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So then what I may not be saying in crystal clear fashion, was on target... , the issues that caused the 06/08 bust was from 95 (mortgages standard changes), 98(liquidity crisis) ,and 00 ( Commodity Futures Modernization Act )…...a perfect storm, especially with jobs being outsourced to over seas...…………..
……………………...,. not from 05 like mets likes to say
The 95 standards had zero to do with it. You don't appear to understand the investment banks didn't care about the standards. They wanted loans with high income streams; when they couldn't find enough they went out and originated their own loans. When even that wasn't enough they greatly increased the use of synthetics were they would arrange deals on previously securitized mortgages which they didn't even need to own or originate.
The CFMA act left in place the prior unregulated state of derivatives. So other then not changing anything it didn't do anything.
The 98 liquidity crisis only had as much influence as anything that happened previously influences actions in the future. CDSs, which were another critical component of structured credit, grew out of the Exxon Valdez oil spill, but I think it would be stretch to claim the Exxon Valdez led to the financial crisis.
Bottom line, the primary cause of the 07/08 financial crisis was the collapse of what had been thought to be a very safe investments: CDOs. This belief was validated by the credit rating agencies who gave the investments triple A ratings which allowed even the most prudent institutional investors to pour billions of dollars in. CDOs based on mortgages were thought to be safer because of the belief that there wouldn't be a sustained drop in real estate prices nationwide. But remember the mortgages didn't have to be new mortgages because they could bet on previously issued mortgages.
The 95 standards had zero to do with it. You don't appear to understand the investment banks didn't care about the standards. They wanted loans with high income streams; when they couldn't find enough they went out and originated their own loans. When even that wasn't enough they greatly increased the use of synthetics were they would arrange deals on previously securitized mortgages which they didn't even need to own or originate.
The CFMA act left in place the prior unregulated state of derivatives. So other then not changing anything it didn't do anything.
The 98 liquidity crisis only had as much influence as anything that happened previously influences actions in the future. CDSs, which were another critical component of structured credit, grew out of the Exxon Valdez oil spill, but I think it would be stretch to claim the Exxon Valdez led to the financial crisis.
Bottom line, the primary cause of the 07/08 financial crisis was the collapse of what had been thought to be a very safe investments: CDOs. This belief was validated by the credit rating agencies who gave the investments triple A ratings which allowed even the most prudent institutional investors to pour billions of dollars in. CDOs based on mortgages were thought to be safer because of the belief that there wouldn't be a sustained drop in real estate prices nationwide. But remember the mortgages didn't have to be new mortgages because they could bet on previously issued mortgages.
HOW does the 95 standard change have nothing to do with bad loans, which were packaged up into bad packages???
From the FCIC report that addresses your assertion "Basic economic premise when you lower standards, quality and efficiency suffer". They believed that had found a way to make money off of subprime loans.
Still, it was not obvious that a pool of mortgage-backed securities rated BBB could be transformed into a new security that is mostly rated triple-A. But math made it so.
The securities firms argued—and the rating agencies agreed—that if they pooled
many BBB-rated mortgage-backed securities, they would create additional diversifi-
cation benefits. The rating agencies believed that those diversification benefits were
significant—that if one security went bad, the second had only a very small chance of
going bad at the same time.
...
Relying on that logic, the CDO machinegobbled up the BBB and other lower-rated
tranches of mortgage-backed securities, growing from a bit player to a multi-hundred-
billion-dollar industry. Between 2003 and 2007, as house prices rose 27% nationally
and $4 trillion in mortgage-backed securities were created, Wall Street issued nearly
$700 billion in CDOs that included mortgage-backed securities as collateral.
With ready buyers for their own product, mortgage securitizers continued to demand loans
for their pools, and hundreds of billions of dollars flooded the mortgage world. In ef-
fect, the CDO became the engine that powered the mortgage supply chain.“There is a
machine going,” Scott Eichel, a senior managing director at Bear Stearns, told a finan-
cial journalist in May 2005. “There is a lot of brain power to keep this going.”
The subprime loans should never have been made and they rarely were in the past when the mortgage industry was left to the free market and not forced to make bad loans to satisfy non free market rules set by government.
Last edited by Loveshiscountry; 05-28-2018 at 05:14 PM..
Except relaxed lending standards don’t create cdo or CDs products don’t create huge leverage don’t explode derivatives market. But again you seem tobe able to comprehend thatyou are only focusing on one part of the equation. But again post non sequitors and claim it supports your failed argument.
The forced lower standards created risky loans that were rarely made in the past.
One more time for everyone to see. Watch how this poster deflects and never addresses what I've posted.
Congress forced lenders to lower standards and make loans they rarely made in the past. In 1989 1 in 240 loans was 3 percent down or less because they werent a good risk. Lenders knew this from experieince. In 2007 those loans were common place as now 1 in 3 or 80 in 240 were 3 percent down or less. Basic economic premise when you lower standards, quality and efficiency suffer.
Quit running and directly respond to what I've posted. Don't make things up like no one forced lenders to make those loans when in fact it's been pointed out several times how they actually did it.
Last edited by Loveshiscountry; 05-28-2018 at 05:10 PM..
I've posted the documentation in this thread time and time again. By the 2000s the investment banks created a demand for subprime loans. The investment banks needed the subprime loans. The investment banks couldn't find enough subprime loans, despite the fact that volume of subprime loans had gone from 100 billion a year to 600 billion a year, so they started buying subprime originators in order to guarantee a supply. The investment banks were not under a congressional mandate to do this. Investment banks motivation was profit and for nearly a decade the investment banks made billions of dollars off of subprime loans.
Therefore it is not after the fact. Its why suddenly there was all this capital to fund subprime mortgages.
Of course it's after the fact. Quit ignoring these facts and respond to them. Don't deflect.
Fact Government forced lenders to lower standards and make loans they rarely made in the past.
Proof of that fact - In 1989 1 in 240 loans was 3 percent down or less because they werent a good risk. Lenders knew this from experience. In 2007 those loans were common place as now 1 in 3 or 80 in 240 were 3 percent down or less.
Basic economic premise when you lower standards, quality and efficiency suffer.
Explain to everyone here why those horrible loans were rarely made in the past while in 2007 they were common place. Are you going to say, "well that's the free market"?????????
Fact - If government didn't force and coerce lenders to make those horrible loans which were rarely made in the past we don't have a crash. Those loans, as a whole, we know for a fact they were doomed to fail because history has taught us that. Everything you mentioned is after the that. That cannot be denied by reasonable people.
Please explain to everyone here how we could have a crash if those horrible loans are never made in the first place? Do you actually think a crash happens if we don't make all those horrible loans. Please answer that and don't deflect.
Last edited by Loveshiscountry; 05-28-2018 at 05:17 PM..
It’s clear he is only interested in his predetermined narrative at this point. As I stated 24 of the top 25 subprime lenders in 06 were non bank entities (hint...shadow banking system I have been referring to throughout) who were not bound by the evil government lending rules he claims are the sole Cause of 08 crisis. It’s clear he really thinks the issue was too many poor people for thier loan docs stamped yes at the local branch bank bc of the evil hud rules. He has demonstrated no capacity to understand or consider otherwise. Whenever presented with evidence otherwise he ignores or claimed its made up or deflection. It would be comical if it weren’t how so much of our nation acts as well.
One more time for everyone to see. Watch how this poster deflects and never addresses what I've posted.
Congress forced lenders to lower standards and make loans they rarely made in the past. In 1989 1 in 240 loans was 3 percent down or less because they werent a good risk. Lenders knew this from experieince. In 2007 those loans were common place as now 1 in 3 or 80 in 240 were 3 percent down or less. Basic economic premise when you lower standards, quality and efficiency suffer.
Quit running and directly respond to what I've posted. Don't make things up like no one forced lenders to make those loans when in fact it's been pointed out several times how they actually did it.
HOW does the 95 standard change have nothing to do with bad loans, which were packaged up into bad packages???
it IS the initial cause, the initial infection
The standard change induced the bad loans.
"Previously, the CRA directed government to monitor banks’ lending practices to make sure they did not violate fair lending rules in poor neighborhoods. With the 1995 change, the government published each bank’s lending activity and started giving bank ratings based primarily upon the amount of lending it performed in poor neighborhoods. These changes empowered community organizations, such as ACORN, to pressure banks to increase lending activities in poorer neighborhoods — which involved reducing mortgage loan standards — or face backlash from those organizations’ private and political associates."
One more time for everyone to see. Watch how this poster deflects and never addresses what I've posted.
Congress forced lenders to lower standards and make loans they rarely made in the past. In 1989 1 in 240 loans was 3 percent down or less because they werent a good risk. Lenders knew this from experieince. In 2007 those loans were common place as now 1 in 3 or 80 in 240 were 3 percent down or less. Basic economic premise when you lower standards, quality and efficiency suffer.
Quit running and directly respond to what I've posted. Don't make things up like no one forced lenders to make those loans when in fact it's been pointed out several times how they actually did it.
It's not "deflecting" to point out that you're wrong and you've been wrong repeatedly and you don't even understand why you're wrong. I've addressed your point, I've just pointed out repeatedly you were incorrect and worse- don't really understand the topic as well as you think you do. It's not "making things up" tp point out facts that in invalidate your preconceived
narrative.
For someone so obsessed with claiming others are "deflecting" you still haven't addressed the fact that in 2006, 24 of the 25 top subprime lenders were non-bank lenders not bound by the government regulations you're referencing. So please don't "deflect" here and address this fact. 96% of the top subprime lenders in 2006 were not subject to the regulation you claim caused the entire 08 crisis. You repeatedly ignore the role of the shadow banking system mostly b/c I think you have no idea what the term even refers to let alone the role it played; same with the derivative and non-agency parts.
You've been shown the unregulated derivative market (CDO, CDS, synthetic CDO), CDO/private label securitization explosions (including non-agency loans- not subject to your regulations), unwavering appetite for increased returns, securitization, and the shadow banking system all played a role in causing the 08 crisis, however you seem unable to grasp this to even the slightest degree.
The subprime loans should never have been made and they rarely were in the past when the mortgage industry was left to the free market and not forced to make bad loans to satisfy non free market rules set by government.
there free market- i.e banks not subject to your precious regulation, make up 96% of the top subprime lenders in 06 (to make it even easier for you- lenders who made the loans of thrown free will- not b/c Andre Cuomo or Congress made them do it). They sought and needed higher coupons on their securitization, only way to do that was to make riskier loans for higher coupons- aka subprime loans. This is what caused the explosion of the subprime market- along with the mistaken believe that they could manage the risk the subprime paper posed. Nobody would make subprime loans if there wasn't;t a secondary market for it (someone to buy the loan from the originator). Keep showing you don't really understand the issue or the forces that were at play.
The 95 standards had zero to do with it. You don't appear to understand the investment banks didn't care about the standards. They wanted loans with high income streams; when they couldn't find enough they went out and originated their own loans. When even that wasn't enough they greatly increased the use of synthetics were they would arrange deals on previously securitized mortgages which they didn't even need to own or originate.
The CFMA act left in place the prior unregulated state of derivatives. So other then not changing anything it didn't do anything.
The 98 liquidity crisis only had as much influence as anything that happened previously influences actions in the future. CDSs, which were another critical component of structured credit, grew out of the Exxon Valdez oil spill, but I think it would be stretch to claim the Exxon Valdez led to the financial crisis.
Bottom line, the primary cause of the 07/08 financial crisis was the collapse of what had been thought to be a very safe investments: CDOs. This belief was validated by the credit rating agencies who gave the investments triple A ratings which allowed even the most prudent institutional investors to pour billions of dollars in. CDOs based on mortgages were thought to be safer because of the belief that there wouldn't be a sustained drop in real estate prices nationwide. But remember the mortgages didn't have to be new mortgages because they could bet on previously issued mortgages.
Will be completely ignored since it can't be refuted- worse I don't even this the other two understand the points here.
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