so is the U.S stock market going to crash heavily in 2016?

[NZStreetBaller]

google search 2016 crash and you will see tones of econimist and books been written that are predicting this crash. they are all saying its going to be the biggest crash we've ever faced. apparently it will overshadow the depression in the 20s and the recession in 2007

https://www.youtube.com/watch?v=80M4daI8tFY

https://www.youtube.com/watch?v=EiRBMmIOwmM

https://www.youtube.com/watch?v=Umd7lqoWhFg

[9erempiree]

If it does happen expect me to buy a bunch of diversified shares from different industry and sectors but I don't want it to happen though. I would probably dabble into the currency market. I love that kind of trading with leverage.

[NZStreetBaller]

according to the so called "Experts" this is gonna be nasty. real nasty. like 3rd world country nasty. conspiracy theorist gona be all over this sht.:facepalm

[fiddy]

according to the so called "Experts" this is gonna be nasty. real nasty. like 3rd world country nasty. conspiracy theorist gona be all over this sht.:facepalm
Say hi to the NWO

[bladefd]

If so, how can I protect myself financially? Shares? Bonds? Or just leave my money in the bank? Buy gold?

[Trollsmasher]

according to the so called "Experts" this is gonna be nasty. real nasty. like 3rd world country nasty. conspiracy theorist gona be all over this sht.:facepalm
Conspiratards got it pegged on as early as September 13th

Watchout for that date

[NZStreetBaller]

If so, how can I protect myself financially? Shares? Bonds? Or just leave my money in the bank? Buy gold?

if so you are practically screwed. the dollar value will plummet to zero and be worth nothing.

[NZStreetBaller]

Conspiratards got it pegged on as early as September 13th

Watchout for that date


and what about the 2012 mayan calender guys and the Y2K bug. Honestly i hope they're wrong about this crash getting as bad as they say it will.

[navy]

Economist are pretty terrible at judging future economic trends. There will obviously be another crash, but it wont be the predicted dates for obvious reasons. We have been a tad too strong recently. Conspiracy tards will call it fake gains created by the feds, but it doesnt work that way.

I would look to make a profit on what I have after the stock goes up from this recent dip. I hope people didnt panic and sell everything.

Depends on your stock obviously, one of the biggest problems with the stock market is how random the investors are as opposed to actually caring about the companies. Leads to ridiculous volatility but decreased risk.

[DCL]

if everyone is talking about it and expecting it, then it probably won't happen until everyone forgets about it. seems to always work like that.

[UK2K]

If so, how can I protect myself financially? Shares? Bonds? Or just leave my money in the bank? Buy gold?

Buy guns and ammo.

Their value will triple.

[KevinNYC]

google search 2016 crash and you will see tones of econimist and books been written that are predicting this crash. they are all saying its going to be the biggest crash we've ever faced. apparently it will overshadow the depression in the 20s and the recession in 2007

https://www.youtube.com/watch?v=80M4daI8tFY

https://www.youtube.com/watch?v=EiRBMmIOwmM

https://www.youtube.com/watch?v=Umd7lqoWhFg
https://moviewriternyu.files.wordpress.com/2014/01/annie-tomorrow.jpg

[West-Side]

Economist are pretty terrible at judging future economic trends. There will obviously be another crash, but it wont be the predicted dates for obvious reasons. We have been a tad too strong recently. Conspiracy tards will call it fake gains created by the feds, but it doesnt work that way.

I would look to make a profit on what I have after the stock goes up from this recent dip. I hope people didnt panic and sell everything.

Depends on your stock obviously, one of the biggest problems with the stock market is how random the investors are as opposed to actually caring about the companies. Leads to ridiculous volatility but decreased risk.

That doesn't even make sense.
In financial markets, volatility is a measure of risk. If there's volatility, than there's risk.

[Dresta]

America is due for a recession, and 7+ years of 0% interest rates means that there will be nowhere for the central bank to go aside from more QE. It is hard to predict anything, because the folly we are engaged in is literally unprecedented.

Where's that interest rate rise we've been hearing about for so long Kevin? :roll:

Now they're talking about next March - good luck with that hope.

[West-Side]

**** the economy, is this a good time for me to buy a house then? :oldlol:

[UK2K]

Years of government pumping artificial money into the market....

It will 'correct' itself eventually.

[West-Side]

Years of government pumping artificial money into the market....

It will 'correct' itself eventually.

That doesn't make sense.
Corporations committing fraud causes stock market crashes; governments bail them out.

In 2007, it was a theoretical mistake by investors to assume that the real estate market will continue to increase in value. Mortgages were given out like a pop of coke from banks and the government eventually had to bail a lot of them out due to defaults.

Government really has nothing to do with the markets.
At least that's my opinion.

[West-Side]

Government interventions actually prevent stock market crashes by monopolizing industries and controlling large sectors. It was government officials that created the SEC to begin with; to regulate the free market trading and protect investors.

[DCL]

the average return for the s&p500 over any 30-year period since 1950 is about 7.32%. the highest return was 10.68% from 1970-2000. the lowest return was 4.74% from 1955-1985. the difference between these returns, compounded over a 30 year period is enormous, but the point is if you invest for the long term (30 years), the return should still should be positive.

BUT the problem... who the hell wants to wait 30 years to see if it'll continue to hold true. if you get 10%+ for 30 years, that's fabulous. that's 17X original value. but if you only get 4.74%, even though it's positive, it sorta sucks when inflation is factored in.

[UK2K]

That doesn't make sense.
Corporations committing fraud causes stock market crashes; governments bail them out.

In 2007, it was a theoretical mistake by investors to assume that the real estate market will continue to increase in value. Mortgages were given out like a pop of coke from banks (to unqualified applicants because the government made them) and the government eventually had to bail a lot of them out due to defaults.

Government really has nothing to do with the markets.
At least that's my opinion.

The government has been keeping the stock market up.

When they step aside, it will correct itself.

[West-Side]

The government has been keeping the stock market up.

When they step aside, it will correct itself.

Again, you make no sense.
Majority of the banks are privately owned in America. They are regulated in Canada.
How exactly did the government make banks give out mortgage loans to unqualified candidates?

Please enlighten me.

[UK2K]

Again, you make no sense.
Majority of the banks are privately owned in America. They are regulated in Canada.
How exactly did the government make banks give out mortgage loans to unqualified candidates?

Please enlighten me.

To answer your question...

http://www.forbes.com/2008/07/18/fannie-freddie-regulation-oped-cx_yb_0718brook.html


Consider the low lending standards that were a significant component of the mortgage crisis. Lenders made millions of loans to borrowers who, under normal market conditions, weren’t able to pay them off. These decisions have cost lenders, especially leading financial institutions, tens of billions of dollars.

It is popular to take low lending standards as proof that the free market has failed, that the system that is supposed to reward productive behavior and punish unproductive behavior has failed to do so. Yet this claim ignores that for years irrational lending standards have been forced on lenders by the federal Community Reinvestment Act (CRA) and rewarded (at taxpayers’ expense) by multiple government bodies.

The CRA forces banks to make loans in poor communities, loans that banks may otherwise reject as financially unsound. Under the CRA, banks must convince a set of bureaucracies that they are not engaging in discrimination, a charge that the act encourages any CRA-recognized community group to bring forward. Otherwise, any merger or expansion the banks attempt will likely be denied. But what counts as discrimination?

According to one enforcement agency, “discrimination exists when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.” Note that these “arbitrary or outdated criteria” include most of the essentials of responsible lending: income level, income verification, credit history and savings history–the very factors lenders are now being criticized for ignoring.

The government has promoted bad loans not just through the stick of the CRA but through the carrot of Fannie Mae and Freddie Mac, which purchase, securitize and guarantee loans made by lenders and whose debt is itself implicitly guaranteed by the federal government. This setup created an easy, artificial profit opportunity for lenders to wrap up bundles of subprime loans and sell them to a government-backed buyer whose primary mandate was to “promote homeownership,” not to apply sound lending standards.

In a free market, lending large amounts of money to low-income, low-credit borrowers with no down payment would quickly prove disastrous. But the Federal Reserve Board’s inflationary policy of artificially low interest rates made investing in subprime loans extraordinarily profitable. Subprime borrowers who would normally not be able to pay off their expensive houses could do so, thanks to payments that plummeted along with Fed rates. And the inflationary housing boom meant homeowners rarely defaulted; so long as housing prices went up, even the worst-credit borrowers could always sell or refinance.

All of these government factors contributed to creating a situation in which millions of people were buying homes they could not afford, in which the participants experienced the illusion of prosperity, in which billions upon billions of dollars were going into bad investments. Eventually the bubble burst; the rest is history.

Given that our government was behind the wheel, influencing every aspect of the mortgage crisis, it is absurd to call today’s situation the result of insufficient regulation.

AKA, give loans to unqualified minorities or else be labeled discriminatory.

To explain how government kept the market up....


The initial government response to the deepening of the recession in late 2008 was shared across the government. Congress and the new Obama administration enacted an $800 billion stimulus act. The Federal Reserve unveiled zero interest rate policies and pledged to pump more than $1 trillion into credit markets. The Treasury used its emergency bailout dollars to pump money directly into banks. It was a strategy of throwing everything the government had at the problem and hoping that it would work—and indeed, hoping that the different prongs of the crisis-response would complement each other and be greater than the sum of their parts. (For example, that efforts to repair the banking system would make monetary policy more effective, and vice verse).

So right now, the Fed’s quantitative easing policies are now pushing an extra $85 billion per month into the financial system, on top of about $2 trillion from its previous efforts. It is buying a mix of Treasury bonds (which help lower U.S. government borrowing costs) and mortgage backed securities (which help lower mortgage rates). A key operating theory at the Fed of how these help growth is known as the “portfolio balance channel.” The Fed buys securities. The investors who otherwise would have bought those bonds have to invest in something else. Maybe it’s corporate debt, maybe it’s the stock market, but either way it props up private asset prices and makes it cheaper and more desirable for companies to invest. Higher prices for stocks and other assets also has “wealth effects,” making the people who own those securities feel richer and therefore more willing to spend. It is no coincidence that the rally in the stock market over the last few days has come about following speeches by the No. 1 and No. 2 Fed officials that suggested that QE policies aren’t going away anytime soon.

The Fed has basically one tool to affect the economy: It decides whether to make money cheaper or more expensive. As long as the central bank is the only entity in Washington doing anything to try to strengthen growth, no one should be surprised if Wall Street keeps rallying and the real economy is slow to keep up.

http://www.washingtonpost.com/news/wonkblog/wp/2013/03/06/the-stock-market-is-back-but-the-economy-isnt-blame-congress/

[KevinNYC]

Where's that interest rate rise we've been hearing about for so long Kevin? :roll:

Why are you asking me?

Why is that funny?

Have I been predicting an interest rate rise?

[West-Side]

I'm really not getting into this with you, you're clearly a little lost at what you're reading. The government's job is to regulate the monetary and fiscal policies; and to create jobs and reduce unemployment. They regulate the monetary policy through banks they regulate. The banks can be regulated federally, state-regulated or even municipally.

There are trillions of dollars that are not regulated by the federal government in the United States. Banks like J.P. Morgan are actually privately owned.

You said the 2007 recession happened because of government interference? Because you think they somehow forced banks into given out unqualified candidates mortgages, right?

[QUOTE]Causes of credit crunch

The period 2000-2007 was a time of strong economic growth, low inflation and falling unemployment. Central Banks appeared to be successful in targeting low inflation and ensuring economic stability. However, underneath the macro-economic stability, there were increasing problems, which only became fully apparent later.
Housing bubble. Many countries experienced a rapid growth in house prices. House price rose faster than inflation and faster than incomes. This boom in housing was encouraged by a growth in bank lending and high confidence. Several countries, such as Ireland and Spain also experienced a boom in house building.
Bad loans. In the period leading up to the credit crunch, banks became more aggressive and willing to take risks in lending. Especially in America, banks and mortgage companies loosened their criteria for giving mortgages. Many homeowners were given large mortgages, with limited checks on their ability to repay.
Bad loans repacked and resold. These

[aj1987]

**** the economy, is this a good time for me to buy a house then? :oldlol:
I seriously doubt that the stock market crash is going to effect the housing market. I'm not a big finance guy though.

[UK2K]

I'm really not getting into this with you, you're clearly a little lost at what you're reading. The government's job is to regulate the monetary and fiscal policies; and to create jobs and reduce unemployment. They regulate the monetary policy through banks they regulate. The banks can be regulated federally, state-regulated or even municipally.

There are trillions of dollars that are not regulated by the federal government in the United States. Banks like J.P. Morgan are actually privately owned.

You said the 2007 recession happened because of government interference? Because you think they somehow forced banks into given out unqualified candidates mortgages, right?



The government intervened in 2008, after the crash occurred.
Read this article very carefully and buy a clue.

:oldlol: @ you blaming the government for forcing banks to offer mortgages to low-income communities but not highlighting the subsidies and grants the government was offering in return. I love how you don't mention that there are over 11 trillion dollars circulating in America by privately owned banks. But most importantly I love how you think that given out mortgages to low-income individuals and families would even constitute 5% of the defaults that occurred between 2001-2007 primarily due to greed not government's intervention.

We were discussing the housing bubble then, and the market now.

I think you are getting them confused, or intentionally blending them into the same discussion.

When you say government only intervened in 2008, you are missing the whole point that government had its hand in the mortgage industry all along.


Government encouraged the growth in nontraditional mortgages. In the decades leading up to the crisis, government officials produced reports and statements criticizing lenders for sticking to the three Cs. They issued lending quotas to Freddie Mac, Fannie Mae and large commercial banks. To meet those quotas, those lenders had to turn to nontraditional mortgages.

That didn't happen all of a sudden in 2008. That started well before 2008.

[Godzuki]

well if we crash, everyones crashing a lot harder than we are. how do you think the oil countries are going to look a year from now? us and china going down affects/kills everybody harder than we are.


most people aren't as tied into the stock market as much as they used to be so it won't crush every average person like before where all of their money was in it.

as seen by the bailouts, which was a worst case scenario of 3 major sectors going wrong at the same time, the government has a lot of maneuvers they can make to save us or the economy.


our companies are strong. our debt is lower. the abuse is still there but its a lot more watchdog'd. we have a lot more influence in oil/shale these days. to think a year from now is some sudden doomsday seems pretty ridiculous :coleman:

and honestly the conspiracy theorists yap so much shit and are wrong so often, its like spam they never hold themselves accountable to. its a i told u so only when they're right but not the thousands of times prior when they're yapping and wrong.

[KevinNYC]

To answer your question...

http://www.forbes.com/2008/07/18/fannie-freddie-regulation-oped-cx_yb_0718brook.htmlYaron Brook is managing director of BH Equity Research and executive director of the Ayn Rand Institute. :lol

The idea that the Community Reinvestment Act led to the subprime-driven housing bubble is complete and utter horseshit. (http://www.mcclatchydc.com/news/politics-government/article24504598.html#storylink=cpy)
More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.http://www.ritholtz.com/blog/wp-content/uploads/2011/11/defaultChart.jpg

The idea that Fannie Mae and Freddie Mac caused the subprime-driven housing bubble is complete and utter horseshit. Fannie and Freddie mortgages went bad at the same rate as the national average. Subprime was three times higher.

http://www.nextnewdeal.net/wp-content/uploads/2011/11/min_updated.jpg

Fannie Mae and Freddie Mar didn't cause the housing bubble, they were victims of it. Their management was obsessed with the market share they were losing to Wall-Street financed subprime shops that didn't take deposits and thus were not subject to the CRA. When prices dropped they didn't have enough capital on hand to keep up.
http://www.ritholtz.com/blog/wp-content/uploads/2011/11/fannieFreddie2.jpg

http://www.businessweek.com/investin...e_mae_and.html
Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.

Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.



http://www.theatlantic.com/business/...crisis/250121/
http://www.nytimes.com/2011/12/24/op...-lie.html?_r=0

Fannie and Freddie's issue (http://www.insidehoops.com/forum/showpost.php?p=8487485&postcount=29)was regulatory capture and undercapitalization, but they got into subprimes AFTER private non-CRA covered banks like Countrywide and Ameriquest were eating their lunch for years. The institutions that issued the most subprime mortgages and which had the worst default performance were subprime mortgage orignators who were funded through Wall Street, not through deposits and thus were not covered by the Community Reinvestment Act or the FDIC and certainly didn't care about HUD.

The Financial Crisis Commission report is quite clear about the causes and the guy who spouted the nonsense argument you are repeating couldn't even get other Republicans to go along with his views.
http://fcic.law.stanford.edu/report

[West-Side]

I seriously doubt that the stock market crash is going to effect the housing market. I'm not a big finance guy though.

Well the market crash of 1929, usually cited the beginning of the Great Depression. The reason I think it's best to buy a house now is because you can enter a fixed 30 year mortgage rate.

If we are expecting to face another possible market crash or a recession, the interest rates will rise. By you buying a house now and speculating that the interest rates will rise in the future due to a possible recession; you will be entering a lower interest mortgage agreement now.

In essence, when a recession happens; market value of houses declines, interest rates rise and most people stay away.

Why? I'll give you an example.

Today, you can buy a house that's worth $400,000 for a 3.5% 30 year fixed rate.

In 5 years, if a recession occurs; that same house will be worth $300,000 but the rate will increase to 5.5%.

Would you buy a house?
Although the same house is worth less, here's why most people will not do it.

1) People live in the now and when downturn swings occur; many people lose confidence in the future. They do not want to buy something and pay MORE interest when they think the value (equity they are building) will continue to decline.

2) The cost of financing the house is simply more.

3) Their ROI could easily be negative after the house is paid off.

Entering a 30 year mortgage rate now is beneficial for two main reasons:

1) Financing the cost would be far cheaper.
2) History trends in real estate market suggest that the retail price of houses in the long term tend to increase rather than decrease. If you enter a 25/30 year mortgage term, chances are by the time you pay of your mortgage, the value of your home would have increased past the purchase price if you do decide to sell.

[West-Side]

We were discussing the housing bubble then, and the market now.

I think you are getting them confused, or intentionally blending them into the same discussion.

When you say government only intervened in 2008, you are missing the whole point that government had its hand in the mortgage industry all along.



That didn't happen all of a sudden in 2008. That started well before 2008.

No I'm saying that most of the mortgages that were given to house buyers were by privately owned financial institutions and had no association with government at all. You telling me about a very specific niche market who worked together with government agencies to improve the quality of life in America has LITTLE to do with why the housing bubble burst.

[UK2K]

No I'm saying that most of the mortgages that were given to house buyers were by privately owned financial institutions and had no association with government at all. You telling me about a very specific niche market who worked together with government agencies to improve the quality of life in America has LITTLE to do with why the housing bubble burst.

I'm telling you people who couldn't afford to pay their mortgages were given mortgages they weren't qualified for, thanks to government intervention.

That's not debatable.

I never said that was the sole reason behind the housing bubble bursting, because like anything in economics, there are 1000 different causes of anything.

[KevinNYC]

When you say government only intervened in 2008, you are missing the whole point that government had its hand in the mortgage industry all along.

Government encouraged the growth in nontraditional mortgages. In the decades leading up to the crisis, government officials produced reports and statements criticizing lenders for sticking to the three Cs. They issued lending quotas to Freddie Mac, Fannie Mae and large commercial banks. To meet those quotas, those lenders had to turn to nontraditional mortgages

That didn't happen all of a sudden in 2008. That started well before 2008.
Peter Wallison is a straight up fraud on the housing crisis and there is a shit-ton of data that shows it. This dude was on the Financial Crisis Inquiry Commission. He couldn't even get the other Republican members to sign on to his bullshit.

Fannie Mae didn't do subprime and their mortgage guidelines prevented them from doing so. However by 2004, they were losing trillions in market share to the Wall-Street back subprime shops who kept lowering and lowering lending standards because it was almost risk-free. Wall Street was buying any paper they could get. And they piled up and sliced it and diced it and sold it off. This is what management at Fan/Fred were responding to, not the CRA. They lowered their mortgage standards to capture back market share and make money. However, they did not and could not go as low as the subprime shops.

The point to understand is that when the subprime high-risk mortgage bubble popped it affected millions of mortgages that weren't high-risk. Housing values all over dropped and that affected Fannie and Freddie and they didn't have enough money on hand to deal with it, that is they were undercapitalized for the risk they took, like virtually every bank at the time from Bear Stearns right up to Goldman Sachs. The ones that survived the financial crisis surveyed because the government stepped in before they were next victim to be attacked. They survived until this point because they got out of this risky market early. However, they too were guilty of mispricing risk and buyers of their securities got hit hard too.

Peter Wallison shtick is that since private market high-risk subprime mortgages caused the bubble and Fannie and Freddie didn't do subprime, he had to find a way to blame them. So he recatgorized a bunch of Fannie/Freddie mortgages as high-risk and started shouting "look over here." However, those loans defaulted as the national average, one-third of the subprime rate.
Highly respected analysts who have looked at these data in much greater detail than Wallison, Pinto, or myself, including the nonpartisan Government Accountability Office, the Harvard Joint Center for Housing Studies, the Financial Crisis Inquiry Commission majority, the Federal Housing Finance Agency, and virtually all academics (https://research.stlouisfed.org/conferences/gse/Van_Order.pdf), have all rejected the Wallison/Pinto argument that federal affordable housing policies were responsible for the proliferation of actual high-risk mortgages over the past decade.

[KevinNYC]

I'm telling you people who couldn't afford to pay their mortgages were given mortgages they weren't qualified for, thanks to government intervention.

That's not debatable.

This is completely false.

[UK2K]

This is completely false.

Really....

[sundizz]

If you are legitimately concerned this should be your strategy:

1. Research all the major large cap/blue chip "good" companies. Read the financials, etc. Learn legitimately about what they do, their outlook plan AND especially their ability to withstand a huge recession (both liquidity/cash, and their nature of business). A company that sells convenience goods (e.g., toothpaste, etc) is going to fare better than a tech company that sells only stuff that people overindulge and overbuy when they are feeling safe/secure (e.g., Ipads, iphones, etc). I'm not saying Apple is a bad bet, but that a lot of areas should be considered.

2. Pick 10

2. Put limit buy for them when their price drops 7.5%

3. Wait for the eventual rebound and profit (buy and hold). This may take multiple years even. However, it will happen (as long as you believe that the world isn't going to end and the ship will get righted someday).

Other things to do:
1. Bonds
2. Fixed deposits
3. Make sure you have enough saved up in case a job gets lost etc.

[KevinNYC]

Really....
This is easily provable.

Here are the top three subprime lenders.
Countrywide Financial Corp.
Amount of Subprime Loans: At least $97.2 billion subprime

Ameriquest Mortgage Co./ACC Capital Holdings Corp.
Amount of Subprime Loans: At least $80.6 billion

New Century Financial Corp.
Amount of Subprime Loans: At least $75.9 billion


They gave out tons of mortgages to people who didn't qualify and eventually caused Wall Street to implode.

Can you explain why they made the loans they did and what government intervention was involved?

For bonus points, can you explain how they helped cause Wall Street to collapse?

I can. It only takes a few sentences

[West-Side]

I'm telling you people who couldn't afford to pay their mortgages were given mortgages they weren't qualified for, thanks to government intervention.

That's not debatable.

I never said that was the sole reason behind the housing bubble bursting, because like anything in economics, there are 1000 different causes of anything.

Okay so you might have explained one highly immaterial reason why the recession occurred.

That's primarily my point; it probably doesn't accumulate to 10% of the defaults that occurred during that time.

As Kevin said, many of those institutions that gave out mortgages were privately owned. Which is what I told you from the beginning.

[UK2K]

Okay so you might have explained one highly immaterial reason why the recession occurred.

That's primarily my point; it probably doesn't accumulate to 10% of the defaults that occurred during that time.

As Kevin said, many of those institutions that gave out mortgages were privately owned. Which is what I told you from the beginning.

Ok, so the company I work for is privately owned too, can the government not dictate and direct our actions?

[West-Side]

Ok, so the company I work for is privately owned too, can the government not dictate and direct our actions?

Only if you're breaking laws.
They can evaluate your policies and deem them inappropriate for example.

They can't flat out tell you: "You need to offer mortgages to unqualified individuals to increase the standard of living."

[UK2K]

This is easily provable.

Here are the top three subprime lenders.
Countrywide Financial Corp.
Amount of Subprime Loans: At least $97.2 billion subprime

Ameriquest Mortgage Co./ACC Capital Holdings Corp.
Amount of Subprime Loans: At least $80.6 billion

New Century Financial Corp.
Amount of Subprime Loans: At least $75.9 billion


They gave out tons of mortgages to people who didn't qualify and eventually caused Wall Street to implode.

Can you explain why they made the loans they did and what government intervention was involved?

For bonus points, can you explain how they helped cause Wall Street to collapse?

I can. It only takes a few sentences

This is my whole point. Thank you.

[UK2K]

Only if you're breaking laws.
They can evaluate your policies and deem them inappropriate for example.

They can't flat out tell you: "You need to offer mortgages to unqualified individuals to increase the standard of living."

No, but they can tell you 'You need to offer mortgages to unqualified individuals because we said so'.


The methodology of the study has since been questioned, but at the time it was highly influential with regulators and members of the incoming Clinton administration; in 1993, bank regulators initiated a major effort to reform the CRA regulations.

In 1995, the regulators created new rules that sought to establish objective criteria for determining whether a bank was meeting CRA standards. Examiners no longer had the discretion they once had. For banks, simply proving that they were looking for qualified buyers wasn’t enough. Banks now had to show that they had actually made a requisite number of loans to low- and moderate-income (LMI) borrowers.

Why is ^^that^^?

Because the Government reformed the CRA , a government policy. Government said, you must give X amount of loans to low income borrowers. Period. Thats it. There's nothing else to discuss.


Correspondingly, sub-prime loans (those made to borrowers with blemished credit) rose from 7.2 percent to 18.8 percent, and Alt-A loans (those made to speculative buyers or without the usual underwriting standards) rose from 2.5 percent to 13.9 percent.

[KevinNYC]

This is my whole point. Thank you.
If that is your whole point, you just proven mine 100%.

Because you made two points.

point 1 I'm telling you people who couldn't afford to pay their mortgages were given mortgages they weren't qualified for,

point 2 thanks to government intervention.


We've just agreed to point one. I'm asking you for evidence of point 2.

I can pretty convincingly explain how point 1 happened in the absence of point 2. So I'm curious as how you get from point 1 to point 2.

If you're coming at this with an open mind, you might see why Wallison has so little support, even among political comrades.

[UK2K]

If that is your whole point, you just proven mine 100%.

Because you made two points.

point 1 I'm telling you people who couldn't afford to pay their mortgages were given mortgages they weren't qualified for,

point 2 thanks to government intervention.


We've just agreed to point one. I'm asking you for evidence of point 2.

I can pretty convincingly explain how point 1 happened in the absence of point 2. So I'm curious as how you get from point 1 to point 2.

If you're coming at this with an open mind, you might see why Wallison has so little support, even among political comrades.

See above.

Which shows that government intervened long before 2008, like you claimed. Unless you meant something else (related to the market crash).

[KevinNYC]

See above.

Which shows that government intervened long before 2008, like you claimed. Unless you meant something else (related to the market crash).

You're still proving my point. The Community Reinvestment Act applies to banks that take deposits. That is your standard community bank. Not mortgage originators.

Ameriquest was not covered by the CRA.
Countrywide was not covered by the CRA.
New Century was not covered by the CRA.

So the government intervention you cite doesn't apply. So why did they make the loans they did.

Peter Wallison is lying to you and you continue to cite him.

[West-Side]

The government can't come to JP Morgan and tell them to give out mortgages to low income families .

Again read my the post where I quoted the reasons for why the recession occurred. The government bailed out companies that were privately owned. It had next to nothing to do with them giving out mortgages to "unqualified" individuals and everything to do with greed. Companies were given our mortgages to increase their revenue streams not because the government ordered them to do so.

You citing a reference that references the fact that the government asked financial institutions to approve mortgages to unqualified individuals to accomplish one of their objectives doesn't tell me anything.

1) It doesn't tell me the magnitude of those loans.
2) It doesn't tell me the types of institutions they asked.

[West-Side]

You're still proving my point. The Community Reinvestment Act applies to banks that take deposits. That is your standard community bank. Not mortgage originators.

Ameriquest was not covered by the CRA.
Countrywide was not covered by the CRA.
New Century was not covered by the CRA.

So the government intervention you cite doesn't apply. So why did they make the loans they did.

Peter Wallison is lying to you and you continue to cite him.

Thank you. :facepalm

[KevinNYC]

You citing a reference that references the fact that the government asked financial institutions to approve mortgages to unqualified individuals to accomplish one of their objectives doesn't tell me anything.The timing doesn't match up at either.

The changes to the CRA were made in the 1990's. I think 1995 is the year of the change cited. Loans made by these banks are mainly bought by Fannie/Freddie

In the early 2000's Subprime loans made by lenders not subject to the CRA take Fannie/Freddie's market share away from them and housing bubble starts.

Fannie/Freddie only react after this bubble has started. The chart I showed early clearly shows this timeline. Growth of non CRA loans started the bubble.


The government can't come to JP Morgan and tell them to give out mortgages to low income families .Chase is now part of JP Morgan and parts of JP Morgan Chase might be subject to the CRA. This is why Wall Street tended to acquire subprime lenders or form new units to go after that market. However, these subsidiaries would be NOT be community deposit banks and thus wouldn't be subject to the CRA.

Also Texas has poor people and Texas has a lot of banks subject to the CRA why didn't Texas have the same bubble that Nevada or Arizona did?

[DCL]

google search 2016 crash and you will see tones of econimist and books been written that are predicting this crash.


ahhhh, using google as your crystal ball for investing...


well, if you googled 2014 crash, you would had gotten these reports:


"New doomsday poll: 99.9% risk of 2014 crash" - Mar 17, 2014

"2014 crash will be worse than 1987's: Marc Faber" - Apr 10, 2014

"These 23 Charts Prove That Stocks Are Heading For A Devastating Crash" - July 1, 2014

"Are Stocks Heading For A Crash This Fall? - Forbes" - Aug 27, 2014

"Stocks To Crash In 2014? - Business Insider" Jan 2, 2014

"THE BIG SLEEP: Why The Stock Market Will Crash In A Few Months, Then Go Nowhere For Years"





so what happened in 2014??? stock market smashed through new highs and S&P500 was up 13.5%.


i think when all these articles claim that everything is going to be rosy and spectacular, then that's the straightest indicator to get out of everything.

:oldlol:

[KevinNYC]

Thank you. :facepalm
If people don't understand the rise of mortgage originators that were funded by Wall Street, they don't understand the housing bubble.

If they don't understand how Wall Street made huge, huge profits from reselling mortgages packaged into CDO's (and stealing market share from Fannie and Freddie), they don't understand that Wall Street was driving demand for the riskiest mortgages and driving the bubble bigger. They needed more and more mortgages to bundle and sell and they made the most money on the riskiest ones.

If people don't understand the Wall Street shadow banking system, they don't understand how the housing bubble that popped in 2006 morphed into a worldwide financial crisis in 2008. This is something a lot of people miss when they don't understand how a blackjack dealer buying a big house outside Vegas can bring down AIG.

[West-Side]

If people don't understand the rise of mortgage originators that were funded by Wall Street, they don't understand the housing bubble.

If they don't understand how Wall Street made huge, huge profits from reselling mortgages packaged into CDO's (and stealing market share from Fannie and Freddie), they don't understand that Wall Street was driving demand for the riskiest mortgages and driving the bubble bigger. They needed more and more mortgages to bundle and sell and they made the most money on the riskiest ones.

If people don't understand the Wall Street shadow banking system, they don't understand how the housing bubble that popped in 2006 morphed into a worldwide financial crisis in 2008. This is something a lot of people miss when they don't understand how a blackjack dealer buying a big house outside Vegas can bring down AIG.

The other poster just read a script from a shitty economist and tried to convince me of what I know otherwise.

Trust me I've studied these financial meltdowns at school and we've had to do research papers about possible ways to mitigate these situations from escalating in the future.

I could go into detail myself but I feel like I'd be wasting my time since the other poster clearly has entry level knowledge about investment finance.

[UK2K]

If people don't understand the rise of mortgage originators that were funded by Wall Street, they don't understand the housing bubble.

If they don't understand how Wall Street made huge, huge profits from reselling mortgages packaged into CDO's (and stealing market share from Fannie and Freddie), they don't understand that Wall Street was driving demand for the riskiest mortgages and driving the bubble bigger. They needed more and more mortgages to bundle and sell and they made the most money on the riskiest ones.

If people don't understand the Wall Street shadow banking system, they don't understand how the housing bubble that popped in 2006 morphed into a worldwide financial crisis in 2008. This is something a lot of people miss when they don't understand how a blackjack dealer buying a big house outside Vegas can bring down AIG.

You know more than Forbes, I suppose...


There is very little doubt that the underlying cause of the current credit crisis was a housing bubble. But the collapse of the bubble would not have led to a worldwide recession and credit crisis if almost 40% of all U.S. mortgages–25 million loans–were not of the low quality known as subprime or Alt-A.

These loans were made to borrowers with blemished credit, or involved low or no down payments, negative amortization and limited documentation of income. The loans’ unprecedentedly high rates of default are what is driving down housing prices and weakening the financial system.

The low interest rates of the early 2000s may explain the growth of the housing bubble, but they don’t explain the poor quality of these mortgages. For that we have to look to the government’s distortion of the mortgage finance system through the Community Reinvestment Act and the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac .

In a recent meeting with the Council on Foreign Relations, Barney Frank–the chair of the House Financial Services Committee and a longtime supporter of Fannie and Freddie–admitted that it had been a mistake to force homeownership on people who could not afford it. Renting, he said, would have been preferable. Now he tells us.

Long-term pressure from Frank and his colleagues to expand home ownership connects government housing policies to both the housing bubble and the poor quality of the mortgages on which it is based. In 1992, Congress gave a new affordable housing “mission” to Fannie and Freddie, and authorized the Department of Housing and Urban Development to define its scope through regulations.

Shortly thereafter, Fannie Mae, under Chairman Jim Johnson, made its first “trillion-dollar commitment” to increase financing for affordable housing. What this meant for the quality of the mortgages that Fannie–and later Freddie–would buy has not become clear until now.

On a parallel track was the Community Reinvestment Act. New CRA regulations in 1995 required banks to demonstrate that they were making mortgage loans to underserved communities, which inevitably included borrowers whose credit standing did not qualify them for a conventional mortgage loan.

To meet this new requirement, insured banks–like the GSEs–had to reduce the quality of the mortgages they would make or acquire. As the enforcers of CRA, the regulators themselves were co-opted into this process, approving lending practices that they would otherwise have scorned. The erosion of traditional mortgage standards had begun.

Shortly after these new mandates went into effect, the nation’s homeownership rate–which had remained at about 64% since 1982–began to rise, increasing 3.3% from 64.2% in 1994 to 67.5% in 2000 under President Clinton, and an additional 1.7% during the Bush administration, before declining in 2007 to 67.8%. There is no reasonable explanation for this sudden spurt, other than a major change in the standards for granting a mortgage or a large increase in the amount of low-cost funding available for mortgages. The data suggest that it was both.

As might be expected, the market for subprime and Alt-A loans grew along with the rise in homeownership. Some have argued that unregulated groups such as mortgage brokers and bankers, working with subprime lenders such as Countrywide Financial, supplied both the easier credit and the lower loan standards, but the facts belie this.

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?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.

My whole argument, from the beginning, was that the housing bubble was influenced and partly caused by governmental actions. That. Is. Not. Debatable.

You can argue until you are blue in the face, but its not an opinion, its a fact.

Did some make a killing off of these moves? Sure. The rich get richer.

Are you going to argue government had nothing (or a very small influence) to do with it? Because that would be the counter to my argument.

[West-Side]

You know more than Forbes, I suppose...



My whole argument, from the beginning, was that the housing bubble was influenced and partly caused by governmental actions. That. Is. Not. Debatable.

You can argue until you are blue in the face, but its not an opinion, its a fact.

Did some make a killing off of these moves? Sure. The rich get richer.

Are you going to argue government had nothing to do with it?

At least you can admit that it was "partially" caused by the government. Initially, I felt like you were implying the government had full control over the housing bubble.

What I've been trying to tell you however is that it was highly immaterial. If it was a significant reason behind the housing bubble I would have heard about it at least once from when I was studying external auditing and real estate markets.

You highlighting a source that states banks were influence by government to approve mortgages to unqualified candidates does not highlight the impact of those mistakes. Nor does it highlight the types of institutions that were obliged by that influence.

You do know there are other companies that give out mortgages besides banks right? And you do know there are regulated banks in America and privately owned?

There's a lot of factors you simply did not consider.

[TheGreatDeraj]

@KevinNYC

why did they make those loans?

Because they had no reason not too.

The government was pushing them to do it.

Plus they made money on the loans.

and when the system came crashing down...

The government was there to steal wealth from it's citizens to pay back their friends in the banking industry.

[West-Side]

Yes, :oldlol: , those government interventions had a very small influence on the housing bubble overall.

So yeah please do counter that point I made.
I'll gladly humiliate you with a rebuttal.

Please cite sources while you do so with specific statistics that validate your argument. I will proceed to shatter every point you make afterwards. :pimp:

This will be fun.

[KevinNYC]

@KevinNYC

why did they make those loans?

Because they had no reason not too.

The government was pushing them to do it.

Plus they made money on the loans.

and when the system came crashing down...

The government was there to steal wealth from it's citizens to pay back their friends in the banking industry.
Incorrect.

Ameriquest and Countrywide made those loans because they were the most profitable. The more risk the more profitable. Government was not pushing them in any way.

Wall street was under no obligation to buy subprime loans but they bought billions worth. Because it was profitable.
Talk in specifics.

[West-Side]

Round 1.


First, mortgage lending wasn't aimed mainly at the poor. Earlier research studied lending by ZIP codes and found sharp growth in poorer neighborhoods. Borrowers were assumed to reflect the average characteristics of residents in these neighborhoods. But the new study examined the actual borrowers and found this wasn't true. They were much richer than average residents. In 2002, homebuyers in these poor neighborhoods had average incomes of $63,000, double the neighborhoods' average of $31,000.

Second, borrowers were not saddled with progressively larger mortgage debt burdens. One way of measuring this is the debt-to-income ratio: Someone with a $100,000 mortgage and $50,000 of income has a debt-to-income ratio of 2. In 2002, the mortgage-debt-to income ratio of the poorest borrowers was 2; in 2006, it was still 2. Ratios for wealthier borrowers also remained stable during the housing boom. The essence of the boom was not that typical debt burdens shot through the roof; it was that more and more people were borrowing.

Third, the bulk of mortgage lending and losses -- measured by dollar volume -- occurred among middle-class and high-income borrowers. In 2006, the wealthiest 40 percent of borrowers represented 55 percent of new loans and nearly 60 percent of delinquencies (defined as payments at least 90 days overdue) in the next three years.

If these findings hold up to scrutiny by other scholars, they alter our picture of the housing bubble. Specifically, they question the notion that the main engine of the bubble was the abusive peddling of mortgages to the uninformed poor. In 2006, the poorest 30 percent of borrowers accounted for only 17 percent of new mortgage debt. This seems too small to explain the financial crisis that actually happened.

It is not that shoddy, misleading and fraudulent merchandising didn't occur. It did. But it wasn't confined to the poor and was caused, at least in part, by a larger delusion that was the bubble's root source.

During the housing boom, there was a widespread belief that home prices could only go in one direction: up. If this were so, the risks of borrowing and lending against housing were negligible. Homebuyers could enjoy spacious new digs as their wealth grew. Lenders were protected. The collateral would always be worth more tomorrow than today. Borrowers who couldn't make their payments could refinance on better terms or sell. -KEY POINT -

This mindset fanned the demand for ever-bigger homes, creating a permissive mortgage market that -- for some -- crossed the line into unethical or illegal behavior. Countless mistakes followed. One example: The Washington Post recently reported that in the early 2000s, many middle-class black families took out huge mortgages, sometimes $1 million, to buy homes now worth much less. These are upper-middle-class households, not the poor.

It's tempting to blame misfortune on someone else's greed or dishonesty. If Wall Street's bad behavior was the only problem, the cure would be stricter regulatory policing that would catch dangerous characters and practices before they do too much damage. This seems to be the view of the public and many "experts."

But the matter is harder if the deeper cause was bubble psychology. It arose from years of economic expansion, beginning in the 1980s, that lulled people into faith in a placid future. They imagined what they wanted: perpetual prosperity. After the brutal Great Recession, this won't soon repeat itself. But are we forever insulated from bubble psychology? Doubtful.

:pimp:

[UK2K]

At least you can admit that it was "partially" caused by the government. Initially, I felt like you were implying the government had full control over the housing bubble.

What I've been trying to tell you however is that it was highly immaterial. If it was a significant reason behind the housing bubble I would have heard about it at least once from when I was studying external auditing and real estate markets.

You highlighting a source that states banks were influence by government to approve mortgages to unqualified candidates does not highlight the impact of those mistakes. Nor does it highlight the types of institutions that were obliged by that influence.

You do know there are other companies that give out mortgages besides banks right? And you do know there are regulated banks in America and privately owned?

There's a lot of factors you simply did not consider.

No, government played a hand in it. I mentioned two pages ago that, as any event related to economics, there are numerous factors. My whole argument was that government had a hand in the housing bubble then, as government has a hand in the market crash now, which is why we are discussing both events in this thread simultaneously.

[falc39]

Of course when you kick the can down the road you will have to face a crash later. Stock market has been in a bubble for quite some time now because of the Fed's disastorous policies. No one can predict the exact moment of a crash, but you have to be truly clueless to not expect one in the future. Interest rates are at 0 for how long? Everyone who thinks this is a legit recovery, why hasn't the Fed been able to raise rates? They can't because they know as soon as they raise it by a significant amount it will all come crashing down like a house of cards. This economy is a fraud and every minute savers are getting screwed by the disastorous policies of the Fed.

[falc39]

That doesn't make sense.
Corporations committing fraud causes stock market crashes; governments bail them out.

In 2007, it was a theoretical mistake by investors to assume that the real estate market will continue to increase in value. Mortgages were given out like a pop of coke from banks and the government eventually had to bail a lot of them out due to defaults.

Government really has nothing to do with the markets.
At least that's my opinion.

The Fed has a lot to do with the markets and derives its powers from Congreas. It has gotten to the point that people are trying to analyze every individual word that comes from the chairman.

[navy]

That doesn't even make sense.
In financial markets, volatility is a measure of risk. If there's volatility, than there's risk.
Risk as in diversified portfolios though investing in companies by random numbers as opposed to interest in the company.

Volatility as in the stock market as an entire entity not individual stocks. Basically legalized gambling.

You're right though.

[KevinNYC]

You know more than Forbes, I suppose...

Forbes is now a content farm, similar to Huffington Post. It's very easy to get a job writing there.

The Financial Crisis Inquiry Commission report is available online for anyone to read. It's very well done.

The best book on the scope and breadth of what caused the crisis is this one

https://upload.wikimedia.org/wikipedia/en/5/54/All_the_Devils_Are_Here.jpg

It was a multi-causal crisis and I'm not saying government was not part of it
My whole argument, from the beginning, was that the housing bubble was influenced and partly caused by governmental actions. That. Is. Not. Debatable. I'm saying the government action that you cite as a cause, changes to the Community Reinvestment Act is myth.

And you have not cited any governmental actions that would have caused Ameriquest to do what they did or Wall Street to do what they did.

Why did Ameriquest actively seek out riskly borrowers? What government action caused that?
Why did Ameriquest promote loans where borrowers didn't have to verify their income A. K. A. Liar's loans? What government action caused that?

Why Wall Street want to buy so many risky loans from Ameriquest, Loans that they knew were based on stated income? What government action caused that?



Bonus question: What government action caused mortgages from Texas to behave very differently from mortgages from Arizona

[TheGreatDeraj]

Incorrect.

Ameriquest and Countrywide made those loans because they were the most profitable. The more risk the more profitable. Government was not pushing them in any way.

Wall street was under no obligation to buy subprime loans but they bought billions worth. Because it was profitable.
Talk in specifics.

Sure, Ameriquest and Countrywide f*cked up. But they didn't do it on their own accord and that was not the major cause.

Government was pushing, and not just with the CRA

Government was pushing loans towards lower incomes with Government Sponsored Enterprise(GSE) Freddie Mae and Fannie Mac


The Housing and Community Development Act of 1992 established an affordable housing loan purchase mandate for Fannie Mae and Freddie Mac, and that mandate was to be regulated by HUD. Initially, the 1992 legislation required that 30 percent or more of Fannie’s and Freddie’s loan purchases be related to affordable housing.

This target was increased to 50% in 2000 and 52% in 2005. Under the Bush Administration HUD continued to pressure Fannie and Freddie to increase affordable housing purchases – to as high as 56 percent by the year 2008.To satisfy these mandates, Fannie and Freddie eventually announced low-income and minority loan commitments totaling $5 trillion. Critics argue that, to meet these commitments, Fannie and Freddie promoted a loosening of lending standards - industry-wide.


So the government had no effect on loans to low income housing when they continually increased the mandate for Fannie’s and Freddie’s loan purchases related to affordable housing up to 56%? This had no effect in the industry?

Government has no effect on these loans when they manipulate the interest rates through the federal reserve?

Ron Paul talking to Congress in 2001 predicting the housing Bubble (https://www.youtube.com/watch?v=KONpt9a6HrI)




Federal reserve creates more credit, that was suppose to stimulate economy, but ends up in real estate bubble

3.2 trillion of debt by Government Sponsored Enterprises Freddie Mae, Fannie Mac, and Federal loan home bank artificially keep housing market afloat despite a slowdown

Spending through GSE cause consumption spending considering the GSE get special artificially low interest rates due to line of credit to US treasury.

Federal reserve gives GSE securities special treatment. Fed monetizes GSE securities as if they are treasury bills.

GSE's borrow without restraint to subsidize new mortgages, records sales and refinancing which lead to housing prices rising to record levels.

refinancing help consumers to keep spending even in a slowing economy

high credit card debt is rolled into second mortgages since interest on mortgage debt is tax deductible

Fannie Mae and Freddie mac are heavily involved in hedging interest rates bets.


Ron Paul in Banking Committee predicts Housing Bubble in 2003


...The special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions...Like all artificially-created bubble, the boom in housing prices cannot lost forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have been had government policy no actively encouraged over-investment in housing

We could listen to people like Ron Paul

Or we can listen to people like the federal reserve who deny the CRA and GSEs had any impact on the housing bubble.


more than 84 percent of the subprime mortgages came from private lending institutions in 2006. The share of subprime loans insured by Fannie Mae and Freddie Mac also decreased as the bubble got bigger (from a high of insuring 48 percent to insuring 24 percent of all subprime loans in 2006)


The Federal Reserve also estimated that only six percent of higher-priced loans were extended by Community Reinvestment Act-covered lenders to lower-income borrowers or CRA neighborhoods.

I'm sure the government doesn't manipulate those statistics like they do the statistics of unemployment, inflation, GDP, the debt etc.

Oh wait...



To make its estimate, the Federal Reserve did not directly analyze the characteristics of the loans (such as downpayment sizes); rather, it assumed that loans carrying interest rates 3% or more higher than normal rates were subprime and loans with lower interest rates were prime. Critics dispute the Federal Reserve's use of interest rates to distinguish prime from subprime loans. They say that subprime loan estimates based on use of the high-interest-rate proxy are distorted because government programs generally promote low-interest rate loans – even when the loans are to borrowers who are clearly subprime.

As it did with respect to GSE loans, the Federal Reserve assumed that all CRA loans were prime unless they carried interest rates 3% or more above the normal rate, an assumption disputed by others.


and of course


Fannie and Freddie did not buy a significant amount of high-risk mortgage backed securities must be evaluated in light of subsequent SEC security fraud charges brought against executives of Fannie Mae and Freddie Mac in December 2011. Significantly, the SEC alleged (and still maintains) that Fannie Mae and Freddie Mac reported as subprime and substandard less than 10 percent of their actual subprime and substandard loans. In other words, the substandard loans held in the GSE portfolios may have been 10 times greater than originally reported

Nah probably all wrong...let's listen to the people who told us there was no housing bubble, like:

federal reserve chairman: Ben Bernake (http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html)


Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week

I bet the federal reserve and the countless analyst who denied there was a housing bubble (http://economicsofcontempt.blogspot.com/2008/07/official-list-of-punditsexperts-who.html) knows more about the cause of the housing bubble than those who predicted it as the boom and bubble formed.

Pretty interesting that the same people who denied the housing bubble even existed go on to claim they know who caused it, and then have the audacity to say don't listen to the people who correctly identified there was a problem(and it's causes) before it happened.

[KevinNYC]

You're going to quote Ron ****ing Paul about something factual? Your Wikipedia quotes are just more Wallison and Pinto who are frauds.


Sure, Ameriquest and Countrywide f*cked up. But they didn't do it on their own accord and that was not the major cause.Ameriquest and Countrywide absolutely did it of their own accord because subprime = higher priced. (http://www.publicintegrity.org/2009/05/06/5449/roots-financial-crisis-who-blame)
subprime does not mean “lower than prime.” In fact, it’s just the opposite. Subprime lenders charge rates that are higher than prime, the rate offered to a bank’s most creditworthy customers — sometimes much higher.Nonbank lenders and Wall Street got into the risky loan business not because the government pushed them, but because it was insanely profitable (at least while home prices were going up.) They loved having folks take out these loans, in fact, there were a lot of cases where people whose credit could get them into cheaper loans on mortgages that "conformed" to Fannie standards, were pushed towards riskier subprime mortgages because Ca-ching! that meant more money for the lender. They called this predatory lending. Adjustable rate loans, where the loan payment was super low and then shot up in two years? You can't sell those to Fannie Mae, but subprime lenders loved them. Interest only loans, where buyers are not even paying the principle? Yup. NINJA loans -No Income No Job verification? Sure, why not. Why did subprime lenders love these risky loans? Why push people into these loans? Because in two years, when they can't make monthly payments, you get to refinance them into another expensive mortgages and take giant origination fees!

These were not CRA banks that took deposits, they were financed by Wall Street and were free of CRA requirements.


The Center’s study found that at least 21 of these Subprime 25 lenders were either owned outright by the biggest banks or former investment houses, or had their subprime lending hugely financed by those banks, either directly or through lines of credit. In other words, the largest American and European banks made the bubble in subprime lending possible by financing it on the front end, so they could reap the huge rewards from securitizing and selling mortgage-backed securities on the back end. The demand was insatiable, and the backing excessive. Between 2000 and 2007, underwriters of subprime mortgage-backed securities — primarily Wall Street and European investment banks — poured $2.1 trillion into the business,

SUBPRIME LENDING DOES NOT EQUAL CRA LENDING. full stop.

but you believe the massively scrutinized government data on the economy is all manipulated, so this will lead nowhere.

[KevinNYC]

The government could have cracked down on predatory lending. Lots of regulations were already on the books that could have been used to stop the housing bubble.

It also could have straight out outlawed these risky loans. The reason I keep bringing up Texas is that is has very strict state mortgage laws and these crazy mortgages would be illegal there.

[KevinNYC]

Fannie and Freddie should certainly have been required to hold more capital.
Republicans argued that for years.

But so should the Wall Street banks who were taking massive risks. Every time the Democrats pushed for raising capital limits across the board, Republicans balked.

[KevinNYC]

Here's Peter Wallison (https://www.aei.org/publication/the-public-trust-of-a-gse/) proving my point that fanny and freddie were not buying up risky mortgages at the beginning of the housing bubble and also that they were acting to maximize profits

[QUOTE]We understand from the rules of corporate governance that the directors of corporations like Fannie Mae and Freddie Mac are expected to serve the interests of the corporation and the shareholders by seeing to the maximization of profits. .....

This is very clearly seen in Fannie and Freddie

[bladefd]

Holy crap! What you guys doing here? I read the first 4 pages then I saw HUGE WALLS of text from Deraj and KevinNYC on 5th page that I just gave up. Seems like you guys enjoy arguing :roll: :roll:

(don't worry, I'm the same way.. I'm just not very passionate about this topic though :lol )