Oversimplified maybe a little, but he's basically telling you the truth.
Banks were "encouraged" by the Feds to make loans to people who otherwise wouldn't qualify, (There is legislation out there making it illegal to discriminate, you know. Who's to say that refusing loans to people just because they can't pay it back, isn't just another form of it?)
The Government sweetened the pot by saying that they would guarantee any loans banks made while trying to provide "Affordable Housing", and avoid potential discrimination lawsuits. This is why Fannie Mae and Freddie Mac were created...To cover bad loans.
The problem was, this idea worked too well, because the demand for free money is infinite. With no risk of losing money, banks made loans to everyone, and then sold the mortgages to the Feds, who had promised to buy them. The only real risk to the banks was in not making loans, and having the Government get after them.
This policy also changed the dynamic of how banks made their money. It no longer mattered if the loan was ever paid back. They would make money selling it to Fannie or Freddie. The profit was in the volume of transactions, not the quality of them.
That's why, as soon as Fannie Mae and Freddie Mac refused to buy any more of these loans, the whole system immediately collapsed.
Listen to your father. The FHA threatened banks with lawsuits if they didn't comply with lower lending standards all in the name of "affordable housing". Frank clearly admitted he wanted to "roll the dice" on affordable housing, and wanted more minorities/ low income families to be homeowners. It wasn't about "greed" that is a myth, think about it, why would somebody motivated by greed lend money to someone he knew couldn't pay it back (credit checks and down payments)? That is not even logical
You are right its not logical, that's the gov't in a nutshell, its not their money so they take the moral high ground and say how we need social justice and affordable housing, nothing is easier than spending someone else's money!Did the federal government force banks to lend sub-prime loans, which caused the 08-09 financial crisis?
the reason it happened was that deregulation, and alan greenspan firing most of the staff at the sec in the risk management sector, and if u truly want to kno what caused the crash watch the film inside job, and see the true reason of greed, and predatory loaning that most of the investment banks did, and also during the bush administration the secretary of treasury had been told this would happen, and he did nothing to stop it since he was the former chairmen at goldmans sachs.
Yes. They did.
%26gt; They offered (it was a lie, of course) to protect the companies against losses from making bad loans.
%26gt; They prosecuted them if they didn't make enough bad loans.
By wondering why the government would put pressure on the banks to lend if if they knew that the loans couldn't be paid back, you demonstrate you don't understand Democrats.Did the federal government force banks to lend sub-prime loans, which caused the 08-09 financial crisis?
and to top the whole mess off -- minority homeownership data are right back to where they were before the whole CRA mess started.
this entire thing accomplished exactly nothing.
***
gives one pause to wonder if the government can manage anything right, doesn't it?
and now we come to ObamaCare and the contention that the government can manage health care very well indeed.
Remember the "Ownership Society Speech" of Li'l Bush back in 2003??? That was the opening gun of the crash of 2008.
You KNOW Li'l Bush didn't care if anybody owned their own house - but suddenly in 2003 he was All Concerned about it. At this point he gave permission to his rich banker friends to start making the wild loans which would finally collapse the whole house of cards.
"Heat up the economy - let it crash" - that's how the rich stay VERY RICH.
The rich make money going up - and coming down. And then when the stock market really tanks, they buy up all that cheap stock.
And that's what republicans do - and will do again. Is it any surprise they're against any bank regulation???
I think the federal law was called the Affordable Housing Act or something to that effect. The result was the Fannie Mae and Freddie Mac debacle. IT was authored by Barney Frank and Chris Dodd. Your father is not full of it. See:
http://online.wsj.com/article/SB10001424鈥?/a>
It certainly contributed to it.
He is correct...thank you Democrats...
Your father is full of it.. Ask him what is a sub-prime loan. Only businesses get sub-prime loans. Any mortgage is prime plus.
Fannie and Freddie did not establish rates only guaranteed the loans.
Wow stupid abounds.
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