Bad policy, bad ethics, broken ideals, and the downfall of America's markets


Yet more clear reasons why Obama and the Democrats (if we can still call them that, and not Obamacrats) won an election based on the broadest of false claims, that the economics of laissez faire, of hands-off and low taxes, got us into this. It was not capitalism and free markets that hurt us, it was failure by gov't, be it Clinton, GW Bush, or many years of Congressional leaders, that got us into this mess. And yes, CRA and poverty mortgages got us into this!

This problem of the failing economy was PARTLY the fault of Republicans in Congress, since they make the LAWS, but not sure when GW Bush instisted banking regulations be all but forgotten. In fact, it seems the GOP leaders were basically assuaged -- or illicitly looked the other way -- and played along with crazy, fast-times-will-never-slow policies, in the case of the sour mortgages that turned into sour credit default swaps, which turned into a ruined U.S. economy.

In my thoughts, in reading about this economic crisis and how we got here, I am reacting against big government types, and socialists, and liberals, all who to some extent or another seem to be convincing people that the GOP did this to us. Ironic, then, that it was liberal mortgage ideas that got us here, right alongside a lack of regulations (which, indeed, is a small gov't thus GOP attitude) but not by way of GW Bush, but through Clinton-era Congressional diddling through the ever-expanding nonsense of CRA and ill-thought mortgage regulations.

Here's some hard work to that end, linked below, but diced into some small pieces, following:

Feds Re-Impose Loan Standards They Helped Undermine | RealClearMarkets
There is a great irony that Washington will now lead the way in imposing new, stricter standards, including a tougher income-to-payment ratio, because it was Washington, prodded by affordable housing advocates, which pushed mortgage lenders to dilute their traditional underwriting values in the first place. Federal regulators attacked those established standards as being “unintentionally biased” against low and moderate income borrowers and used a variety of laws and regulatory bodies to push often resistant lenders into programs based on these lower standards. The government and those who backed its actions assured lenders these lower standards were safer than they thought, even though there was little research to support that contention. Now that a huge chunk of the market based on these debased standards has melted down, the government is going full circle.
And those who were most easily "prodded by affordable housing advocates" are now running things, so this is quite quite ironic.
...a Freddie Mac program called Affordable Gold, which purchased loans from banks under looser underwriting standards, including loans which allowed a borrower to make a down payment with funds contributed from a third party like a government assistance program or a nonprofit, showed sharply higher default rates, up to four times higher than traditional underwriting standards.
...politicians in both parties made expanding the number of home owners in America a high priority, and the only way to keep doing that was to lend to people with increasingly riskier credit.
Got bad credit? No problem! Not only will you get a loan, but it will be with a low interest rate, too! We'll bend over backwards for our risky customers since Big Brother asked us to. After all, everyone deserves to lose a home at least once in their lifetime!
In a recent Forbes article Peter Wallison of the American Enterprise Institute and Edward Pinto, former chief credit officer of Fannie Mae, point out that by 2001, 18 percent of Fannie Mae’s portfolio consisted of loans to people with credit scores below 680—the traditional definition of a loan to someone with riskier credit, who is also someone more likely to default.

Of course, with two huge federal agencies willing to purchase such loans, mortgage makers couldn’t churn them out fast enough, and private investors also began snapping up the loans in competition with Fannie and Freddie.
As if that is not insulting enough, and ironic that this all came to a head during GW Bush's time in office, when he was too busy waging war on Teararists to notice the economy was failing in a big way, there's this little nugget to chew on:
[Relevant experts] say federal programs were not the problem because many of the worst loans portfolios were created by non-bank lenders which are not even subject to the Community Reinvestment Act. But that’s an argument that ignores the much broader role that government played in watering down standards, including using pressure to force players across the industry to participate.

The Department of Housing and Urban Development under President Clinton, for instance, threatened to introduce legislation to make non-bank lenders, that is, mortgage finance companies, subject to CRA if these firms didn’t sign on to affordable lending goals.
So where were these blowhard, blame Bush, extended-stay Congress members during all of this, for two double-term presidents?!! Those sillies over in Congress -- can't do anything without the White House, it seems!

Who were some of the big fans of this fun mortgage idea? Countrywide hopped right into the cesspool first!
One of the first ... to take up the pledge was Countrywide, which pledged to introduce low-down payment loans with high income-to-payment ratios for low-income borrowers. Countrywide and its co-founder, Angelo Mozilo, ultimately became infamous as one of the first major mortgage lenders to melt down under the weight of its bad lending, but before it was notorious Countrywide was celebrated for its low-income efforts.
Today, the Obama administration acknowledges through its bailout program that those standards were unsafe. It’s a backhanded acknowledgement. ... I suppose that’s about as far as we can expect government to go in admitting the mess it helped to make.

I guess I don't get a bailout, since I was not getting any loans out. Oh well. I hope I can get a JOB at some point that isn't in CONSTRUCTION. Which I have zero experience in.


- jR


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