

Mortgage Crisis Caused By Anti-Racist Activism - xlnt
http://www.nypost.com/seven/02052008/postopinion/opedcolumnists/the_real_scandal_243911.htm

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bilbo0s
I have officially heard it all now.

I knew that a lot of the 'handlers' of corporate bigwigs would have them out
angling for a defense at the trials that are looking increasingly likely, but
this one just reeks of desperation. The current mortgage crisis was fueled by
a myriad of reasons, but believe me, the idea that billionaires were sitting
around thinking about ways to get money into the hands of poor black guys was
hardly one of them.

I can see now that one of their strategies will be to play the race card.
Their aim will be to ensure the jury thinks about something other than the
mountain of documents, emails, and other internal and external communications
and directives. All of which will point to the inescapable conclusion that
their cases are really about garden variety fiduciary negligence on an
unprecedented scale. The race card is how many of the wealthy, from OJ to the
CEO of HealthSouth manage to escape justice. It behooves us all to hold our
wallet and our will a little closer when the wealthy start to talk about
racism, or the dangers thereof.

Middle America you are being conned. Just today the CEO of Bear Stearns
unloaded what used to be over a USD1 billion stake in Bear for USD60 million,
under the terms of the original deal with the government that his stake was
only to be USD15 million. Poor him you say? He lost so much money you say?
Consider the fact that Bear's stock price is being propped up by a USD30
billion guarantee from the US. Then ask yourself where the money for that
guarantee comes from. Even better research it. Did you know several such
guarantees are being made?

Consider some news that the government would have us believe is completely
unrelated. It just got a whole lot harder for poor and middle class college
students to get student loans, because the government has found it necessary
to materially decrease the levels of subsidy it provides to student loans. Now
a cynic would say that the CEO of Bear just raided the US college fund for
USD60 million. An optimist would say the government is simply making
financially prudent cut backs in its spending. The truth is somewhere in the
middle, but I think we'd all agree that these types of financial machinations
are sub optimal. Giving anti-capitalist guarantees of security is how we got
here in the first place.

WOW . . . I'm ranting . . . I gotta stop working so late.

At least I caught myself.

The short version is this article insults my intelligence, and assumes that I
am uninformed. All of which would trouble me a good deal less if the aim of
this article was something other than keeping a scumbag out of Club-Fed.

~~~
yummyfajitas
The article doesn't claim that billionaires were "sitting around thinking
about ways to get money into the hands of poor black guys was hardly one of
them."

It claims that changes to the law, promoted by ACORN, made it legal to write
bad loans.

A quick look at Wikipedia suggests that this might be the case:

>The [1995] revisions [to the Community Reinvestment Act] allowed the
securitization of CRA loans containing subprime mortgages. The first public
securitization of CRA loans started in 1997

[http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Chan...](http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Changes_of_1995)

NY Post or not, it appears correct. I also recommend reading this article (for
a different reason):

<http://www.paulgraham.com/disagree.html>

~~~
bilbo0s
That is EXACTLY my point. This article would have me believe that writing bad
loans caused the credit crisis.

As a former quant, I can tell you that my belief is that the practice of
improperly securing bundled debt is the cause of the credit crisis. When
everyone began to realize that their risk analysis was off, they discovered
that they held bonds or other more exotic instruments that were improperly
hedged. The entire world asked for the same CDS's at the same time. That's
when EVERYONE knew the game was up.

BTW, if you are a quant, or if you know your finance, I would be happy to
explain why I believe the collapse in the bond market is caused by the
asymmetric nature of a lot of the hedging that was going on. Or rather the
total lack of hedging, and by implication, proper risk management. CDS's,
CDO's and indeed derivatives in general are going to have their problems, but
that is BECAUSE of improper securitization practices. We have a USD500
trillion, yes I said TRILLION, house of cards out there because of rampant
misuse of these instruments. The mortgage bond market is just the place where
the problems cropped up first.

I would be happy to listen to your explanation of how bad loans were the
cause, but you will have to have a good explanation for two things. Firstly,
explain why the bundles containing these loans were improperly secured in the
first place, given that the lenders, according to the article you are citing,
freely admit that they knew these to be bad loans? Could it be fiduciary
negligence? Secondly, why is there so much trouble in the Jumbo market,
(mortgages higher than USD417000), where CRA is not an issue at all, if CRA is
the problem they are making it out to be?

I stand by my belief that fiscal negligence, and by implication, a failure to
exercise the proper fiduciary duty to the companies, lies behind the collapse
of ALL of these enterprises. If you have evidence to the contrary, submit it.

~~~
rms
Do the owners of forecloses houses have to sell them? Could they hold them
indefinitely as investments or even rent them? And why don't they do this?

~~~
bilbo0s
The owner of a foreclosed house becomes the bank, or more precisely, whoever
the bank sold the bond to. In answer to your question, yes they can hold it,
but there are a lot of very complicated reasons not to. They involve liquidity
ratios and the like. So selling makes since in a great many instances. In
short, what a bank, or financial institution does with it will depend on their
fiscal position. Or it SHOULD. This mess has shown us that they can behave
irrationally.

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Kaizyn
Most of these 'junk loans' that were made to borrowers with bad credit were
resold on the stock market to third parties. The fact that lenders 1) didn't
have to suffer the consequences of making bad loans and 2) financially
profited from making those bad loans suggests that they had an interest in
seeing relaxed underwriting standards. For this reason, I can't help but think
that the author is pointedly ignoring the main contributing factor to the
mortgage disaster.

~~~
xlnt
It's easier to sell loans that are likely to get paid back, isn't it? And at a
higher price.

~~~
jauco
depends on what you mean by sell. But the way I understand it, it's way easier
to sell loans without caring if they get paid back. Because then your
essentially expanding your market to include 'people who won't pay back'.
Bigger market means more sells. Normally you would exclude those people
because you eventually want your money back with interest, but the sellers in
this particular story didn't care about that. (It wasn't their money)

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tbourdon
Where does education and personal responsibility come into play? Just because
one qualifies for a loan doesn't mean one should enter into a loan, no matter
what the means of qualification. It doesn't really matter if one qualifies by
some government mandate or by the lender's willingness to accept more risk,
responsibility still lies with the borrower to honestly analyze whether or not
they will be able to make good. In my mind, the real failure lies with our
nation's inability to educate it's citizens on how to manage their own
finances effectively.

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far33d
i won't be using the NYPost for economic analysis, thank you very much.

~~~
pg
I'm not saying this article is right, but can you point to something specific
it says that you feel is incorrect?

~~~
far33d
This article uses a classic diversion tactic - focus on a singular issue,
which may have contributed, and attribute all of a complex issue to the single
issue that fits the agenda.

No mention of how lending agencies, given incentives to close as many
mortgages as possible, had no incentive to make sure those lenders could
actually pay. The article gives no mention to how the Fed's lax monetary
policy dropped interest rates and created a frenzy in housing that blocked a
lot of people out unless they used non-traditional instruments.

The author doesn't say that the "anti-racist" policies are one factor (which
may be true) but that these policies are the direct cause. As someone who
purchased a home two years ago, I became personally aware of how low short-
term interest rates combined with a housing frenzy that drove prices up over
20% a year can easily push a lot of people to get low-interest ARM mortgages
instead of more stable 30yr mortgages.

I just think this article takes on a straw man because it suits an anti
affirmative action agenda.

~~~
xlnt
So, which sentences in the article contain mistakes, specifically?

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rms
I swear that I remember a quote from Greenspan saying that low interest rates
would cause a housing bubble but I can't find it anymore. Anyone have any idea
what I am thinking of?

~~~
pius
I don't know if this what you're looking for, as Greenspan was not
prognosticating, but speaking in hindsight.

 _"Greenspan said in an interview with Austrian magazine Format that low
interest rates in the past 15 years were to blame for the house price bubble,
but that central banks were powerless when they tried to bring it under
control."_

<http://www.reuters.com/article/ousiv/idUSL2146624120070921>

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jfoutz
It was those damned shiftless minorities, not our commision only salespeople.
A salesperson would NEVER lie to close a sale.

Thanks Sarah Silverman, for making racist humor ok for rich white people.

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mynameishere
That's just one factor among many, but symptomatic of our underlying belief
that money should go to where it is "deserved" rather than where it is
effective....

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wumi
and the reason for changing the title was ...?

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davidw
!NH

------
sohail
Awesome.

