What Caused This Economic Crises?
September 26th, 2008 at 02:08pm Kevin Patrick
Here’s a 10 minute video that is worth every second to watch:
UPDATE, by Mark Noonan: Senator Bunning injects a note of reality into the debate:
I also strongly disagree with the Senators who have come to the floor and declared that this crisis is a failure of the free markets. No, the root of this crisis is a failure of government. It comes from a failure of regulation and, most importantly, monetary policy. In the long term we certainly need to update our financial regulation to reflect the realities of our modern economy, but it is just plain wrong to blame failures of our regulations and regulators on the markets…
…I want to mention a few more failures of government that directly contributed to this mess. Federal regulations require the use of ratings from rating agencies that have proven to be wrong on the biggest financial failures of the last decade. The Community Reinvestment Act forces banks to make loans they would not otherwise make based on the credit history of the borrower. The Securities and Exchange Commission under former Chairman Donaldson failed to establish meaningful oversight and leverage restrictions for investment banks.
Fannie Mae and Freddie Mac used the implied backing of the government to grow so large that their takeover by the government effectively doubled the national debt. And they were pushed by their executives and the Clinton Administration to loosen their lending standards and write the loans that drove the companies to the point of being bailed out by the taxpayers.
Finally, the same individuals who have come to this building to ask for the latest bailout set the stage for the very panic they are using to justify the bailout.
Entry Filed under: Congress, Economy, Grassroots
59 Comments
1. LaMano | September 26th, 2008 at 2:23 pm
The prisoners are running the prison. And we get to pick up the tab.
2. Rich | September 26th, 2008 at 2:49 pm
As of 1:48 now the dow is up 28 points. So much for the market crashing today.
3. something else | September 26th, 2008 at 3:02 pm
I’m an independent invsestment analyst in New York. The video you posted is a load of partisan BS advancing an argument that has been TOTALLY debunked. There is NOTHING and I mean NOTHING in the Community Reinvestment Act that forces banks or even encourages them to make loans to borrowers who are assessed as bad credit risks. The ONLY thing the CRA did and does to this day is force banks to treat all applicants equally, regardless of the geographic area they live in. This was done to stop banks ‘red-lining’ entire neighborhoods such as Harlem in New York. Shame on you for posting this lying trash. Point out to me ANY SECTION of the CRA that forces or encourages banks to make bad loans.
It’s really, really sad that in this time of financial crisis, a crisis caused by Bush turning on the credit tap too strong for too long, that you would try to blame an act that merely allowed people of GOOD CREDIT living in disadvantaged neighborhoods for this mess. You will not find a SINGLE serious economic commentator who agrees with you.
A new low, even for the armpit of the internet that is blogsforvictory.
4. CanadianObserver | September 26th, 2008 at 3:25 pm
3. something else | September 26th, 2008 at 3:02 pm
—————————————
Many thanks for posting honest clear-headed non-partisan comments. Much appreciated.
5. Fredrick Schwartz | September 26th, 2008 at 3:41 pm
As my comment that debunks this video lies in moderation limbo I would like to thank
something else for her/his comment
CRA had nothing to do with this crisis. The video is a lie. How do you make a wingnut cry? Check facts baby check facts!
6. Timmy J. Rooter | September 26th, 2008 at 4:32 pm
Funny how the lefties claim “debunked” when their caught lying,
Notice how they make the jump to “There is NOTHING and I mean NOTHING in the Community Reinvestment Act that forces banks or even encourages them to make loans to borrowers who are assessed as bad credit risks.”?
Red herring, the subject of the video is the changes to the applications foisted by the Clinton Administration that precipitated the sub-prime meltdown.
7. SEW | September 26th, 2008 at 4:56 pm
Affirmative action loans. Progressives rock! Save the planet, combat CO2.
8. Kahn | September 26th, 2008 at 5:05 pm
Democrats used the finance laws and regulations to engineer social change. They abused the trust.
Then, when Republicans tried to put in oversight, it was blocked.
These are NOT lies. And frankly, I don’t believe Mr. “I’m an independent investment analyst in New York”.
Partly because he misspelled investment in his post. But also because he’s full of crap.
9. something else | September 26th, 2008 at 5:10 pm
Just a second “Timmy”, where does the quote you posted above come from? It’s hearsay by a nobody columnist (Lorie Byrd?) on a townhall.com blog. That’s the best you’ve got?
The blog in question doesn’t post any sources for its claims (and why should it, it’s nothing more than an OPINION piece after all) and it certainly does not specify in ANY way how the CRA was used to force banks to make bad loans. (It couldn’t because the CRA does not do this.)
Even if the quote was true (again we have NO source so how can we know) all it says is that Rubin went after banks that did not make “enough” loans to distressed neighborhoods. There is no quota of how many loans banks must make to neighborhoods, all Rubin could have done (if he did anything, again with no source we have no way of knowing) would have been to go after banks who refused to make loans to anyone in a neighborhood who has good credit, also known as redlining. How exactly do you think the government could do this? This isn’t stalinist Russia, the only way the government can force banks to do anything is through the law and the courts and since the regulations do not force banks to make bad loans ergo the government could not have done this.
But of course the weasel worded blog “quote” you posted doesn’t specify this, instead it tries to make it look like the evil government is forcing banks to make bad loans when all the CRA does is prevent banks from discriminating against borrowers solely on the basis of where they are from.
Can you find a single bank or banker who claims that they were forced to make a single bad loan because of the CRA or pressure from the Clinton government? Go ahead and post a link to just one credible (non-anonymous) person saying that and I’ll cede this agument completely to you.
You won’t be able to do it though because it has never happened. Nice work in trying to blame the financial crisis on the poor though. Wonderful stuff. I suppose you’re a “compassionate conservative”, just like our president. By the way, isn’t he the one who’s been running the country for the last eight years? If the CRA was so harmful to our nation’s financial well-being why hasn’t he done anything?
So go ahead, post a link to a single bank or banker saying they were forced to make bad loans by the CRA or the government and you’ll completely win this argument. The subprime meltdown encompasses literally hundreds of billions of dollars in bad loans spread over tens of thousands of mortgages - surely you can find one single bank or banker ready to point out to America that it was the government who somehow forced them to make a specific bad loan.
I’ll be waiting.
10. something else | September 26th, 2008 at 5:12 pm
Kahn, any sources for your untrue claims? Any sources at all?
11. BARRASSO | September 26th, 2008 at 5:12 pm
A little excerpt from the Washington Post:
Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers’ ability to repay, making loans with deceptive “teaser” rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.
Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.
***
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.
Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.
***
When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.
link is here:
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783_pf.html
12. dickvee | September 26th, 2008 at 5:46 pm
These scoundrel liberals will end up getting what they so vociferously contend occurred. Step up to the disappointment window deadbeats…this time you won’t get any financial satisfaction. We’ll need 25% downpayment and even then your past financial indiscretions will not allow us to lend you money. Accuse banks of forcing loans on unsuspecting ‘dupes’ andbeing predatory, and you’ll find out what the opposite of that agenda would be. So, if you are saying banks forced the money on you, they won’t be interested in giving it to you at all in the future. When credit dries up, it only dries up for those with the inability to repay. Got it?
13. xaviercugat | September 26th, 2008 at 5:51 pm
The video is wrong.
Starting in 2000, the global pool of investment money (fixed-income securities) began to rapidly grow due to globalization. It doubled between the years 2000 and 2006 to 70 trillion dollars. This money always sought reliable sound investments, which they generally found in US Treasuries.
But in 2001, those bonds were producing yields of 1%. There was global pressure to increase the yield. Alan Greenspan said no. So the money searched for other stable investments that produced a better yield.
The answer: The US mortgage market.
To meet the demand, new investment instruments were created — Collateralized Debt Obligations, or CDOs. These things packaged a bunch of mortgages together, and sold them off to the waiting hordes.
They sold rapidly. The global investors would take all that were available. They demanded more. And since they were so profitable, wall street was happy to meet the demand.
Problem was that in 2003, the market saturated. All safe mortgages had already been packaged and sold. The solution? Find more mortgages. The US mortgage industry created more, and the only way they could do it is to entice people into more than they could afford. And that enticement happened throughout the economic spectrum through new procedures called NINA (No Income No Asset verification). The mortgage market became so competitive brokers couldn’t bother with income or asset verification or they’d risk losing the business. And because these instruments were so profitable, the sales commissions were huge. Schmucks out of college were making $25K a month. Predictably, there was fraud. Always happens when big money is in play in a fast uncontrolled market.
I can go on. There are more intricacies, with the flood of easy money fueling the incestuous cycle of the housing boom. Credit rating agencies screwed by applying old statistical models to this unprecedented situation. But by now you get the gist.
This problem wasn’t created with Clinton or CRA. Brokers and Wall Street weren’t giving loans to bad credit risks because they were forced to; they did it because they were making great profits doing so. It was the $70 Trillion looking for a sound investment, and they found it in the US housing industry. It caused a bubble. It caused fraud. And it happened quickly — or at least by the standards of regulation and legislation.
Note that I blamed neither the Republicans or the Democrats in this. Yes, some Democrats feared increased regulation because of the impact on low income tiers. But Republicans - in addition to being reflexively anti-regulation - were equally timid to apply the brakes either — their constituencies were living in bigger houses with higher property taxes. In general, any political entity like our legislative or executive branch is unprepared to really nimbly respond in the new global economic machine, where trillions float through the ether in minutes.
14. something else | September 26th, 2008 at 6:02 pm
Bottom line, the video above is a really sleazy attempt to blame the subprime meltdown on the Community Reinvestment Act and the Clinton administration (who as far as I can tell have been out of power for eight years). The video and the argument it tries to make have been widely and resoundingly debunked and nobody of any stature stands behind these arguments. If the people running this blog have any honor they will take it down.
15. Mark Noonan | September 26th, 2008 at 6:02 pm
Something Else,
Nonsense - I work at a bank as a credit underwriter and I’ve spent the last 8 years watching us loan money to people who can’t afford it and don’t qualify for it because the executives are afraid of running afoul of accusations of discrimination and redlining. The video is truth, nothing more and nothing less. This is what we get when government tries to force the private market to do something.
16. Timmy J. Rooter | September 26th, 2008 at 6:09 pm
“Go ahead and post a link to just one credible (non-anonymous) person saying that and I’ll cede this agument completely to you.
” Investors Business Daily
17. FactCheck | September 26th, 2008 at 6:17 pm
UPDATE, by Mark Noonan:
Yeas, please do run with the “deregulation and free markets forever!” line. Really. I want you to yell it as loud as you can. So that everybody can then mock you for being so ridiculous.
18. something else | September 26th, 2008 at 7:11 pm
Mark Noonan,
Why exactly were executives at your bank supposedly (according to you) “afraid” of being accused of red lining? The law is very clear about this - I have a copy of the CRA act on my computer and on the official FDIC website it clearly states that the only thing the act requires banks to do is to state WHY they have refused credit to any applicant. Do you think that given the history of banks refusing credit to entire neighborhoods that that is too much to ask them to do?
A bad credit score, lack of income, etc. would all be valid reasons for refusing credit. Your post is nothing but hearsay garbage - executives “afraid” of being accused of redlining, thus approving bad loans. Total (expletive deleted). Show me one, just ONE instance of a bank being accused of redlining and prosecuted under the CRA when they were not in fact doing so.
The largest bank failure in US history occurred yesterday when Washington Mutual was taken over by regulators - over $300 BILLION in mortgage loans, can you find ONE SINGLE Washington Mutual executive who is prepared to say that they were forced to make bad loans because of the CRA?
Your talking total bs by any standards Noonan. Come back to me with real world examples instead of bs hearsay about what executives at your company are supposedly afraid of and you might have some credibility
19. something else | September 26th, 2008 at 7:21 pm
“Timmy”, your quote, which comes from an eight year old entry in some non-entity blog known as the City Journal kind of loses credibility when the writer of the piece claims that the CRA forces “quotas” on banks to lend to certain neighborhoods. That’s total nonsense, there is no quota system in the CRA anywhere. Go ahead and post me a link in the actual Community Reinvestment Act regulations (which can be found online here: http://www.fdic.gov/regulations/laws/rules/6500-2515.html ) and prove me wrong.
Go ahead and show me where the act forces banks to use quotas for certain neighborhoods Timmy. I’m looking forward to it or whatever other nonsense you are prepared to grace us with next.
20. Timmy J. Rooter | September 26th, 2008 at 7:27 pm
“There is no quota of how many loans banks must make to neighborhoods, ”
“Banks were given strict new numerical quotas and measures for the level of “diversity” in their loan portfolios. ”
“Why exactly were executives at your bank supposedly (according to you) “afraid” of being accused of red lining?”
“Getting a good CRA rating was key for a bank that wanted to expand or merge with another.”
“Show me one, just ONE instance of a bank being accused of redlining and prosecuted under the CRA
Typical liberal trap; CRA doesn’t have prosecutorial authority, however, “The CRA requires federal regulators to assess the record of each bank or thrift in helping to fulfill its obligations to the community. This record will then be used in evaluating applications for future approval of bank mergers, charters, acquisitions, branch openings and deposit facilities.”
Just like the City Journal said, just like Investor’s Business Daily said, just like Lorie Byrd said, just like Mark said. I know, it’s a vast right wing conspiracy to make you look like the liar you are.
Mark,
I guess we can’t take him at his word. A simple, “Gee, I guess I was wrong” is just too hard for liberals to say.
Like I said before, the lefties claim “debunked” when their caught lying.
21. gotbrains? | September 26th, 2008 at 7:29 pm
The ability of the ding dongs here at B4V to deny reality is becoming truly entertaining.
But somewhere in some dimly lit corner of your otherwise darkened, um,… “minds”… you know very well what happened and exactly who is to blame for this mess.
It’s not like we haven’t seen this movie before. The S&L scandal following the great deregulation of the savings and loan industry in the 1980’s set the example - and it’s one Mr Keating’s good friend Mr McCain is quite familiar with. That mess cost tax payers hundreds of billions in today’s dollars.
Obviously, no lesson was learned, as Mr McCain continued to portray himself as a champion of wreckless deregulation thoughout the 90’s. His future chief economics adviser Phil Gramm was the architect of the 1999 legislation that basically repealed the Glass-Steagal Act, which was the key law regulating the banking industry.
The Bush administration continued the general regulation gutting zeal that is the center-piece of modern Republican economics.
The Bushies made the situation worse in several ways. First, they stacked US government regulatory agencies with lobbyists from the very industries they were supposed to be regulating and overseeing. Not just in banking, but in every single government oversight and regulatory agency that was ever set up to protect the interests of consumers and the nation itself from industry excesses and greed. ie, basically the foxes were put in charge of guarding the henhouse.
Second, as was pointed out earlier, the Bush admin has kept the economy afloat - mostly for near term electoral advantage and to reward industry friends - by pumping it with money. For years, they have responded to the underlaying weak foundations of the US economy by lowering interest rates and keeping them artificially low, flooding the economy with capital at every opportunity. They have at the same time dramatically increased government spending, pumping billions of dollars into industries of war, etc. And they have relentlessly cut taxes, especially on those at the very top, which encourages more speculative investment. Put altogether along with the gutting of regulatory oversight, this regular flooding of the market with more and more dollars created a huge credit bubble. Except the US itself is now so in debt to China and other creditors, not much can be done to deal with the resulting train wreck.
And now, my friends, the USA is officially broke - and we know exactly whose economic philosophies led us here.
But you go on desperately clinging to exculpatory, revisionist fairy tales from an alternate universe. You’ve got one heck of a rude awakening coming. This thing called reality is a real b*tch.
22. Kahn | September 26th, 2008 at 7:38 pm
something else - well my claim that you mis-spelled investment is clear enough. YOU are the source.
But encouraging investment is not that same as forcing it. I’ll grant you that. Go semantical argument. But encouraging it and causing the current mess ARE related. See how that works?
You are not what you claim. Prove us wrong if you’re so smart.
23. something else | September 26th, 2008 at 7:47 pm
No Kahn, you guys made the ridiculous claim that the CRA is responsible for the current mess. It’s up to you to provide evidence your allegation. You can’t do that because there isn’t any.
By the way, it’s a well known truism that it’s impossible to prove a negative. I’ve repeatedly issued you guys with a challenge to provide a single source to a bank or banker claiming that the CRA forced them to make a bad loan. You haven’t yet been able to do so. Don’t you think that if the bank executives had a nice little excuse for their ridiculous greed-fueled practices over the last 5 years they would use it?
All you guys show is how low and desperate the partisanship on this blog is. And fyi I’m a republican. However I am also a fiscal conservative and a member of the reality based community. I am also voting Obama cause the rot inside the republican party has got to be stopped at some point and McCain/Palin is a walking joke, expecially for those who care about economics.
Great to see that the only criticism you can make of my posts is a typo on the spelling of the word “investment” though, says a lot about the strength of your arguments.
24. Jeremiah | September 26th, 2008 at 7:56 pm
Is government too big to end Bill Clinton’s NAFTA bill?
If we ended NAFTA wouldn’t that help us to get our jobs back, instead of sending all our money and natural resources overseas?
We buy China’s products, and we send all our resources over their, do we not?
If we kept all our coal & wood here we could start more power plants and lumber yards here putting more people to work.
You know, if we don’t have the jobs, how can they feed themselves?
Trillions of jobs and dollars go overseas, and our government then has to feed the people here.
That’s socialism.
What about the people who’ve horded their money…why can’t they give some to small businesses, companies, etc, etc?
25. Timmy J. Rooter | September 26th, 2008 at 8:00 pm
Kahn, don’t you know by now the reality based community, or kos-kids as they like to be called, are all republican fiscal conservatives.
pbllfft!
26. phnx | September 26th, 2008 at 8:01 pm
Something else, by any chance is your real name Bruce Marks? Its no wonder that you can’t find one banker to speak openly against CRA related mortgages. They fear the organizations like ACORN and NACA that use agressive tactics. “Borrowers must pledge to assist the organization (NACA) in five “actions” annually—anything from making phone calls to full-scale “mobilizations” against target banks, “mau-mauing” them, as sixties’ radicals used to call it. “NACA believes in aggressive grassroots advocacy,” says its Homebuyer’s Workbook
“Though bankers generally cheerlead for CRA out of fear of being branded racists if they do not, the CEO of one midsize bank grumbles that 20 percent of his institution’s CRA-related mortgages, which required only $500 down payments, were delinquent in their very first year, and probably 7 percent will end in foreclosure. “The problem with CRA,” says an executive with a major national financial-services firm, “is that banks will simply throw money at things because they want that CRA rating.” From the banks’ point of view, CRA lending is simply a price of doing business—even if some of the mortgages must be written off.”
So is there a specific article in the CRA which forces banks to make bad loans. NO, there is just the mechanism for them to be extorted by NCRCs like ACORN and NACA to do so, under the threat of judicial action.
You say you are an independent investment analyst, but by your vocal defense of the CRA it sounds as though you are benefiting from these tactics.
27. something else | September 26th, 2008 at 8:06 pm
Great rebuttal Timmy. Still waiting for you to post a single banking source blaming bad loans on the Community Reinvestment Act.
And waiting…
28. something else | September 26th, 2008 at 8:18 pm
Phnx, thanks for posting an unsourced opinion piece which again has nothing but hearsay in it - is there a single person named in any of the nonsense you posted? You don’t even post a link to whatever blog you found it on, too embarrassed of the provenance?
I’ve never heard of Bruce Marks and have no connection with the CRA whatsoever. I just don’t like seeing idealogical partisans trying to blame the subprime meltdown on an act which had nothing to do with it. As a New Yorker I well remember the times that people in the Bronx, Harlem and large parts of Brooklyn and Queens couldn’t get a home loan no matter how good their credit history, income level etc. Teachers, office workers, small business owners were all frozen out and the CRA was an entirely justified act to stop the practice of redlining. Now a bunch of wacko idealogues are trying to blame if for a trillion dollar mortgage meltdown? That just shows how unhinged from reality you guys are.
Again, Bush has been in power for 8 years, can you even find one of his myriad of Treasury Secretaries who agrees with you? Or any executive from any of the large banks that have gone busto? No you can’t. Those guys would love to have an excuse for the current meltdown but they know that if they tried to blame the CRA they would be laughed out of it.
Again, go ahead and post a single CREDIBLE source for any of your claims and you win the arguement. Why can’t you do that?
29. Rich | September 26th, 2008 at 8:24 pm
“Just a second “Timmy”, where does the quote you posted above come from? It’s hearsay by a nobody columnist (Lorie Byrd?) on a townhall.com blog. That’s the best you’ve got?
The blog in question doesn’t post any sources for its claims (and why should it, it’s nothing more than an OPINION piece after all) and it certainly does not specify in ANY way how the CRA was used to force banks to make bad loans. (It couldn’t because the CRA does not do this.)”
And you say this with a straight face after posting-
“I’m an independent invsestment analyst in New York. The video you posted is a load of partisan BS advancing an argument that has been TOTALLY debunked. There is NOTHING and I mean NOTHING in the Community Reinvestment Act that forces banks or even encourages them to make loans to borrowers who are assessed as bad credit risks.”
Is this not hearsay from you? Where are your sources for your claims? Are you not a nobody yourself?
30. something else | September 26th, 2008 at 8:38 pm
No Rich it isn’t. The video makes claims. I have pointed out repeatedly that there is nothing in the Community Reinvestment Act that backs these claims and that you will not be able to find a single credible source in the banking community who would claim that the CRA was responsible for the current subprime meltdown.
I did not make the initial claims, the stupid video posted above did. If you can provide a shred of evidence to back up the CLAIMS found in the video, go for it and I will shut up. Otherwise I’m waiting.
And by the way, my words are not hearsay, I provided a link to the actual CRA here on the FDIC website here:
http://www.fdic.gov/regulations/laws/rules/6500-2515.html
What is pathetic though “Rich” is that you cannot provide a SHRED of evidence to back up your argument. I’m surprised you haven’t just called me a libtard or some other name since that seems to be the tactic employed on this site when absurd evidence-free opinions bump up against reality.
31. something else | September 26th, 2008 at 8:46 pm
Just curious to know what you guys have to say about the following:
Source: http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf
32. phnx | September 26th, 2008 at 9:04 pm
something else, for someone who represents himslef to be an expert on the CRA I find it hard to believe that you don’t know who Bruce Marks is. He is the head of Boston-based Neighborhood Assistance Corporation of America. The largest of these groups benefiting from CRA. NACA raked in over $10 MILLION in originatios fees per year while assisting his clients in obtaining mortgages.
In a September 1999 story, the Wall Street Journal reported, based on a review of court documents by Boston real estate analyst John Anderson, that the Fleet Bank initiated foreclosure proceedings against 4 percent of loans made for Fleet by NACA in 1994 and 1995—a rate four times the industry average.
Bruce Marks said that he would consider a low foreclosure rate to be a problem. “If we had a foreclosure rate of 1 percent, that would just prove we were skimming,” he says. Accordingly, in mid-1999, 8.2 percent of the mortgages NACA had arranged with the Fleet Bank were delinquent, compared with the national average of 1.9 percent.
Mind you the 8.2 percent deliquency rate was during good economic times. I hate to see what it is now. Do you really think that Fleet Bank would have made such loans unless they were pressured to do so? If you do you are more naive that I previously thought.
Now I have given you names, dates and banks. I’ll even add a specific loan to show you how ludicrous your defense of the CRA has been.
NACA likes to promote the story of Renea Swain-Price, grateful for NACA’s negotiating on her behalf with Fleet Bank to prevent foreclosure when she fell behind on a $1,400 monthly mortgage payment on her three-family house in Dorchester. Yet NACA had no qualms about arranging the $137,500 mortgage in the first place, notwithstanding the fact that Swain-Price’s husband was in prison, that she’d had previous credit problems, and that the monthly mortgage payment constituted more than half her monthly salary. The fact that NACA has arranged an agreement to forestall foreclosure does not inspire confidence that she will have the resources required to maintain her aging frame house: her new monthly payment, in recognition of previously missed payments, is $1,879.
Would you have given her a loan? The answer is YES if you were working for NACA or ACORN.
Class dismissed.
33. SEW | September 26th, 2008 at 9:07 pm
“Just curious to know what you guys have to say about the following.”
She was special assistant to Bill Clinton for 5 years as economic advisor. Why do you think Sandy Burglar stole documents relating to Clinton’s failure to take OBL out?
34. Rich | September 26th, 2008 at 9:10 pm
Something else, please note
http://www.occ.treas.gov/crainfo.htm
“Banks are permitted and encouraged to develop and apply flexible underwriting standards for loans that benefit low- or moderate-income geographies or individuals, only if consistent with safe and sound operations.”
Key part- Banks are permitted and encouraged to develop and apply flexible underwriting standards for loans that benefit low or moderate income geographies!!!!!!!!!! Flexible underwriting standards for people that are not likely to pay back can not be considered safe and sound operations. Sorry, but that is like saying you should only eat poison when you can do it safely.
35. Rich | September 26th, 2008 at 9:26 pm
Wow Obama is stuttering a lot and getting mad. Not very presidential. Johnny Mac is hitting him on specifics.
36. something else | September 26th, 2008 at 9:28 pm
Jeez, Rich, are you serious? Did you miss the end of the very sentence you quoteed: “Banks are permitted and encouraged to develop and apply flexible underwriting standards for loans that benefit low- or moderate-income geographies or individuals, only if consistent with safe and sound operations.”
Wow, you just debunked your own argument (while addressing none of mine) in a post that is little more than a single sentence long. Somehow, I don’t feel like I’m addressing one of the great minds of my generation when I read your posts.
SEW: your post doesn’t even make sense. Are you guys all on meth or something?
Still not a SINGLE source from any of you quoting anyone inside the actual banking community supporting your ridiculous claims regarding the CRA being responsible for the subprime meltdown. It’s surprising cause you’d kind of think one of those bankers would have spoken up to let us know why their banks failed - it was really all the government’s fault. Amazing that they have all for some reason decided not to say anything about this, instead knobly falling upon their own investment swords. I think I feel a tear welling on my cheek.
But wait, perhaps all the CEOs of these failed banks are liberals or something? That must be it, right? It sure can’t be that the half-assed, source-free youtube video posted above is a steaming pile of bs. That’s a crazy idea.
37. Rich | September 26th, 2008 at 9:50 pm
No dumbass its right in my quote and I commented on it.
See- “Flexible underwriting standards for people that are not likely to pay back can not be considered safe and sound operations”
Would you loan your money to somone that can not afford to pay it back? What safe and sound type of loan is involved when you are forced to loan to people that cannot pay it back? How about you let you kids get babysitted by pedophiles in a safe and sound matter.
P.S. McCain just told Obama he doen’t know the diffrence between a tactic and a strategy. Talk about getting bitched on national television.
38. Rich | September 26th, 2008 at 10:01 pm
“uh uh uh uh ih I’ve got a bracelet too.” Barack Obama. What a boner.
39. Fredrick Schwartz | September 26th, 2008 at 10:18 pm
For the hayseeds in the powys this might work. Excellent presentation full of “facts” that they don’t need to check and that convincing McCain Palin pitch at the end.
I know most of you here think I sit in my parent’s basement and peck away at the keyboard looking to pick fights with conservatives to get my jollies. Sorry, but that’s not me. I’m a researcher I sit in an office and I corral about 400 other researchers who are bound by a simple creed: “Verify, verify, verify.”
Back in April 2008 the right wing tried to blame the subprime crisis on the CRA and thereby the Democrats, but two guys named Klein and Gordon writing in the American Prospect. They discovered that this began back in January on a thread at the Free Republic and gained traction with conservative bloggers and eventually a fellow at the Cato Institute decided that the facts were too hard to check for anyone to call him out so he ran with the idea that the CRA and the changes to it made by Clinton were the cause of the subprime mess.
Then it was on to John Derbyshire at the NRO then to Bob Litan from the Brookings Institution. I guarantee none of them have read the latest incarnation of the CRA because if they had they would not have placed their reputations in the gun sights of Gordon, Klein and I.
So here I am with the latest version of the CRA in front of me and a pile of links that state that the FDIC penalties were eliminated for 296 of the 297 banks regulated by the CRA in 2004 by none other than George W Bush. This was done so banks would have no trace or trail of how many subprime loans they made. So the blaming minorities and Democrats for this crisis is rendered moot. Vice president Dick Cheney in Davenport Iowa on August 24, 2004 was asked about FDIC Chairman Don Powell’s decision to let 99% of the banks which had to adhere to the CRA provisions no longer be regulated by that act. Here is the link from whitehouse.gov on the page seek the word “reinvestment,” and you go right to this question:
“Thank you, Mr. Vice President, Mrs. Cheney. I just wanted to get back to — you mentioned economic developments in response to this gentleman’s question about engaging more minorities in the party, and to this woman’s question about her company closing, and I was privileged of being at the White House when the President announced an increase of 500,000 mortgages, a commitment to do 500,000 mortgages for new, minority home buyers. I also serve on the President’s Community Development Financial Institutions Advisory Board. And one of the things that occurred just last week is the announcement from Chairman Don Powell, from the FDIC, that they were going to change the system for how they hold the banks hands to the fire in making loans and mortgages and credit available for economic development for affordable housing, for what have you. What they have proposed to do in Iowa, for example, of the 297 banks that the FDIC regulates, 296 will no longer have the comprehensive CRA — community reinvestment act evalu . . .”
It turns out this questioner was incorrect in his assessment of how many banks were regulated by CRA. What the Bush administration revisions to CRA did was release 1100 small banks with less than 1 MMM USD in assets from the regulations. In effect at the height of the subprime profit peak before anyone ever said the words housing bubble, the Bush Office of Thrift Supervision and the Bush FDIC virtually took the teeth out of the CRA. The point is not many minority subprime loans were made by banks with assets of over 1 MMM USD but many, many mainstream subprime and Alt-A loans were made by large banks including Countrywide Bank.
More links:
Black Caucus outraged at Bush changes to CRA
Yellin SF Fed President
Mike Barr before Congressional Committee
http://www.prospect.org/csnc/blogs/ezraklein_archive?month=04&year=2008Klein’s addendum to Gordon’s article
Gordon and Klein end their piece with this salient paragraph:
“It’s telling that, amid all the recent recriminations, even lenders have not fingered CRA. That’s because CRA didn’t bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA — or any federal regulator. Law didn’t make them lend. The profit motive did.”
The difference between politics and journalism is politicians and their enablers lie to convince voters and it is the job of the journalist to catch them and offer the voters the truth.
40. Fredrick Schwartz | September 26th, 2008 at 10:22 pm
16. Mark Noonan | September 26th, 2008 at 6:02 pm
BS
Other than being exposed as discriminatory what are the penalties for violating the CRA?
41. Ken | September 27th, 2008 at 1:29 am
Just a quick recap to stay on topic…
Banks were forced to give loans to people to poor credit.
President Bush and Senator McCain called for reform and were ignored.
As far as our liberal ‘friends pecking away on their keyboards in their parent’s basements? Nope, Don’t really see it that way… Though I can see just about all of the liberals that comment on this web site are doing so just to pick fights with conservatives to get ‘their jollies’.
42. cam | September 27th, 2008 at 1:41 am
Ken,
You must have been asleep the last couple of days. The liberal position on the understanding of this debacle has been very well represented. Your conservative friends who ran that argument up the flag pole have been seriously schooled over the past couple of days.
The purpose of the CRA and its wording prohibits the practice of redlining. It does not require the loaning of money to people who do not qualify. Look back over the past couple of days’ posts and read for yourself. While tonight’s debate was very close what happened here over the past couple of days was not even close.
43. Ken | September 27th, 2008 at 1:56 am
Cam… you are mostly right…. I’ve been working a late shift on my FOB pulling guard duty so I’ve been asleep during most of the daylight hours…
Recap again… banks were forced to give loans to people that could not afford them and they lost a lot of money…
Did I miss anything?
44. Danish Artist | September 27th, 2008 at 6:42 am
Regardless of the results of CRA…….
Republicans proposed legislation to regulate and oversee Fannie Mae and Freddie Mac TWICE, even when they their accounting practices came into question.
Democrats killed them TWICE and at the same time saying how strong those two organizations were and that Republicans were into the “politics of fear” and they did not see a problem.
Now we know better (at least us non-liberals).
45. ho-hum | September 27th, 2008 at 7:30 am
Ken: “Did I miss anything?”
Yeah - it’s called the point.
Banks weren’t forced to make bad loans - that’s the point of myriad posts above. Perhaps you can be the first person here to demonstrate how banks were forced to make bad loans Ken, since no-one else has.
Or is it just a case that you are spouting your opinions as “facts” just like phnx and Mark Noonan and others above. Some sources to back your opinions up would be wonderfully refreshing, otherwise thanks for your non-contribution.
46. Fredrick Schwartz | September 27th, 2008 at 8:27 am
44. Ken | September 27th, 2008 at 1:56 am
Based on your inability to understand simple concepts like the CRA didn’t “force” banks to do anything I suggest you take special care when around weapons.
Be safe.
47. Pain | September 27th, 2008 at 8:30 am
Regardless of the results of CRA…….
45. Danish Artist | September 27th, 2008 at 6:42 am
A wingnut recognizes that his talking points rae a lie and quietly steps away from the pile of poop he has stepped in hoping no one notices the smell.
We, Ourselves, welcome you DA to the sunshine of Reason.
48. Danish Artist | September 27th, 2008 at 9:57 am
Bill Clinton has been making the rounds lately. Two comments that I want to bring to your attention.
First, Clinton actually defended John McCain’s decision to suspend his campaign until a resolution is reached on the financial crisis. Even Clinton points out that John McCain didn’t do this because he is “scared,” which is what a lot of fellow Democrats were saying. Clinton reminds us that it was John McCain who was asking for more debates, town hall events, and Barack Obama is the one that refused … probably because the Obama campaign has yet to figure out a way for Obama to use a teleprompter during a town hall meeting. I still think that this is a silly campaign move. But we’ll see if it pays off for him.
Second, Bill Clinton also said that the Democrats aren’t entirely blameless for our current financial situation … Nancy Pelosi, are you listening? He said that Democrat should have highlighted the problems with Fannie Mae and Freddie Mac and “tried more aggressively to regulate derivatives.” He even somewhat acknowledged the “possible danger” in his administration’s policy of pressing Fannie Mae, the mortgage company, to lower its credit standards for lower- and middle-income families seeking homes.
Pain, don’t put words in my mouth. Your talking points conflict with actual facts as indicated above - straight from the President who amended CRA in 1995.
No matter how you spin CRA (it still is a fact that CRA gave leverage to the government to force bad loans, especially with Fannie Mae and Freddie Mac who sold those high risk loans to investors - another instrument of CRA 1995), DEMOCRATS still had the chance to halt the FMs failure and in usual big government protection tactic (not strategy), they put party before the American people.
DEMOCRATS’ chickens have come home to roost.
Pain, it seem you have been infected by the Obamaton computer virus - what will your gumdrops do now?
49. Moosetracks | September 27th, 2008 at 11:19 am
Something Else has the cons going in circles.
Mark, your post 15. was interesting.
Nonsense - I work at a bank as a credit underwriter and I’ve spent the last 8 years watching us loan money to people who can’t afford
I think the operative words are “last 8 years” and “watching.” Didn’t you have any sense of compassion for your fellow man; and object to these practices at Blogs for Victory and former Blogs for Bush? A repost of just one of your objections would make me feel at ease.
50. Mark Noonan | September 27th, 2008 at 12:24 pm
something,
I’m not about to get into a drawn out debate with a seminar commenter sent here by the left to mindlessly repeat talking points. I’ve been there, watching this happen. I know what went down - its just as the video states.
51. Mark Noonan | September 27th, 2008 at 12:41 pm
Moosetracks,
At times over the years on Blogs for Bush and Blogs for Victory I’ve decried the rampant greed of our times…as for the corporation I work for: repeated missives right up to the top and various levels in between pointing out the flaws in the corporation’s actions. Like dropping rocks down a bottomless well; one thing working in corporate America has told me is that the people who run it are a mish-mash of cowardice, ignorance and “me-tooism” on social liberalism. Those few corporations which are not like that are the one’s which keep chugging along, year after year, no matter what the economic conditions are…like, for instance, McDonald’s, JP Morgan, Wal-Mart, etc, etc, etc…(though I’m concerned, now, that Wal-Mart has grown so large that its getting close to the point where idiocy will start to take over).
As I noted elsewhere, my reaction to all of this a desire to make things smaller - make things more in line with human scale. Big Government and Big Corporation have got to go. Not that Small Corporation and Small Government won’t make bone-headed mistakes (we are, after all, dealing with human beings, here), but that when they do the scope of the disaster will be far less - and, of course, if it is smaller there is a greater chance that problems will be identified earlier and rectified before catastrophe strikes.
52. something else | September 27th, 2008 at 4:37 pm
Again, Mark, you’ve left several posts here since I”ve repeatedly challenged you to provide ANY evidence quoting anybody credible within the decimated American banking industry claiming that what is said in the video is true.
You haven’t done so because no serious person in the industry would make such a claim since it’s patently false. In post 50 above you state “I know what went down - its just as the video states.”.
So that’s it? We’re just supposed to take your word for it despite the fact that you have provided no evidence whatsoever? And one would imagine theat there would be a preponderance of bankers talking about this if what the video claims is true - if for no other reason than the fact that the CRA still exists and presumably if the video is true it would still be forcing banks to make bad loans. How come we haven’t heard ANYTHING in the media about that from any side - republicans, democrats, bankers, investors, anyone?
The video is total 100% bullshit and you cannot defend it beyond saying you “know” it to be true. How ridiculously pompous you are. Do you really think anyone takes you seriously?
PS - If you want me to take you seriously just go ahead and post a link to a banker agreeing with the points made in the video. Otherwise I think a retraction is in order.
53. phnx | September 27th, 2008 at 7:57 pm
something else,
I provided you the citations in #32 above. You obvioulsy chose to ignore it because you can’t refute it. You are nothing more than a gas bag.
54. something else | September 27th, 2008 at 10:34 pm
First of all phnx, you don’t manage to provide a link to the story you purport to quote from above.
Secondly, nothing in that story illustrates how the CRA forced the bank to do anything. It’s just a lot of blather about a particular loan and some guy called Bruce Marks who has no connection to any official agency and who did not cite the CRA in any way in the nonsense that you posted.
So once again, go ahead and find a reputable source within the banking industry who agrees with this bs. Find someone who says - you know what, our bank was FORCED to make a lot of bad loans by the CRA and that’s why we’re in this lousy situation with all these subprime mortgages defaulting.
The fact is phnx, nobody in the industry has said that (even though they would LOVE to have an excuse for the mess they find themselves in) because it is demonstrably untrue. There is nothing in the CRA that forces or even encourages banks to make bad loans. If you think there is then go ahead and post the evidence. Until then it’s obvious to any neutral observer that you are just trying to use the subprime meltdown as another excuse to talk unsubstantiated partisan nonsense.
55. phnx | September 28th, 2008 at 7:29 am
Wall Street Journal Sep 1999
Fleet Bank
Bruce Marks
NACA
Try google gas bag
56. FmrMarine | September 28th, 2008 at 1:17 pm
all
http://www.youtube.com/watch?v=3QBRIsCkGQ0
57. something else | September 28th, 2008 at 2:16 pm
phnx, first of all, if it was in the journal, post a link. Secondly, it doesn’t provide ANY evidence that what is said in the video is true, so it’s irrelevant anyway. It’s bee three days since the video was posted and you guys have not managed to post a SINGLE piece of evidence from anyone in the banking industry (which is in kind of a crisis) that blames the crisis on the Community Reinvestment Act. All that’s going on here is that once again Mr. Noonan has been caught in a blatant lie.
58. something else | September 28th, 2008 at 2:21 pm
PS Phnx,
I googled using the terms you suggested above. Guess what? No search result included any story in the Wall Street Journal (and the WSJ was definitely online in 1999). So we can take it that your so-called defense (which doesn’t even prove anything) is just a lot of made up lying garbage to support your laughable bullshit assertion that the CRA somehow forced banks to make bad loans.
Using made-up “quotes” to support arguments just shows how desperate you are slimeball.
59. Ken | September 30th, 2008 at 5:06 am
Yup… late post… Limited access to the net does this…
Here is a quote or two from the New York Times article on Fannie Mae back in September 30, 1999.
Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
and
”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”
Here is the link… copy and paste yourself…
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=print
So Ho Hum, Fredrick… any response? Or are you going to throw some more insults my way?
After all, here is an article from a very liberal news org stating that FM “has been under increasing pressure” to give loans to people that basicly could not afford them.