Uncovering the Ingredients in a Shit Stew

About: foxnews.com - analysis: reckless mortgages brought financial market to its knees - opinion

source: ...

"In an attempt to increase homeownership, particularly by minorities and the less affluent, an attack on underwriting standards was undertaken by virtually every branch of the government since the early 1990s," Liebowitz writes. "The decline in mortgage underwriting standards was universally praised as 'innovation' in mortgage lending by regulators, academic specialists, (government-sponsored enterprises) and housing activists."

He continues, "Although a seemingly noble goal, the tool chosen to achieve this goal was one that endangered the entire mortgage enterprise."


...
With the Democrat Congress in charge I wonder if this information will ever be published before the election.  If it doesn't, IMHO, and Obama gets into power the entire economic system of the country will fall apart. These policies are the same kinds of things that are the meat of Obama's community organizing.
source: ...

But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.

Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.


... It's worth investigating this thoroughly, but with names like Barney Frank & Franklin Raines in the mix I doubt that it will see much of the light of day; Congress, political correctness & multiculturalism being the primary turds in this shit stew.
<== GI in Iraq burning the contents of the shit stew from their version of porta potties. 
Maybe something like this is what it will take.

Tags

  1. housing meltdown
  2. mortgages
  3. markets
  4. congress
  5. shit stew
  6. redlining ban

Comments


Mark de LA says
FYI, none of what you said is true.  I started with the WND article here (Also above). Where did you pick up the codeword phrase: trickle down deregulation economics?


Mark de LA says
seth 2008-09-20 15:28:39 10513
Well what do you know, one of the author's of trickle down deregulation economics blames the banking crisis that his policies helped create on  making loans to "minorities and the less affluent", then he gets Fox news to publish it and you pick it up and call it a shit stew.   Pardon me while i barf.
Well what do you know, you missed the quotes from other sources & probably didn't read any of them in the first place. Pretty good knee-jerk or is it just a jerk-off. Did you read the book "Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't" ? Are you still stuck in the past , still bashing Ronald Reagan? You seem to have become a prime example of why discussing partisan politics is a fruitless pursuit for discovering the truth.


Mark de LA says
Again IMHO, this is a direct result of the government crossing over into the economic sector to enforce the equality sector.  Liberty, Equality & Fraternity must be separate (much like the 3 branches of our government were intended), but balanced like the dynamic equilibrium of the separate systems of the human body.  We don't have the nerves digesting a hamburger directly, do we?  See 10459 for more clarity.

Seth says
M 2008-09-20 15:41:48 10513
seth 2008-09-20 15:28:39 10513
Well what do you know, one of the author's of trickle down deregulation economics blames the banking crisis that his policies helped create on  making loans to "minorities and the less affluent", then he gets Fox news to publish it and you pick it up and call it a shit stew.   Pardon me while i barf.
Well what do you know, you missed the quotes from other sources & probably didn't read any of them in the first place. Pretty good knee-jerk or is it just a jerk-off. Did you read the book "Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't" ? Are you still stuck in the past , still bashing Ronald Reagan?  [unnecessary personal bs instult snipped]
I read the whole article.  I've also read some other stories about this crash.  There was a whole culture of corruption in some of these financial circles.   These guys knew they were playing with fire ... but then they knew that nobody was watching the store.  They knew that they were mislabeling risk and passing it around in a shell game so that nobody could track what was what.  It worked as long as prices kept going up.  That's why is is so funny to find one of the guys who wrote a book on it is now blaming loans to minorities and the less affluent.  You should try to get to the real bottom of it instead of insulting me.  Maybe i am wrong ... but this article you have held up just does not leave a truthiness taste in my mouth.

Mark de LA says
source: ...

The Boston Fed still used the study to produce a manual for mortgage lenders that said: "discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower–income minority applicants."

So what were some of the "outdated" criteria?

Credit History: Lack of credit history should not be seen as a negative factor.... In reviewing past credit problems, lenders should be willing to consider extenuating circumstances. For lower–income applicants in particular, unforeseen expenses can have a disproportionate effect on an otherwise positive credit record. In these instances, paying off past bad debts or establishing a regular repayment schedule with creditors may demonstrate a willingness and ability to resolve debts....

Down Payment and Closing Costs: Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to homeownership by lower-income applicants. Lenders may wish to allow gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies to cover part of these costs. . . .

Sources of Income: In addition to primary employment income, Fannie Mae and Freddie Mac will accept the following as valid income sources: overtime and part–time work, second jobs (including seasonal work), retirement and Social Security income, alimony, child support, Veterans Administration (VA) benefits, welfare payments, and unemployment benefits.

Accepting these new criteria was hardly voluntary. The Fed warned the banks:

"Did You Know? Failure to comply with the Equal Credit Opportunity Act or Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions. Liability for punitive damages can be as much as $10,000 in individual actions and the lesser of $500,000 or 1 percent of the creditor’s net worth in class actions."

...wasn't only minorities but low income people. Do you think that the taxpayers should have just given a house to all low income & minority people? Forcing lenders to make bad loans under penalty of fines spun out of control. It's certainly not the free market & it was bad regulation.



Seth says
Well ...
source: M reacts to  underwriting standards
...wasn't only minorities but low income people. Do you think that the taxpayers should have just given a house to all low income & minority people? Forcing lenders to make bad loans under penalty of fines spun out of control. It's certainly not the free market & it was bad regulation.
These underwriting standards do not say anything about "no income verification" ... because that is what others are pointing to as the problem.  Who invented that?   Did you read in there about making loans where the lender know the rate is going up so high that the person would not be able to pay?  Mark, that is the stuff that made this problem ... and that is not in this document.  All that is in this document is stuff that would level the playing field.  It does not even come close to your "giving a house to low income and minority people".   In fact, i think you will find that most of these foreclosures are on homes over $300,000.  Those were not being purchased by "low income" people.   


Seth says
M 2008-09-20 16:09:21 10513
FYI, none of what you said is true.  I started with the WND article here (Also above). Where did you pick up the codeword phrase: trickle down deregulation economics?

Well "trickle down" has been around since the Regan era.  Perhaps it works for some people.  But it has the nasty effect of widening the gap between rich and poor - go look up your own stats there are plenty of them around.  That it may increase the GDP does not mean that it is good for the grunt on Main Street. 

"Deregulation" is what Bush and McCain have been pushing for the past 8 years ... that is until things got so bad that now they need to print up 800,000,000,000 more dollars of your tax payers money to bail out the financial world.  Now McBush is shouting mad about regulating the corruption.  That's what is called "trickle down deregulation economics" ... you put  money in the top ... deregulate it ... then bail it out.  It happened back in the 80's too after the Regan years ... remember.  

Mark de LA says
seth 2008-09-20 17:14:11 10513
Well ...
source: M reacts to  underwriting standards
...wasn't only minorities but low income people. Do you think that the taxpayers should have just given a house to all low income & minority people? Forcing lenders to make bad loans under penalty of fines spun out of control. It's certainly not the free market & it was bad regulation.
These underwriting standards do not say anything about "no income verification" ... because that is what others are pointing to as the problem.  Who invented that?   Did you read in there about making loans where the lender know the rate is going up so high that the person would not be able to pay?  Mark, that is the stuff that made this problem ... and that is not in this document.  All that is in this document is stuff that would level the playing field.  It does not even come close to your "giving a house to low income and minority people".   In fact, i think you will find that most of these foreclosures are on homes over $300,000.  Those were not being purchased by "low income" people.   

Most of this is a red herring!  whenever I see the words "level the playing field" I hear wealth redistribution & feel a hand in my pocket. Everyone that can read is advised to read the loan papers - variable rates are explained in detail. I had one myself. Sometimes the threats of fines & lawsuits are good enough to make a private entity do stupid things to avoid the government forcing it out of business.  What would be more interesting is the subsequent documents which describe in details how the lending institutions implemented the procedures.  The only date on this document is a 4/93 at the bottom of the document. Most official documents are dated on the title page & have official numbers on every page.  This looks like someone's attempts to regulate lending in a particular city? or state? based on FHA & other laws. There are multiple facets to the meltdown.  One of them begins with the stuff mentioned in this 10513. Nothing in what you said invalidates the points mentioned under "outdated criteria" above.

Mark de LA says
M 2008-09-20 18:25:36 10513
Thanks for sharing on you making up the codeword phrase  trickle down deregulation economics.
Someday you should ponder what would happen if there were no people with capital resources to fund the jobs & pay the salaries of those who work for them. Who would buy your goods? Who would make the goods you sell? JFK lowered taxes & got more money into the US treasury, so did Reagan. The higher taxes on capital gains (why businesses invest) the less incentive there is to do business & create jobs.  The government produces nothing at all; they only spend your money.  "trickle down" is just a leftest snear slogan that makes liberals feel good as if they had actually said something.
BTW, the really rich don't have to bother with this shit at all they can go to other countries or set up shop where the environment is more friendly or just retire in luxury in the Bahamas or somewhere.

Mark de LA says
Let me ask you the question would you loan a sizable amount of money to a person who:
  • had no history of paying money back or paying it back on time
  • put no money down to show a vested commitment & had no money to even process the loan
  • a person who did all of his money in cash transactions or did not have a steady job
  • was buying in a gang infested area where few people ever paid back loans & the values of the real estate rarely appreciated

If so, I would like you to loan me some money on a bridge I want to buy. Why should the loan company take all the risk? 



Mark de LA says
Good idea - do another study, but while another study would be interesting, now that the results are in from underwriting loans with questionable criteria, what would insure that it would not be buried if the results came out different than the politically correct answer? It was a bad study that caused the whole problem in the first place:
source: ...

Yet, there was another major change that has gotten little attention. Back in 1992, a Boston Federal Reserve study claimed to find evidence of racial discrimination -- claiming that minorities got denied mortgages at higher rates than whites even after important factors such as creditworthiness were accounted for. The data used in the study were riddled with typos and other serious errors. For example, of the 3,000 mortgages studied, 50 of the loans supposedly had the banks paying interest to the borrowers, 500 of the mortgages were not even in the data set from which the data was supposedly obtained, and some mortgages were supposedly approved for individuals who had negative net worth in the millions of dollars. When those mistakes were corrected, no evidence of discrimination remained.


...


Mark de LA says
seth 2008-09-21 10:19:50 10513
M 2008-09-21 06:45:28 10513
M 2008-09-20 23:25:05 10513
Sorry, I accidentally deleted your "fat cats" argument. Anyway it's not redlining vs fatcats. The third alternative is to buy in good area were values appreciate, show credit history, have a steady job & prove via IRS tax forms for a few years that you have been doing good for a period of time.

Definition of fat cats, eh?
You should delete this, since you deleted the context it refered to.
I'm sure you still have the context imbedded in your brain. You are invited to resurrect it if you like.


Mark de LA says
The basic point might be illustrated by something CFR said a very long time ago. He said talking about the 3-fold state that "RS said.." using housing as capital did nothing for the economy. In other words putting money into the ground doesn't produce anything.  Capital should be out and circulating producing goods & services. Linking capital to land is a very curious kind of occupation for humans to be doing. I have yet to find the RS quotes. (You can't just pull sound bytes out of his writings). But, I will research it more urgently. Capital  s/b the means to produce something. Some people have used it otherwise & produced the current disaster. Maybe a meltdown is the only way out. 

Seth says
source: M above
There are multiple facets to the meltdown.  One of them begins with the stuff mentioned in this [item 10513]. Nothing in what you said invalidates the points mentioned under "outdated criteria" above.
What in particular do you object to in the criteria?  Take for example a lack of credit history. A guy has a good income but pays mostly in cash. So should banks discriminate against him?  I seriously doubt that paying attention to the practices in the criteria will necessarily mean that bad loans would have been made.  The first re loan i eve got i had to fight some of the practices these criteria were targeted to avoid.  The banks had red-lined the area where i wanted to buy the house.  What these talking heads need to do is to break the bad loans down by the number that meet these criteria and publish those actual numbers traceable to actual loans.  Then compare them to the ones where banks handed out loans to fat cats based upon no sane underwriting rules whatsoever.  Compare actual facts ... don't just point the finger at the other side of the track.

Seth says
You know, Mark, it is not just "politically correct" not to discriminate against minorities in lending, but it actually is in the constitution - not to mention your own principals.  Keeping records to audit the process seems like a very reasonable measure.  I don't understand your spin.

Mark de LA says
seth 2008-09-22 14:02:35 10513
You know, Mark, it is not just "politically correct" not to discriminate against minorities in lending, but it actually is in the constitution - not to mention your own principals.  Keeping records to audit the process seems like a very reasonable measure.  I don't understand your spin.
It is the government that is interested in race, not me! It might just be that those who have bad credit tend to be minorities - some of the articles I linked to in the original item suggest that. But, to avoid being branded as racist I use a term that is borrowed from the class warfare of Marx & Engels (& the 3-fold state of Steiner) - proletariat. Once we remove race & the demographics of race from the picture then we can begin to understand that loans were being pushed to people with bad credit (those with good credit already had houses). Once we remove race from the picture we can begin to inquire what was Congress pandering to.  Congress using statistics to pressure an even mix of loans under threat of fines & lawsuits if the minority mix wasn't right is exactly what caused the problems in the beginning. The statistics have already been gathered. I suspect that they probably won't make you happy.

Mark de LA says
seth 2008-09-22 12:53:41 10513
source: media matters examines foxnews
CAVUTO: All right, but let me ask you -- but, Congressman, when -- when you and many of your colleagues were pushing for more minority lending and more expanded lending to folks who heretofore couldn't get mortgages, when you were pushing homeownership --
This is the kind of question that confuses the issue.  Questions that "and" something that is true with something that you are trying to spin, should be a big red flag telling us that we are being spun.  It is pretty obvious that the underwriting requirements were relaxed too much --- but there is no demonstrated connection between that and "minority lending". 

What you might want to come away from this interview with is not what Cavuto was pushing, rather it is what he couldn't prevent the  expert from letting drop: "I'm not aware of anyone asking anyone to make a loan to someone who couldn't afford it." But that is what ended up happening.  Now go look for the people who made loans to people who couldn't afford it and those who were profiting by that. 

source: ...
Also at the bottom of that article: CAVUTO: -- that -- that you wanted to encourage minority lending -- obviously, a lot of Republicans did as well. There was a lot of -- expand lending to those to get a home. Do you think, intrinsically, it was a mistake, on both parties' part, to push -- HOYER: I think -- CAVUTO: -- to push for homeownership for everybody? HOYER: I think clearly what happened is, Fannie and Freddie got caught up in trying to do what the Congress wanted done.
... The real spin is likely to happen during the upcoming presidential debates on Friday. I suppose just for amusement that you could say that those who did not yet have loans while Freddy & Fannie & the Carter & Clinton administrations were pushing loans were the proletariat removing race & minority status from the picture! OTOH, it is political correctness & the government that requires keeping records on race etc. 


Mark de LA says
seth 2008-09-22 14:31:43 10513
source: M spuculates
"It might just be that those who have bad credit tend to be minorities"
You are just repeating unsourced speculations.  Show me an actual statistical study which was conducted scientifically.  In fact this whole train of though needs an actual extensional (listing a sufficient sampling of cases) study justifying its claims.  Sans that demographic study this whole item is just pointing blame away from those who actually got rich by mutating the rules in their favor.  Sans some kind of extensional study, i am so out of here.  If i never respond to this item again, you will know why.


I'm not interested in chasing something which is mostly your concern. If you believe that the proletariat are mostly low income (see definition) & you believe that low income is usually less credit-worthy then you can believe that the picture is probably correct. (Why agitate for more minority loans otherwise?) There were loan statistics captured from my papers when I got a mortgage so the government has them. If you don't believe it go chase it yourself. I am more interested in researching the 3-fold solution to the problem. Now that would be real revolution!


Mark de LA says
Source: ...

A Democratic committee chairman overrode his own subpoena three years ago in an investigation of former subprime mortgage lender Countrywide to exclude records showing that he, other House members and congressional aides got VIP discounted loans from the company, documents show.

The procedure to keep the names secret was devised by Rep. Edolphus Towns, D-N.Y. In 2003, the 15-term congressman had two loans processed by Countrywide's VIP section, which was established to give discounts to favored borrowers.



Read more: http://www.foxnews.com/politics/2012/08/15/house-members-vip-loans-from-countrywide-excluded-from-subpoena-report-says/#ixzz23dCE4CHo
... crony capitalism & corruption started the shit-stew!

Mark de LA says
Here is one of the ingredients & it's Barack Obama himself:
 ... President Barack Obama was a pioneering contributor to the national subprime real estate bubble, and roughly half of the 186 African-American clients in his landmark 1995 mortgage discrimination lawsuit against Citibank have since gone bankrupt or received foreclosure notices.

As few as 19 of those 186 clients still own homes with clean credit ratings, following a decade in which Obama and other progressives pushed banks to provide mortgages to poor African Americans.

The startling failure rate among Obama’s private sector clients was discovered during The Daily Caller’s review of previously unpublished court information from the lawsuit that a young Obama helmed as the lead plaintiff’s attorney.


Read more: http://dailycaller.com/2012/09/03/with-landmark-lawsuit-barack-obama-pushed-banks-to-give-subprime-loans-to-chicagos-african-americans/#ixzz25Qn0ulO5
...


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