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In Reply to: RE: "America's housing policy: The definition of insanity" posted by regmac on October 28, 2014 at 07:51:55
have to applaud it: it's giving industry exactly what it wants. You know, "laissez-faire?"
Follow Ups:
truth is no one has ever nailed it down to a single source. That said, there's no need to politicize the piece. When it comes to U.S. housing policy there's plenty of blame to go around.
has been "laissez-faire," keep government out of business.
You are saying we NEED government to interfere. That is contra-conservative ideology. I am not arguing, not saying whether that's right or wrong. I am pointing out the defining economic mantra of the Republican Party, that's all.
"has been "laissez-faire," keep government out of business.
You are saying we NEED government to interfere. That is contra-conservative ideology. I am not arguing, not saying whether that's right or wrong. I am pointing out the defining economic mantra of the Republican Party, that's all."
Conflating traditional conservatives with Republicans is a common mistake. That said, I'm unaware of **any** conservative or Republican advocating zero banking regulations. Perhaps you would be good enough to point out a few.
Libertarians are another matter. A libertarian friend I have coffee with insists the financial meltdown we suffered in 2008 was made possible by the presence of government meddling and interference. He blames the housing/debt bubble on central banks and dubious U.S. programs to encourage home purchase. Moreover, he faults the existence of consumer protection acts such as the FDIC for making people less careful with their money and hence banking CEO's less careful about taking the proper risks where their customers are concerned.
Lastly, he faults the government for forcing taxpayers to bail out the Wall Street bankers, insisting that if there were no government backstop bankers would be more cautious with their investments. Therefore, he argues, it was gov't intervention that caused the crisis. This isn't the same thing as "regulation" per se but you get the point: Libertarians loath all forms of gov't intervention.
I can’t say I agree with him 100% but he offers some interesting observations. Moreover, a panel of economists on Maria Bartiromo’s show the other evening acknowledged that free money from the Fed has caused the past two market meltdowns. But what really got my attention was the unchallenged comment of one economist who said the leveraging we see today is as deplorable as the leveraging that existed in 2008. That's troubling.
The Panic of 1792 was a financial credit crisis that occurred during the months of March and April of 1792, precipitated by the expansion of credit by the newly formed Bank of the United States as well as by rampant speculation on the part of William Duer, Alexander Macomb and other prominent bankers. Duer, Macomb and their colleagues attempted to drive up prices of US debt securities and bank stocks, but when they defaulted on loans, prices fell causing a bank run. Simultaneous tightening of credit by the Bank of the United States served to heighten the initial panic. Secretary of the Treasury Alexander Hamilton was able to deftly manage the crisis by providing banks across the Northeast with hundreds of thousands of dollars to make open-market purchases of securities, which allowed the market to stabilize by May of 1792.
EXACTLY! Thank you.The construction industry may win in the short term, and it makes the neighborhood activists feel like they're helping people, but it's a recipe for disaster. And it's obvious! And we've done it before!
It's pushed by folks on both sides of the aisle and it's an outrage.
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Edits: 10/28/14
Since their inception, the Community Reinvestment Act and affordable housing goals have helped millions of creditworthy low-income and minority families access affordable mortgages. Most high-risk subprime loans were originated by non-bank lenders not subject to CRA, and the loans were usually issued to middle- and high-income borrowers that did not qualify for CRA. It’s also important to note that Fannie and Freddie did not securitize subprime mortgages.
To be sure, Fannie and Freddie did eventually take on riskier mortgage products — so-called “Alt-As” — in 2006 and 2007, but they lagged the private-label market significantly in an effort to win back market share. In the end, Fannie and Freddie failed primarily because they are entirely focused on residential mortgage finance, unlike most private investment firms. So the government-sponsored enterprises were hit especially hard by the historic drop in home prices starting in 2006.
"To be sure, Fannie and Freddie did eventually take on riskier mortgage products — so-called "Alt-As" — in 2006 and 2007, but they lagged the private-label market significantly in an effort to win back market share."
Your chronology is defective and fails to provide an accurate accounting of what occurred. Let me help you, dear boy. BTW...great baseball game last night. ~:)
Snippet: How did we get here? Let's review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.
It is important to understand that, as GSEs, Fannie and Freddie were viewed in the capital markets as government-backed buyers (a belief that has now been reduced to fact). Thus they were able to borrow as much as they wanted for the purpose of buying mortgages and mortgage-backed securities. Their buying patterns and interests were followed closely in the markets. If Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. Their accounting had just been revealed as fraudulent, and they were under pressure from Congress to demonstrate that they deserved their considerable privileges. Among other problems, economists at the Federal Reserve and Congressional Budget Office had begun to study them in detail, and found that -- despite their subsidized borrowing rates -- they did not significantly reduce mortgage interest rates. In the wake of Freddie's 2003 accounting scandal, Fed Chairman Alan Greenspan became a powerful opponent, and began to call for stricter regulation of the GSEs and limitations on the growth of their highly profitable, but risky, retained portfolios.
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.
facts at all.It's the nature of the Free Market to boom and bust. The only time it didn't happen was during your heyday, after the Gov't restrained it.
And now you bite the hand the fed and protected you, because you want to distance yourself from the needy? Sad. So sad.
Edits: 10/29/14
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