So much for the argument that the administration had nothing to do with the mortgage crisis... and the part about NOLA really ticks me off. Definitely a pattern with the W appointees...
The day after former NY governor reportedly got his jollies at the hotel room, WaPo published this: Predatory Lenders' Partner in Crime How the Bush Administration Stopped the States From Stepping In to Help Consumers By Eliot Spitzer Thursday, February 14, 2008; A25 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. Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices. What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no. 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. But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation. Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position. 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. The writer is governor of New York.
Looks to me like this all started once the Democrats got a hold of Congress. Ah, screw it, it's just so much EASIER to blame Bush for everything. Excuse me while I go cling to my guns and religion out of my bitter frustration... lol
Was there some point in the past when you actually made an effort, or have you always been this lazy? The articles point out specific actions by the Bush administration that contributed to the crisis, so it's not enough to just say that it happened post-2004.
1) FHA backed loans are a small percentage of the problem that's out there 2) They are insured by the government, why the hell is it corrupt for the government to insure loans they know are going to fail and then have to pay money on? 3) You're joking right? I guess it would have been much better for neighborhoods and the country as a whole to get these guys signed up for a house with a subprime loan shark. Maybe then they would have got the neg am loan they always dreamed of. 4) The 3% FHA minimum down payment in California would have been about as awesome as taking a fat wad of cash and flushing it down the toilet. 5) This is the punchline correct? Seriously, if HUD would have controlled every realtor, loan officer, borrower, securities firms, etc. this would have never happened. It's like so easy. But seriously, from the frontlines of the mortgage crisis, I can tell you everyone is to blame. The subprime slump is actually good, it's weeding out all the seedy lenders, servicers not set up to handle products, and making sure people start putting down payments down on homes again. Having someone have to rent for a few more years is hardly a tragedy.
There is plenty of blame to go around. It has been clear from the beginning that the federal government engaged in bad policy. A good number of the subprime mortgages are FHA approved loans. Some of them are even VA loans which, IIRC, have a governmentally backed component. There is also blame for the mortgage institutions that entered into loans they knew would have a high risk of default. There is blame for mortgage brokers who made money by convincing borrowers that they could afford these loans when the brokewr knew it was unlikely they could make it work long term. This was done to make a commission. There is blame for realtors who worked in concert with the mortgage brokers. There is blame for the borrower who should have known they could not arrord a rising interest rate. Many of them saw that they could afford the payment as it was at origination, and they decided they'd figure the rest out later. I have heard that story time and again in my practice. Really poor planning strategy. As I said...there is plenty of blame to go around.
I don't disagree at all. I do have a problem when wingnuts wring their hands and say there was nothing the administration could have done about it and thus no blame should accrue to them... that's the point of this thread... not to say the administration is the sole cause.
No More Financial Katrinas The government had plenty of power to prevent the mortgage crisis. But regulators didn't do their jobs—and still don't get it. Apr 14, 2008 Issue CAPITAL GAINS | Jane Bryant Quinn Why did the mortgage-lending mess get so out of hand? One explanation, promoted by Treasury Secretary Henry Paulson last week, is that the system for regulating U.S. financial institutions is too antique to work. He seeks reforms, and some of them make sense. But he's also throwing sand in your eyes. The government had plenty of power to stop the frauds and financial pyramid schemes that brought home buyers down. It just didn't use it. You're looking at what amounts to a financial Katrina, brought to you by regulators who didn't do their jobs. Apologists like to argue that, despite its eventual crash, flaky subprime lending did a lot of good. By 2004, a record 69.2 percent of the population owned their own homes. Now, however, the homeowners are being shoved back out. At the end of 2007, the rate of homeownership dropped by a record amount—to 67.8 percent. That's a level not seen since 2002 and 2001, and will probably sink lower still. Losing a house is costlier, to your purse and future prospects, than never having owned one at all. By that standard, it's hard to call heedless subprime mortgage credit a social good. Not to mention the daisy chain of financial-instruments loans that almost caused a 1930s-style collapse. How were the regulators complicit? Let me count the ways. * The Federal Reserve had the authority to force lenders to quit giving mortgages to people who couldn't afford them. Lenders were minting money on fees; they got rid of the loans by selling them to investors who didn't grasp the risks. Consumer organizations shouted about the abuses, but consumers don't have much of a voice in Washington today. "The regulators should have noticed banks were giving money away to poor people," the Nobel economist Joseph Stiglitz says. Maybe they did. They just didn't act. At least not until the subprime structure actually collapsed. * The Securities and Exchange Commission could have required investment firms to carry more capital against their riskiest loans. This might have calmed the speculation that helped bring down Bear Stearns. The SEC also could have inspected the Street's risk-management systems and leaned on them to improve. Cassandras begged the commission to require disclosure about the weird financial instruments Wall Street has been playing poker with. No deal. * One of the Enron lessons is that aggressive companies will shift big liabilities off balance sheets, where investors can't find them. New accounting rules were supposed to fix the problem but didn't. Some banks were closer to insolvency than anybody knew. * When the states tried to move against predatory lending by national banks, they were blocked by the banks' federal regulator, the Office of the Comptroller of the Currency. "That empowered money lenders who were fleecing the people," says an angry Lynn Turner, former chief accountant for the SEC. * Where was Congress? "It should have hauled the heads of these agencies up on the Hill for grilling," Turner says. But much of Congress is owned (through campaign contributions) by the banks and brokers whose wealth depends on fending off the financial police. * Even now, the big banks—cheered on the by Treasury Department—are heading into a new, international deregulatory process. It lets them use their own "risk models" to help decide how much safety capital they should hold. But those are the very models that failed spectacularly last year "because they didn't put enough weight on common sense," says economist Jerry Caprio of Williams College. Will the Fed have to bail them out again? The reforms Paulson offered last week were cheered by the investment community, which tells you something. I'd rather have had them screaming "overkill." There's a bit more oversight of financial firms, a bit more disclosure and much less scrutiny of the stock exchanges. You can't expect a strong hand from guys who don't want to regulate in the first place. I've been thinking about the phrase "P.C." (politically correct), routinely used to deride the ideas of liberals. Today's P.C. turns the other way—to knee-jerk support of phrases like "free market" and "deregulate." Markets need clarity and regulation to keep from drowning in their own excess. They'll drag us down with them, if the cops give Wall Street a pass again. Reporter Associate: Temma Ehrenfeld © 2008
Maybe I'm a little slow on the go with this situation but I read a few articles in the WSJ last week that made a lot of sense to me. Let me see if I have the basic understanding here: I go and get an ARM loan let's says 6% the first three years and then it jumps to 12%. Now 3 months after I get my mortgage it's sold as part of a security. Now the security is rated highly because the idea is in three years it will be worth a lot more correct? However not being a complete moron I refinance the loan before the interest rates resets thus the security that was thought to be valued so highly is now not so high? There were two article I am thinking about in particular (the piece on Moody's and there was another about a Philly based company that went under and many people lost their life savings). If I remember correctly it was mentioned that it was not forseen that so many people would refinance and drive down the value of the investments. When I was looking at buying a home two years ago everyone I went to suggested an ARM and just told me "it's not a big deal just refinance it." Point being IMO if what I am reading is correct I think a lot of blame can be put on the large amount of homeowner's refinancing. If that is true then I point the finger at whomever overvalued the securities. Am I completely off base here, or is something the rest of you already knew months ago that I am just finding out?
There's so much going on here that we really don't fully understand. there has been a lot of deregulation of the banking/investment banking industries since bush has taken office. this is not a blame bush post. I don't know if the deregulation has a anything to do with it or not because its still the mortgage companies making loans, and the investment community buying them, which would happen anyway without deregulation. one of the deregulations that is scary is the ease with which commercial banks can move into the investment banking industry. this was a huge deal when it when it happened. this industries have been separated since the great depression to avoid another great depression from happening. and alot of this stuff sounds like great depression failure, just not on the same scale. but today there Wachovia is reporting a loss. that's scary. as far as the original article is concerned, I really think this is a separate issue. I know someone who got a home through one of these government programs. its really a separate issue from predatory lending.
There's certainly lots of blame to go around. But the ones getting off easy, in my opinion, are the rating agencies who kept AAA ratings on paper that should have been rated junk. The high ratings kept the cash available, and allowed the players to shift risk to investors who didn't know they were accepting that risk. If the ones approving the loans don't carry the risk, and tho ones carrying the risk, have no way of measuring that risk, it's bound to fail. Sure there could and should have been better regulation....and encouraging home ownership was an active policy of the administration...but their role...overall...was nowhere near as big the role played by others. And in the political arena, it was't just the Bush boys who were cheering this stuff on.
If you really want to "blame" just one person, you blame the guy who could have prevented it all, and knew how (based on his pre-chairmanship writings). But since he's the "greatest economic mind", no one wants to point the finger in the right direction. Sure, Bush's "ownership society" contributed. Sure there were banks that loaned money to borrowers that they shouldn't have. Sure Fannie May and Freddie Mac saddled the American Taxpayers with Billions in ridiculous risk. Sure The Learning Channel fueled the house-flipping hysteria. But one guy had the power to raise interest rates to a sensible rate and chose to not do it. Greenspan was the one guy who could have stopped it all, and chose not to do it.
I think phone rates went down for long distance call? Not sure if that is due to deregulation or advancement of technologies.
