2012 debates

Shady · October 14, 2012

NO SHADY! Those sub primes were given out for 20 years with out a problem because there is a portion of those in the high risk category who will work hard to pay off their debts.

Nope, you're just plain flat-out wrong. In the late 90s, the government lowered lending standards, which made it even easier for people to qualify for subprime loans. On top of that, they made in mandatory to issue a certain percentage of subprime loans. So no, that hadn't been going on for 20 years.

Shady · October 14, 2012

The encouragement to lend in depressed areas was a very small part of the problem.

Not really. The whole housing crisis was based on a very small percentage of loans. 90+ percent of mortgages weren't the problem, and were being paid on time. It's as only 5 - 6% of mortgages that were the problem, but it composed enough of dollar value to pose serious risk to banks and the economy in general. Again, giving a pass to bad government policy, that enabled the housing bubble in the first place, by manipulting the housing market is absolutely wrong.

punked · October 14, 2012

Nope, you're just plain flat-out wrong. In the late 90s, the government lowered lending standards, which made it even easier for people to qualify for subprime loans. On top of that, they made in mandatory to issue a certain percentage of subprime loans. So no, that hadn't been going on for 20 years.

What do you mean "the government lowered lending standards" I thought you were against government regulation, now you are criticizing lower regulation in the housing market. You and Romney belong together two flip floppers that will say anything even if it contradicts what you have said for years so your side doesn't have to run on their record.

punked · October 14, 2012

Not really. The whole housing crisis was based on a very small percentage of loans. 90+ percent of mortgages weren't the problem, and were being paid on time. It's as only 5 - 6% of mortgages that were the problem, but it composed enough of dollar value to pose serious risk to banks and the economy in general. Again, giving a pass to bad government policy, that enabled the housing bubble in the first place, by manipulting the housing market is absolutely wrong.

In 2007 Sub primes made up 15% of all mortgages given out. From 2004-2006 they made up 20+% of all mortgages. If they were only 2-3% given out like the government regulated there would have been no problem or even their historic average of 5-8% Shady stop trying to obscure what happened with misleading facts.

It makes sense though considering Bush made it his policy priority in 2003 that every American own a home that in 2004 onward very risky mortgages went from a very small historic percentage of total mortgages to almost a quarter of all new mortgages. Right Shady?

Edited October 14, 2012 by punked

punked · October 14, 2012

Ouch even Fox news isn't buying what Romney is selling.

http://www.youtube.com/watch?v=V61r5PYqLnM&feature=plcp]

Edited October 14, 2012 by punked

dre · October 14, 2012

Yes. A certain percentage of subprime loans was mandated by law. Banks had to set a side a small percentage of mortgages for subprime qualfiers. When that goes on for several years, those types of risky mortgages add up. And then we have what took place, a bubble, that ends up bursting.

Show us the law that mandated sub prime loans. Lets see it. You dont even appear to know where these subprime loans came from. You keep saying "banks were mandated to (blah blah blah)" but it wasnt even banks that were making most of these loans. In fact... banks subject to government regulation were not ALLOWED to make them. For the most part commercial banks were the best behaved lenders out there. It was mortgage companies like CountryWide that were making all these loans, and theres no law what-so-ever that forced them to.

But we can put this whole thing to bed. Instead of just making the same bogus claims over and over again, SHOW US THE LAW!

Show us the law that forced companies like Countrywide to make sub prime loans.

Edited October 14, 2012 by dre

punked · October 14, 2012

Show us the law that mandated sub prime loans. Lets see it. You dont even appear to know where these subprime loans came from. You keep saying "banks were mandated to (blah blah blah)" but it wasnt even banks that were making most of these loans. In fact... banks subject to government regulation were not ALLOWED to make them. For the most part commercial banks were the best behaved lenders out there. It was mortgage companies like CountryWide that were making all these loans, and theres no law what-so-ever that forced them to.

But we can put this whole thing to bed. Instead of just making the same bogus claims over and over again, SHOW US THE LAW!

Show us the law that forced companies like Countrywide to make sub prime loans.

I believe country wide which was subject to (no job killing) regulations accounted for 80% of the subprimes in the years leading up the crises. Now Shady is arguing for regulation? What kinda of upside down reasoning is he following again?

punked · October 14, 2012

Ouch even Fox news isn't buying what Romney is selling.

http://www.youtube.com/watch?v=V61r5PYqLnM&feature=plcp]

Now it isn't only Fox news pilling on to point out that Romney's tax plan is impossible it is the republican congress joining in the game.

http://www.businessweek.com/news/2012-10-12/repealing-deductions-pays-for-4-percent-tax-cuts-study-says

Newest study from congress says repealing deductions can only pay for a 4 percent tax cut and that the 20 percent one Romney is selling is impossible. Ouch more facts getting in the way of Romney's lies and FACTS MATTER!

kimmy · October 14, 2012

A real picture would include not only percentages but quantities.

Percentages vs actual quantities is sometimes an important question to ask. "Second week audiences at The Adventures of Pluto Nash increased by 50% over first week audiences!" would give you a very different impression if you didn't know that only 2 people saw it in the first week.

In the case of subprime mortgages from 2002 to 2006, however, we know that the number of mortgages was increasing dramatically, so it's not like the percentages are masking anything. The overall number of mortgages was growing rapidly, the private lenders share of the mortgage market was growing rapidly, so slice it any way you like and you're still left with the unavoidable conclusion that private lenders were the driving force behind the housing bubble.

Fannie and Freddie's share should have been zero if they were concerned about subprime mortgages.

It was never my position that Fannie and Freddie were "so concerned about subprime mortgages".

In 2008 they held 70%. Once again percentages are just statistics.

Of course. By 2008, the private lenders (the ones who hadn't collapsed, at least) were selling their Troubled Assets (the TA in TARP, ie risky mortgages) to the government. Of course their share of that market shrank dramatically.

No need to worry Fanny and Freddie will buy them...after all they seem to approve.

Percentages...percentages. No actual numbers? The number of mortgages handed out was getting pretty high.

Of course they did.... they had the wink, wink nudge nudge from Fannie and Freddie who shared in their creation.

You're trying to say that all these private institutions were in this business because they were somehow conned into it by Fannie and Freddie? This is just hilarious stuff.

History is fabricated by the movers and shakers not the losers. Those that could predict the future were once again ignored in writing the history.

What? What does that even mean?

-k

kimmy · October 14, 2012

The encouragement to lend in depressed areas was a very small part of the problem. The bigger problem was the securitization of loans. Banks could make loans, sell hem immediately, and keep a fee for doing so. Thus, the originating bank had no concern with the ability of the borrower to pay.

The banks made money hand over fist by lending to willing borrowers. People such as myself are not so lucrative as borrowers to most lenders since we pay in full every month.

This is an excellent, succinct explanation of why private lenders were so excited about sub-prime market in the mid-2000s.

-k

kimmy · October 14, 2012

After the Obama debate, everyone said Obama lost. Not so for Ryan in this case. The polls are split, Republicans say Ryan won, and Democrats say biden won.

The conventional wisdom last week was that you could tell who lost by who was mad afterwards, and...

-k

kimmy · October 14, 2012

Show us the law that mandated sub prime loans. Lets see it. You dont even appear to know where these subprime loans came from. You keep saying "banks were mandated to (blah blah blah)" but it wasnt even banks that were making most of these loans. In fact... banks subject to government regulation were not ALLOWED to make them. For the most part commercial banks were the best behaved lenders out there. It was mortgage companies like CountryWide that were making all these loans, and theres no law what-so-ever that forced them to.

But we can put this whole thing to bed. Instead of just making the same bogus claims over and over again, SHOW US THE LAW!

Show us the law that forced companies like Countrywide to make sub prime loans.

Yeah! Show us the law, Shady!

-k

dre · October 14, 2012

This is an excellent, succinct explanation of why private lenders were so excited about sub-prime market in the mid-2000s.

-k

I agree.

Not too suprising either.... that the actions of private firms would be motivated by profit.

I still think this piece warrants more discussion. It was basically accepted operating procedure for these private lenders to move loans off their balance sheets in this manner, It was also perfect legal. And securitization has been with us for a long time as well, and I dont really see anything unethical about the idea of bundling investments into securities, although the way these securities were structured certain did look like an attempt to hide the risk from investors which is a problem, and I would say thats at the very least unethical if not illegal. But still... lenders did what you would basically expect them to do, and investment banks did pretty much what they were designed to do.

The 800lb guerilla in the room is why were these securities being rated as "investment grade" AAA by ratings agencies. It seems to me that if these securities has been rated properly that none of this bundling would have posed a major problem, and way less people would have bought them.

I guess what Im getting at here, is that if you were going to fix 10 things, you would regulate the shadow banking industry, enforce income/debt ratios for all lenders, regulate the structure of securities themselves, and a host of other things.

But if you could only do ONE thing, with the hope of preventing this from happening again, it would simply be to fix the ratings system so that even if investment banks tried to sell risky securities investors would at least know not to buy them. Currently credit ratings agencies are paid by the the exactly same investment banks whos securities they are rating... this is a blatant conflict of interest that needs to be fixed, and as far as I know nothing has been done about this at all. Maybe these agencies shoud get public funding in order to draw a line between them and investment banks. Or maybe they should be nationalized completely or replaced with something else.

Either way... as far as I can tell almost nothing has been done to prevent this from happening again.

Heres the wiki link...Its a good place to start.

http://en.wikipedia.org/wiki/Credit_rating_agencies_and_the_subprime_crisis

The ratings of these securities was a lucrative business for the rating agencies, accounting for just under half of Moody's total ratings revenue in 2007

The problem: Credit ratings agencies such a moodies stood to make less money if they accurately rated securities.

Rating agencies also competed with each other to rate particular MBS and CDO securities issued by investment banks, which critics argued contributed to lower rating standards.

"Well rating your securities REALLY HIGH!!! Do business with us!".

Edited October 14, 2012 by dre

blueblood · October 14, 2012

Of course not. Its the lenders responsibility to make sure they enforce solid income/debt ratios, not some random dude that walks through the door.

It's also a persons responsibility to manage their finances properly. If your too stupid to buy a house you can't afford instead of rent, you deserve the consequences.

Greed and entitlement and the enablement of the greed and entitlement by all players caused this problem. Why should ordinary people who asked for those loans they couldn't afford be given a pass, because they're not fat cats? That's a cop out and you know it. Their hands are just as dirty as the bankers and the government.

cybercoma · October 14, 2012

Yeah! Show us the law, Shady!

-k

Shady? SHAAADY? haha

punked · October 14, 2012

I would also like to see the law.

msj · October 14, 2012

It's also a persons responsibility to manage their finances properly. If your too stupid to buy a house you can't afford instead of rent, you deserve the consequences.

It is the banks who are making the loans.

They are the ones who decide who to lend to and who not to lend to.

They are the ones who decided to give out loans based on "stated income" and "stated assets."

No one forced them to shovel money off the back of pick up trucks.

They set up the system all on their own - lend money to someone who maybe should know better.

Sell that piece of paper, the "loan receivable," as a Triple A "investment" to some other person who likely should have known better.

Then repeat.

Banks are supposed to measure risk prior to lending. They are the ones who ultimately are supposed to know the probability of default.

Because they were not taking on risk by "selling" the loan receivable they were willing to keep the game going and offer NINJA loans.

As such, ultimately it is the banks who should have paid the price.

Ideally, all of them should have gone broke.

But since that would lead to an apocalypse the government couldn't allow it.

As such, the government should regulate the banks to prevent banks from offloading risk in this way.

Of course, to do so has led to socialized losses and crony capitalistic profits. That is, the banks have been able to transfer their losses to taxpayers while keeping any profits for their shareholders.

This is all well known and discussed very well in books such as "Bailout Nation" by Barry Rhitholtz and "ECONned" by Yves Smith.

I suggest you try reading up on this subject further.

Edited October 14, 2012 by msj

blueblood · October 15, 2012

Once again that's a cop out. I blame EVERYONE for that little disaster. I have no sympathy for govts who regulate stupidly, bankers that make bad loans, and people who think they have the God given right to live in a fancy pants house even though their paycheck is shit.

I suggest also reading meltdown by Thomas woods JR. For another perspective.

Had everyone acted more responsibly this wouldn't have happened.

Nobody forced those people to walk in the banks as no one forced the bankers to rig up the mortgages shell game.

BubberMiley · October 15, 2012

If you pull Shady's pants down too many times, he won't come and play anymore. You have to give him some kind of opening where he can say he b*tchslapped you to keep him happy.

msj · October 15, 2012

Nobody forced those people to walk in the banks as no one forced the bankers to rig up the mortgages shell game.

We are talking about people making contracts with banks.

It is the banks who lend money and it is the banks who were pushing loans.

I remember the marketing going on during that era.

It's simple - banks extend the loan. Person signs contract. If person cannot make payments then person sends keys to bank and has a blemish on credit (for non-recourse loans) or has a legal fight to deal with for recourse loans.

Given how slow the banks have been to foreclose on properties this encouraged people to live "rent free" for years (yes, years). This didn't help matters.

So, no, banks have played a bigger role than the typical person - as issuers of loans they have the duty to check their risk and check their customer's income and assets.

A person is merely and individual. For him/her to take a loan is but a small amount of risk.

A bank is lending out to thousands upon thousands of individuals so their risk is high and they should be checking it prior to lending.

As for the government - yes, I agree they need to do a better job regulating but when Republicans are getting elected (starting with Ronald Reagan) on the basis of deregulation and "the free market does everything better"^TMthen it's not really a surprise that a melt down is going to happen due to poor regulations.

Pliny · October 15, 2012

Show us the law that mandated sub prime loans. Lets see it. You dont even appear to know where these subprime loans came from. You keep saying "banks were mandated to (blah blah blah)" but it wasnt even banks that were making most of these loans. In fact... banks subject to government regulation were not ALLOWED to make them. For the most part commercial banks were the best behaved lenders out there. It was mortgage companies like CountryWide that were making all these loans, and theres no law what-so-ever that forced them to.

But we can put this whole thing to bed. Instead of just making the same bogus claims over and over again, SHOW US THE LAW!

Show us the law that forced companies like Countrywide to make sub prime loans.

Mortgage brokers create the paper, the banks create the funding. Mortgage brokers who originated most of the bad loans had to sell them to banks and got approval from banks before they created the mortgage. The banks supplied the funding so they had to give final approval..

The law is how the CRA was interpreted by regulators to encourage the creation of loans to lower income and thus riskier applicants. Of course banks didn't have to make the loans. They were "encouraged" to make the loans and the regulations which, as I mentioned before, are copious and complex are just arbitrarily applied depending upon what the government wants to accomplish. Whether it's politicians giving their backers on Wall Street privilege or wanting to squeeze someone out of the market or lobbyests advocating laws giving advantage to themselves or, as in this case, for "social justice" purposes, you know, "leveling the playing field", social engineering, the regulations take away any personal responsibility of the players and the after effect becomes a tactic of finger-pointing.

Everyone involved does play a role to a greater or lesser degree but government is supposed to be the watch dog tends to get off scott-free by inventing terms like "irrational exuberance" (another way of saying the creation of moral hazard) to label anyone but themselves.

Pliny · October 15, 2012

This is just mindless partisan hackery.

Wow! What an excellent illustration of the accuser being guilty of his accusations. I have never seen a more clear example of "mindless partisan hackery" than that statement.

You take the obvious, in the case of the housing bubble, "corporate greed" and it's that simple. Very simplistic and easy for anyone to understand.

Never questioning what factors come together to explain why corporate greed is unleashed. Corporate greed is the explanation. As though no one had ever thought of it before.

We all know people will take advantage of an opportunity, everyone will, unless they just don't recognize an opportunity. What was the opportunity Wall Street saw that made them disregard a century of being prudent enough to last that long? That is the pertinent question not explaining away the whole thing as corporate greed. Your answer may be de-regulation but again too simplistic. Is de-regulation enough to override prudent business practices? That isn't the entire reason. Add in "encouragement" to ignore prudent business practices. What could possibly do that?

You know what the simplistic explanation you have swallowed does? Keeps the whole thing buried and provides a convenient scapegoat. Just what the guilty want you to do. Face the facts it is ultimately governments responsibility to provide oversight and eliminate fraud and criminal activity. They didn't because they had an agenda to engineer social justice.

The view of big government, and your view on this, is that people are really bad and never do the right thing so we need heavy regulation. This is how the police state comes into being, by not eliminating the criminal element, which is what it is supposed to do, and considering everyone the criminal.

dre · October 15, 2012

Wow! What an excellent illustration of the accuser being guilty of his accusations. I have never seen a more clear example of "mindless partisan hackery" than that statement.

You take the obvious, in the case of the housing bubble, "corporate greed" and it's that simple. Very simplistic and easy for anyone to understand.

Never questioning what factors come together to explain why corporate greed is unleashed. Corporate greed is the explanation. As though no one had ever thought of it before.

We all know people will take advantage of an opportunity, everyone will, unless they just don't recognize an opportunity. What was the opportunity Wall Street saw that made them disregard a century of being prudent enough to last that long? That is the pertinent question not explaining away the whole thing as corporate greed. Your answer may be de-regulation but again too simplistic. Is de-regulation enough to override prudent business practices? That isn't the entire reason. Add in "encouragement" to ignore prudent business practices. What could possibly do that?

You know what the simplistic explanation you have swallowed does? Keeps the whole thing buried and provides a convenient scapegoat. Just what the guilty want you to do. Face the facts it is ultimately governments responsibility to provide oversight and eliminate fraud and criminal activity. They didn't because they had an agenda to engineer social justice.

The view of big government, and your view on this, is that people are really bad and never do the right thing so we need heavy regulation. This is how the police state comes into being, by not eliminating the criminal element, which is what it is supposed to do, and considering everyone the criminal.

You take the obvious, in the case of the housing bubble, "corporate greed" and it's that simple. Very simplistic and easy for anyone to understand.

No this is just pure BS. Like I said, Im harder on the private sector than you, AND Im harder on the government than you.

I blame each for the things they actually did. You blame your usual ideological boogeyman for every single thing that goes wrong on earth.

Its actually amazing that you would repeat this crap, after I explained to you so clearly what the governments role in this was, and why it was significant. I cant tell if youre incredibly dishonest, or if your memory is so bad you cant remember stuff posted the day before.

Edited October 15, 2012 by dre

Pliny · October 16, 2012

No this is just pure BS. Like I said, Im harder on the private sector than you, AND Im harder on the government than you.

I blame each for the things they actually did. You blame your usual ideological boogeyman for every single thing that goes wrong on earth.

Its actually amazing that you would repeat this crap, after I explained to you so clearly what the governments role in this was, and why it was significant. I cant tell if youre incredibly dishonest, or if your memory is so bad you cant remember stuff posted the day before.

So you haven't learned anything at all over the years.

I gave you credit for outlining the government's role. They are the things necessary for the boom to gel.

Corporate greed or what the banks did is just an effect of the true cause. Banks disregarding prudent business practices is one of the symptoms of what you will see when a bubble is created by loose monetary and fiscal policies of the Federal Reserve in collaboration with politicians.

These problems of the economy occur easily when social engineering takes precedence over the economy.

Your choice to drink the mainstream kool-aid is simply your choice. The explanation they have for the business cycle is generally the same for every boom but it never prevents the next one. If one knew the true cause one could do something about it. Fortunately, more and more people are seeing meddlesome government policies as the biggest problem. In order for a whole economy to go through a boom-bust cycle there has to be something common to every sector of the whole economy that causes it.

I don't expect your view of the economy would give us accurate predictions of it. I suppose you believe the economy to be on the mend but really it is in pretty dire straits and is heading for a big fall. No rosy political rhetoric changes the truth. And it won't matter who is elected, but whoever is will probably get the blame.

I really get a chuckle out of someone getting excited because the unemployment rate fell below 8% and claiming the economy has turned around. Or the auto industry has its greatest sales in four years and we are on the mend.