Hey, I started the debate, LOL!

 

Then went ObamaCare on us all:p

I think the President's heart is in the right place, but misguided.

 

This one sentence, in my opinion, best summarizes the Obama presidency & has pretty much been my view of him from Day 1. I refuse to believe that he desires to do the country harm.

 

I also hope there is "more to the story" because if there isn't, it's hard to see how pursuing this ends well.

Then went ObamaCare on us all:p

But, ObamaCare is part of the debate actually. It all goes hand in hand.

This one sentence, in my opinion, best summarizes the Obama presidency & has pretty much been my view of him from Day 1. I refuse to believe that he desires to do the country harm.

 

I also hope there is "more to the story" because if there isn't, it's hard to see how pursuing this ends well.

Regardless, the road to hell is paved with "good intentions".

Sub prime consumer loans were a red herring for the collapse of the economy. It played a minor role in the big picture.

 

Wall St was the main culprit.

If done right it could work. The recent past should make lenders cautious enough not to go down the path we took before. Of course, once greed kicks in again we could end up repeating history.

I think the problem is that President Obama lacks common sense and logic. He had no real life experience in the working world prior to getting into politics and no real political experience before becoming President. This is a recipe for disaster. He feels that the government can and should help everybody. This is also dangerous. He wants us all to live in a utopian society where nobody has any problems and he can hand out goodies like he was Santa Claus. I do also. But it is just not possible. Capable people have to be responsible for themselves and sink or swim on their own. The country is basically bankrupt and we cannot afford all of these feelgood programs. Raising taxes is not the answer. We already bring in 3+ trillion in taxes per year.

I do think that he wants as many people as possible going to the Govt with their hand out.

"We can put light where there's darkness, and hope where there's despondency in this country. And part of it is working together as a nation to encourage folks to own their own home."

--President George W. Bush 10-15-02

Sub prime consumer loans were a red herring for the collapse of the economy. It played a minor role in the big picture.

 

Wall St was the main culprit.

 

How was Wall St. the main culprit?

How was Wall St. the main culprit?

 

Insatiable desire for high returns on high risk mortgages that were bundled together. Moody's ignoring obvious poor investments by rating them as safe. Wall St being in the pockets of Washington which let them write their own legislation as far as capital requirements.

 

Wall St had an incentive to put people into mortgages they couldn't afford.

 

Read "The Big Short" by Michael Lewis.

Insatiable desire for high returns on high risk mortgages that were bundled together. Moody's ignoring obvious poor investments by rating them as safe. Wall St being in the pockets of Washington which let them write their own legislation as far as capital requirements.

 

Wall St had an incentive to put people into mortgages they couldn't afford.

 

Read "The Big Short" by Michael Lewis.

 

So, besides the 'minor' part about Wall St lobbying themselves to get the upper hand in business deals via lobbying the government and getting law on their side, ensuring no harm can ever come to the institutions or the CEO's of that particular Wall St firm at the same time putting a stranglehold on smaller businesses making it harder for them to compete, forcing them to sell or go bankrupt then having no alternative but to go out of business, allowing the bigger financial institution to suck up the consumers that were once with a smaller business -- there is no other harm the government did? It was Wall St?

 

Seriously?

I say the government has a much bigger hand in all this than people are lead to believe.

 

The government got in the business of insuring mortgages so banks could loan money for housing. Thanks to the New Deal Government Sponsored Enterprises (GSE) such as Fannie Mae and Freddie Mac, GSE's could now buy insured mortgages from banks. Then repackages and sells them as securities to investors. Hooray!

 

Then government got in the business of insuring loans for borrowers with crap credit. What does this do? It allows government to promise low interest rates on loans to low-income borrowers -- in other words, its the beginning of a bubble. It ups the artificial demand of houses being sold and produced.

 

It doesn't stop there....

 

Fannie Mae and Freddie Mac's sole intention is to purchase mortgages from banks. They then compile the purchased mortgages into securities, guarantee them, and sell them to investors.

 

By paying banks money for mortgages, they bring more liquidity to the banks, which are then able to loan the money to another applicant.

 

Both institutions are backed by the taxpayers.

 

Then comes the Community Reinvestment Act. This made it law that banks have to loan where they are located -- regardless how crappy the borrower's credit rating is. Clinton upped the detriments the law entailed, like pushing for sub-prime loans. By the end of Clinton's term, home ownership was at an all time high. In reality, the bubble was just expanding. In other words the artificial housing market the government perpetuated was getting ready to pop.

 

Bush came along and through the Fed Reserve after September 11, they lowered interest rates on houses from 6% to 1.75% then even further to 1.25% and then to 1% after the 9/11 attacks. I'm sure everyone recalls when Bush told everyone to "go out shop" to help the economy. What better way to get the market going than encouraging people to go into more debt by offering them low interest rates.

 

With interest rates at 1%m the rate allows borrowers to borrow at an interest rate lower than the rate of inflation, effectively subsidizing borrowers, encouraging banks and individuals to borrow as much as possible -- making the bubble even bigger.

 

Following in 2003 Fannie Mae and Freddie Mac encounter a huge corruption ordeal including a "1 billion accounting error."

 

Eventually interest rates rise back up around 5%. but the damage was done.

 

If you want something to blame on our country's boom and bust cycle, blame the banking system and how it is intertwined with government. Institutions, especially the Federal Reserve, but as well as Fannie Mae and Freddie Mac are government backed organizations that have no accountability to the people who subsidize them. They have had corruption scandal after another but it never goes anywhere.

 

I blame Wall St, for sure, but they would not have this power were it not for the United States Congress and the Executive.

Government, big banks, Fannie Mae, Freddie Mac...They were not just in bed with each other, it was a scene from Caligula. They never really got untangled.

 

The political windfall of 'home ownership' was equal to that of the financial windfall. And Freddie and Fannie are government entities with very well connected officers who go very rich. Big banks (Too Big to Fail banks) packaged up the mortgages and slapped AAA on them and sold them all over the world. The TBTF banks borrowed money from the Fed and lent it out in forms of Mortgages with record margin spreads from the Fed rate. And Bush declared a record high percentage of home 'ownership' in 2006. But what people 'owned' was a house that they put nothing down on, was appraised higher than it should have and consuming more of their income than percentage wise than ever in history. Only where there was no one left to stick with the check did the market crash and all of sudden you had 'toxic assets'. The 'TA' in 'TARP'. And near the end with everyone know the music was stopping the hedge players started getting against the bubble.

 

The TBTF banks said they would do just that. That would mean that the Fed would not get their money back (with interest) so letting the TBTF banks fail was not something the Fed would tolerate. So the Fed ensured there would be a bail-out.

 

No entities hands are clean here. And there no independence of Congress, the Administration, the Fed, Fannie Mae/Freddie Mac and the TBTF banks. If anything they are all inter-dependent at this point. If any fail - all fail.

 

 

As for this action of easing it is hard to understand why the push NOW. Maybe because refi's are probably almost done and even though housing is 'getting better' it is still too low in volume. The federal programs are a bust. Most homeowners helped still end up losing their homes. It has only prolonged a bottoming out process. The economy still is struggling. So what levers are there to soak up the current houses on the market and those being held by the banks that are not yet on the market (they do not tell you about those). So they have to do SOMETHING or else Bubble II/Crash II hits. So they go to easing of credit - like the good ol' days! Its about the only they they have left right now.

The definition of insanity is..........Obama administration pushes banks to make home loans to people with weaker credit - The Washington Post

 

DUMB, DUMB, DUMB!!!

 

The Gov't continues to push its debilitating dependency which smothers the instinct to strive and excel.

My home buying experience here. Bought my house (first and only so far) 10 years ago this month. Had a friend who was a mortgage broker, ran the numbers for me to see what I could "afford". Came back, told me I "qualified" for a $129,000 loan. My first reaction was, man, I can get a really nice house for that, especially where I was looking to buy, get more than I thought I would be able to. I then, quite smartly I may add, asked what kind of payment would I be looking at a month. He told me, and my jaw almost hit the floor. Just the house payment would be 40%+ of my take home pay. That did not include added water, electric and trash bills that I didn't have at the time as all that was included in my apartment rent, which was pretty cheap, plus having to go out and buy all the stuff one needs as a new home owner. After some rough figuring, I concluded that I would only have very little left at the end of each month to live on. Food, gas, clothes, entertainment, incidentals, home upkeep, etc. Almost everything I brought home would be tied up in some way with the house. There was no way in the world I could do that. I ended up buying a house significantly less than the amount I qualified for, and even then it was s struggle at times initially.

 

Point of the story? I think THOUSANDS of people were in the same boat I was in...were told they "qualied" for loans that in actuallality were way beyond their means, but they took them anyway without really thinking it through. There is pleanty of fault to go around for sure, but as far as the housing market is concerned, let's not forget about personal resposibility. Yes, the system may have been screwed up to allow people to get more than they should have which put the potential for the crash in motion, BUT, no one was forcing those people to take loans they really couldn't afford either.