How the Democrats caused the Recession

[Vladimir Lenin]

Basically the Community Reinvestment Act something heavily pushed by the Democrats, forced Banks to give unsafe and risky loans, which created the Housing Bubble.

Beginning in 1992, Congress pushed Fannie Mae and Freddie Mac to increase their purchases of mortgages going to low and moderate income borrowers. For 1996, the Department of Housing and Urban Development (HUD) gave Fannie and Freddie an explicit target -- 42% of their mortgage financing had to go to borrowers with income below the median in their area. The target increased to 50% in 2000 and 52% in 2005.

For 1996, HUD required that 12% of all mortgage purchases by Fannie and Freddie be "special affordable" loans, typically to borrowers with income less than 60% of their area's median income. That number was increased to 20% in 2000 and 22% in 2005. The 2008 goal was to be 28%. Between 2000 and 2005, Fannie and Freddie met those goals every year, funding hundreds of billions of dollars worth of loans, many of them subprime and adjustable-rate loans, and made to borrowers who bought houses with less than 10% down.
http://online.wsj.com/article/SB122298982558700341.html

[bushbush]

Basically the Community Reinvestment Act something heavily pushed by the Democrats, forced Banks to give unsafe and risky loans, which created the Housing Bubble.

you are pretty much wrong, period.

just read here about CRA:

Additionally, there is debate among economists regarding the effect of the Community Reinvestment Act, with detractors claiming it encourages lending to uncreditworthy consumers[69][70][71][72] and defenders claiming a thirty year history of lending without increased risk.[73][74][75][76] Detractors also claim that amendments to the CRA in the mid-1990s, raised the amount of home loans to otherwise unqualified low-income borrowers and also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages.[77][78] A study by a legal firm which counsels financial services entities on Community Reinvestment Act compliance found that CRA-covered institutions were less likely to make subprime loans(only 20-25% of all subprime loans), and when they did the interest rates were lower. The banks were half as likely to resell the loans to other parties.[79]

more importantly, CRA occupies a very small amount of problem loans. You gotta be extremely stupid to think such a gigantic global crisis is due to this little act.

----------------------------

that's not the real cause of this crisis, the real ones are these, just read them through, it's pretty well sourced.
http://en.wikipedia.org/wiki/Subprim..._of_the_crisis

keys are:
-loose monetary policy that awashed banks with money, and banks were driven to rid of these cheap money into the market at any means (subprime being the invention)

-lack of an updated government regulatory system that
could ve stopped these dangerous loans

-a surge of speculation in the housing market that were marked with people and INSTITUTIONS who would borrow loans to speculate, rather than owning a house like an ordinary folks.

[Vladimir Lenin]

you are pretty much wrong, period.

just read here about CRA:

Additionally, there is debate among economists regarding the effect of the Community Reinvestment Act, with detractors claiming it encourages lending to uncreditworthy consumers[69][70][71][72] and defenders claiming a thirty year history of lending without increased risk.[73][74][75][76] Detractors also claim that amendments to the CRA in the mid-1990s, raised the amount of home loans to otherwise unqualified low-income borrowers and also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages.[77][78] A study by a legal firm which counsels financial services entities on Community Reinvestment Act compliance found that CRA-covered institutions were less likely to make subprime loans(only 20-25% of all subprime loans), and when they did the interest rates were lower. The banks were half as likely to resell the loans to other parties.[79]

more importantly, CRA occupies a very small amount of problem loans. You gotta be extremely stupid to think such a gigantic global crisis is due to this little act.

----------------------------

that's not the real cause of this crisis, the real ones are these, just read them through, it's pretty well sourced.
http://en.wikipedia.org/wiki/Subprim..._of_the_crisis

keys are:
-loose monetary policy that awashed banks with money, and banks were driven to rid of these cheap money into the market at any means (subprime being the invention)

-lack of an updated government regulatory system that
could ve stopped these dangerous loans

-a surge of speculation in the housing market that were marked with people and INSTITUTIONS who would borrow loans to speculate, rather than owning a house like an ordinary folks.

Commentators have charged that the CRA contributed in part to the 2008 financial crisis, as it encouraged banks to make unsafe loans. For example, economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry.[49] In a commentary for CNN, Congressman Ron Paul, who serves on the United States House Committee on Financial Services, charged that the CRA with "forcing banks to lend to people who normally would be rejected as bad credit risks."[55] In a Wall Street Journal opinion piece, Austrian school economist Russell Roberts wrote that the CRA subsidized low-income housing by pressuring banks to serve poor borrowers and poor regions of the country.[56]

http://en.wikipedia.org/wiki/Communi...nancial_crisis

It's still pretty clear that the CRA was a key factor in the Subprime Mortgage Crisis, if you watched the video it shows the correlation between the two.

[bushbush]

a key factor in the Subprime Mortgage Crisis, if you watched the video it shows the correlation between the two.

Flame removed - EvM
"
However, others dispute the involvement of the CRA in the crisis. In a Bank for International Settlements ("BIS") working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust," relying partly on evidence that the housing bust has been a largely exurban event.[59] Others commentators, for example, Daniel Gross of Slate, Tim Westrich of the Center for American Progress,[60] Robert Gordon of the American Prospect,[61] and Aaron Pressman from BusinessWeek,[62] have also concluded that the CRA did not contribute to the current financial crisis.
Some legal and financial experts note that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton,[63][32] stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA. Another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. He stated that institutions fully regulated by CRA made "perhaps" one in four sub-prime loans. Referring to CRA and abuses in the subprime market, Michael Barr stated that in his judgment "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[64] According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis.[65] A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.[66]
Assistant professor of law Alan M. White[67] notes that some abuses blamed on the CRA actually occurred because the Housing and Urban Development and Office of Federal Housing Enterprise Oversight under the Bush administration allowed Fannie Mae and Freddie Mac to fulfill their affordable housing goals by buying subprime mortgage-backed securities. These affordable housing goals were motivated by similar aims, but not part of the CRA.[68]
Barney Frank, a Democratic member of the US House of Representatives, called Republican criticism of the Act in light of the nation's housing crisis a veiled attack on the poor that's racially motivated. House Minority Leader John Boehner called Frank's remarks "a lame, desperate attempt to divert Americans' attention away from the Democratic party's obstruction of reforms that would have reined in Fannie Mae and Freddie Mac". [69]:"

It's still pretty clear that the CRA was a key factor in the Subprime Mortgage Crisis, if you watched the video it shows the correlation between the two.

again, it didn't even make the majority of loans and most of its loans weren't subprime and were considered safe. How could it be a "key factor then". Again, most risky loans were given to people who speculate by banks who were awash with cheap federal money due to loose monetary policy.

that's the real cause.

[Vladimir Lenin]

man you are so low. why don't you share the entire article, rather just the part supporting your BS.

Because the entire article has an incredible amount of URLs in there messing up the editing for others, which is why for example I linked the article.


http://www.prospect.org/cs/articles?...ubprime_crisis

http://www.lewrockwell.com/dilorenzo/dilorenzo125.html

http://findarticles.com/p/articles/m...s_/ai_14779796

http://www.city-journal.org/html/10_...on_dollar.html

http://www.nypost.com/seven/02052008...dal_243911.htm

http://corner.nationalreview.com/pos...Y1NTU1M2M0OWU=

http://www.forbes.com/2008/07/18/fan...0718brook.html

http://www.reuters.com/article/press...008+BW20080107

Dude, it's pretty obvious that the CRA was a huge part of the Subprime Mortgage Crisis.

What the CRA did is punish banks who did'nt make loans to low-income people, because they were forced to make these risky loans it ended up creating the housing bubble. Interest rates went up, the low income people couldn't pay they sold their houses, housing values plummeted leading to the explosion of the Housing Bubble. The explosion of the Housing Bubble destabilized the U.S markets, destabilization of the U.S Markets created a HUUUUGE ripple effect reaching the rest of the world.

[Xan]

Basically the Community Reinvestment Act something heavily pushed by the Democrats, forced Banks to give unsafe and risky loans, which created the Housing Bubble.

The crises was caused by a multitude of reasons bad banks loans was one of them.

But maybe you shud think of the fact that if your system was difffrent you would not have a poor lower class that have no chance of paying for there loans or at the very least it could be significantly smaller.

But i guess the US is the land were socialism is only okey for the very rich.

And what a fool you are..blaming government...and psuedo socialist policiies... we all know big government is the answer to everything....

well lets see Scandinavian country's are all more left leaning and probebly have relatively a bigger government and we seem to do better then you so yes you might be on to something

I cant believe how stupid you are... youre not allowed to use actual evidence and congressional records in your claims... its all about emotion... man what an idiot...

Republicans lied to the word to gather support for a war so if anyone is known to play fast and lose with the truth then...

We all know its Bush (really Chaney) whose responsible for this becuase they hate black/poor people

Actually from were i am it seems they are either completely incompetent or they only care about making them selfs and there rich friends richer at the expense of the country and the rest of it`s inhabitants.

[bushbush]

Dude, it's pretty obvious that the CRA was a huge part of the Subprime Mortgage Crisis, which in turned destabilized the U.S Markets, destabilization of the U.S Markets created a HUUUUGE ripple effect reaching the rest of the world.

dude, again, subprime loan under CRA is like 20-25% of total subprime loans. And they are considered generally safe. Just read the whole damn article again, there is like 1 paragraph supporting your argument, then like 5 paragraph full of sources against your BS.

it's not a "key factor", it's disputable that it even played a noticable role, The key is again loose monetary policy combined with lack of oversight as well as over-speculation on the part of Americans.

Flame removed - EvM

Here!, all sourced, jsut click on the damn numbers.


However, others dispute the involvement of the CRA in the crisis. In a Bank for International Settlements ("BIS") working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust," relying partly on evidence that the housing bust has been a largely exurban event.[59] Others commentators, for example, Daniel Gross of Slate, Tim Westrich of the Center for American Progress,[60] Robert Gordon of the American Prospect,[61] and Aaron Pressman from BusinessWeek,[62] have also concluded that the CRA did not contribute to the current financial crisis.

Some legal and financial experts note that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton,[63][32] stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA. Another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. He stated that institutions fully regulated by CRA made "perhaps" one in four sub-prime loans. Referring to CRA and abuses in the subprime market, Michael Barr stated that in his judgment "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[64] According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis.[65] A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.[66]
Assistant professor of law Alan M. White[67] notes that some abuses blamed on the CRA actually occurred because the Housing and Urban Development and Office of Federal Housing Enterprise Oversight under the Bush administration allowed Fannie Mae and Freddie Mac to fulfill their affordable housing goals by buying subprime mortgage-backed securities. These affordable housing goals were motivated by similar aims, but not part of the CRA.[68]
Barney Frank, a Democratic member of the US House of Representatives, called Republican criticism of the Act in light of the nation's housing crisis a veiled attack on the poor that's racially motivated. House Minority Leader John Boehner called Frank's remarks "a lame, desperate attempt to divert Americans' attention away from the Democratic party's obstruction of reforms that would have reined in Fannie Mae and Freddie Mac". [69]

[Last Roman]

if you watched the video it shows the correlation between the two.

and there you have one of the biggest logical fallacies out there

correlation does not imply causation

But it was exacerbated by well-meaning legislation that ultimately destroyed our finanical system.

Thanks Regulation of the Market!

the fact remains that it made it worse. if you are going to blame the Dems for some faulty legislation, then you must blame the Republicans for the same.

[touchmaster]

you are pretty much wrong, period.

just read here about CRA:

Additionally, there is debate among economists regarding the effect of the Community Reinvestment Act, with detractors claiming it encourages lending to uncreditworthy consumers[69][70][71][72] and defenders claiming a thirty year history of lending without increased risk.[73][74][75][76] Detractors also claim that amendments to the CRA in the mid-1990s, raised the amount of home loans to otherwise unqualified low-income borrowers and also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages.[77][78] A study by a legal firm which counsels financial services entities on Community Reinvestment Act compliance found that CRA-covered institutions were less likely to make subprime loans(only 20-25% of all subprime loans), and when they did the interest rates were lower. The banks were half as likely to resell the loans to other parties.[79]

more importantly, CRA occupies a very small amount of problem loans. You gotta be extremely stupid to think such a gigantic global crisis is due to this little act.

----------------------------

that's not the real cause of this crisis, the real ones are these, just read them through, it's pretty well sourced.
http://en.wikipedia.org/wiki/Subprim..._of_the_crisis

keys are:
-loose monetary policy that awashed banks with money, and banks were driven to rid of these cheap money into the market at any means (subprime being the invention)

-lack of an updated government regulatory system that
could ve stopped these dangerous loans

-a surge of speculation in the housing market that were marked with people and INSTITUTIONS who would borrow loans to speculate, rather than owning a house like an ordinary folks.

LOL, wiki. The most unreliable source for information.

[Viking Prince]

@Arian -- you are wrong. Bushbush is not complete in the answer, but his points are valid. I will try and post more in a bit. Something to keep in mind -- neither the Democrats nor the Republicans wanted or desired the results that we have today. Politicians from both parties have a hand in this as well as banks. We all have a general misunderstanding of what constitutes passive versus active investments, liquidity, and risk.

[Oglethorpe1983]

Saving myself any future headaches....

[Sidmen]

And here I thought that it was because banks never counted in any risk to their loans. Since they could always bundle them all up and send them off to a third party - they would never have any risk.

[Zephyrus]

Lets blame the democrats for Iraq too. And 9/11. And Sars. And the illegal immigration dispute?
, don't stop there though! I'm pretty sure they have some communist-inspired plan to leech america's hard earned dollars and give them to the workers instead of their maste-I mean people who average more than 250k in income. We should send the entire lot of them into Canada where that kind of left-wing idealogy crap like socialized healthcare for all citizens and cheap inexpensive drugs belongs. Wheres the irony pic when you need 1?

[bushbush]

in regards to your sources, a bunch of them were crappy sites with no credentials. One of them worked against you actually.

http://www.reuters.com/article/press...008+BW20080107

NEW YORK--(Business Wire)--A Traiger & Hinckley LLP study of 2006 mortgage loan data suggests
that the Community Reinvestment Act, a federal law that requires banks
to help serve the credit needs of their local communities, including
low- and moderate-income neighborhoods, deterred banks from engaging
in the kinds of risky lending practices that are provoking the
foreclosure crisis.

[eddy_purpus]

that was a good made video ...
is it true that all is fact ?

[bushbush]

that was a good made video ...
is it true that all is fact ?

read above posts. It's pure BS. CRA contributed 20-25% of subprime loans and most of CRA loans were considered safe and even deterred risky lendings. The key was the subprime loans made by banks for people and institutions who speculated. These are people who have some money and not under CRA. Banks were desperate to borrow to them because of the loose monetary policy in the past decade. Combine that with bad oversight, you get a huge housing market bubble and finally the collapse.

[Vladimir Lenin]

that was a good made video ...
is it true that all is fact ?

Yes it is. Read the articles in my post.

[Da Skinna]

This is what I've been trying to say all along: the poor people.

[bushbush]

I will also link the entire businessweek article, which is pretty educational for people like Heretic. It has some key numbers (20-25% of subprime loans were from CRA and they were actually safe and less risky), i think even newbies should find it silly to point CRA as the main cause of this crisis.

Community Reinvestment Act had nothing to do with subprime crisis

Posted by: Aaron Pressman on September 29

Fresh off the false and politicized attack on Fannie Mae and Freddie Mac, today we’re hearing the know-nothings blame the subprime crisis on the Community Reinvestment Act — a 30-year-old law that was actually weakened by the Bush administration just as the worst lending wave began. This is even more ridiculous than blaming Freddie and Fannie.
The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.”
Not surprisingly given the higher degree of supervision, loans made under the CRA program were made in a more responsible way than other subprime loans. CRA loans carried lower rates than other subprime loans and were less likely to end up securitized into the mortgage-backed securities that have caused so many losses, according to a recent study by the law firm Traiger & Hinckley (PDF file here).
Finally, keep in mind that the Bush administration has been weakening CRA enforcement and the law’s reach since the day it took office. The CRA was at its strongest in the 1990s, under the Clinton administration, a period when subprime loans performed quite well. It was only after the Bush administration cut back on CRA enforcement that problems arose, a timing issue which should stop those blaming the law dead in their tracks. The Federal Reserve, too, did nothing but encourage the wild west of lending in recent years. It wasn’t until the middle of 2007 that the Fed decided it was time to crack down on abusive pratices in the subprime lending market. Oops.
Better targets for blame in government circles might be the 2000 law which ensured that credit default swaps would remain unregulated, the SEC’s puzzling 2004 decision to allow the largest brokerage firms to borrow upwards of 30 times their capital and that same agency’s failure to oversee those brokerage firms in subsequent years as many gorged on subprime debt. (Barry Ritholtz had an excellent and more comprehensive survey of how Washington contributed to the crisis in this week’s Barron’s.)
There’s plenty more good reading on the CRA and the subprime crisis out in the blogosphere. Ellen Seidman, who headed the Office of Thrift Supervision in the late 90s, has written several fact-filled posts about the CRA controversey, including one just last week. University of Oregon professor and economist Mark Thoma has also defended the CRA on his blog. I also learned something from a post back in April by Robert Gordon, a senior fellow at the Center for American Progress, which ends with this ditty:

It’s telling that, amid all the recent recriminations, even lenders have not fingered CRA. That’s because CRA didn’t bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA — or any federal regulator. Law didn’t make them lend. The profit motive did. And that is not political correctness. It is correctness.

[Jubal_Barca]

Can we rename this thread 'How we can't imagine the conservamessiah his holiness Dubya with an IQ of under 80 balled up our country, it must have been someone else's fault!'