Reason Morning Links: The Treasury's Losses, A Mystery Blast in Iran, Google Sociology

- Turns out full-body airport scanners can store and transmit images after all.

- The Treasury admits it's losing more money from TARP than it's gaining. The White House considers a bank tax to make up those losses.

- Medical marijuana is coming to Jersey.

- A bomb kills one of Iran's leading nuclear physicists.

- Fox News hires Sarah Palin.

- The coming Tea Party convention sparks more dissension within the Tea Party movement.

- The Google hive-mind offers its perspective on gender differences.

Comments

[Gomer Pyle]

Turns out full-body airport scanners can store and transmit images after all.

Surprise, surprise, surprise!

[Tonio]

Yeah, but only in test mode, and TSA screeners "can't" access this according to the article. Suspect that test mode is probably a hard-coded password or secret key combo and once that info gets out...

Hell, I can even see the trainers telling them how to do this in class. "Now, we can't put this in writing, and you didn't hear it from me...."

Argh.

[MattXIV]

Or a DIP switch on one of the boards. Probably with no stronger security than a "no user servicable parts inside" sticker.

[JB]

It's time to start a movement. Every time you have to go through one of those, call the TSA people nearby 'dirty perverts'.

[Gomer Pyle]

The Treasury admits it's losing more money from TARP than it's gaining.

Surprise, surprise, surprise!

[hmm]

Only Gomer could be surprised twice.

[Sergeant Carter]

Tell me about it.

[Admiral Ackbar]

IT'S A TARP!!!

[Joe M]

Excellent.

[Death Panelist]

Someone besides Lipton needs to start making money off the tea party movement!

[sage]

? The Treasury admits it's losing more money from TARP than it's gaining. The White House considers a bank tax to make up those losses.

I am Jack's complete lack of surprise.

[Pro Libertate]

Sounds like a scam to me.

[hmm]

It's all starting to sound like a scam. I mean all of it from bailouts to budgets to healthcare to just about everything they get their hands on.

[Mike M.]

Most corrupt government in American history.

[Nancy Pelosi]

Are you serious?

[John]

So we give TARP to bailout the banks because they are going broke. But they are supposed to pay us back when they get back on their feet. Well apparently they are not paying us back. That means that they are not back on their feet or they are and are stealing the money.

So, what is the point of the tax? If the banks are solvent they should be paying us back without the tax. If they are not solvent, the tax will just make things worse and work at cross purposes with TARP. It seems to me Obama is either admitting TARP was nothing but a fraud scheme for bankers or is sabotaging his own program.

[hmm]

Because taxes are paid by the public, which means they can soak you for more money and say they are soaking the banks. And people will believe them.

[John]

You mean taxes are just passed to consumers? Wow, who would have guessed? 😉

[sage]

My wife, who works at home doing medical transcription, recently had to register her business with the state (this was required by a company she works for). As I predicted, she now has to charge sales tax (or pay it herself, a de facto state income tax). But the cosumers (doctors) are the ones that are going to get shafted here. Plus we have to do a bunch of extra paperwork. As with anything having to do with the state, it sucks.

[Pro Libertate]

sage,

Need I say it again?

[sage]

Not at all, ProL. Something stinks. We may need to come up with a scam of our own.

[Pro Libertate]

A libertarian scam. Hmmm, has possibilities.

[John]

Liberals hate mathematics. It is funny, they constantly claim the market is a zero sum game. But then somehow see taxes as being free money.

[Rich]

+1

[MNG]

Liberals hate mathematics? Yeah,not like thos stats loving Austrian economists...

[hmm]

It's the logic, not the math they have problems with.

[JB]

Yet it's obvious it's not or we would still be living in caves.

Liberals = retarded fetuses.

[Rich]

"Because taxes are paid by the public, which means they can soak you for more money and say they are soaking the banks."

I like paying for things twice, especially when I get nothing both times!

[Rich]

My bad, that's me, MC MNG, not Rich, I was still spoofing his JT butt kissing.

[MNG]

Argh!

[Rich]

Thanks for 'fessing up, MNG.

You just saved me a lot of investigative work.

[MNG]

Anytime Magnum PI!

[Pro Libertate]

What's all this Magnum hate? I always liked the show. At least before the last couple of seasons.

[MNG]

Did you ever see the one where he was floating in the ocean most episode, with the shark? Classic.

[Pro Libertate]

The classic episode is the sunrise, Ivan, boom episode.

[MNG]

I liked the show, but then again I liked Simon & Simon...

[JW]

Now I have the goddamn Magnum theme song stuck in my head.

Curse you Stephen J. Cannell and Mike Post!

[Isaac Bartram]

"[T]he last couple of seasons..." are the ruin of just about every TV show.

When I become Emperor of the Universe, my first edict will be that no series can exceed three seasons. Well, maybe four with special dispensation.

Second edict, drawing and quartering will be brought back for anyone who makes another Star Trek sequel.

[JW]

Second edict, drawing and quartering will be brought back for anyone who makes another Star Trek sequel.

My lord, I will do thy bidding. Simply speak his name and I will slay him in a most ill-mannered manner.

[Pro Libertate]

Even if it has Kirk? I mean, of course, The Shat and not that childlike abomination.

[JW]

Of course not. The Shat is all that is holy. I could no more harm He Who is The Shat than cut off my own limb.

But, JJ Abrams? Where do I start chopping?

[EJ]

its socialization of cost. They are going to tax the now more healthy banks that have already paid back the TARP (ie. Wells Fargo and Goldman) money to pay for the institutions like AIG that TARP has lost money on. So basically its just a weird perverse scheme to transfer wealth from relatively healthy banks to relatively unhealthy... go figure

[MNG]

As pointed out above the cost of the tax will be passed on to customers, so the transfer is from bank consumers to cover the debt negligent/lying banks to taxpayers (many of whom are bank consumers, so they paid for this twice!).

[EJ]

if only more of your type would realize that business taxes in general are passed on to the consumer

[MNG]

It's a too common failing among many liberals, and after reading David Hennessey or whatever's posts over the weekend it seems a lot my brethern are pretty ignorant about incentives generally too...

In some liberals defense they often recognize that the main cost of taxes will be passed on but they think it it better because it spreads the cost out over more people (the thinking often found in product liability cases); but that doesn't always apply...

[robc]

But, as anyone who has taken a basic econ class knows, 100% of the tax is rarely passed on, so the good banks, like those mentioned above and BB&T - which never wanted bailout money to begin with - will be paying for this. Along with their customers, who will bear most of the brunt of it.

[JB]

EJ, the biggest debtor that AIG owned money to was Goldman so the AIG bailout was a Goldman bailout (something like $22 billion). As far as I know, they haven't paid back that $22 billion.

[crayon]

May I remind you that George W. "9/11 was Clinton's fault" Bush and Henry "I 3> Goldman-Sachs" were the ones who set up this TARP bullshit?

If Obama's trying to get the money back, then that's a good thing, right?
Right?

[John]

And Obama objected to TARP while a Senator right? Oh no he didn't. He supported it and voted for it. And the he expanded it once in office.

[Coyoteblue]

Also bought us (as in, all us american taxpayers) two super craptastic car companies.

[emoticon nazi]

does not a heart make.

[emoticon nazi]

fuck your filters and old busted html with a chainsaw.

[Mad Elf]

3>Goldman Sachs? 3 what? Dollars, escorts, billion tons of cocaine? We need some units to decide if that is a true statement.

[Internet douche]

1

[Suki]

It is supposed to be a tax on the biggest banks. Some of them were forced to take the loans even if they didn't want them and most, if not all, have paid the loans back already.

[Johnny Longtorso]

Here it is. Read it and weep, MNG:

The Community Reinvestment Act, Evaluated, by Jonathan Livingston Longtorso

...94% of the $6 trillion in CRA commitments made between 1992 and 2008 "were made by banks and thrifts that were or ended up being owned by just four banks: Wells Fargo, JP Morgan Chase, Citibank, and Bank of America" [Pinto 2009b]. ...

...Unfortunately, the left's strategy is to use the CRA to target large institutions, then evaluate the harm done by the CRA (and related initiatives) by examining smaller institutions....

[Rich]

Wow, Johnny, nice work!

Now I've got something to digest at lunch besides my sandwich.

[Rich]

Two turd sandwiches to look forward to in mere hours, yum!

[MNG]

Again, even most hard-core folks here dropped the CRA meme after joe introduced all this evidence to the contrary a while back. You're fighting Vietnam again JT...

[Bergholt Stuttley Johnson]

You got a link to that?

And can you stop the lame sockpuppeting please?

[robc]

Are you saying that joe's work cant be updated? That once joe declares it, it is true for all eternity? Really?

[Johnny Longtorso]

Did Joe link to studies of small lending institutions? That's actually addressed.

[robc]

Finished reading it. Well done.

I always agreed with joe that CRA was a minor player in the crash (well, joe would have gone with "not at all") but I probably underestimated it due to the small v large issues you talk about. Still not as important as the GSEs or the Fed cheap money, but Ive always, like in your conclusion, felt there was plenty of blame to go around.

For me, the killer bit of your piece:

Beginning in 1992, Fannie and Freddie received increasing pressure by Congress and the Department of Housing and Urban Development ("HUD") to increase their "affordable lending" operations. For 1996, HUD instructed Fannie and Freddie that 42% of their mortgage financing had to go to borrowers with income below the median in their area, a target that increased to 50% in 2000 and 52% in 2005. HUD also increased Fannie and Freddie's obligations with respect to "special affordable" loans, those borrowers with income less than 60% of their area's median income. In 1996, Fannie and Freddie were expected to make 12% of their loans as "special affordable," a figure that rose to 20% in 2000, 22% in 2005, and a goal of 28% by 2008. To meet these ambitious targets, Fannie and Freddie encouraged lenders to dip further into the risk pool of borrowers and to take on loans with increasingly risky terms, such as ARMs, interest-only, and high-LTV loans.

^^^That is just plain stupid.

[MNG]

How did they "encourage" lenders to do that? Iirc this is exactly what joe's evidence related to: private lenders needed no "encouraging" to make shitty loans.

A much better libertarian critique is that these private actors were reckless because they assumed they would be bailed out. It's not much of a critique though because i doubt many private actors were thinking of the possibility or probability of being bailed out, they were thinking ka-ching!

[Johnny Longtorso]

They protested at the school where one bank exec's kid went, they post their home address (w/ pictures of the house), they dump furniture on the lawn so they can "see what its like to be evicted".

Read the article.

[robc]

For the 3rd time (Im reading from bottom up, stupid threading), did you read the fucking piece?

[EJ]

MNG,

There wouldnt have been and ka-ching for these loans had we not had 1. really cheap money from the Fed and 2. Fannie and Freddie gobbling these things up so banks had a market to unload them. Had the GSES not had the implicit guarentee and had they not been required to buy this stuff by HUD, then they would have never had the financing to purchase all these shitty loans which means banks would not have had a place to sell them and therefore would not be making them. Markets participants react to incentives. If you give them fucked up incentives, then they will tkae fucked up actions.

And my work brings me into contact with a lot of bankers now. And every time I see them, I ask what they are doing with resdiential mrotgages considering interest rates are so low. They always tell me they dont book them and are dumping them on Fannie/ Freddie. We are doing it all over again!

This bubble had two parts. Lots of easy money, and then government policy that incetivized that easy money to be disproportionatly channeled into the housing market.

[hmm]

A plausible belief in being bailed out is an incentive. Who's fault is it for that belief?

[hmm]

Maybe it wasn't the bail out? Maybe it was the precedent that created the incentive and the ability to shift risk to government, and then others.

[MNG]

"Sources close to the network say Palin will act as a contributor and as host of her own show titled "My Ex-brother In-Law is an Evil, Asshole: We Report, You Decide."

[Warty]

He's an evil, eh? And why are you calling me an asshole?

[MNG]

That comma is the result of right wing gremlins trying to discredit The Message through grammatical warfare.

[T]

You're doing just fine without their assistance, MNG.

[John]

Maybe she can have Obama's nominee to run TSA as her first guest. He can then explain to her how you properly abuse your public position and invade the privacy of those you don't like.

[Pro Libertate]

Son-in-law? Either way is wrong, I think, because I don't think her daughter married Levi Johnston. Who, incidentally, is an asshole. Even if you want to believe all he says about the Palins, he's obviously a huge attention whore. He'll be faking his kid floating off on a balloon before it's all over.

[MNG]

I think I said bro in law pro

[Pro Libertate]

Isn't her beef with her daughter's ex-boyfriend?

[Bergholt Stuttley Johnson]

Ah, but she also had one with her brother-in-law (or ex bro-in-law, I forget). He was the focus of the Troopergate scandal that broke just before her nomination, but was sadly overshadowed by all the other craziness that accompanied her rise.

[Pro Libertate]

Oh, right, my mistake. I remember that one, now. Maybe just a general program about in-laws and quasi in-laws?

[MNG]

Tonight on Sarah Palin, the Scummy Men Who Have Let Down Members of My Family!

[Bergholt Stuttley Johnson]

They should just put the entire extended Palin-Johnston clan on Springer. That's the only way that shit's getting sorted out.

[Pro Libertate]

That ex-almost-son-in-law is a whore. I'm not sure what that says about Palin's daughter, though access to fame often takes seemingly normal people and makes them totally nuts.

[JB]

Two things I learned from Democrats this past election:

1. Women are never to be taken seriously.

2. It's ok to torture children ('Troopergate' was about her punishing a state trooper for tasering his child)

[Tony]

She's a grudge machine. She'll be perfect for FOX.

[J sub D]

J sub D|11.25.09 @ 6:39PM|#
When it comes to Sarah you folks are friggin' clueless. I've magnanimously doped it all out for you so you don't have to furrow your brows in unproductive thought.

She's smarter than she lets on. She's tired of real work. Selling books and hosting a talk show beckons.

The End.

[MNG]

Props where it's due J sub...

[T]

Good call.

[TrickyVic]

TrickyVic|7.13.09 @ 4:15PM|#
"""Joe Biden may be the dumbest person ever to hold high office this country. The guy is walking talking gaffe machine."""

He has a long way to go before he rises to the level of Bush 41 and 43. But he is trying.

I'm starting to think Palin is done holding office, and she just wants to be a cheerleader. She wants to promote her idea but not acutally hold office. My bet is she'll be a Fox News Network host or radio personality by the end of next year.

reply to this

[Rich]

allowing controlled marijuana to be used by New Jerseyans suffering from such health problems as cancer, glaucoma, HIV, AIDS, seizures, muscle spasms and multiple sclerosis.

Good. I imagine there'll soon be a substantial rise in such health problems caused by salt deficiency.

[Death Panelist]

You will never convince me to decriminalize medical marijuana. If it makes you feel good, it's got no medicinal value.

[TrickyVic]

So here, have some Prozac.

[TrickyVic]

So they prescribe anti-depressants.

[MNG]

"The network is also considering development of a show featuring Palin titled 'American Lexicography.' The pilot episode is reportedly titled "Achilles Heel."

[Xeones]

Again, even most hard-core folks here dropped the CRA meme after joe introduced all this evidence to the contrary a while back.

Appeal to the authority of... joe? That's a new one. God bless joe, out there doing God's work on some of the toughest message boards in America.

[Pro Libertate]

Blaming the CRA alone would be inaccurate, but the fact that the CRA was one of a number of devices used to force banks to make risky loans--all while telling banks not to price them accordingly (that's predatory!) is the principal reason the mess happened. Everything stemmed from that.

Very few of us took that "It's all the CRA!" position, and I recall several of us who work or worked for banks trying to explain some of the nuances to joe and others who wanted to leave the government blameless in this. But, of course, they just said, "Not the CRA; therefore, not the government!"

[MNG]

"one of a number of devices used to force banks to make risky loans"

But that's just it, the crappy loans at the heart of this mess, private banks didn't need much "forcing" to make those. They were climbing all over themselves to make them.

[robc]

Of course, because the GSEs were willing to buy them from them.

Once again, (see below), did you read Longtorso's piece?

[Pro Libertate]

But for the government pressure, these loans would've been priced much higher. Also, without the generally held (and accurate) belief that paper in the secondary market would be backed up by the government in the event of a GSE crash, most of the crazy risks wouldn't have been taken.

[JB]

Once they saw that Fannie and Freddie were making money with the scam, they jumped on board.

[MNG]

Not the authority of joe, the evidence he provided on those threads.

[John]

He just moved the goal posts. Was the CRA the sole cause of the credit collapse? Of course not. It did however contribute to it and remains a terrible program. The best thing either you or Joe can say about CRA is that it wasn't solely responsible for the biggest credit collapse in history. Gee, that changes everything. It must be a good idea.

[MNG]

When private actors are out front of governmental ones on something it's a bit hard to blame the latter for it all...

And I don't subscribe to a view that must lay the blame squarely on one institution, so now worries for me on the nuanced view.

[John]

They were out in front on CRA because liberal groups like ACORN were busy Mao Maoing them. Liberals spent 20 years brow beating and extorting banks to make irresponsible loans to poor areas and then when the whole thing collapsed claimed that "private parties were out in front of this". Well no shit. Isn't that what you wanted and didn't you also spend billions subsidizing them to do so?

Being liberal means never being responsible for anything no matter how badly you fuck it up.

[MNG]

Uh yeah, ACORN was the cause...

[robc]

Did you read the freakin piece?

[John]

No he didn't. MNG is okay when he has a point. But, when he doesn't and gets caught with his ass hanging out, he turns into Joe.

[MNG]

Which "piece?"

John-boys? Of course not, wtf?

[John]

That is weak MNG. Read the damn post and at least try and respond to it. It wasn't just ACORN. Redlining and the need for banks to loan in disadvantaged areas was a huge issue for liberals. So they launched a two pronged attack. They used racial groups to extort banks into lending and they got Fannie and Freddie to buy the loans. As I said below, why wouldn't the banks make stupid loans? It got the race hustlers off their backs and the government bought them anyway.

And all you can say is ACORN. You are starting to sound like Tony. Pathetic.

[MNG]

"And all you can say is ACORN."

Yeah John, it was I who said this:

"They were out in front on CRA because liberal groups like ACORN were busy Mao Maoing them."

[John]

As Johnny L says below, groups like ACORN and NACA would go out and do things like go to loan officers' kid's schools and throw furniture in their yard and such. Seriously, did you miss the last 40 years? Are you such a liar that you are now going to claim with a straight face that community investment and making loans to minorities wasn't a huge grassroots liberal priority?

[MNG]

But liberal activists have urged all kinds of institutions to do all kinds of things like that for decades, and not all of them have gone out and done it. Of course besides that point there is the fact that there was much discussion on threads last year providing evidence that far from being cajoled most banks were actively going after these messed up loans and later securities based on them.

[MNG]

Er, and where's the proof that loans to black people make up most of the loans involved in the credit crisis? You know, these loans that were made because the race-hustlers, etc.,

[John]

You are straw manning again. I have only said about 20 times that CRA is not most of the loans or the sole cause of the crisis. It was a cause not the cause. Again, you are left defending the program by claiming that it "wasn't most of the loans". That is a pretty pathetic defense of a terrible program. As BSJ says below, stop fucking the straw man.

[MNG]

John, I'm not defending the CRA, I'm saying assetions it was the main cause of the problem are incorrect.

It's like the Chavez thing, if I say Chavez is a thug but not as bad as Satan that doesn't mean I'm defending him...

[robc]

No one has claimed it as "main cause", not even the article you refuse to read.

[John]

Then repeat after me MNG, CRA was a terrible program that did untold damage and liberals ought to admit their responsibility in this horrible mistake.

[MNG]

So robc and John, how much damage did the CRA do? I'd like to know before I start condemning...I'm sure you know since you are jumping in and so eagerly denouncing it, so share.

[freeforall232]

@John - In all fairness to MNG, conservatives held a Congressional majority from 1981 - 1987 and then from 1995 - 2007 and did nothing to repeal CRA. So can we expect you to repeat the phrase, "CRA was a terrible program that did untold damage and conservatives ought to admit their responsibility in this horrible mistake."?

[robc]

Race was unmentioned in the article you refused to read.

Maybe if you had read it, you would be propping up strawmen.

[Bergholt Stuttley Johnson]

He's not saying ACORN was the cause of the financial crisis, he's saying ACORN was one of the groups that made private lenders eager to make CRA loans. IOW, ACORN played a part.

Making the strawman's ass hurt may feel good, but it accomplishes nothing.

[Pro Libertate]

ACORN was just one of several advocacy groups, but they played a pretty sizable role in the predatory lending legislation that was pushed in the states and at the federal level a while back. Not that there weren't any real "predatory" tactics being used--there were--but a lot of what was being pushed was much more about forcing lenders to use prime customers to subsidize subprime than anything else.

Their end goal appeared to be socialized lending--loans defined and controlled by regulators, with rates based on need rather than on ability to repay. In other words, wealthy people with good credit would pay higher rates than poorer people with bad credit.

[sage]

He just moved the goal posts.

[sage]

Uh, WTS?

Try again:

Not joe. No way. And he never said a word about people.

[Pro Libertate]

I once accused joe of trying to use all of the logical fallacies in one thread.

[John]

He was a master of that. I doubt that was the only thread he hit for the cycle in.

[Johnny Longtorso]

I addressed "CRA caused everything when it was passed in 1977" at the very end of the article.

[Bergholt Stuttley Johnson]

We just hear about this evidence, care to provide some links?

[SugarFree]

Here's the thread that most are thinking of I imagine.

I don't see him posting much evidence. But then I'm not a supergenius all-knowing city planner.

[John]

There is some evidence. It wasn't all CRA. There was a post on Hit and Run a couple of days ago about the commercial real estate contribution. A lot of things caused what happened. CRA was one of them but not the only one. Again, Joe and MNG are left saying that CRA is a good program because it wasn't the only cause of the collapse and private companies, not the government were really out in front anyway. Of course they fail to mention that liberals spent 40 years encouraging, extorting and bribing private companies to do just that. But, the whole thing is still a failure of the market not liberal ideology.

[MNG]

"There is some evidence."

Let me stop and give props to John here. There were several threads on this a while back, and it's just tiresome to always have to go back and try to look up every thread in the past for every child who wanders into the movie halfway in.

[MNG]

"Joe and MNG are left saying that CRA is a good program because"

Did I say CRA was a good program?

[Bergholt Stuttley Johnson]

Man, he was really tearing into those strawmen right there.

[Johnny Longtorso]

Joe: "Fannie/Freddie don't make loans, case closed". Banks made loans due to the CRA, Fannie/Freddie bought the loans (which also encouraged banks to make them).

[John]

And don't forget ACORN was out doing God's work campaigning against redlining and lack of investment in poor neighborhoods. Why wouldn't the banks have made stupid loans? It got race hustlers off their backs and Uncle Sam was going to buy the damn things anyway.

[Johnny Longtorso]

Google 'NACA' sometime.

[MNG]

Yeah, and liberals have been campaigning for living wages for about that long and you can see everyone now pays that living wage...

These banks weren't cajoled into the loans at the heart of this, they were competing for them!

[John]

WTF does living wage have to do with it. You really are desperate. The banks were competing to make the loans because of the dumb ass system liberals set up. When the bank made a stupid loan to a minority area, they got to claim the public good will of "helping the disadvantaged" and they got to sell the loan for a profit to Barney Frank and his cronies at Freddie and Fannie. They made money, got good publicity, and didn't assume any risk. Of course they were competing.

[MNG]

Liberal activists have tried to push institutions to do things like living wage but they have laregly resisted, so I'm not convinced these banks were forced by the same measures to engage in incredibly foolish loans.

Again, until you explain what portion of our current credit crisis can be traced back to these loans made to curry favor with ACORN or to comply with the CRA you're just beating around the bush (and not the bush we are focusing on).

[John]

They haven't succeeded on "living wage" because they haven't gotten the government to subsidize it. In this case they had Freddie and Fannie to buy the loans.

You are such a pathetic hack. You claim on the one hand that you are not defending CRA. But then on the other hand that it really didn't do any damage. Bullshit.

[John]

Read this 1996 pamphlet on complying with the CRA.

It discusses "some activities undertaken by small national banks that demonstrate exemplary performance under the Community Reinvestment Act." Those activities now look a lot like the creation of toxic loans.

And what are those activities?

* Hawley National Bank is praised for offering residential loans with flexible terms, including three-year and five-year balloons and adjustable-rate mortgages. It also offers down-payment assistance.
*

First National Bank of the Berkshires' loan portfolio, which consisted mostly of real estate related loans, is said to "reflect positively" on the bank's efforts to meet CRA requirements. "The bank's most innovative product is a mortgage loan, offered to customers of all income levels, that requires only a 3 percent down payment. In addition, the bank pays most of the closing costs and will escrow those to be paid by the borrowers. According to the bank officer, this product has received tremendous interest and represents about 80 percent of new loan originations," the pamphlet says.

These examples are offered as "helpful hints" to other banks on how to comply with the CRA.

http://www.occ.treas.gov/cra/excel.htm

But the CRA had nothing to do with it. We just set up a government program that rewarded and encouraged banks to lower their credit standards and give things like no down adjustable rate mortgages. But that had nothing to do with the housing bubble or all of the bad mortgages. Nope. Not at all.

[robc]

And interpolating from some numbers posted the other day, a 3% down payment will have a 6x failure rate compared to a 20% down payment.

[Suki]

1.12.10 Never Forget!

[brotherben]

I saw this cartoon over the weekend and thought ya'll would like it.

[Rich]

described him as an outspoken supporter of opposition figure Mir-Hossein Mousavi.
But hard-line Iranian officials immediately blamed Israel and the West for the assassination

Two birds with one stone. 8-(

[kwais]

Chuck Norris can kill two stones with one bird

[SugarFree]

Genital Cosmetic Colorant

If internet message boards have taught me anything it is that men are fucking cruel.

The New Yorker on Jersey Shore

Unless the show manages to make us feel as though we were anthropologists secretly observing a new tribe through a break in the trees, it hasn't done its job. MTV has succeeded on that score; it can give itself a pat on the back for enabling viewers to feel superior to at least eight other people. (Then it can stop patting itself and slap its forehead for not having realized that nobody says "Jersey Shore," and that the title should have been "The Jersey Shore" or "The Shore." And then it can go buy a dictionary and figure out what's wrong with the following line, which appeared on the screen during the second episode, as a subtitle for what a doctor is saying to one of the housemates, who has pinkeye: "You can see where all the puss is forming.")

[kinnath]

Genital Cosmetic Colorant

Saw this over at Salon a day or so ago.

[Suki]

Tim Cavanaugh posted that on Facebook the other day.

[Warty]

I like that the critique goes as follows: BOO HOO MEN PAY US LESS AND THEN THEY FORCE US TO DYE OUR TWATS BOO HOO HOO

[Kyle Jordan]

"Women make about 75? for every dollar that men earn."

I'd pay a quarter extra for guaranteed "light strawberry cream".

[jesse]

teehee twat

[OO=======D]

Po tee wheet

[Poo - tee - weet]

Spelled correctly:

Poo - tee - weet

[T]

I know that, personally, I've kicked many a skank with low self-esteem out the bed because her vag wasn't the right shade of pink. Haven't you?

[Kyle Jordan]

"If internet message boards have taught me anything it is that men are fucking cruel."

Reading the comments on tht site pretty much always makes me disgruntled with mankind a new.

I love how it seems as though the idea of a woman, or hell, even a man, may not like the discoloration of their genitals and would like to do something about it.

[Rich]

Some of those Jezebel comments on the colorant are "pretty" funny.

[brotherben]

Like this one?

01/11/10
Just what I need - one more thing to stain my underwear.

[Kyle Jordan]

Yeah that was a good one.

[Rich]

When I want some color in my cheeks I just rub them a bit. Just sayin'.

[Kyle Jordan]

"...a print in your panties...", kinda like a Victoria's Secret Shroud of Turin?"

[Poo - tee - weet]

I recall a female artist years ago, who would apply paint to her genitals and then press them against paper.

[T]

The tradition continues.

[emoticon nazi]

Product is racist. Only one color.

[Charles]

Maybe I've been doing things wrong, but does this come up a lot? I'm trying to think of situations where I'm down there in good reading light, and I can't.

[hmm]

The euphemisms on that site are almost as good as the feminist site.

[MNG]

"Fox has not ruled out a regular advice-style contribution from Palin offering homespun wisdom from the ex-VP candidate, with topics ranging from 'Protecting Yourself From Witches' and 'Magazines and Journals: How to Read All of Them.'"

[brotherben]

Leave Katie alone!

[John]

Her second guess needs to be Harry Reid. He can discuss the intricacies of the Negro Dialect.

[brotherben]

Another moment of zenannyism from Waaaaashington state.

[John]

"At Hope Children" I love it. People make language not vice versa. A hundred years ago "idiot" and "retarded" were scientific terms. I guess a few years from now "at hope" can become the new playground insult.

[Rich]

Labels can work like self-fulfilling prophecies

That's why I always say, "At your cervix." 😉

[CaptainSmartass]

I think this is just a clever way to generate free energy by getting Orwell to spin in his grave.

[EscapedWestOfTheBigMuddy]

"At Hope Children" I love it.

Ever the optimist I had kinda assume that we'd hit linguistic bottom. Now I see that I was wrong.

Jeez. "Disadvantaged" and "at risk" are descriptive. Moreover, the former is also grammatical at "At risk" can be if you complete the phase "at risk of ...". Mind you, they are both awkward and long winded, but what he hell.

"At hope" has neither of these modest advantages.

The alleged right to not feel bad marches forward.

[John]

What is depressing is that that woman has a job and is supposed to be concerned with the public good. And the best idea she can come up with is calling poor kids "at hope". You can't even satirize that.

[Johnny Longtorso]

I always agreed with joe that CRA was a minor player in the crash (well, joe would have gone with "not at all") but I probably underestimated it due to the small v large issues you talk about. Still not as important as the GSEs

At some point the question is whether "the CRA" means just one law passed in 1977, or if it is shorthand for many different, overlapping govt initiatives. The left plays a similar game with 'welfare', either defining it as AFDC when they need a small number, or all social spending when they need a large one.

[Johnny Longtorso]

How did they "encourage" lenders to do that? Iirc this is exactly what joe's evidence related to: private lenders needed no "encouraging" to make shitty loans.

They protested at the school where one bank exec's kid went, they post their home address (w/ pictures of the house), they dump furniture on the lawn so they can "see what its like to be evicted".

[John]

And when he made the stupid loans, he could just sell it back to Freddie and Fannie.

[MNG]

http://www.newsweek.com/id/162789

[robc]

Apparently that author didnt read Longtorso's piece either.

[robc]

Fannie and Freddie, which didn't make subprime loans but did buy subprime loans made by others, were part of the problem. Poor congressional oversight was part of the problem. Banks that sought to meet CRA requirements by indiscriminately doling out loans to minorities may have been part of the problem.

Myabe the author did read JL's piece. So, MNG, since you posted this you are agreeing with Johnny?

[robc]

BTW, that is the strawmaniest article I think I have ever seen in Newsweek. And that says a lot.

For example:

The subtext: if only Congress didn't force banks to lend money to poor minorities, the Dow would be well on its way to 36,000.

I would have been embarrassed to link to that.

[MNG]

That's called a joke robc.

[robc]

MNG - you need to either fisk JL's piece or shut the fuck up.

[MNG]

Sorry robc, if JT has points worth making then he can put them into posts here and we can discuss them, I'm certainly not going to spend my time reading an "analysis" cooked up by one of our Lonewhacko-esque cranks...

[robc]

Then stop discussing it.

Seriously, it is pretty good. Is it one-sided? Of course. Hence the need for an in-depth fisking. It is much more coherent than the article you just posted. Real evidence, not random blathering.

[MNG]

Real evidence?

1. The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren't regulated banks.

2. the CRA didn't force mortgage companies to offer loans for no-money down, or to throw underwriting standards out the window, or to encourage mortgage brokers to aggressively seek out new markets. Nor did the CRA force the credit-rating agencies to slap high-grade ratings on subprime debt.

3. Second, many of the biggest flameouts in real estate have had nothing to do with subprime lending.

4. Third, lending money to poor people and minorities isn't inherently risky. There's plenty of evidence that in fact it's not that risky at all. That's what we've learned from several decades of microlending programs, at home and abroad, with their very high repayment rates

There's many more points in here. If you think they are inaccurate then discuss, but "oh my it's just random blathering" is not good "fisking" robc...

[robc]

MNG,

#1 - correct, they were GSEs spurring the growth.

#2 - False. It didnt specifically encourage that, but the combination of changes in CRA certification in the 90s and the increase in GSE holdings of lower income mortgages combined to indirectly encourage it. The banks needed to make the loans to get CRA cert. Fannie and Freddie needed to buy low income mortgages to meet their goals.

#3 - true. However, as has been pointed out, the correlation between downpayment rates and failure rates is pretty clear. And no one disagreed with #3 that I know of.

#4 - see JL's article, as pointed out in it, the problem was not with the small banks, which did a pretty good job (relatively) with CRA loans. The big banks, however, sucked at it. For two reasons, 1) pressure from NACA and ACORN. 2) regulatory pressure. CRA standing was a major factor in mergers, big banks considered CRA lending to be a "loss leader" in order to have flexibility on the buying/merger side of the business. While the market was good, this was okay, CRA loans did fine in an up-market. During the crash, they crashed harder.

[robc]

Also on #1 - Fed cheap money policy. As any Austrian Economist will point out, misallocation of resources leads to things like subprime loans.

[MNG]

1. Please demonstrate this.
2. hmm, please explain how these things forced credit rating agencies to rate the sub-prime debt so highly
3. If argument is that the CRA encouraged sub-prime lending that private actors would not have made and that sub-prime lending is a big part of the problem, then if lots of the real estate "flameouts" had nothing to do with subprime lending, then that's not telling of something?

[robc]

You seem overly focused on subprime.

[robc]

specifically #1 and #3 of your points contradict each other.

[MNG]

I'm not sure how any point that asks you to explain yourself contradicts another...

[robc]

Huh, they werent points asking me to explain myself, they were 4 pts you took from the article. Dont you know the source of your points?

[John]

Liberals go out and protest banks that don't loan to minorities. Fannie and Freddie go out and buy loans with very little congressional oversight.

And now you act surprised when the banks went out and made a bunch of bad loans to minority areas? What did liberals think was going to happen? The banks were under pressure to loan and were given a way to sell their loans no matter how bad back to the government. It was a match made in hell.

Just be something besides a hack and admit CRA was a terrible program and caused a lot of damage.

[MNG]

John
Can you describe the extent of the damage done by the CRA?

[John]

Freddie and FAnnie have cost how many billions? You are right that the credit crisis as a hole was bigger than CRA. But Freddie and Fannie not so much. CRA gave us the Freddie and Fannie debacle. But it got a bunch of crook liberals in Congress rich, and that is what it is all about in the end isn't it?

[MNG]

Freddie and Fannie, like a lot of private companies, lost a lot in this market. What am I supposed to conclude from that John?

[robc]

Fannie and Freddie are government backed. I have a hard time calling a GSE a private company. Same for GM.

[Bergholt Stuttley Johnson]

Yo, MNG, when someone posts something that you do not want to spend time reading, you say, "tl;dr". You do not say, "Joe proved this wrong at some unspecified date in the past" because you do not know what he said exactly. You might have been on better ground had Joe conclusively and unarguably proved that the CRA had nothing whatsoever to do with the housing crisis, but you admit that he did not. So either read the article and comment on it, or STFU.

[MNG]

What joe provided was more of what I've provided: that many of the instutions spurring the growth in the subprime market were institutions to which the CRA did not apply, that the CRA did not force these agencies to do what they did or analysts to rate the securities based on this stuff so highly, that it didn't apply to some of the risky strategies that many private actors engaged in, etc. Yes, I don't think Johnny has anything interesting to add on that. If I'm wrong his specific points can be made in posts here.

Look, as long as there were shitloads of private actors to which the CRA did not apply doing the same shit then I think the point that the CRA caused this is bullshit. Once you know what and who the CRA covered and know that many private actors that did not fall into that class were rushing into the subprime market it's pretty conclusive to me that the CRA alone isn't responsible...

[robc]

Strawman again. No one, including Johnny has said "CRA alone" other than you.

[Bergholt Stuttley Johnson]

as long as there were shitloads of private actors to which the CRA did not apply doing the same shit then I think the point that the CRA caused this is bullshit.

This is perhaps the only legitimate point you have made all day. But for this to hold, you have to prove that private actors to which CRA did not apply were causing the exact same problems (wrt the financial crisis) that the CRA caused and in the absence of the CRA the problems would have been exactly as large. You have not proven this.

[MNG's follower]

See my AEI quote below. CRA enable the private actors to lower credit standards across the entire economy.

[P Brooks]

private lenders needed no "encouraging" to make shitty loans.

Bullshit; without Fannie and Freddie standing by to assume the role of "next greater fool" a lot of those loans would never have been made.

[MNG]

http://www.businessweek.com/in.....e_and.html

Sigh, but this all has a too familiar ring to it...

[robc]

virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie.

Fannie and Freddie purchased billions of dollars of subprime-backed securities for their own investment portfolios and got hit just like every other investor.

Shooting yourself down within the same article. Aaron Pressman is a freakin genius.

[Mark Buehner]

Ah, so the government is actually turning a profit on the bank loans but losing their shirt on the AIG and auto company bail outs. Solution? Tax the banks. That makes total sense, particularly when local banks that never took TARP are struggling and small business are already havign trouble getting loans.

[John]

If you tax the banks that will have the effect of hurting the small banks because they can't absorb the cost as easy as big banks. That of course helps the big banks. The tax is really then about paying off influential big banks at the expense of small ones.

Everything Obama does is about stealing. You just follow the money.

[Johnny Longtorso]

http://www.newsweek.com/id/162789

Blaming a govt program isn't blaming "minorities", unless you wish to make a blanket assertion that a govt program aimed at minorities cannot ever have negative consequences.

'Microlending' is addressed by my big vs small institution info. I address prime vs subprime designation games, and its dishonest to say it didn't force banks to make specific loans or relax specific criteria when it demanded those loans and relaxing those criteria were the only way to make those loans.

[Johnny Longtorso]

I forgot to add my "blame minority" bit to the article originally - I'll add it tonite.

[Johnny Longtorso]

Sigh, but this all has a too familiar ring to it...

We've already discussed Fannie/Freddie's games w/ prime and subprime loan designations.

[Johnny Longtorso]

Marks and the NACA were doing God's work, terrorizing bankers in some of the toughest high income areas of Manhattan.

[Johnny Longtorso]

As far as the idiot loans "the bankers" made, check out the bit about community groups being allowed to decide who specifically gets the loans, and closing the loans in THEIR offices (for $2k per loan).

[robc]

So robc and John, how much damage did the CRA do? I'd like to know before I start condemning...I'm sure you know since you are jumping in and so eagerly denouncing it, so share.

It was a small part of total problem, but bigger than I originally thought.

I still think the GSEs are a bigger problem, the article verified that. Especially the HUD changes to GSE holdings over the last 15 years. Horrible.

FED was still the biggiest problem. Without cheap money, the GSE and CRA problems wouldnt have been amplified.

If I have to rank blame, I would go as follows:

1. FED
2. Fannie/Freddie for buying up the damn things with government guarantees
3. Idiot bankers
4. Idiot borrowers
5. CRA

Breaking 5 down:
5A. the law itself, especially 90s changes
5B. large banks
5C. community groups pressuring banks
5D. small banks

[John]

The liberals set up a system that created the incentives for banks to do exactly what they did. But when the banks did just that, the liberals claim that it was the "market's fault". Again being liberal means never having to say you were wrong no matter how stupid you are.

[robc]

The markets fault bit is funny, because the market actually fixed everything. Or would have, if there hadnt been any bailouts.

The crash in the housing market is a perfect example of MARKET SUCCESS. But I didnt hear any of the people regularly yelling MARKET FAILURE yelling that. In fact, they somehow think this was a market failure. Weird, deluded people.

[MNG]

High Unemployment=Success!

[robc]

At times, YES it is. Misemployment is bad.

[MNG]

Bad for what? For whom?

[robc]

The companies hiring them. Unemployment is bad for the unemployed. Overemployment is bad for those overemploying.

[John]

No, overpriced housing corrected by lowering of prices. Irresponsible banks and unsustainable system of easy money ended so that a better system can rise in its wake.

[MNG]

"so that a better system can rise in its wake."

This is borderline religious...

[robc]

Bullshit. Buying a house at 200k is much better (for the buyer) than buying the same house at 400k.

[John]

No it is not dumb ass. Bad business fail and that allows better businesses to take their place. It is not good for housing to be over priced. Whatever the pain associated with the loss in price, it is outweighed by the benefit of the lower prices.

[Jordan]

Paying people to dig ditches and fill them in again = Success!

[hmm]

This is what we hear every press conference from Gibbs.

[Johnny Longtorso]

Can you describe the extent of the damage done by the CRA?

$6 trillion in bad loans.

[Johnny Longtorso]

I still think the GSEs are a bigger problem, the article verified that. Especially the HUD changes to GSE holdings over the last 15 years. Horrible.

Affordable housing-wise, 6 of one half a dozen of the other. I've never heard a liberal say "the CRA is insignificant, all the good was done by other govt actions, so go ahead and repeal it". MNG might say that here or might now, but if he does, its a minority viewpoint among the left.

[John]

MNG,

Here is what the CRA did.

"The key question, however, is the effect of relaxed lending standards on lending standards in non-CRA markets. In principle, it would seem impossible?if down payment or other requirements were being relaxed for loans in minority-populated or other underserved areas?to limit the benefits only to those borrowers. Inevitably, the relaxed standards banks were enjoined to adopt under CRA would be spread to the wider market?including to prime mortgage markets and to speculative borrowers. Bank regulators, who were in charge of enforcing CRA standards, could hardly disapprove of similar loans made to better qualified borrowers. This is exactly what occurred. Writing in December 2007 for the Milken Institute, four scholars observed: "Over the past decade, most, if not all, the products offered to subprime borrowers have also been offered to prime borrowers. In fact, during the period from January 1999 through July 2007, prime borrowers obtained thirty-one of the thirty-two types of mortgage products?fixed-rate, adjust-able rate and hybrid mortgages, including those with balloon payments?obtained by subprime borrowers."

http://baselinescenario.com/20.....risis-aei/

It is about more than just the number of failed minority loans. It is about the system that was setup whereby banks were encouraged to lower standards in the name of CRA. That combined with a complete lack of oversight caused the lowering of lending standards everywhere.

[John]

Here is AEI explaining what CRA did.

"The key question, however, is the effect of relaxed lending standards on lending standards in non-CRA markets. In principle, it would seem impossible?if down payment or other requirements were being relaxed for loans in minority-populated or other underserved areas?to limit the benefits only to those borrowers. Inevitably, the relaxed standards banks were enjoined to adopt under CRA would be spread to the wider market?including to prime mortgage markets and to speculative borrowers. Bank regulators, who were in charge of enforcing CRA standards, could hardly disapprove of similar loans made to better qualified borrowers. This is exactly what occurred. Writing in December 2007 for the Milken Institute, four scholars observed: "Over the past decade, most, if not all, the products offered to subprime borrowers have also been offered to prime borrowers. In fact, during the period from January 1999 through July 2007, prime borrowers obtained thirty-one of the thirty-two types of mortgage products?fixed-rate, adjust-able rate and hybrid mortgages, including those with balloon payments?obtained by subprime borrowers."

It isn't just about the number of bad minority loans. It is about the entire system and lack of oversight that encouraged banks to lower lending standards.

[John]

I would put a link with this but it keeps getting marked as SPAM

[Johnny Longtorso]

John, I'll google your quote text and add the para (and reference) to the article.

[MNG]

They were a bad influence!

John, if the CRA was pushing foolish lending standards on the institutions it covered why did so many institutions not covered by that rush into relying on the same foolish standards?

[robc]

Market forces. Really, is it that hard to understand? If Kroger's is selling milk for 89 cents, while will Winn-Dixie match the price, even if they both lose money?

In this case, with the GSEs buying up these loans to meet their new HUD standards, it was less risky that it seemed, at least as long as the market was going up.

[MNG]

If Kroger's is selling milk at a price that will bankrupt it I doubt Winn-Dixie is going to follow the lead, because people tend to avoid bankruptcy.

"with the GSEs buying up these loans to meet their new HUD standards, it was less risky that it seemed"

But I thought much of the sub-prime mess would not have met Fannie/Freddie's standards? What about that portion?

[robc]

What about it?

F&F bought up lots of stuff that we would call subprime but that they didnt.

[MNG]

Private actors were eagerly buying up subprime stuff just as bad as what FF were, and worse, right?

[robc]

Yep, never said otherwise.

[John]

"If Kroger's is selling milk at a price that will bankrupt it I doubt Winn-Dixie is going to follow the lead, because people tend to avoid bankruptcy."

Then they won't sell anything and will go bankrupt anyway. Kroger will sell its milk for the lower price and try to make up for the loss on other products.

[robc]

You seem unable to comprehend a complex system with multiple inputs. If one thing doesnt fit the explanation, you throw out the entire explanation. There were many, many problems. See my list above, note I have CRA 5th on the list.

[MNG]

No, actually that has been my overall point. I can see all along how the CRA could contribute to our current credit crisis, my contention has been that I'm doubtful as to the size of the role it played.

[robc]

Then you disagree with joe.

[robc]

Did you not see my point that I use to agree with joe that is was small (he claimed zero) and that now I think it is larger?

[robc]

Quoting yet again from an article you linked to:

Fannie and Freddie purchased billions of dollars of subprime-backed securities for their own investment portfolios and got hit just like every other investor.

[MNG]

Yes, yes. I'm not sure this explains why the other investors did the same.

[robc]

What the fuck? You are confounding two points? That was in response to you saying that F&F werent buying subprime loans.

[John]

Because they had to compete to make loans. If you give a guy with a lousy credit history a no down payment loan in the name of fairness, it is pretty hard then to deny a guy with good credit the same loan. And that is exactly what happened. CRA led to an overall lowering of lending standards.

It is important to also remember that lowered lending standards don't just effect the borrower and the bank. If I am going out to buy property and am doing it responsibly, I can't compete with the jackass getting the no down ARM. The jackass will out bid me every time. So once we lowered the lending standards, the prices artificially went up and everyone had to take more debt than they would have.

It was a long complex chain of events. The banks were certainly not without fault. But, CRA played a big role. It is a terrible idea to lower lending standards. You can't just keep the standards low in one area. The lesson of this crisis is that once you start making bad loans, it doesn't stop.

If you were anything but a liberal, you would admit some liberal and CRA culpability in this. But, you are a liberal and thus will never admit fault with your programs or ideology no matter how much evidence is shoved in your face.

[MNG]

A lot of people were making a lot of money dealing in these bad loans John. Do you dispute that? If not, then why wouldn't that alone, apart from government or ACORN "encouragement" or "example" be enough to explain why so many got involved in that?

[robc]

It does explain it. But why were so many able to make money dealing in them? Because there were government-bakced entities willing to take the loans off their hands.

[MNG]

Wait a minute, I think they were able to make money on them because everyone assumed the house prices would rise and the people would not be unable to pay off their loans, hence they were "good bets" and worth buying. Didn't a lot of private actors buy securities based on these loans? And credit analysts rate them as good bets?

Are you saying Fannie or the CRA forced these private actors to buy these securities or made the analysts rate them as good bets?

[robc]

Force? No. Im saying they created market conditions.

Notice I have Idiot bankers on my list of people to blame.

Stop trying to reduce a complex problem.

[Johnny Longtorso]

Does anyone have any actual info on the failure rate of the top tranches of these securities?

[MNG's follower]

Neither liberals nor their policies can ever be responsible for any harm. Liberals are just wonderful well meaning people and nothing they do can ever contribute to something like the credit crisis. So there!!

[Johnny Longtorso]

Shorter MNG: "if the govt pays you to do something, that is the free market in action because money changed hands and you acted voluntarily - the govt is therefore innocent of any negative result"

[John]

You have to remember he is a liberal. So that hole second order effects thing is a bit beyond him.

[MNG]

OK John and robc, let's try to wrap this up. Let me start with trying to make sure we are not talking past one another.

I can certainly see how the CRA would lead to defaults. It's like affirmative action: making a college accept a kid who does not have the skills to succeed means there will be a higher failure rate for those kids, likewise making, or even "encouraging" banks to make loans to people that normally would seem to be poorer risks will mean more people defaulting from that group.

Are we agreed on this part?

[robc]

Yes. Now I recommend you read Longtorso's post so you can see all the details involved in it.

I thought the amount was relatively small, because the evidence previously presented all came either from the housing runup or from small banks, which werent under the same kind of pressure as larger banks. However, I now think the CRA problem is much larger, but still minor compared to GSE's, Fed action, and general idiocy.

[John]

There is more than just that. The problem was that once they lowered standards under the CRA, banks took that as carte blanche to lower standards everywhere else. There is a certain logic to it. If un credit worthy people are getting no down loans under the CRA, why shouldn't people with good credit get the same?

So when people point at the relatively small number of actual CRA loans, they only get it half right. Yes, the CRA was just a small part. But, the CRA became the impetus for a general lowering of credit standards. Now, you can blame the banks for that. But, I really don't see how you can tell banks, and in fact coerce them in some cases, to lower credit in some areas and then be surprised when they don't do it in other areas.

[MNG]

"why shouldn't people with good credit get the same?"

Because it's risky. I mean, it's not like because they were forced to do something stupid by the CRA in one area they had to lose their good sense in every area. Again, I think they thought they would make money off of those no down loans, and that's why they did it.

[robc]

Because it's risky.

But its less risky than the CRA loans. And much easier to sell off, so how risky was it?

[John]

Bingo!!

[Pro Libertate]

What kind of risk is government-subsidized and guaranteed risk?

[MNG]

Now Fannie Mae and Freddie Mac. To the extent these agencies encouraged lending to groups with less objective abilities to satisfy such loans, and to the extent they purchased such loans and securities based on them, they contributed to more defaults and any problems associated with such defaults.

Are we agreed on this part?

[robc]

Also, to the extent that a government backed organization increases risky behavior.

[robc]

Also, also, need to consider the combined effect of CRA and F&F. Banks needed to give CRA loans, F&F was required by HUD to hold a larger and larger percent of low income loans combined to create a market for questionable loans.

[robc]

My point being, stop separating these things and trying to look at them individually.

[MNG]

Well, but it strikes me that your point is that if not for FF or CRA no lending institutions would have made these risky loans, no credit agencies would have rated them as securitized as good risks, and noone would have bought such securities. I don't think that's true and perhaps here is where we actually disagree. I think there would have been a big market in this area because so many people assumed housing prices would continue to soar and that this made the risks less apparent or focused on.

And hey, I understand that in putting the Fed as your number one you can say "yes, and the government is to blame for that expectation due to Fed policy."

[robc]

I look at it this way - Fed policy cause A bubble. But the reason it was a HOUSING bubble as opposed to another tech stock bubble or a tulip bulb bubble this time was due to policies that were making housing an attractive investment. This included CRA and GSE policy.

[MNG]

OK, let me see if I understand you here. Banks were required to make risky loans by the CRA. Got you. What do you mean by FF being required to hold a larger and larger percent of low income loans?

[robc]

Read Longtorso's piece, and/or the bit I quoted above at 10:07. You even replied to it.

[MNG]

OK, so you are saying that in buying more and more risky loans FF encouraged private actors to do the same?

Is this analogy correct: you own a bank and so do I. You make more and more risky loans, loans likely to default and harm your bottom line. That makes me start to seek to make more of those loans.

That doesn't make sense to me. It seems to me I'd say "hey, knock yourself out with those insane loans, you can have the entire market!"

Now, if both you and I thought those loans were not that risky and money could be made even under the risky terms you are offering then yes I would be encoouraged to compete with you because I would want some of that pie.

But that's been my ENTIRE POINT, that people discounted the risk of these loans focusing on the anticipated profit.

Shew. This is why I was reluctant to have this conversation, because it's been had before, not only elsewhere, but on H&R, by others and even us three posters...

Gotta go now...

[robc]

F&F encouraged them by buying them. So they were making a profit on them. And F&F had every tendency to buy more of them in the future. It was all fine as long as housing prices kept going up. Like I said, idiotic bankers are part of the problem.

[MNG]

Now, I also submit that there were a great many private actors, such as lending insitutions, both banks and otherwise, which thought such loans would make them money and hence made them without being required to, agencies that rated related securities (and on which other private actors relied) which incorrectly rated such securities, etc., that also contributed to this mess. Do we agree on that?

[John]

If you want to shoot the bankers who gave dumb ass loans, have fun. They should have all gone broke. If you look at what happened though, it was more than just ACORN or CRA or just craven bankers. It was the hole lot of them working in combination over the course of years.

[John]

If you want to shoot the bankers who gave dumb ass loans, have fun. They should have all gone broke. If you look at what happened though, it was more than just ACORN or CRA or just craven bankers. It was the hole lot of them working in combination over the course of years.

[robc]

Incorrectly rated is questionable. Relying on a rating agency instead of doing your own due diligence is just stupid. I personally dont blame the ratings agencies at all. Sure they were "wrong" and if I was one of their customers, I might sue them, but caveat emptor.

[robc]

Also, what John said. yeah, I have this group at #3 on my list, but stop trying to separate these things out.

COMBINATION COMBINATION COMBINATION

[MNG]

How am I seperating? I'm step-by step accumulating it seems...

[robc]

You arent including the confounding terms.

[robc]

You appear to be doing:

F = A + B + C + D + E

I am saying do the following:

F = A + B + C + D + E + AB + AB + AD + AE + BC + BD + BE + CD + CE + DE + ABC + .... etc

yeah, at a certain point you have to cut off the higher order terms, but in this case in particular, I think the confounding of multiple factors was a big part of the problem.

The CRA, by itself, wasnt a problem.
The GSE's by themselves, werent a problem.
The FED behavior was a problem, but by itself, it probably wouldnt have been a housing problem.
Idiotic borrowers always exist, normally they are told no. By themselves, they are not a problem.
Idiotic bankers normally fail, by themselves, they arent a problem, because their behavior isnt encouraged, it doesnt work for a while normally.

[JB]

Whole bunch of problems. Nearly all of them actively encouraged and supported by the government.

Until the home mortgage deduction is repealed, the government will never be serious about not fucking up the housing markets.

[Johnny Longtorso]

If GSEs' purchase of bad loans is the market's fault, and the GSE heads were just poor dupes, should we trust those same dupes to regulate the market?

[Warty]

Fred on airport security

[Johnny Longtorso]

"Dahl, Evanoff,
and Spivey (2000) point out that a drawback of these studies is that mortgage companies may be
influenced by potential regulations even though they are not currently subject to the CRA."

http://www.alliedacademies.org/Publications/Papers/JCBF Vol 5 No 1 and 2 2006 p 115-139.pdf

[TrickyVic]

" In 2005, regulators made several important changes in an attempt to reduce the regulatory burden on community banks and make CRA evaluations more effective in encouraging banks to meet community development needs outside of metropolitan areas.

One of the changes federal regulators made to the CRA regulations was to broaden the definition of the geographic areas in which activities can qualify as community development. Regulators added designated disaster areas to the definition of CRA-eligible geographies. They also defined two new types of CRA-eligible rural geographies: distressed and underserved. In defining these rural geographies, they sought to further recognize and encourage community development outside the nation's metropolitan regions. This article examines how the inclusion of distressed or underserved areas could influence the geographic scope of CRA-eligible community development investment in rural parts of the Ninth Federal Reserve District.2/ The analysis finds that the CRA landscape in the District has changed greatly and that investments routinely made in large portions of the region may now count as CRA-qualified activities under the revised regulation."

http://www.minneapolisfed.org/.....fm?id=1923

Not picking sides in this fight, but it appears Bush shares some responsiblity too. This isn't just a liberal thing.

[John]

In the sense that Bush is responsible for the action of every federal bureaucrat under his watch. It is not surprising at all the regulators expanded the reach of CRA. And I will bet you dollars to doughnuts that Congress encouraged them to do it in order to reward their cronies.

No matter who you blame, the bottom line is that government intervention and political favoritism and outright theft caused this more than anything.

[TrickyVic]

Congress might have had something to do with it. It was 2005 so it would have been a republican Congress.

[Johnny Longtorso]

but it appears Bush shares some responsiblity too

Most definitely. I don't consider Bush a fiscal conservative, but this is definitely a bipartisan thing.

[TrickyVic]

When have we had a President that was? Clinton?

People often point to Reagan, but he ran a tab so high the next President, his VP, had to break his no new tax pledge, which costed him an election.

[Fluffy]

Wow, all these posts about lending and I missed it.

There's a lot of discussion here that is irrelevant.

One thing and one thing only contributed to the growth of poor underwriting standards, at the end of the day: the data made it look like the underwriting standards were good.

"Yadda yadda yadda the banks were pressured" - it doesn't matter. If there is a class of loans experiencing record repayment rates and delivering premium returns, there is no force on heaven or earth that can stop banks from trying to make more of them. And the whole shitworks - CRA, subprime, Alt-A, interest-only, everything - experienced year after year of record low default rates during the boom years.

There is no way to resist that data set. If you tried to argue against that data you'd get run over by a steamroller of competing originators trying to get the business you didn't want.

Those record low default rates come from one place and one institution has the ultimate responsibility for them: the Federal Reserve. They created bubble conditions. The bubble conditions made bad loans look like good loans. Since people make money by making good loans, if bad loans look like good loans they will be made. By someone. Somewhere. And if you aren't the one to make it, someone else gets the commission and you don't. It's that simple.

The Fed should have been able to look at the data and know they had created a bubble. They failed to do so. "Blah blah blah it's different this time." That's what they said and everyone knows it.

I don't blame Barney Frank. I don't blame Fannie or Freddie. I don't blame mortgage companies. I don't blame real estate speculators. They all [even Barney] did what the Fed-bubble-produced data told them to do. When you produce bubble conditions, don't come bitching to me later if people change their behavior based on those conditions.

[SAM]

This is silly. The banks are repaying their loans plus some.

What the government is losing money on is GM and AIG. The government expanded TARP for GM, into which they keep dumping more money they know will never be repaid. Likewise Fannie Mae and Freddie Mac.

So they're going to tax the banks that paid the money back for the money they're losing on GM and AIG.

What they need to do is let GM go under. The government and unions are running it and using banks as a scapegoat for the losses in TARP hoping no one will notice (the media certainly will never clarify it) in an effort to push another tax through.

Plus the money they've gotten back from the banks is not being returned to taxpayers as the TARP program dictated. Rather Barney Frank and other democrats are directing the money to pet spending projects that won't do anything to help the economy.