Fairness is crucial to economic growth

[erdawiro]

The Fed...Sigh...same clown category as the the CBO.

Right, all of those institutions that have always been used but are conveniently ignored when they don't fit your own trademarked brand of reality.

Just out of curiosity, what percentage of CRA loans were sub-prime?

[VTA]

Right, all of those institutions that have always been used but are conveniently ignored when they don't fit your own trademarked brand of reality.

Just out of curiosity, what percentage of CRA loans were sub-prime?

You don't think there's any chance political influence could have swayed the results of such a finding?

[JBond]

Clinton set numerical targets used to rate banks based on the number of loans to minorities and poor people. Sub Prime loans from FDIC banks were just under 50% if I remember correctly. the rest were from scum like Countrywide....Hmm Countrywide......Who got sweet personal loan deals from Countrywide? Who raised the alarm and who told us all was just fine right before the collapse?

[a_minimalist]

I'm not well read on all of these issues, but, I'm pretty sure all of the data I have ever seen shows that it's a problem, and was a problem, when there is/was such a large gap between the middle class and the upper class.

[Supply Sider]

An excellent video that's well worth the three and a half minutes.

[erdawiro]

The Boston Fed Releases a working paper last year that examined historical mobility trends from 1969 to 2006. The findings?

Comparing results based on pre-government income suggests that an increasingly redistributive tax and transfer system contributed to rising mobility into the 1980s, but that its impact has since waned. Overall, the evidence indicates that over the 1969-to-2006 time span, family income mobility across the distribution decreased, families’ later-year incomes increasingly depended on their starting place, and the distribution of families’ lifetime incomes became less equal.

Decreased mobility and increased inequality.

Link

[erdawiro]

You don't think there's any chance political influence could have swayed the results of such a finding?

Do you have any evidence suggesting that happened, or do you just not like the results?

[erdawiro]

Clinton set numerical targets used to rate banks based on the number of loans to minorities and poor people. Sub Prime loans from FDIC banks were just under 50% if I remember correctly. the rest were from scum like Countrywide....Hmm Countrywide......Who got sweet personal loan deals from Countrywide? Who raised the alarm and who told us all was just fine right before the collapse?

On the role of the CRA:

These claims about CRA are based on two premises which turn out to be false. The first premise is that sub-prime mortgages were mostly the result of CRA-regulated banks. But most sub-prime mortgages were in fact originated by mortgage brokers that were not covered under CRA. It turns out that fewer and fewer loans since 1977 have actually been covered by CRA, because fewer and fewer of these loans originated with banks that are covered by the law (see this Harvard Joint Center for Housing Studies report). In fact, between 2004 and 2006, only 9 percent of sub-prime mortgages to risky borrowers were from institutions complying with CRA. That is, nine out of every ten sub-prime mortgages to risky borrowers had nothing to do with CRA. They were originated by independent mortgage brokers that were able to evade CRA regulations.

The second premise is that sub-prime mortgages were primarily given to non-creditworthy borrowers who could not afford prime rate mortgages. But a Wall Street Journal article from nearly two years ago has categorically demonstrated that this is not true: in 2005, 55 percent of sub-prime mortgages went to people who could have qualified at that time for a prime mortgage. Indeed, the percentage of sub-prime mortgages under-written for creditworthy borrowers steadily increased between 2000 and 2006, from 41 to 61 percent.

Link

[JBond]

You evidently do not understand how bubbles are created. When demand outpaces supply prices go up. In this case an artificial demand created by leftists. As far as the loans by Countrywide and similar companies, who was protecting them when Bush was demanding the system be reformed? Fannie and Freddie. Remember those disasters? Government entities. The government created the bubble through the CRA and other similar dimwitted, shortsighted policies. I will argee it was not soley due to Clinton rewriting the CRA. The government had many policies in play that caused the problem.

Remember the fat, lying bastard, Barney Frank? A month before the collapse he claimed all was fine. Do you remember which politicians were getting rich off the housing bubble? Sweetheart loans deals? Does any of this ring a bell?

Both parties played a role but the origins of the crisis can be directly tied to the actions of stupid liberals.

The student loan industry will follow the pattern of the housing market. Smaller numbers, but the result will be the same. Government interference and poor policies have made education cost prohibitive for many. The dumb one's that spend more than a house on their education using tax payer money are never going to repay it. Guess who will be forced to pick up that bill? The few producers left.

From 1995 until 2004, subprime loans by the traditional subprime lenders like Countrywide averaged slightly more than 5% of all mortgages, far too few to account for the growth in either homeownership or the housing bubble. CRA loans, totaling 3% of originations, were also too few. Where, then, did all the low-quality loans come from?

From 1994 to 2003, Fannie and Freddie's purchases of mortgages, as a percentage of all mortgage originations, increased from 37% to an all-time high of 57%, effectively cornering the conventional conforming market. With leverage ratios that averaged 75-to-1, and funds raised with implicit government backing, the GSEs were pouring money into the housing market. This in itself would have driven the housing bubble.

But it also appears that, perhaps as early as 1993, Fannie Mae began to offer easy financing terms and lowered its loan standards in order to meet congressionally mandated affordable housing goals and fulfill the company's trillion-dollar commitment. For example, in each of the years 2000 and 2001, the first years for which data are available, 18% of Fannie's originations--totaling $157 billion--were loans with FICO scores of less than 660 (the federal regulators' cut-off point for defining subprime loans). There is no equivalent data available for Freddie, but it is likely that its purchases were proportionately the same, amounting to an estimated $120 billion.

These sums would have swamped originations by the traditional subprime lenders, which probably totaled $119 billion in these two years. Data for Alt-A loans before 2005 are unavailable, but the fact that that Fannie and Freddie now hold 60% of all outstanding Alt-A loans provides a strong indication of the purchases they were making for many earlier years.

The GSE's purchases of all mortgages slowed in 2004, as they worked to overcome their accounting scandals, but in late 2004 they returned to the market with a vengeance. Late that year, their chairmen were telling meetings of mortgage originators that the GSEs were eager to purchase subprime and other nonprime loans.

This set off a frenzy of subprime and Alt-A mortgage origination, in which--as incredible as it seems--Fannie and Freddie were competing with Wall Street and one another for low-quality loans. Even when they were not the purchasers, the GSEs were Wall Street's biggest customers, often buying the AAA tranches of subprime and Alt-A pools that Wall Street put together. By 2007 they held $227 billion (one in six loans) in these nonprime pools, and approximately $1.6 trillion in low-quality loans altogether.

From 2005 through 2007, the GSEs purchased over $1 trillion in subprime and Alt-A loans, driving up the housing bubble and driving down mortgage quality. During these years, HUD's regulations required that 55% of all GSE purchases be affordable, including 25% made to low- and very low-income borrowers. Housing bubbles are nothing new. We and other countries have had them before. The reason that the most recent bubble created a worldwide financial crisis is that it was inflated with low-quality loans required by government mandate. The fact that the same government must now come to the rescue is no reason for gratitude.

http://www.forbes.com/2009/02/13/hou...ard_pinto.html

[VTA]

Do you have any evidence suggesting that happened, or do you just not like the results?

Are you kidding? I have the entire crumbling of this country's strength and prosperity as evidence that a complete lack of responsibility is doing what another nations military could never do.