strong argument. In most cases, these are the favorite arguments of a person who has no argument.

If someone's opinion is wrong because you say it is, tell us why. If someone is just believing what they want to believe, tell us why their belief is wrong. If it is a waste of time to tell us why someone is wrong, don't waste your precious time posting to tell us you don't have the time.

[Oberjej]

1. Fannie and Freddie were clearly not the major problem. They acted quite a bit more responsibly than their non-GSE competitors, mostly staying out of the subprime mess, etc. The legislation that you referred to did nothing about the rest of the market.

2. The idea that the Dems killed GSE regulation is total bullshit. A Republican version of regulation passed the House by a huge margin (with a large majority of Dems voting for it), and then languished due to apathy in the Senate and hostility by Bush (according to Republican Rep. Oxley, of Sarbannes-Oxley fame). It looks like it was read into Committee, and then ignored.
http://www.ft.com/cms/s/0/8780c35e-7...click_check=1.
http://www.govtrack.us/congress/vote.xpd?vote=h2005-547

Your articles fail the most cursory logical scrutiny. If the R's voted for, and D's voted against it in Committee party line, since the Republicans controlled the Senate at the time (55-45), that would've meant that it would've gone to the floor. But it never did.

[fectsnanteemy]

Originally posted by Deity Dude


Not that I agree or disagree with his point, since I think the issue is much more complicated than a single point, but I will attempt to explain his point to you. I believe his point is that the GOP is being blamed for this situation because of their general support for deregulation when in actuality it was the Dems who favored deregulation of Fannie Mae and Freddie Mac while the GOP opposed it.

I believe his point would also qualify for the irony thread.

Asserting that someone's opinion is wrong simply because you say it is or because it would be a waste of time to explain why they are wrong or to accuse them of "believing whatever they want" without actually explaining why they are wrong is not a very strong argument. In most cases, these are the favorite arguments of a person who has no argument.

If someone's opinion is wrong because you say it is, tell us why. If someone is just believing what they want to believe, tell us why their belief is wrong. If it is a waste of time to tell us why someone is wrong, don't waste your precious time posting to tell us you don't have the time. tl;dr

[gamecasta]

Of course the Democrats are to blame. As are the Republicans... the banks... the Fed... and the people buying houses they couldn't afford. Pretending like just one thing caused this mess is ridiculously stupid.

[SkapySisy]

Fundamentally this is two distinct but connected valuation errors. Banks underestimated the risk in a subprime loan, and the overvalued the asset backing the loan. An unfortunate combination.

[Dapnoinaacale]

So I guess once we can determine who to blame - the democrats or the republicans, we can't be satisfied with the fact that banks gave tons of loans and credit to people they shouldn't have and people are always after loans and more credit so they can buy **** they can't afford. Good for business? Short term, perhaps, long term, nope.

But now it is way more important to blame Obama or McCain for this Because when we elect THE OTHER GUY who is less responsible, crap like this won't happen. Yes?

[Michael-jeckson2]

Half of the posters are saying the other half doesn't understand the
crisis. It seems I am the only one not understanding it.
So, a poor buys a house with a loan and cannot pay it. But the house
is still there,right?
No loss, unless the house's price was very high, and even so...
True loss only comes when a "paper" has nothing behind or there are
several papers on the same thing.
Perhaps someone can enlight me.

[DEMassteers]

Are the Democrats responsible for the U.S. financial crisis? I don't really know. I suspect they are, in part, as are the Republicans. Seems to me this has been brewing for some time, and couldn't have happened without both sides being complicit.

-Arrian

[Biashpainabix]

Financial Times

By David Blake

Published: September 18 2008 18:39 | Last updated: September 18 2008 18:39

Back in 2002, when his reputation as “The Man Who Saved the World” was at its peak, Alan Greenspan, former chairman of the Federal Reserve, came to Britain to pick up his knighthood. His biggest fan, Gordon Brown, now the UK prime minister, had ensured that the citation said it was being awarded for promoting “economic stability”.

During his trip, Mr Greenspan visited the Bank of England’s monetary policy committee. He told them the US financial system had been resilient amid the bursting of the internet bubble. Share prices had halved and there had been massive bond defaults, but no big bank collapses. Mr Greenspan lauded the fact that risk had been spread, using complex derivative instruments. One of the MPC members asked: how could this be? Someone must have lost all that money; who was it? A look of quiet satisfaction came across Mr Greenspan’s face as he answered: “European insurance companies.”

Six years later, AIG, the largest US insurance company, has in effect been nationalised to stop it blowing up the financial world. The US has nationalised the core of its mortgage industry and the government has become the arbiter of which financial companies should survive or die.

Financial markets have an enormous capacity for flexibility, but market participants need to be sure that there are rules, and a referee willing to impose them. Permanent damage has been done to the financial system, despite the extraordinary measures of Messrs Henry Paulson, the US Treasury secretary, and Ben Bernanke, the Fed chairman, to address the problems that stem from the actions of their predecessors. As Mr Paulson has suggested, he is playing a hand dealt by others.

Many blame the Greenspan Fed for this mess. They are right, but not for the reason often cited. It is unfair to say low interest rates are to blame. In the past decade, there is no evidence the US suffered from excessive growth leading to inflation. The economy needed low interest rates and a fiscal stimulus to avoid a severe recession. The Fed was right to do its bit.

Where Mr Greenspan bears responsibility is his role in ensuring that the era of cheap interest rates created a speculative bubble. He cannot claim he was not warned of the risks. Take two incidents from the 1990s. The first came before he made his 1996 speech referring to “irrational exuberance”. In a Federal Open Market Committee meeting, he conceded there was an equity bubble but declined to do anything about it. He admitted that proposals for tightening the margin requirement, which people need to hold against equity positions, would be effective: “I guarantee that if you want to get rid of the bubble, whatever it is, that will do it.” It seems odd that since then, in defending the Fed’s inaction, he has claimed in three speeches that tightening margins would not have worked.

The second incident stems from spring 1998 when the head of the Commodity Futures Trading Commission expressed concern about the massive increase in over-the-counter derivatives. These have been at the heart of the counter-party risk in the crisis. Mr Greenspan suggested new regulation risked disrupting the capital markets.

At the turn of the millennium, with no move to tighten margin requirements, a feedback loop sent share prices into orbit. As prices rose, more brokers were willing to lend to buy more shares. As share prices went up the buying continued, until the bubble burst. To create one bubble may be seen as a misfortune; to create two looks like carelessness. Yet that is exactly what the Greenspan Fed did.

Bruised by stock market losses, Americans bought houses. The mortgage industry used securitised bonds to ensure that the people who initiated the mortgage did not worry about getting paid back; risk was packaged and sold to others. This time Mr Greenspan did not just stand aside. He said repeatedly that housing was a safe investment because prices do not fall. Home owners could wait out any downturn. Is it any surprise that so many people thought if the world’s financial genius held this view it must be all right?

Even as things went completely wild, Mr Greenspan dismissed those who warned that a new bubble was emerging. It was just a case of a little “froth” in a few areas. Later, after waiting until 2007, two years after he left office, he conceded that “froth” had been his euphemism for “bubble”. “All the froth bubbles add up to an aggregate bubble,” he told the Financial Times.

This time, as with the equity bubble, the mistake was not to set interest rates too low; it was to stand back as wildly imprudent policies were pursued by mortgage lenders. Indeed, any lender would have been encouraged by his words in April 2005: “Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending.” Well, he was right about the rapid growth in subprime lending.

Mr Greenspan was in charge of supervising and regulating much of the banking industry for two decades. The Fed says it is responsible for ensuring “safe and sound banking practices”. It is right that other regulators should have stepped in, too – the US regulatory structure has not kept pace with market changes . But given the Fed’s institutional importance and Mr Greenspan’s personal stature, does anyone doubt that the Fed could have used its limited powers to ensure a closer examination of what was going on?

Mr Greenspan realises that something big has happened and describes it as a “once in a hundred years” event. But then, you do not get Alan Greenspans coming along every day.

The writer is an executive in an asset management company. He writes in a personal capacity
Copyright The Financial Times Limited 2008
Greed.

[Hbkj89D2]

but last time I looked the problem comes from the fact that these bad loans were then bundled with other mortgages and bonds issued based on this bad debt. The story says nothing about this bill that would have made doing that harder. And then buyers bought insurance on these bad loans, and then those instruments get sold, then bought on credit, then even more credit, and so forth. If the loans were not made in the first place Gepap, they can't be bundled and sold.

No one forced Wall Street to buy what they should have seen as risky assets, and no one forced them to continue selling and reselling these and insurance on them. Fighting the symptons instead of the disease. Gepap

1. Fannie and Freddie were clearly not the major problem. They acted quite a bit more responsibly than their non-GSE competitors, mostly staying out of the subprime mess, etc. Ramo, you are on crack. Freddie and Fannie were the entities most exposed to sub prime mortgages. Furthermore, because the government gave F&F the wink and nod and everyone saw this, Fannie Mae loan practices became the standard for nearly all home loan offering entities. Have you looked at a home lone application this decade?

The legislation that you referred to did nothing about the rest of the market. It didn't have to, because without the loans in the first place none of the rest would be possible.

Government distortion is responsible, and the Republicans who touted "their" ownership society share guilt. Every party when in power loves to crow about home ownership numbers, but it was the Democrats from Carter on who legislated that banks must have a certain percentage of their loans be made to sub prime borrowers. They created the very concept in the first place, and this is the logical conclusion.

This is only one piece of the puzzle of course, but to pretend the Democrats are not at the heart of this problem is fantasy.

[cmruloah]

Ramo, you are on crack. Freddie and Fannie were the entities most exposed to sub prime mortgages.

No. They weren't (unless you're using a bizarre definition of "exposed"). Because Fannie and Freddie were more regulated than the rest of the market, mortgages they offered required large down payments and for borrowers to document their incomes. They engaged in far less risky behavior than the rest of the market.

Every party when in power loves to crow about home ownership numbers, but it was the Democrats from Carter on who legestlated that banks must have a certain percentage of their loans be made to sub prime borrowers. They created the very concept in the first place, and this is the logical conclusion.

This is only one piece of the puzzle of course, but to pretend the Democrats are not at the heart of this problem is fantacy.

Utterly ridiculous spin. Subprime mortgages took off in the past few years because of legislation passed decades ago to stop banks from using race and marital status as proxies for risk. Yeah, right.

Are these really the right's new talking points?

[Jxlacvio]

Looks like Obama has stated that he opposes a stimulus package to go along with this bailout as some Democrats are proposing. He dropped the ball. It's becoming clearer and clearer that Democrats **** up the presidential election every time.