In hindsight, who is most to blame for the Financial Crisis?

[briansd1]

[quote=Hobie]Hold on guys. Put your guns down. The intent of the policy was to encourage banks to lend to folks who didn’t qualify under the current terms. ie. 20% down, income to prove loan repayment, etc.
[/quote]

20% down are conventional loans. Anything less needs PMI.

The lenders came up with schemes like piggyback, and the other toxic loans which were then sold and packaged as securities.

The government didn’t have a hand in forcing the lenders to make any loans they didn’t want to originate.

The government didn’t have a hand in forcing the banks to overlook the banks’ own underwriting guidelines.

The banks come up with the loose lending schemes on their own because they could originate more loans and package more securities as AAA. The rating agencies played along.

The Federal Reserve didn’t monitor the banks as it should have.

[quote=Hobie]
The administration looked at the banks lending policies as ethnic discrimination rather than based on financial ability to repay.
[/quote]

It’s not true that ethnic minorities defaulted at a greater rate, if that’s what you’re implying.

[SK in CV]

[quote=Hobie]Hold on guys. Put your guns down. The intent of the policy was to encourage banks to lend to folks who didn’t qualify under the current terms. ie. 20% down, income to prove loan repayment, etc.

The administration looked at the banks lending policies as ethnic discrimination rather than based on financial ability to repay.

The problems were the unintended consequences from this noble policy.[/quote]

As to the bolded part, not exactly. But that is exactly how lenders who had been redlining neighborhoods for years saw it. Despite the fact that down payment and ability to repay loans were not even part of the equation in their redlining.

The act outlawed redlining but specifically required that lending be done consistent with safe and sound lending practices. Not make loans to people who didn’t qualify.

Economic theorists rarely see descrimination. They make the false assumption that the market is color blind and class blind, collect their data based on that assumption, and prove their thesis. Empirical research, however shows otherwise.

[SK in CV]

[quote=Hobie]Hold on guys. Put your guns down. The intent of the policy was to encourage banks to lend to folks who didn’t qualify under the current terms. ie. 20% down, income to prove loan repayment, etc.

The administration looked at the banks lending policies as ethnic discrimination rather than based on financial ability to repay.

The problems were the unintended consequences from this noble policy.[/quote]

As to the bolded part, not exactly. But that is exactly how lenders who had been redlining neighborhoods for years saw it. Despite the fact that down payment and ability to repay loans were not even part of the equation in their redlining.

The act outlawed redlining but specifically required that lending be done consistent with safe and sound lending practices. Not make loans to people who didn’t qualify.

Economic theorists rarely see descrimination. They make the false assumption that the market is color blind and class blind, collect their data based on that assumption, and prove their thesis. Empirical research, however shows otherwise.

[SK in CV]

[quote=Hobie]Hold on guys. Put your guns down. The intent of the policy was to encourage banks to lend to folks who didn’t qualify under the current terms. ie. 20% down, income to prove loan repayment, etc.

The administration looked at the banks lending policies as ethnic discrimination rather than based on financial ability to repay.

The problems were the unintended consequences from this noble policy.[/quote]

As to the bolded part, not exactly. But that is exactly how lenders who had been redlining neighborhoods for years saw it. Despite the fact that down payment and ability to repay loans were not even part of the equation in their redlining.

The act outlawed redlining but specifically required that lending be done consistent with safe and sound lending practices. Not make loans to people who didn’t qualify.

Economic theorists rarely see descrimination. They make the false assumption that the market is color blind and class blind, collect their data based on that assumption, and prove their thesis. Empirical research, however shows otherwise.

[SK in CV]

[quote=Hobie]Hold on guys. Put your guns down. The intent of the policy was to encourage banks to lend to folks who didn’t qualify under the current terms. ie. 20% down, income to prove loan repayment, etc.

The administration looked at the banks lending policies as ethnic discrimination rather than based on financial ability to repay.

The problems were the unintended consequences from this noble policy.[/quote]

As to the bolded part, not exactly. But that is exactly how lenders who had been redlining neighborhoods for years saw it. Despite the fact that down payment and ability to repay loans were not even part of the equation in their redlining.

The act outlawed redlining but specifically required that lending be done consistent with safe and sound lending practices. Not make loans to people who didn’t qualify.

Economic theorists rarely see descrimination. They make the false assumption that the market is color blind and class blind, collect their data based on that assumption, and prove their thesis. Empirical research, however shows otherwise.

[SK in CV]

[quote=Hobie]Hold on guys. Put your guns down. The intent of the policy was to encourage banks to lend to folks who didn’t qualify under the current terms. ie. 20% down, income to prove loan repayment, etc.

The administration looked at the banks lending policies as ethnic discrimination rather than based on financial ability to repay.

The problems were the unintended consequences from this noble policy.[/quote]

As to the bolded part, not exactly. But that is exactly how lenders who had been redlining neighborhoods for years saw it. Despite the fact that down payment and ability to repay loans were not even part of the equation in their redlining.

The act outlawed redlining but specifically required that lending be done consistent with safe and sound lending practices. Not make loans to people who didn’t qualify.

Economic theorists rarely see descrimination. They make the false assumption that the market is color blind and class blind, collect their data based on that assumption, and prove their thesis. Empirical research, however shows otherwise.

[Hobie]

We are actually together on most of this issue.

Except this:
[quote=SK in CV]
Not make loans to people who didn’t qualify.

[/quote]

Then why did Freddie and Fannie buy the paper from the banks who issued loans mandated by the policy?

[Hobie]

We are actually together on most of this issue.

Except this:
[quote=SK in CV]
Not make loans to people who didn’t qualify.

[/quote]

Then why did Freddie and Fannie buy the paper from the banks who issued loans mandated by the policy?

[Hobie]

We are actually together on most of this issue.

Except this:
[quote=SK in CV]
Not make loans to people who didn’t qualify.

[/quote]

Then why did Freddie and Fannie buy the paper from the banks who issued loans mandated by the policy?

[Hobie]

We are actually together on most of this issue.

Except this:
[quote=SK in CV]
Not make loans to people who didn’t qualify.

[/quote]

Then why did Freddie and Fannie buy the paper from the banks who issued loans mandated by the policy?

[Hobie]

We are actually together on most of this issue.

Except this:
[quote=SK in CV]
Not make loans to people who didn’t qualify.

[/quote]

Then why did Freddie and Fannie buy the paper from the banks who issued loans mandated by the policy?

[SK in CV]

[quote=Hobie]
Then why did Freddie and Fannie buy the paper from the banks who issued loans mandated by the policy?[/quote]

That’s kind of like asking why apples are red. They bought the loans because thats what they do.

If you’re somehow arguing that Fannie and Freddie are to blame for the current mess, you need to review what happened over the last 5 years. The percentage and dollar value of non-GSE loans skyrocketed. The GSE’s stayed relatively flat in comparison.

[SK in CV]

[quote=Hobie]
Then why did Freddie and Fannie buy the paper from the banks who issued loans mandated by the policy?[/quote]

That’s kind of like asking why apples are red. They bought the loans because thats what they do.

If you’re somehow arguing that Fannie and Freddie are to blame for the current mess, you need to review what happened over the last 5 years. The percentage and dollar value of non-GSE loans skyrocketed. The GSE’s stayed relatively flat in comparison.

[SK in CV]

[quote=Hobie]
Then why did Freddie and Fannie buy the paper from the banks who issued loans mandated by the policy?[/quote]

That’s kind of like asking why apples are red. They bought the loans because thats what they do.

If you’re somehow arguing that Fannie and Freddie are to blame for the current mess, you need to review what happened over the last 5 years. The percentage and dollar value of non-GSE loans skyrocketed. The GSE’s stayed relatively flat in comparison.

[SK in CV]

[quote=Hobie]
Then why did Freddie and Fannie buy the paper from the banks who issued loans mandated by the policy?[/quote]

That’s kind of like asking why apples are red. They bought the loans because thats what they do.

If you’re somehow arguing that Fannie and Freddie are to blame for the current mess, you need to review what happened over the last 5 years. The percentage and dollar value of non-GSE loans skyrocketed. The GSE’s stayed relatively flat in comparison.

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