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Yesterday I found myself in a political discussion that included my very lonely Republican friend. Eyes rolled when he claimed the Clinton administration was to blame for the mortgage fiasco. His argument is that during the Clinton era, lenders were pressured by the government, and by interest groups, to loosen loan standards in order to increase minority home ownership. This strategy reportedly worked splendidly while home prices were increasing. You know the rest of the story.

My Republican friend followed up with a link to an article that I have seen twice in the comments to this blog, so I hereby promote that link to my post:

http://www.nypost.com/seven/09242008/postopinion/opedcolumnists/house_of_cards_130479.htm?page=0


I'm not persuaded by the article, but neither do I discount it entirely. My problem, as always, is that I don't have enough knowledge to make a judgment about it. It sounds credible, but that doesn't mean much.

At best, the pressure to increase minority home ownership was only part of the problem. The executives in the mortgage industry must have known that the increased lending activity would make them even more stinkin' rich than usual, at least short term. In the long term, they would be living on their yachts. Without the greed angle, the executives might have better resisted what they knew was a risky path.

Second, as Warren Buffett said when he saw all the complicated financial derivatives based on mortgage activity, "My eyebrows are huge!" He didn't actually say that, but he did warn that trouble was brewing in the derivatives game long before it was obvious to people with normal sized eyebrows. So the exotic and complicated financial derivatives market made a bad situation worse, and that had nothing to do with the liberal agenda.

If there is any truth to the idea that the Clinton administration was a major cause of the mortgage crisis, you have to ask yourself why the media is mostly ignoring that angle. If it isn't true, does anyone have a link to a rebuttal?

 
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Sep 25, 2008
When Clinton was President, he amended a great deal of the CRA. Once you open the barn door, you cannot possibly be surprised when the horse gets out.

Loaning money to people who cannot afford to pay it back is a poor risk.
Loaning money to people who have no intention of paying it back is a poor risk.
Loaning money to people with poor work histories and bad credit is a poor risk.

But in a real estate boom market, even foreclosure is profitable. The house you financed for $200,000 is now worth $350,000. The lender profits either way. Pay your payments or we'll sell the house at a profit. Win/win.

Until the bottom dropped out. Whoops.

Very little coverage in most media because most media is liberal/Democrat. Glass houses (mortgaged?) and stones, you know.
 
 
Sep 25, 2008
It looks like Bill Clinton agrees that it happened during his administration, saying that the Democratic Congress refused to regulate Fannie Mae and Freddie Mac.

http://www.digitaljournal.com/article/260301

 
 
-1 Rank Up Rank Down
Sep 25, 2008
If a doctor tells a 400 pound guy to lose weight, they're doing the right thing even if the next doctor continues giving the guy the same advice till he's anorexic.

Even if you think Clinton's policy was wrong under the !$%*!$%*!$%*! at the time, which I think is highly questionable, the current administration had nearly 8 years to fix it. This line of rationalization is LAME.

By the way, I think Clinton is a slimeball, but that doesn't validate this silly line of reasoning.
 
 
Sep 25, 2008
Scott, one of your creations was mentioned in this article. What would a cross between Dilbert and Avril Lavigne be like?

http://filmdrunk.uproxx.com/?p=3964
 
 
Sep 25, 2008
I know that this is probably late, but the NY Post article is from today. It got me thinking about what was said about this before it blew up. There is an article in the LA Times from 1999 praising congress for doing just this thing. It goes on to explain how bank were FORCED to give loans to people who couldn't pay them back via the 'Community Reinvestment Act'. I guess at the time, it was viewed as a good thing, instead of something that would destroy the country's economy.

Anyway, here's the article:
http://articles.latimes.com/1999/may/31/news/mn-42807
 
 
Sep 25, 2008
I think a good book to read to understand the basic underpinnings of what Clinton, the Rhodes Scholar, helped implement is The Naked Capitalist by W. Cleon Skousen.

The best way I heard this housing debacle explained is that everybody got drunk on the equity. The borrowers, the secondary investors, the lenders, brokers, agents, everybody drank the kool-aid.
 
 
Sep 25, 2008
The Democratic Party is not on "the Left" of the Right to Left Spectrum. This explains some of their awkward populist policies and the same is true with The Republican Party. Democrats reward people who do not use family planning and Republicans have sympathized with people with religious convictions, but who seem to lack the fortitude to finance their own children's education, or take leadership in a parenting role in a world that is sometimes at odds with their values. I was just reading how Barak Obama supported government subsidies for privately owned public housing in Chicago, and how the situation is unique to Chicago. Grove Parc continued to be full of rat holes with steel wool stuffed in them and no insulation. Yet Obama continued to believe that this system of privately owned public housing worked as "Tony" Rezko raked in all the monies. This doesn't make sense from a Capitalist to Communist perspective. Both Adam Smith and Karl Marx would be turning in their graves right now.

http://www.boston.com/news/nation/articles/2008/06/27/grim_proving_ground_for_obamas_housing_policy/?

This is because Populism is the main driving force behind the two parties. However I want to point out that there is a very real fringe Left out there and they wish to destroy the institutions and forces that have made civilizations around the world great: education, medicine, literature, technology, government accountability, faith, philosophy and the free market--in both goods and ideas. There is a Right fringe as well, but they are easier to recognize and not intertwined in the pillars of our society like the Left. When Pragmatism replaces Populism, things will improve until this cycle repeats itself in some future century.
 
 
Sep 25, 2008
Actually, you really shouldn't have to ask why the liberal biased mainstream media is ignoring the angle that Clinton and other Democrats set up the situation that led to the crisis.

The conservative alternative media is covering it just fine, though.
 
 
Sep 25, 2008
Hey Scott:

Change the World, I dare you:

http://www.project10tothe100.com/how_it_works.html
 
 
Sep 25, 2008
thtstudios, you could go on, but I already think you're a tool for taking me, and yourself, so seriously. No need to compound that, but please, go ahead if you wish...
 
 
Sep 25, 2008
@Captain Awesome: So as per your logic if I take my car to a mechanic because it has an oil leak, and the mechanic just rotates the tires and does not even open the engine bay to take care of the oil leak, we should all just keep our mouth shut as we are not mechanics?

I think I would like to find a forum and be able to discuss with other people that are effected having a car with an oil leak of which mechanic I can put my trust on looking forward. I am guessing mechanics also need the services of farmers, butchers, electricians, plumbers, fire fighters, policeman, doctors, nurses, teachers ... should I go on?
 
 
Sep 25, 2008
The best explanation I have ever heard: http://www.thislife.org/Radio_Episode.aspx?sched=1242
 
 
Sep 25, 2008
Ever notice how people with the strongest opinions on politics don't work in politics, then, they discuss their opinions with other people who aren't in politics?

Isn't that kind of like taking your car to a mechanic, then sitting in the waiting area with the other customers arguing about the best way to fix a car?
 
 
Sep 25, 2008
@shagbark I have a different definition of Greed and a distinction I would like to make. As you rightly pointed out, it is not Greedy to want too much money, but in truth GREED is about the "intense or selfish desire for obtaining more". It is not greedy to want too much of anything, but the distinction comes at what will you do to obtain it. If you make money by using slave labor, polluting the environment, and having a complete disregard for moral decency, for the sake of a buck that is were greed comes in. I don't think anyone should have a problem with companies making money, but when they do it (like Enron did unscrupulously) that is not doing your job, that is motivated by "Greed".

So finally; yes whilst it is fair to say that you take high risk and are just doing your job, your job is also about sustainability and looking at the long term growth (not just the end of quarter financial, and your bonus). If people where lending to make money for themselves in a quick scheme, that is someone doing their job poorly for their own benefit driven by greed.
 
 
Sep 25, 2008
@dilgal, a lot of what you want already exists.

"at least 30% of the foreclosures were from people who lied on their applications ... These people should go on a credit blacklist"

Actually, they have committed fraud. That doesn't call for a credit blacklist, that calls for time in prison.

"If people stick the bank with a loss because they chose to, rather than because they have to because of something like unemployment or medical bills, then they should have to pay taxes on the "income" they got by taking out a loan they didn't pay back."

If someone forgives a debt, even if you can't pay because of unemployment or medical bills, it's already taxable income. The only exception is if you file bankruptcy.

"banks allow refinancing up to a value above the market value of a home... That should be stopped."

I suspect that's illegal. I know it's illegal to trade in a car if the dealer's paperwork doesn't show a trade-in value that equals or exceeds the payoff on the car loan.

"A lot of people just didn't get the concept of adjustable rate loans. It should be a requirement that borrowers be shown a table of what their monthly payments can look like if the rate goes up 1/2%, 1%, 2%, etc. so they have a clue what they might be in for. Plus, banks should be required to confirm that the person's income is enough to cover at least a 1% increase in the rate."

I'm not sure the first part will help. Many people are clueless and very much want to REMAIN clueless.

I'm opposed to adjustable rate mortgages, period. It takes us back to the days of Nell and Snidley Whiplash. Before the 1930s, mortgages were rarely amortized. They were written for one year or once in a while, for as long as five years, and you paid them off in one lump sum. In practice, you paid a big chunk of money to cover interest and a reduction of principal, and the bank rolled over the rest into a new mortgage - but not always. If you were no longer in good health, or the bank was in sorry condition, or if the banker thought you couldn't get the money anywhere else and wanted to steal your property, they called the note, and there was a sheriff's sale.

In part, amortized mortgages were introduced because of penny auctions. It really must have made bankers unhappy to send a property to sheriff's sale, only to find that friends and relatives of the homeowner excluded other potential buyers from the auction, sometimes by use of force, and a property would be sold to a friend of the homeowner for $1, the friend gifting the homeowner with the property as soon as title passed.
 
 
Sep 25, 2008
Funny; I went to a bank about a year and a half ago, to ask about a loan for a house. They wouldn't return my calls. I visited them in person twice, and left about 6 phone messages, and they gave me the cold shoulder.

(Lucky for me.)

So who was making all these bad loans, at a time when, with a 6-figure salary, I couldn't even get them to return my phone calls?
 
 
Sep 25, 2008
I've also wondered why this hasn't been offered as an explanation in the mainstream media, despite it turning up on many blogs.

I am tired of hearing it blamed on "greed". "Greed" means wanting too much money. It is impossible for investment bankers to be greedy. Making money is their job. Making more money is better. Period.

It is possible for them to take too high risks. That isn't greed. It's taking too high risks.
 
 
+1 Rank Up Rank Down
Sep 25, 2008
Oops! Forgot the link!

NYT
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
Published: September 30, 1999

"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits."

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1
 
 
+1 Rank Up Rank Down
Sep 25, 2008
NYT
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
Published: September 30, 1999

"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits."
 
 
Sep 25, 2008
The mythical "typical right-wing republican" will essentially believe any kind of even remotely grammatically-correct nonsense their favorite talking head is spouting. That is to say, while a "liberal leftie jesus-hating commie Democrat" would say to themselves "golly- with all of my liberal bias and higher education, I feel a twinge indicating that I need some sort of outside verification, such as a fact, to back this up"... Joe-average republican won't bother, because the government is our friend and would never hurt us or lie to us.

So, if you will, we have a group that largely cooperates and doesn't ask questions or buck the system, and a group which doesn't cooperate even amongst tmeselves- and also asks a lot of questions.

Which side, do you suppose, is going to be ripe for corruption and conspiracy, and which side is going to be relatively impervious to that?

The Democrats want a level playing field for everyone, including gays, muslims, people who are not white and christian, etc. And Democrats also know that a level playing field is not exactly cheap, and is definitely not privatized. While I do not for a moment suspect that Democrats are somehow magically not corrupt, I do not think other Democrats tolerate corruption in their ranks as easily as some others.

The Republicans, on the other hand, have a very intersting theme: pander to fear and reel in the people who are afraid of gays, muslims, and people who are not white christians- and very cleverly convince these people that it is in their best interest to bankrupt the country in order to save it. The Republicans have shown that they have no scruples and can be counted upon to use win-at-any-cost strategies, and somehow their followers find ways to deny their actions or forgive them every time... especially in the last 8 years, where blatant criminal behavior in the white house has gone completely unchecked.

In any case, the way McCain is currently spiraling down the toilet, it really makes me worry what kind of contrived nonsense the Republicans are going to whip out in order to save the day again.

Unless they're just going to step back and let the Democrats come in and clean up after their 8-year bank-emptying party. Like the Democrats have in the past.

Exactly how much money can the Democrats be spending on themselves and their friends if, in every case, the national debt goes down when they are in office?

http://www.lafn.org/gvdc/Natl_Debt_Chart.html
 
 
 
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