New York Times Article From 1999

[bills_fan_in_raleigh]

I would not say that. I would say that relaxed lending standards to all parties caused this.

 

Basically, banks were pressured to relaxed the old 20% down, 30 year fixed rate mortgage that my parents had. They were pressured by groups (such as ACORN) to do this so that socioeconomic groups unable to meet the standard could own a home. This relaxation, by itself is not a problem. Subprime lending was, for years, a niche market that helped everyone. But now the banks applied the relaxed lending standards to everyone...low income minorities, people wanting a $500k McMansion on $100k a year etc.

 

Each successive administration since Carter has pledged to "bring the American dream of home ownership" to more and more people. Banks kept relaxing their lending standards to more and more borrows (and making a boatload of cash in the process). More and more borrowers that had no business qualifying for a loan. You have seen the ads..."No Job, No Money, No Problem...$200,000 home loan for $300 a month!"

 

Nothing wrong with increasing home ownership, it just has to be done properly. New York City (not exactly the model of efficiency) ran a program where they made 1706 home loans to low income minority borrowers to increase home ownership. They capped the amount they lent, required down payments and courses in home ownership. Of those 1706 loans, only 5 were in default. Thats an astonishingly low number and the City should be applauded for running the program the right way and imposing limits/constraints, where people may not have done so themselves.

Like I said before many on the right were trying to say it was the loaning to the low income etc that create the mess but it was also the 100K a year folks wanting the McMansions. people need to self examine their own behavior before they start the mightier than thou attitude

[DC Tom]

Like I said before many on the right were trying to say it was the loaning to the low income etc that create the mess but it was also the 100K a year folks wanting the McMansions. people need to self examine their own behavior before they start the mightier than thou attitude

 

Why make it a class issue? The problem is people borrowing more than they can afford. The government, for thirty years, has encouraged that.

[bills_fan_in_raleigh]

Why make it a class issue? The problem is people borrowing more than they can afford. The government, for thirty years, has encouraged that.

Not saying its a class issue its across the board people are borrowing more than they can afford in houses, cars, credit cards etc. Its amazing when I hear about someone who goes bankrupt and weeks later credit companies are ready to hand over a few more bad loans. The fire is almost out and throw some gas on it to see if it ignites.

[elegantelliotoffen]

Not saying its a class issue its across the board people are borrowing more than they can afford in houses, cars, credit cards etc. Its amazing when I hear about someone who goes bankrupt and weeks later credit companies are ready to hand over a few more bad loans. The fire is almost out and throw some gas on it to see if it ignites.

 

I don't know how people can say that lending to low income minorities to buy 10 thousand dollar houses on Sycamore was the main cause of this crisis when the areas hardest hit were in booming real estate markets like Clark County Nevada, Maricopa County Arizona, Riverside County California, Los Angeles County California, Miami-Dade County Florida, Fulton County Georgia, Broward County Florida, Palm Beach County Florida, and Adams County Colorado. Sounds to me like a bunch of greedy honkys thought that they could live in a beautiful mcmansion that they couldn't afford for a few years and in the end they could just flip it and profit as it's value continued to skyrocket.

[finknottle]

I would love to see evidence that shows that the borrowing to the lower income caused these foreclosures or to the middle/upper class wanna bees that were buying 500K+ houses immediately out of college or with huge other debts. My guess many of the foreclosures are in suburbia and many of the me me me drones.

 

Increased lending at the lower end of the market drives up prices at the lower end of the market. This in turn drives up prices uniformly (better houses will always cost more than lesser houses). That's not so good for middle-class buyers, but the samerelaxed lending standards must be applied, so now everybody can finance the over-priced house appropriate to their strata.

 

And leaves them just as vulnerable, when their mortages are 2/3 of their salary.

[finknottle]

I have a hard time believing that loans to minorities caused all this. Sounds pretty far fetched

 

One of the under-reported stories is that there is a very strong correlation between the areas hardest hit by forclosure and the illegal alien sanctuary counties. Over the past few years, certain banks (BoA comes to mind) have been particularly aggressive in extending credit (cards and mortgages) to undocumented borrowers.

[Lurker]

This just speaks to the complete failure of George Bush's economic policies. He wasn't even president yet and he still managed to #$%^$#^ it up!

Well, since the worst excesses of the subprime lending debacle took place from 2003 to 2006, what was George up to then?

 

(page 10, figure 2)

[Wacka]

I don't know how people can say that lending to low income minorities to buy 10 thousand dollar houses on Sycamore was the main cause of this crisis when the areas hardest hit were in booming real estate markets like Clark County Nevada, Maricopa County Arizona, Riverside County California, Los Angeles County California, Miami-Dade County Florida, Fulton County Georgia, Broward County Florida, Palm Beach County Florida, and Adams County Colorado. Sounds to me like a bunch of greedy honkys thought that they could live in a beautiful mcmansion that they couldn't afford for a few years and in the end they could just flip it and profit as it's value continued to skyrocket.

 

It because the banks in Nevada, California and else where were giving loans for new houses to people who could only afford 10K houses on Sycamore in Buffalo.The highest% of foreclosures is around Stockton, CA. They were giving loans to the illegals working in the fields for cripes sake!

[Lurker]

It wasn't only subprime. Probably as good a read as any.

 

Pretty good read, but like most reports, the author considers commercial and investment banks to be one and the same from a leverage perspective. The banking regulators never allowed the type of absurd leverage the SEC permitted I-banks to operate with:

 

"But instead, as the real estate market started to crack in 2007, most of the large commercial banks and Wall Street investment banks were absurdly over-levered. For every dollar of assets on their balance sheets, they often had 96 to 97 cents of debt."

[TPS]

It wasn't only subprime. Probably as good a read as any.

thanks. I wish people would give up on this dems vs reps blame BS--both parties take money from the industry and both parties are accomplices, but much of the blame lies squarely on Wall Street. One of the reasons I asked you if you thought this $700 bil. bailout would solve the crisis is something they point out:

It strained credulity to suppose these insurers could make good on all their insurance contracts in the predictable event that a class of assets simultaneously deteriorated. One insurer alone wrote more than $400 billion on mortgage securities.) TARP addresses none of these issues.

To me, it really is the trillions of dollars CDSs that represent the rest of the iceberg, and until that gets sorted out, we haven't resolved the crisis.

[Lurker]

To me, it really is the trillions of dollars CDSs that represent the rest of the iceberg, and until that gets sorted out, we haven't resolved the crisis.

Agreed. $54.6 Trillion and counting...a deathstar/skynet come to life if this house of cards ever collapsed.

[GG]

thanks. I wish people would give up on this dems vs reps blame BS--both parties take money from the industry and both parties are accomplices, but much of the blame lies squarely on Wall Street. One of the reasons I asked you if you thought this $700 bil. bailout would solve the crisis is something they point out:

To me, it really is the trillions of dollars CDSs that represent the rest of the iceberg, and until that gets sorted out, we haven't resolved the crisis.

 

Well, the loneliest job on Wall Street is that of a risk manager during a bull market. Don't think that there weren't a lot of people screaming about CDSs when they came into existence. Their voices just weren't heard....

 

Of course Wall St should carry most of blame, but let's not let the consumers off either. I don't remember BMWs showing up in neighborhoods and balding pinstriped thugs holding people up at gunpoint to overpay for a house.

 

Everyone who had bought a house, used a credit card, or financed a car in the last 6 years shoulders part of the mess. The explosion of credit made very expensive things more affordable to a wider audience, and that audience obliged. Boy, did it ever oblige. The only people with a legitimate beef are the ones who pay cash for every single purchase.

[TPS]

Well, the loneliest job on Wall Street is that of a risk manager during a bull market. Don't think that there weren't a lot of people screaming about CDSs when they came into existence. Their voices just weren't heard....

 

Of course Wall St should carry most of blame, but let's not let the consumers off either. I don't remember BMWs showing up in neighborhoods and balding pinstriped thugs holding people up at gunpoint to overpay for a house.

 

Everyone who had bought a house, used a credit card, or financed a car in the last 6 years shoulders part of the mess. The explosion of credit made very expensive things more affordable to a wider audience, and that audience obliged. Boy, did it ever oblige. The only people with a legitimate beef are the ones who pay cash for every single purchase.

Aren't finance companies supposed to evaluate one's credit rating? yes, our consumer-driven economy and narcotic demand for credit play a role, but ultimately the banks (and other FIs) are supposed to "draw the line."

[Lurker]

Aren't finance companies supposed to evaluate one's credit rating? yes, our consumer-driven economy and narcotic demand for credit play a role, but ultimately the banks (and other FIs) are supposed to "draw the line."

Originate to sell, Baby!

[GG]

The vast majority of outstanding debt was written based on sound criteria. The problem is too much debt in the system that is getting pressured on the low end, and that will cause an economic ripple effect on the previously good borrowers.

[TPS]

The vast majority of outstanding debt was written based on sound criteria. The problem is too much debt in the system that is getting pressured on the low end, and that will cause an economic ripple effect on the previously good borrowers.

It's the very nature of a profit-driven system. Financial institutions make money by making loans. When those who meet the "sound criteria" run out, well..let's just start loosening the criteria. Financial institutions are the ones who create the credit, and they set the criteria.

Btw, how does one define too much debt? And if one knows how to define it, then shouldn't one know when they've issued too much?

[Pine Barrens Mafia]

When those who meet he "sound criteria" run out, well..let's just start loosening the criteria.

 

Nonsense. The financial institutions have incentive to loan to those with less than perfect credit at the start because of one reason: PROFIT. They can charge higher interest and more fees to those with poorer credit than to those with better.

[molson_golden2002]

It because the banks in Nevada, California and else where were giving loans for new houses to people who could only afford 10K houses on Sycamore in Buffalo.The highest% of foreclosures is around Stockton, CA. They were giving loans to the illegals working in the fields for cripes sake!

I knew this was all the fault of the dirty illegals! Along with the blacks! Good white Americans suffer because of these people! I'm as mad as hell and am going to vote for McCain now! He'd never allow the illegals to.....he'd...oh wait

 

nevermind

[TPS]

Nonsense. The financial institutions have incentive to loan to those with less than perfect credit at the start because of one reason: PROFIT. They can charge higher interest and more fees to those with poorer credit than to those with better.

I guess you missed the part where I said that FIs were "profit driven"?

[TPS]

This just speaks to the complete failure of George Bush's economic policies. He wasn't even president yet and he still managed to #$%^$#^ it up!

It speaks to the scum of the right that they have to blame minorities for this crisis. Maybe it plays into "don't vote for Obama because he's black" card. This is the most discusting thing I've seen in this campaign. But nothing surprises me that comes out of the republican camp. I think the proof is in the question someone raised: the majority of the problem loans came from high-end loans--$200K to $500K. Someone please provide the data that shows BLACKS--because that is what this bull sh-- is about, are to blame for those loans. This is the worst bull sh-- I've ever seen pushed by any party.