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Financial Crisis:

 
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PostPosted: Sun May 01, 2016 2:57 pm    Post subject: Financial Crisis: Reply with quote

PeakTrader:

Government has subsidized and forced riskier loans on lenders and then when lenders lose on riskier loans, government blames lenders. So, recoveries have become weaker, until lenders recover.

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Even you wouldn’t make risky loans on your own to go broke. So, don’t give me more nonsense.

“It is certainly possible to find prime mortgages among borrowers below the median income, but when half or more of the mortgages the GSEs bought had to be made to people below that income level, it was inevitable that underwriting standards had to decline. And they did. By 2000, Fannie was offering no-downpayment loans. By 2002, Fannie and Freddie had bought well over $1 trillion of subprime and other low quality loans. Fannie and Freddie were by far the largest part of this effort, but the FHA, Federal Home Loan Banks, Veterans Administration and other agencies–all under congressional and HUD pressure–followed suit. This continued through the 1990s and 2000s until the housing bubble–created by all this government-backed spending–collapsed in 2007. As a result, in 2008, before the mortgage meltdown that triggered the crisis, there were 27 million subprime and other low quality mortgages in the US financial system. That was half of all mortgages. Of these, over 70% (19.2 million) were on the books of government agencies like Fannie and Freddie, so there is no doubt that the government created the demand for these weak loans; less than 30% (7.8 million) were held or distributed by the banks, which profited from the opportunity created by the government. When these mortgages failed in unprecedented numbers in 2008, driving down housing prices throughout the U.S., they weakened all financial institutions and caused the financial crisis.”

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http://www.theatlantic.com/business/archive/2011/12/hey-barney-frank-the-government-did-cause-the-housing-crisis/249903/

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My favorite sources can’t be disputed. For example, the New York Times couldn’t dispute Congressional action and the data. However, it tried to paint a liberal Republican as a conservative. And, normally, I have more faith what moderates say than extremists. Moreover, when an extremist doubts his actions, like Barney Frank, that just further supports what the moderates said.

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It was government policy borrowers were able to borrow for homes they couldn’t really afford, investors took risks for returns and potential losses, and lenders were the intermediaries making more loans. Government created a bubble before the 2007-09 recession.

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Baffling, you’ve been watching too many movies and believing what politicians, who have all day blaming others, say. I’m sure, you’ll keep trying to get that square peg in the round hole.

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So, everything you believe is based on one book, a Hollywood movie, and a real estate agent, who bought too many properties.

I worked in the financial industry, including commercial banks, along with passing the comp exams in Money & Banking, in grad econ.

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That 2001 statement basically only states homeownership is good and should be fair. By 2004, the Bush Administration tried to slow the amount of risky loans, while Barney Frank and others ramped up risky loans. In 2007, when the crisis began to emerge and unfold, and it was too late, only then Congress decided there were way too many risky loans.

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The Bush Administration tried to regulate Fannie and Freddie in 2003!, but was filibustered by Sen Dodd and Rep Frank (funny how politics actually work):

http://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html

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Lenders knew Congress wanted to create a giant social program and lenders received Congress’s blessing. The policy was forced upon them anyway. It was perfectly rational for lenders to turn a bad policy into their advantage. It turned out like taking candy from a baby. When the politicians, who pushed this policy, since the ’90s, realized they’d actually have to pay for the giant social program, it was too late. So, given they are politician-lawyers, they went after the lenders.

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Typically, lenders don’t make risky loans, because they don’t want to lose money.

You can thank your generous government for the large amount of risky loans.

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A steep economic downturn in itself will increase bad debts. You can thank government for creating a worse downturn that affected the entire macroeconomy, including commercial real estate. The U.S. oil boom was needed for declining oil production in other countries. The free market achieved its objected – more oil at lower prices.

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