Where is the US economy headed?

@okie,

Quote:

It isn't just CRA, cyclops. I think the blame is largely due to Fannie and Freddie, that would buy high risk loan packages from banks.

I've demonstrated to you that it isn't the CRA at all. You're totally wrong on that point. If you aren't interested in arguing your side of it (and how could you be?) I will assume that you have conceded this fact.

Let's just go a little bit at a time here, Okie. As to the above: you do realize that the banks had to guarantee in writing that they had properly vetted these homeowners, right? That the banks had determined that the people actually had the money they said they did, and that they could afford the loan?

And that in many cases, this was a total and complete falsehood? I just want to be clear on this point before we go forward.

Cycloptichorn

2 Replies

@au1929,

It is not what can Congress but what can we do? First, put in people we can trust, people who will listen to us and not the status quo. The administration is not in charge; the congress pulls the strings and manipulates the laws. The administration asks and tries to guide the outcome.
They need to think about the long term results then start becoming pro active instead of reactive. Put on the brakes and try to regain control of the local and national economies as a team then carefully move our finances and thinking into a worldwide mode of operation. We cannot change the country by ourselves any more; competition from our international neighbors will beat us if we are not careful.
We need to raise the bar across the country, do more, think outside of the box and strive for competitive excellence. I know I have rose colored glasses but I also believe what I wrote is true.

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@georgeob1,

They keep raising taxes, because they don't know how to control spending. You can't continue to have income tax rates drop while congress continues to increase their spending. The only other option for any government is to increase all other forms of taxes - which they are doing. It's a stupid way to run any government, because they will never learn to control spending.

0 Replies

@Cycloptichorn,

Cycloptichorn wrote:

I've demonstrated to you that it isn't the CRA at all. You're totally wrong on that point.
...
do realize that the banks had to guarantee in writing that they had properly vetted these homeowners, right?

You have not "demonstrated" any such thing. All you've done is post the opinions of others as well as your own.

There are many (previously posted here over the last three years) who have opined that CRA, Fannie, and Freddie were major contributors to the current recession/depression.

Please provide some evidence that "banks had to guarantee in writing that they had properly vetted these homeowners."

1 Reply

@ican711nm,

ican711nm wrote:

Cycloptichorn wrote:
I've demonstrated to you that it isn't the CRA at all. You're totally wrong on that point.
...
do realize that the banks had to guarantee in writing that they had properly vetted these homeowners, right?

You have not "demonstrated" any such thing. All you've done is post the opinions of others as well as your own

On the contrary, I've linked to factual discussions by people who work in the industry about exactly what the requirements were and how the problems happened. You just didn't bother to read them, because they are complex and you sort of have to be smart to understand them, which is a problem for you.

Here you go - start with these two:

http://rortybomb.wordpress.com/2010/10/11/foreclosure-fraud-for-dummies-2-what-is-a-note-and-why-is-it-so-important/

http://rortybomb.wordpress.com/2010/10/11/foreclosure-fraud-for-dummies-4-how-could-this-explode-into-a-systemic-crisis/

Quote:

There are many (previously posted here over the last three years) who have opined that CRA, Fannie, and Freddie were major contributors to the current recession/depression.

Those opinions are wrong, and neither you nor those others have bothered to link to ANY factual or logical discussion that backs up their position. Even now, you can't adequately explain how those things you claim are true; you can only mutter about them, ignorantly, because you were told by your political pundits that these were the people to blame. If I were to ask you to present a complete picture of how these bad mortgages got into the hands of investors, and how they got made in the first place, you'd be unable to do so - and you know it.

Quote:

Please provide some evidence that "banks had to guarantee in writing that they had properly vetted these homeowners."

See my two links above, especially the first one; although this really is such an elementary point of modern business, it's rather embarrassing for you to admit that you actually need proof of it.

Cycloptichorn

1 Reply

Obama and his democrats continue to lead the country down the path of economic destruction... not for long though.

0 Replies

@Cycloptichorn,

Your references suggest that the government screwed up (i.e., CRA, Fannie and Freddie) in what it encouraged and allowed.

Quote:

http://rortybomb.wordpress.com/2010/10/11/foreclosure-fraud-for-dummies-2-what-is-a-note-and-why-is-it-so-important/

Looking at the documents you see that the smart guys who created these mortgage-backed securities put large poison pills into them to try and prevent the kind of note fraud we are currently experiencing as a country. They took the policing and legal recourse (and legal ability to cover their ass) very seriously on this issue. So seriously they can force repurchases of this bad debt.

Quote:

http://rortybomb.wordpress.com/2010/10/11/foreclosure-fraud-for-dummies-4-how-could-this-explode-into-a-systemic-crisis/
No matter what happens, the uncertainty about notes and what is currently going on with the foreclosure crisis is terrible for the economy. Getting to the heart of this problem so that negotiations can be worked out is important for getting the economy going again. There is little reason to trust what comes out of the servicers and the banks in whatever they conclude at the end of the month, and the market will know that. Only the government can credible clear the air here as to what the legal situation is with the notes and the securitizations.

1 Reply

@ican711nm,

Quote:

Your references suggest that the government screwed up (i.e., CRA, Fannie and Freddie) in what it encouraged and allowed.

No, they don't. They specifically did not say that. What more, the quotes you put in the post above don't say what you seem to think they say, at all.

Go back and re-read the pieces with a more careful eye towards detail this time.

Cycloptichorn

0 Replies

@okie,

Quote:

How come you don't apply the same line of reasoning with home loans, parados? That is exactly what I think about the Community Reinvestment Act.

Home loans existed LONG before the CRA okie. Irresponsible loans weren't started because of the CRA. The CRA doesn't require irresponsible loans.

1 Reply

@parados,

parados wrote:

[Home loans existed LONG before the CRA okie. Irresponsible loans weren't started because of the CRA. The CRA doesn't require irresponsible loans.

I agree with that. The main factor in diluting lender responsibility for making mortgage loans was the high volume securitization of loans done chiefly by Fannie Mae & Freddie Mac. Lenders no longer had to face the risk of borrower default over the long term, particularly if home prices fell. Their risk lasted only a few weeks until the loan was bought by Fannie or Freddy, packaged into a security and sold. Moreover, the lender's capital was quickly replenished by these quasi government buyers so they could quickly do it all again. The CRA was merely an added incentive to lend money into a dangerously expanding market bubble.

2 Replies

@georgeob1,

Quote:

The CRA was merely an added incentive to lend money into a dangerously expanding market bubble.

Except that isn't supported by any facts.

1 Reply

@georgeob1,

You surely can't advance that narrative, George, without pointing out that the banks bear some responsibility for massively defrauding F/F by selling them hundreds of thousands of mortgages whose paperwork was in fact extremely deficient - despite the fact that they assured the banks they had done the requisite vetting of the buyers, it is quite clear now that they did not.

Cycloptichorn

1 Reply

@parados,

parados wrote:

Quote:
The CRA was merely an added incentive to lend money into a dangerously expanding market bubble.

Except that isn't supported by any facts.

I was going to add that.

Cycloptichorn

0 Replies

@Cycloptichorn,

If you are advancing the theory that the banks were systematically failing to properly vet the financial qualifications of the borrowers, then it is very hard to see how you are so certain that the CRA didn't provide an addded incentive for that.

1 Reply

@georgeob1,

georgeob1 wrote:

If you are advancing the theory that the banks were systematically failing to properly vet the financial qualifications of the borrowers, then it is very hard to see how you are so certain that the CRA didn't provide an addded incentive for that.

Well, you tell us: in what way did the CRA provide added incentive for that? CRA loans typically have stricter requirements as to their type then the so-called 'interest only' loans or ARMs that we see lead to the problem.

Please be specific.

Cycloptichorn

0 Replies

@Cycloptichorn,

Cycloptichorn wrote:

Let's just go a little bit at a time here, Okie. As to the above: you do realize that the banks had to guarantee in writing that they had properly vetted these homeowners, right? That the banks had determined that the people actually had the money they said they did, and that they could afford the loan?
Cycloptichorn

Cyclops, I have a question for you, one that I have asked before and one that you have avoided answering. It is a simple one that common sense could answer. Here it is. You need to answer the question with a logical common sense projection about what would happen, based upon your knowledge of free markets, economics, and human nature.

If the government formed loan companies that actively loaned and also guaranteed a large portion of all automobile purchases, and if Congress passed a bill that would prohibit red-lining or discriminating against people that were not good credit risks for buying vehicles, as well as prohibiting any discrimination in regard to the differences in vehicles being purchased. In other words, if certain models of vehicles had been shown to be highly flawed, or if resale values of those types of vehicles were going into the tank, loans still had to be made, and they would be guaranteed by the government car loan companies. And private banks could make vast numbers of loans to people buying automobiles and have assurance they could bundle all of those loans and resell them to the government auto loan companies, or to other banks that might sell them to the government loan companies.
What do you think would happen to the automobile market over the long term, and what do you think would ultimately happen to the government auto loan companies as well as private banks that got into the business of auto loans?

The question does not require a rocket scientist to answer it. In fact, a similar question could be formulated for any product out there, such as boats, swimming pools, almost anything.

1 Reply

@parados,

He authorized the use of cruise missiles in August of 1998.
Those missiles attacked SUSPECTED terror sites in Afghanistan, and a civilian aspirin factory in Sudan.

http://articles.cnn.com/1998-08-20/us/9808_20_us.strikes.02_1_sudanese-television-bin-ladens?_s=PM:US

Then in 1996 he authorized their use in Iraq, even though they were no threat to us and we werent at war.

http://articles.latimes.com/1996-09-03/news/mn-40208_1_cruise-missiles

And he also ordered a cruise missile attack in June of 1993 against Iraq.
Again, Iraq was no threat to us, nor were there any terrorists in Iraq.
(at least, not according to some of the people on here there werent).

1 Reply

Here is an interesting article about how Obama's plans to help homeowners has actually worked.

http://www.huffingtonpost.com/2010/10/27/bailout-oversight-panel-obama_n_775054.html

Quote:

A key government panel keeping tabs on the bailout strongly criticized the Obama administration Wednesday for its apparent failure on a variety of housing-related fronts, from its ineffective foreclosure-prevention initiatives to its refusal to acknowledge the growing crisis sparked by widespread evidence that mortgage companies frequently take their customers' homes via fraud.

Faced with increasingly heated criticism from the Congressional Oversight Panel, the administration's representative -- the Treasury Department's housing rescue chief, Phyllis Caldwell -- hunkered down, refusing to answer basic questions.

Quote:

During Wednesday's hearing, members of the Congressional Oversight Panel said Treasury's foreclosure-prevention programs "failed to provide meaningful relief," generated "false expectations," and have been a "major disappointment." COP is an independent, nonpartisan commission created by Congress.

More than 20 months after President Barack Obama announced a plan to "enable as many as three to four million homeowners to modify the terms of their mortgages to avoid foreclosure," just 640,300 homeowners remain in the program. Nearly 729,000 struggling homeowners have been kicked out

Now you economic geniuses here can figure out what this means, but to me it doesnt look good for the economy or for the homeowners it was designed to help.

1 Reply

A few interesting facts about Fannie Mae and Freddie Mac:

http://www.usatoday.com/money/economy/housing/2008-07-12-facts-fannie-freddie_N.htm

"Fannie Mae and Freddie Mac bundle the loans they buy into securities, which are sold, with a guarantee of payment, to investors worldwide. The two companies also guarantee mortgages and pay owners of the loans when there is a default.
Including investments and guarantees, Fannie Mae's total book of business topped $3 trillion for the first time in May, twice its size at the beginning of 2002.

With Freddie Mac's $2.2 trillion in investments and guarantees, the two have a hand in nearly half of the entire U.S. mortgage market.
As the housing market continues to deteriorate, foreclosures have spread beyond subprime loans to higher-quality mortgages. The two companies have been required to write down the value of their loans held for investment and pay out on guaranteed mortgages that default, depleting their capital.

Fannie Mae and Freddie Mac have reported more than $11 billion in losses since the housing market bubble burst.

Contrary to many other financial institutions, Fannie Mae and Freddie Mac have never been required to hold much capital relative to their assets. That leaves them with a smaller cushion for absorbing losses."

Seriously folks, consider the fact that apparently these two government sponsored enterprises are involved in about half of all home loans in this country, and consider the fact that they guarantee the mortgages that default and that they are not carrying necessary capital to run a loan business like this, is it any surprise that these two enterprises are costing the taxpayers a boat load of money, and isn't it incredible that Democrats and partisans on that side of the aisle continue to claim these enterprises are innocent bystanders to the home loan industry? It is not only incredible, but it is criminal when you consider the fact that their boys at these enterprises were cooking the books and they still continue to do absolutely nothing about it.

About the only thing we can do is to rise up in great numbers next Tuesday and kick as many of these people out of office as we can.

0 Replies

@okie,

Okie, rather than discuss scenarios you made up, try discussing reality. What ACTUALLY happened. You will be unable to do so and avoid blaming the banks.

Cycloptichorn

1 Reply

Where is the US economy headed?

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