truth on hold Posted February 21, 2013 Share Posted February 21, 2013 Some interesting perspective from a bank CEO.... While running regional giant BB&T for two decades, John Allison had an insider's view of the factors behind the crisis. A burst of greed wasn't one of them, he says. Nor was deregulation. "The financial industry was not deregulated, it was misregulated," he asserted. In his new book, "The Financial Crisis and the Free Market Cure," Allison says at every step of the way, Washington politicians and regulators brought on the crisis and then made things worse during the panic. Now, he warns, they're sowing the seeds of another financial crisis, thanks to new rules sold to the public as insurance against another crisis but that in fact double down on old mistakes. Allison says problems started in the 1990s when regulators pressured banks to abandon traditional mortgage underwriting standards. "Under Clinton, making high-risk home loans to low-income borrowers was given priority over safety and soundness from a regulatory perspective," he said. The ex-president used the Community Reinvestment Act as an enforcement tool. When home prices fell years later, Allison points out, loss ratios on high-risk CRA loan portfolios soared. Then in 2000, Clinton's HUD required Fannie Mae and Freddie Mac, which had dominated the prime lending market, to restructure their portfolios so at least half their loans were CRA and other subprime mortgages. "The legitimate affordable-housing market was not big enough to equal 50% of (their) giant loan portfolios," Allison said. "To meet this political goal, Freddie and Fannie would have to consistently lower their lending standards." Read More At IBD: http://news.investors.com/ibd-editorials-perspective/021513-644751-banker-says-government-not-market-caused-crisis.htm#ixzz2LZjZytFf Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily on Facebook Link to comment Share on other sites More sharing options...
Dean Cain Posted February 21, 2013 Share Posted February 21, 2013 (edited) Good article, but to lay all the blame at the foot of the banking industry. I contend we are in an era of govt & banking duopoly & not oligopoly as Allison states. "Allison says the TARP bailout fund and other post-crisis action by Washington merely propped up unhealthy bank giants (as well as Detroit unions), creating a "government-sponsored oligopoly". Edited February 21, 2013 by BigCountryBills Link to comment Share on other sites More sharing options...
KD in CA Posted February 21, 2013 Share Posted February 21, 2013 In other breaking news, the Bills need a QB. Link to comment Share on other sites More sharing options...
Magox Posted February 21, 2013 Share Posted February 21, 2013 There are a lot of places to pin the blame, but undoubtedly the government was one of the main culprits in this whole disaster. Link to comment Share on other sites More sharing options...
truth on hold Posted February 21, 2013 Author Share Posted February 21, 2013 (edited) There are a lot of places to pin the blame, but undoubtedly the government was one of the main culprits in this whole disaster. In the hearings I remember barney frank being particularly aggressive shutting down anyone who cited low income housing legislation he sponsored as a factor. Blatant abuse of political power to intimidate people and cover his own a$$. What a dbag Edited February 21, 2013 by Joe_the_6_pack Link to comment Share on other sites More sharing options...
\GoBillsInDallas/ Posted February 21, 2013 Share Posted February 21, 2013 http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html Link to comment Share on other sites More sharing options...
Rob's House Posted February 21, 2013 Share Posted February 21, 2013 I've met and exchanged emails with Allison. He's very solid on this topic. I haven't read his book yet, but I imagine it's as good an account of the housing crisis as you're likely to find. Link to comment Share on other sites More sharing options...
Magox Posted February 21, 2013 Share Posted February 21, 2013 http://www.nytimes.c...ge-lending.html That is pretty damning. While we're at it, remember this golden oldie? "I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward." Or the infamous "I do not want the same kind of focus on safety and soundness [in the regulation of Fannie Mae and Freddie Mac] that we have in the office in comptroller of currency or office of the thrift supervision. I want to roll the dice a little bit more in this situation towards subsidized housing." Ah, the good ol days. Link to comment Share on other sites More sharing options...
Dante Posted February 21, 2013 Share Posted February 21, 2013 Probably a year ago I posted about this only I referenced a book called "The Great American Bank Robbery". Got beat up over it mainly over the title of the book. None of the people posting in the thread read the book but discarded it because of the title. It goes into great detail about the items in your post but goes even further how it all was enforced. How bank branches, bank CEO's were coerced by HUD, Janet Reno and "community organizers" who threatened with charges of racism and so on. It was so frustrating to read I only read the first 2/3 of it I had to put it down so my blood pressure didn't go through the roof. Link to comment Share on other sites More sharing options...
Rob's House Posted February 21, 2013 Share Posted February 21, 2013 Probably a year ago I posted about this only I referenced a book called "The Great American Bank Robbery". Got beat up over it mainly over the title of the book. None of the people posting in the thread read the book but discarded it because of the title. It goes into great detail about the items in your post but goes even further how it all was enforced. How bank branches, bank CEO's were coerced by HUD, Janet Reno and "community organizers" who threatened with charges of racism and so on. It was so frustrating to read I only read the first 2/3 of it I had to put it down so my blood pressure didn't go through the roof. It didn't fit the narrative. Link to comment Share on other sites More sharing options...
meazza Posted February 21, 2013 Share Posted February 21, 2013 In other breaking news, the Bills need a QB. I still think Fitz is our guy (trying to get the first thread ever moved back to the main wall) Link to comment Share on other sites More sharing options...
truth on hold Posted February 22, 2013 Author Share Posted February 22, 2013 That is pretty damning. While we're at it, remember this golden oldie? "I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward." Or the infamous "I do not want the same kind of focus on safety and soundness [in the regulation of Fannie Mae and Freddie Mac] that we have in the office in comptroller of currency or office of the thrift supervision. I want to roll the dice a little bit more in this situation towards subsidized housing." Ah, the good ol days. Who said that? Link to comment Share on other sites More sharing options...
DC Tom Posted February 22, 2013 Share Posted February 22, 2013 Some interesting perspective from a bank CEO.... While running regional giant BB&T for two decades, John Allison had an insider's view of the factors behind the crisis. A burst of greed wasn't one of them, he says. Nor was deregulation. "The financial industry was not deregulated, it was misregulated," he asserted. In his new book, "The Financial Crisis and the Free Market Cure," Allison says at every step of the way, Washington politicians and regulators brought on the crisis and then made things worse during the panic. Now, he warns, they're sowing the seeds of another financial crisis, thanks to new rules sold to the public as insurance against another crisis but that in fact double down on old mistakes. Allison says problems started in the 1990s when regulators pressured banks to abandon traditional mortgage underwriting standards. "Under Clinton, making high-risk home loans to low-income borrowers was given priority over safety and soundness from a regulatory perspective," he said. The ex-president used the Community Reinvestment Act as an enforcement tool. When home prices fell years later, Allison points out, loss ratios on high-risk CRA loan portfolios soared. Then in 2000, Clinton's HUD required Fannie Mae and Freddie Mac, which had dominated the prime lending market, to restructure their portfolios so at least half their loans were CRA and other subprime mortgages. "The legitimate affordable-housing market was not big enough to equal 50% of (their) giant loan portfolios," Allison said. "To meet this political goal, Freddie and Fannie would have to consistently lower their lending standards." Read More At IBD: http://news.investor...m#ixzz2LZjZytFf Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily on Facebook It was everyone. Lenders, the government, the home-buying public, local and county governments (making a ton off taxes and fees). Link to comment Share on other sites More sharing options...
3rdnlng Posted February 22, 2013 Share Posted February 22, 2013 The CRA as the root cause of the housing bubble and burst, and the subsequent collapse of the economy is what I've been preaching here for years. Several times I've also posted videos of the Barney Franks of this world and their refusal to accept warnings from federal regulators. Link to comment Share on other sites More sharing options...
Nanker Posted February 22, 2013 Share Posted February 22, 2013 In other breaking news, the Bills need a QB. I still think Fitz is our guy (trying to get the first thread ever moved back to the main wall) But there's no one there this year that I think they should take with the #8 pick. Link to comment Share on other sites More sharing options...
TPS Posted February 22, 2013 Share Posted February 22, 2013 It was everyone. Lenders, the government, the home-buying public, local and county governments (making a ton off taxes and fees). Yep.Then there was Greenspan, China, and the list goes on. To focus on one group as THE cause tends to fit one's political bias... Link to comment Share on other sites More sharing options...
Rob's House Posted February 22, 2013 Share Posted February 22, 2013 Yep. Then there was Greenspan, China, and the list goes on. To focus on one group as THE cause tends to fit one's political bias... The dude's theory doesn't allocate blame solely to one entity, but he does explain how none of this would have been possible were it not for the unintended consequences of well-intentioned governmental interference. He does not outright absolve others of blame, nor would it make sense that he would seeing as how he responsibly ran his bank such that they weren't tanked by the crisis. Link to comment Share on other sites More sharing options...
Jauronimo Posted February 22, 2013 Share Posted February 22, 2013 You can point in any direction and find a guilty party. The housing market crash will go down in history as the Perfect Cluster !@#$. Ultimately our government incentivized this mess, but its hard to say that they could have accurately predicted that the private sector would respond with rampant fraud, predatory lending, reviving an all but forgotten risk management vehicle to effectively insure a single bet 1 million times over and that our ratings agencies would be the last to know that there's a problem. Link to comment Share on other sites More sharing options...
B-Large Posted February 22, 2013 Share Posted February 22, 2013 (edited) So wait, financing a 300K home on a 3yr ARM, no money down, with stated income wasn't a good practice.... say it ain't so... Bad Public Policy, Fast and Loose Mortgage Writing, and a Dumbass Public that doesn't have a clue about leverage the fickle B word when they sign off at closing... I can't imagine where is all went wrong.... Edited February 22, 2013 by B-Large Link to comment Share on other sites More sharing options...
3rdnlng Posted February 22, 2013 Share Posted February 22, 2013 If it wasn't for the CRA, which was nothing more than forced deregulation by way of regulation, none of this would have been possible. Lenders didn't have a problem with it as long as they could sell the loans to the secondary market. Those that want to blame everyone and their brother want to lessen the blame on the government for its failed social engineering attempt. Link to comment Share on other sites More sharing options...
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