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Friday, October 03, 2008

A couple of notes

You may be wondering what I thought of the debate. Didn't see it. Sorry, but life got in the way. I'll catch up with a rebroadcast or an online version.

Meanwhile, Anglachel (who took my previous post in the right spirit) sent me a link to this amazing article, which provides the Ultimate Slapdown to anyone trying to sell the idea that Bill Clinton or the CRA (the minority home loan program) caused the mortgage meltdown. A few samples:
• Did the 1977 legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?

• 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by either CRA or GSEs ?

• What about "No Money Down" Mortgages (0% down payments) ? Were they required by the CRA? Fannie? Freddie?

• Explain the shift in Loan to value from 80% to 120%: What was it in the Act that changed this traditional lending requirement?
• How exactly did legislation force Moody's, S&Ps and Fitch to rate junk paper as Triple AAA?

• What about piggy back loans? Were banks required by Congress to lend the first mortgage and do a HELOC for the down payment -- at the same time?

• Internal bank memos showed employees how to cheat the system to get poor mortgages prospects approved that shouldn't have been: Titled How to Get an "Iffy" loan approved at JPM Chase. (Was circulating that memo also a FNM/FRE/CRA requirement?)

• The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act ?
It's obvious, isn't it? The housing boom was the only bright spot in the economy for roughly six years. Without it, we would have had deflation and an intractable recession. So the nation's financial infrastructure and the Bush administration did everything they could to keep the party going as long as possible. And now that the party has ended, they're singing "Blame Bill; blame blacks."
I've been trying to make the same point for days now, but those desperate for yet another reason to hate Obama just won't let go. The fact that JPM Chase, which you refenced, has two high ranking members, William Daley, brother of Mayor Richard, and Jamie Dimon, CEO, on Obama's finance committee, is more than enough reason for me not to not vote for him. That, and all the money he gets from the banking industry, including Goldman Sachs. Considering those two companies alone are making out like bandits in the bank industry restructuring seems more than a tad suspicious.
In a related sense, the house in the boom served as a kind of Widget or McGuffin to make SUVs and Minivans 'necessary' for the runs to Home Depot and Wall*Mart. I mean the boom was radioactive. China made it possible: We borrowed trillions from China so we could buy their building and home improvement materials.

Scared? The only thing we have to fear is fear itself.

Note to Sarah: good job, but face facts: We couldn't afford to pay our workers to suck Alaska's (or Houston's) oil out of our ground for $40 per barrel. At $90-$100/bbl it's worth it and profitable. We're still dependent on foreign oil since the price could drop back to $40 or $50, and then the domestic oil boom will go bust. It happened in the late 1980s to Texas.

Late 80's had peak oil?? Abby, $200 barrels going to make it affordable to stripmine all of Colorado for the shake n' shale oil... and oil has peaked.

--but will climate change (man made? in part yes, but also part of natural cycles-- Sara was more correct than Joe) make it impossible to ever go back to Levittown? Boom's gone, buh bye...

Note re: Sara. I would have expected more from this lot--- nobody noticed the bulge??? the bulge was back!
Why is it automatically r@cist to posit that the CRA may have led to lax lending standards that screwed things up for everyone? It's not the fault of minorities or lower income people that a piece of legislation was a dismal failure and nearly led to the collapse of our financial system.

CRA failed because its proponents ended up exceding the bounds of common sense. I am a huge fan of President Clinton, but even he says now that we failed to put the brakes on when we needed to.

Please read this analysis of the effects of CRA and the negligence of government and academia.
On the "Real Time with Bill Maher" of Sept 26th, two of the guests were Ralph Nader and Lisa Schiffren of the National Review. At one point, she tried to blame part of the mortgage crisis on the CRA legislation, which was immediately refuted by Nader - an example of a "progressive purist" leader, not just a blogger, who still values facts and reality over any partisan political agenda. I cannot find a transcript from a brief search, but my listening to the exchange is as follows:

Speaking about the economic crisis & mortgages in general..
Maher: I think they are smart, but greed can take overtake smarts.
Schiffren: Greed and bad incentives, and a government that set up incentives for low-income people which were abused by people across the spectrum..

Nader: its a great success, the community reinvestment - had one of the highest repayment - low income home-owners had one of the highest repayment [rates], thats why banks went into it.
Thank God. This wingnut garbage is being peddled at every so-called liberal blog I visit. It's ridiculous that everyone just keeps repeating it when it is so easy to Google the refutation. The initial purpose of the CRA was to eliminate redlining neighborhoods-isn't equal opportunity a Liberal value? We loathe Obama so much that we're willing to sell-out anyone and anything as long as we can tie it to him somehow?
Not sure what Nader meant-banks didn't get into it-they were forced by legislation. They would have kept not lending in "those neighborhoods" otherwise.
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