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1. subprime mortgages are not illegal, but would NOT have happened at the rate they did, if the government had not lowered the standards in 1995
2. the packaging of mortgages is not illegal, MBS (mortgage backed securities) in fact are a good thing for smaller companies to get rid of debts, the banks buy the packaged mortgages, and it adds assets as they now own not only the property but also the notes which are receivable assets... the problem was bad loans to idiots that could not pay those loans.... and this was considered a good thing, since historically housing didn't decrease, but always increased
An MBS can be bought and sold through a broker and the minimum investment varies between issuers. It is issued by either a federal government agency company, government-sponsored enterprise (GSE), or a federally sponsored/backed private financial company.
3. the bubble bursting in 06/07 was not due to any policies that came around in 04/05...they as most were the interest only or arms that had a 5 year on them...meaning those bad loans were made in 99/00 there is the reason why as you ask (you have been told repeatedly , yet you refuse to acknowledge it)
4. the whole point which you fail/refuse to admit, is that when HUD/FHA changed the rules in 1995, they opened up this can of worms
a) it was a '''nice''' thing to open up credit to the impoverished or those with less than stellar credit.. but it had its consequences
b) the packaging of loans (MBS (mortgage backed securities)) and (subprime MBSs issued by various structures, such as CMOs) started a long time ago.... as did most ABS (asset backed securities)
….1)Ginnie Mae guaranteed the first mortgage pass-through security of an approved lender in 1968
….2) In 1981, Fannie Mae issued its first mortgage pass-through, called a mortgage-backed security..
….3) In 1983, Freddie Mac issued the first collateralized mortgage obligation.
….4) in 1995 HUD/FHA eased the rules to Fannie Mae/ Freddie Mac for them to up their share of packaging of loans (MBS (mortgage backed securities)) and (subprime MBSs issued by various structures, such as CMOs)
so just the bolded from above:
1994/5
[b]In addition to changing its guidelines, Fannie Mae plans a national educational campaign that will seek to teach recent immigrants and minorities how to obtain mortgages. The campaign will be aimed particularly at immigrants in a dozen "gateway" cities where the percentage of home ownership has been declining.
[b]Mortgage experts have estimated that up to two million American households are excluded from buying homes now because of conservative mortgage lending standards. These include Americans with minor blemishes on their credit records, for such things as changing jobs repeatedly or failing to pay utility bills on time.
1996:
THAT has changed in the last few years, however, as secondary-market investors such as the Federal National Mortgage Association, better known as Fannie Mae -- which package blocks of loans and sell them to private investors -- have made it easier for mortgage lenders to market low-down-payment loans.
1997: In 1995, seeking to save his department from elimination by the newly elected Republican-led Congress, Housing Secretary Henry G. Cisneros adopted a ''national homeownership strategy'' that eased requirements to qualify for Federal Housing Administration-insured loans
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
One measure of the expanding subprime market is the number of loans that have been packaged and sold as asset-backed securities -- meaning that investors buy shares in those resold loans and then reap the returns as the mortgages are paid off.
1999:
But it got greater impetus in late 1994 when Fannie Mae, the nation's largest purchaser of mortgages from banks and other home-mortgage originators, introduced pilot programs to stimulate the home sales market in New York and Boston. Fannie Mae packages these loans with other mortgages as securities for sale to investors. Creating a market to which mortgage originators can sell their loans encourages them to lend more
you say we deflect, yet we provide the evidence and you refuse to listen.... the recession (at least the housing bubble / bust (1995-2007)) was government caused, all in the name of home-ownership for those with bad credit
The biggest issue is what happened in the early 2000s. Remember this caused a GLOBAL FINANCIAL CRISIS and lending standards vary between countries. The private sector did a bunch of shenanigans with bad loans and became historically overleveraged when their models turned out to be wrong.
1. subprime mortgages are not illegal, but would NOT have happened at the rate they did, if the government had not lowered the standards in 1995
2. the packaging of mortgages is not illegal, MBS (mortgage backed securities) in fact are a good thing for smaller companies to get rid of debts, the banks buy the packaged mortgages, and it adds assets as they now own not only the property but also the notes which are receivable assets... the problem was bad loans to idiots that could not pay those loans.... and this was considered a good thing, since historically housing didn't decrease, but always increased
An MBS can be bought and sold through a broker and the minimum investment varies between issuers. It is issued by either a federal government agency company, government-sponsored enterprise (GSE), or a federally sponsored/backed private financial company.
3. the bubble bursting in 06/07 was not due to any policies that came around in 04/05...they as most were the interest only or arms that had a 5 year on them...meaning those bad loans were made in 99/00 there is the reason why as you ask (you have been told repeatedly , yet you refuse to acknowledge it)
4. the whole point which you fail/refuse to admit, is that when HUD/FHA changed the rules in 1995, they opened up this can of worms
a) it was a '''nice''' thing to open up credit to the impoverished or those with less than stellar credit.. but it had its consequences
b) the packaging of loans (MBS (mortgage backed securities)) and (subprime MBSs issued by various structures, such as CMOs) started a long time ago.... as did most ABS (asset backed securities)
….1)Ginnie Mae guaranteed the first mortgage pass-through security of an approved lender in 1968
….2) In 1981, Fannie Mae issued its first mortgage pass-through, called a mortgage-backed security..
….3) In 1983, Freddie Mac issued the first collateralized mortgage obligation.
….4) in 1995 HUD/FHA eased the rules to Fannie Mae/ Freddie Mac for them to up their share of packaging of loans (MBS (mortgage backed securities)) and (subprime MBSs issued by various structures, such as CMOs)
so just the bolded from above:
1994/5
[b]In addition to changing its guidelines, Fannie Mae plans a national educational campaign that will seek to teach recent immigrants and minorities how to obtain mortgages. The campaign will be aimed particularly at immigrants in a dozen "gateway" cities where the percentage of home ownership has been declining.
[b]Mortgage experts have estimated that up to two million American households are excluded from buying homes now because of conservative mortgage lending standards. These include Americans with minor blemishes on their credit records, for such things as changing jobs repeatedly or failing to pay utility bills on time.
1996:
THAT has changed in the last few years, however, as secondary-market investors such as the Federal National Mortgage Association, better known as Fannie Mae -- which package blocks of loans and sell them to private investors -- have made it easier for mortgage lenders to market low-down-payment loans.
1997: In 1995, seeking to save his department from elimination by the newly elected Republican-led Congress, Housing Secretary Henry G. Cisneros adopted a ''national homeownership strategy'' that eased requirements to qualify for Federal Housing Administration-insured loans
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
One measure of the expanding subprime market is the number of loans that have been packaged and sold as asset-backed securities -- meaning that investors buy shares in those resold loans and then reap the returns as the mortgages are paid off.
1999:
But it got greater impetus in late 1994 when Fannie Mae, the nation's largest purchaser of mortgages from banks and other home-mortgage originators, introduced pilot programs to stimulate the home sales market in New York and Boston. Fannie Mae packages these loans with other mortgages as securities for sale to investors. Creating a market to which mortgage originators can sell their loans encourages them to lend more
you say we deflect, yet we provide the evidence and you refuse to listen.... the recession (at least the housing bubble / bust (1995-2007)) was government caused, all in the name of home-ownership for those with bad credit
dude- nobody is going to read your gibberish manifesto-
but for a quick lesson-
Subprime loans grew in aughts due to securitization and the search for returns, wasn't just government that juiced risk appetite- hint if nobody bought the subprime tape banks would stop lending. Buyers wanted higher coupons on their bonds- thus the risk appetite grew which lead lenders (including shadow banking sector which you don't seem to grasp concept of) to chase returns via higher coupon and make more and more risky loans. Add in the fact that models saw no risk here, in fact between the thought that housing doesn't go down and the magic of securitization it let bonds with billions of dollar at original face be rated AAA even though it was made up of only subprime paper...I'd take a quick guess that I have more experience here than you considering I do this for a living. ON your a thread earlier this year I believe I smoked you again on this. But thanks for lesson on MBS and CDOs. Let me know next time your checking underlying collateral on busted CMBS and deciding if Dutch whole loan pools with LTV of 125 are better buys than Italian ones at 85. IF you're repo-ing MBS and arguing bid/ask with desks or chastising services b/c nobody ever asked borrowers who stopped paying to actually write a check. How many REO's have you dealt with? Just checking here...but guessing your little cribbed manifesto doesn't cover much fo this...but keep thinking you got this!
Are you ignoring the facts and proving to everyone here that you are too ignorant to discuss the issue and why it's related? That's on you not me.
If you're deflecting because you are uneducated about the subject then stay out of the conversation. You wont come across as ridiculous.
Keep making it about me instead of deflecting and you'll be embarrassed yet again.
Here's the best part and why you post is absurd. "Quote:
Remarks on Signing the Garn-St Germain Depository Institutions Act of 1982
~October 15, 1982"
You posted this so dont try and deflect. Again how does somehting that passed on Mar 31 1980 cause 85 percent of all S and Ls to loose money in 1980? how did that cause the industry as a whole to be 120 billion in debt. Qhat ever you do, don't answer that question. Don't even acknowledge it. Just deflect and ignore your own inability to understand the simple fact that something which happens after the fact isn't the cause. Get it yet? School is out.
Are you related to another member here? ( get a clue: it's never been "about him or you" ~ not now, not here, not ever ... )
As for this other incomprehensible nonsense above: for one thing, get your chronology straight.
Take a passing glance at something like this as an overview or chronological timeline ( if possible drag yourself away from your own mirror for a change of pace ~ granted you must be quite the handsome one to be so self-absorbed ):
1966-1979 Market interest rates fluctuate with increasing intensity and S&Ls experience difficulty with each interest rate rise. Interest rate ceilings prevent S&Ls from paying competitive interest rates on deposits. Thus, every time the market interest rates rise, substantial amounts of funds are withdrawn by consumers for placement in instruments with higher rates of return. This process of deposit withdrawal ("disintermediation") and the subsequent deposit influx when rates rise ("reintermediation") leaves S&Ls highly vulnerable. Concurrently, money market funds become a source of competition for S&L deposits. S&Ls are additionally restricted by not being allowed to enter into business other than accepting deposits and granting home mortgage loans.
1967--State of Texas approves major liberalization of S&L powers. Property development loans of up to 50% of net worth are allowed.
1972--Hunt Commission recommendations would have created federal savings banks to replace S&Ls. The banks would have had additional authority to make commercial loans and invest in commercial paper.
1973--FINE Study would have granted same powers for S&Ls as for banks, including checking accounts. Also recommends consolidation of the regulators. Interest rate insurance was recommended if S&Ls are to remain primarily involved in housing finance.
1978--Financial Institutions Regulatory and Interest Rate Control Act of 1978 enacted. Weak version of previous recommendations. Allows S&Ls to invest up 5% of assets in each of land development, construction, and education loans.
1979--Doubling of oil prices. Inflation moves into double digits for second time in five years.
1980-1982 Statutory and regulatory changes give the S&L industry new powers in the hopes of their entering new areas of business and subsequently returning to profitability. For the first time, the government approves measures intended to increase S&L profits as opposed to promoting housing and homeownership.
March, 1980--Depository Institutions Deregulation and Monetary Control Act (DIDMCA) enacted. The law is a Carter Administration initiative aimed at eliminating many of the distinctions among different types of depository institutions and ultimately removing interest rate ceiling on deposit accounts. Authority for federal S&Ls to make ADC (acquisition, development, construction) loans is expanded. Deposit insurance limit raised to $100,000 from $40,000. This last provision is added without debate.
November, 1980--Federal Home Loan Bank Board reduces net worth requirement for insured S&Ls from 5 to 4 percent of total deposits. Bank Board also removes limits on the amounts of brokered deposits an S&L can hold.
August, 1981--Tax Reform Act of 1981 enacted. Provides powerful tax incentives for real-estate investment by individuals. This legislation helps create a "boom" in real estate and contributes to over-building.
September, 1981--Federal Home Loan Bank Board permits troubled S&Ls to issue "income capital certificates" that are purchased by FSLIC and included as capital. Rather than showing that an institution is insolvent, the certificates make it appear solvent.
1982-1985 Reductions in the Bank Board's regulatory and supervisory staff. In 1983, a starting S&L examiner is paid $14,000 a year. The average examiner has only two years on the job. Examiner salaries are paid through OMB, not the Bank Board. During this period of supervisory and examination retraction, industry growth increases. Industry assets increase by 56% between 1982 and 1985. 40 Texas S&Ls triple in size between 1982 and 1986; many of them grow by 100% each year. California S&Ls follow a similar pattern.
January, 1982--Federal Home Loan Bank Board reduces net worth requirement for insured S&Ls from 4 to 3 percent of total deposits. Additionally, S&Ls are allowed to meet the low net worth standard not in terms of generally accepted accounting principles (GAAP), but of even more liberal regulatory accounting principles (RAP).
April, 1982--Bank Board eliminates restrictions on minimum numbers of S&L stock holders. Previously, it required at least 400 stock holders of which at least 125 had to be from "local community", with no individual owning more than 10% of stock and no "controlling group" more than 25%. Bank Board's new ownership regulation would allow a single owner. Purchases of S&Ls were made easier by allowing buyers to put up land and other real estate, as opposed to cash.
December, 1982--Garn - St Germain Depository Institutions Act of 1982 enacted. This Reagan Administration initiative is designed to complete the process of giving expanded powers to federally chartered S&Ls and enables them to diversify their activities with the view of increasing profits. Major provisions include: elimination of deposit interest rate ceilings; elimination of the previous statutory limit on loan to value ratio; and expansion of the asset powers of federal S&Ls by permitting up to 40% of assets in commercial mortgages, up to 30% of assets in consumer loans, up to 10% of assets in commercial loans, and up to 10% of assets in commercial leases.
December, 1982--In response to the massive defections of state chartered S&Ls to the federal system, Nolan Bill passes in California. Allows California-chartered S&Ls to invest 100% of deposits in any kind of venture. Similar plans adopted in Texas and Florida.
1983--Lower market interest rates return many S&Ls to health. 35% of institutions, however, still sustain losses. 9% of all S&Ls (representing 10% of industry assets) are insolvent by GAAP standards.
March, 1983--Edwin Gray becomes Chairman of the Federal Home Loan Bank Board. Beginning in 1984 and continuing throughout his tenure, regulatory and supervisory measures passed by the Bank Board begin the reversing of deregulation.
November, 1983--Bank Board raises net worth requirement for newly chartered S&Ls to 7%.
March, 1984--Failure of Empire Savings of Mesquite, TX. "Land flips" and other criminal activities are a pattern at Empire. This failure would eventually cost the taxpayers approximately $300 million.
April, 1984--Bank Board moves jointly with the FDIC to attempt to eliminate deposit insurance for brokered deposits. Federal court rejects this attempt in mid-1984 as overstepping statutory limits.
July, 1984--Bank Board requires S&L management to adopt policies and procedures for managing interest rate risk.
January, 1985--Bank Board limits the amount of brokered deposits to 5% of deposits at FSLIC insured institutions failing to meet their net worth requirements. Bank Board also limits direct investment (equity securities, real estate, service corporations, and operating subsidiaries) to the greater of 10% of assets or twice the S&L's net worth, provided the institution meets regulatory net worth.
March, 1985--Ohio bank holiday. Anticipated failure of Home State Savings Bank of Cincinnati, OH and possible depletion of Ohio state deposit insurance fund cause Governor Celeste to close Ohio S&Ls. Eventually, those that can qualify for federal deposit insurance are allowed to reopen.
May, 1985--S&L failures in Maryland eventually cause loss to state deposit insurance fund and Maryland taxpayers of $185 million. Ohio and Maryland S&L failures helped kill state deposit insurance funds.
July, 1985--Chairman Gray begins transfer of federal examiners to the twelve regional Federal Home Loan Banks so that they are no longer overseen by OMB and their salaries are paid directly by the Bank Board system.
August, 1985--Only $4.6 billion in FSLIC insurance fund. Chairman Gray tries to gain support for recapitalizing FSLIC on Capitol Hill. In 1986, GAO estimates the loss to the insurance fund to be around $20 billion.
December, 1985--Bank Board allows S&L examiners to "classify" questionable loans and other assets for the purpose of requiring loan loss reserves.
There was no question that small community banks had a problem, even Barney Frank recommended changes but I don't see Sun Trust or American Express as small community banks.
Reminds me of Reagan removing restrictions on S&L's back in the 1980's, we all know where that went.
Like you say, short memories.
To make a very long story short: it's a balancing act ~ like a juggler running out of hands.
From the chronology above:
Quote:
1980-1982 Statutory and regulatory changes give the S&L industry new powers in the hopes of their entering new areas of business and subsequently returning to profitability. For the first time, the government approves measures intended to increase S&L profits as opposed to promoting housing and homeownership.
From this point forward, with the desire to increase profits acting as the major objective, the increase in financialization began in earnest & with ideological conviction.
The FIRE (financial-insurance-real estate) sector was & still is all on the same page ~ to increase profits.
There never was & still isn't a mandate or requirement to re-sell mortgages as securities.
What is the purpose of a financial sector in any economy anyhow? For now, the purpose seems to be to serve itself.
dude- nobody is going to read your gibberish manifesto-
but for a quick lesson-
Subprime loans grew in aughts due to securitization and the search for returns, wasn't just government that juiced risk appetite- hint if nobody bought the subprime tape banks would stop lending. Buyers wanted higher coupons on their bonds- thus the risk appetite grew which lead lenders (including shadow banking sector which you don't seem to grasp concept of) to chase returns via higher coupon and make more and more risky loans. Add in the fact that models saw no risk here, in fact between the thought that housing doesn't go down and the magic of securitization it let bonds with billions of dollar at original face be rated AAA even though it was made up of only subprime paper...I'd take a quick guess that I have more experience here than you considering I do this for a living. ON your a thread earlier this year I believe I smoked you again on this. But thanks for lesson on MBS and CDOs. Let me know next time your checking underlying collateral on busted CMBS and deciding if Dutch whole loan pools with LTV of 125 are better buys than Italian ones at 85. IF you're repo-ing MBS and arguing bid/ask with desks or chastising services b/c nobody ever asked borrowers who stopped paying to actually write a check. How many REO's have you dealt with? Just checking here...but guessing your little cribbed manifesto doesn't cover much fo this...but keep thinking you got this!
wow...mighty astute of you
so now showing evidence from the NYT is a gibberish manifesto
you still refuse to acknowledge the actual issue or cause
so now showing evidence from the NYT is a gibberish manifesto
you still refuse to acknowledge the actual issue or cause
I for one am not questioning the validity of what was written in the NYT that you linked. However there is no way a writer in the 90s would have known about what was about occur in the mid 2000s.
Your analysis consistently ignores 60% of the market.
I for one am not questioning the validity of what was written in the NYT that you linked. However there is no way a writer in the 90s would have known about what was about occur in the mid 2000s.
Your analysis consistently ignores 60% of the market.
Bill (if I can call you Bill) or Mr. Smyth
I never said ""a writer in the 90s would have known about what was about occur in the mid 2000s. ""
what I and the NYT, and the FED have said is that the problems of the mid00's...were caused by the mid 90's
they all thought this is cool, look we are doing a good thing for those that have been locked out of home ownership.....but like most of the stuff out of Washington..... great idea, lousy plan
I never said ""a writer in the 90s would have known about what was about occur in the mid 2000s. ""
what I and the NYT, and the FED have said is that the problems of the mid00's...were caused by the mid 90's
they all thought this is cool, look we are doing a good thing for those that have been locked out of home ownership.....but like most of the stuff out of Washington..... great idea, lousy plan
However the efforts to promote home ownership were swamped by the investment banks you believed they found a great way to make a ton of money. Which they did, well until most of them lost it all. Their method involved promoting subprime mortgages, which were a key element in the structured investments that they were selling. Their new business lines grew so fast that the supply of subprime mortgages started to dry up; so they started buying subprime mortgage originators to guarantee a supply of subprime mortgages.
There is just noway to analyze the growth of subprime mortgages in the mid 2000s without understanding the demand from the top for subprime mortgages. This demand vastly exceeded the growth of subprime due to government policy.
This strategy is also why the first large banks that started to fail were heavily involved in bundling subprime mortgages.
However the efforts to promote home ownership were swamped by the investment banks you believed they found a great way to make a ton of money. Which they did, well until most of them lost it all. Their method involved promoting subprime mortgages, which were a key element in the structured investments that they were selling. Their new business lines grew so fast that the supply of subprime mortgages started to dry up; so they started buying subprime mortgage originators to guarantee a supply of subprime mortgages.
There is just noway to analyze the growth of subprime mortgages in the mid 2000s without understanding the demand from the top for subprime mortgages. This demand vastly exceeded the growth of subprime due to government policy.
This strategy is also why the first large banks that started to fail were heavily involved in bundling subprime mortgages.
Aka Golden West, Franklin First Financial, etc. been pointed out numerous times to these posters to try educate them on the topic to no avail. Instead they bury their heads in sand and harp on one part of the issue as though it’s the only thing. Thy also don’t get that appetite for subprime paper lead to things like synthetic Cdo or CDS on MBS where you can take exposure numerous times on same bond then lever up 30 to 1 But they don’t understand this aspect at all.
so now showing evidence from the NYT is a gibberish manifesto
you still refuse to acknowledge the actual issue or cause
So you can’t refute or don’t understand what I said. Got it, pretty obvious to all at this point.
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