The lie that the Federal Govt. caused the Housing Market Crash.....Must stop immediately!!

[busterbrown]

Source: Home Mortgage Disclosure Act data and Center for Public Integrity Research..

Securities created from subprime loans widely blamed for the economic meltdown. These top 25 subprime lenders were responsible for nearly $1 trillion of the loans. The loans listed below consist of mortgage applications between 2005 and 2007 at the peak and collapse of the subprime market.
These top 25 lenders were responsible for nearly $1 trillion of subprime loans, according to a Center for Public Integrity analysis of 7.2 million “high interest” loans made from 2005 through 2007. Together, the companies account for about 72 percent of high-priced loans reported to the government at the peak of the subprime market. Securities created from subprime loans have been blamed for the economic collapse from which the world’s economies have yet to recover.

Countrywide Financial Corp.
Amount of Subprime Loans: At least $97.2 billion

Ameriquest Mortgage Co./ACC Capital Holdings Corp.
Amount of Subprime Loans: At least $80.6 billion

New Century Financial Corp.
Amount of Subprime Loans: At least $75.9 billion

First Franklin Corp./National City Corp./Merrill Lynch & Co.
Amount of Subprime Loans: At least $68 billion

Long Beach Mortgage Co./Washington Mutual
Amount of Subprime Loans: At least $65.2 billion

Option One Mortgage Corp./H&R Block Inc.
Amount of Subprime Loans: At least $64.7 billion

Fremont Investment & Loan/Fremont General Corp.
Amount of Subprime Loans: At least $61.7 billion

Wells Fargo Financial/Wells Fargo & Co.
Amount of Subprime Loans: At least $51.8 billion

HSBC Finance Corp./HSBC Holdings plc
Amount of Subprime Loans: At least $50.3 billion ***

WMC Mortgage Corp./General Electric Co.
Amount of Subprime Loans: At least $49.6 billion

BNC Mortgage Inc./Lehman Brothers
Amount of Subprime Loans: At least $47.6 billion ***

Chase Home Finance/JPMorgan Chase & Co.
Amount of Subprime Loans: At least $30 billion

Accredited Home Lenders Inc./Lone Star Funds V
Amount of Subprime Loans: At least $29.0 billion

IndyMac Bancorp, Inc.
Amount of Subprime Loans: At least $26.4 billion

CitiFinancial / Citigroup Inc.
Amount of Subprime Loans: At least $26.3 billion

EquiFirst Corp./Regions Financial Corp./Barclays Bank plc
Amount of Subprime Loans: At least $24.4 billion

Encore Credit Corp./ ECC Capital Corp./Bear Stearns Cos. Inc.
Amount of Subprime Loans: At least $22.3 billion

American General Finance Inc./American International Group Inc. (AIG)
Amount of Subprime Loans: At least $21.8 billion ***

Wachovia Corp.
Amount of Subprime Loans: At least $17.6 billion.

GMAC LLC/Cerberus Capital Management
Amount of Subprime Loans: At least $17.2 billion ***

NovaStar Financial Inc.
Amount of Subprime Loans: At least $16 billion

American Home Mortgage Investment Corp.
Amount of Subprime Loans: At least $15.3 billion

GreenPoint Mortgage Funding Inc./Capital One Financial Corp.
Amount of Subprime Loans: At least $13.1 billion

ResMAE Mortgage Corp./Citadel Investment Group
Amount of Subprime Loans: At least $13 billion

Aegis Mortgage Corp./Cerberus Capital Management
Amount of Subprime Loans: At least $11.5 billi

[Proud Liberal Dem]

1. The government didn't do enough to prevent it IMHO

But that was the order of the day under the eight years of Bushco. Still, the government hardly can be blamed for directly causing the meltdown.

[FBaggins]

2. Except that they did cause it

Or better put... They caused it too.

Poor regulation (in some casesfover, in others under) and really poor oversight.

Banking had more regulation than just about anything shy of nuclear power... and at more levels... yet this read allowed (and in some cases encouraged) to happen.

This isn't too ignore those banks that screwed up royally. Theres plenty of blame to go around.

[David Heyer]

3. What led to the Housing Market Crash?

Legislation that allowed banks to bundle mortgages and sell them as commodities was passed during Clinton's time in office. Clinton was acting on the information he got from bankers that this was necessary for the economy. This led to balloon mortgages which led to defaults on mortgages which led to a lot of empty houses which created the Housing Market Crash. The writing was on the wall during Bush's term. If only he had chosen to act before the roof caved in.
In all honesty you can't be expected to write sound mortgages if you can sell those mortgages to others who will then assume the full effect of defaults.
The changes in Banking regulation that were passed in the 90's gave Bankers a license to steal. And that's what they did.
.

[busterbrown]

4. Are you not referring to Phil Gramm and a triangulating President Bill Clinton?

And There was an income verification law, which allowed a Certified Accountant to make up income numbers based on overtime...

[jmowreader]

5. The federal government created the conditions that allowed the crash to happen

Three pieces of legislation were responsible:

a. The Financial Services Modernization Act of 1999 repealed the part of the Glass-Steagall Act of 1933 that prohibited a financial institution from doing business in a combination of banking, securities and insurance. (This was also called the Gramm-Leach-Bliley Act.)

b. The Commodity Futures Modernization Act of 2000 outlawed regulation of the derivatives market.

c. The American Dream Downpayment Initiative of 2003 caused the government to provide downpayment and closing cost assistance to lower-income Americans.

All of these are nice on their own, but consider: The banks were not writing mortgages to low-income Americans out of the goodness of their hearts. To understand the reason for the crash you must understand three other financial terms: leveraged buyout, junk bond and collateralized debt obligation.

A leveraged buyout is a form of corporate takeover. The reason it's called "leveraged" is most of the money is borrowed. In Jackie Mason's infamous "What the hell is an LBO?" (which is funny but doesn't answer the question asked in the title) he points out that it takes less money to buy a $1 billion company than it does to buy a shoe-shine stand...because if the shoe-shine stand costs $3000 you need to bring $3000 in cash, but all you need to buy a $1 billion company is a list of names you can borrow shitloads of money from.

In the first "golden age" of LBO financing junk bonds were used. Now, a junk bond is really a risky bond that pays lots of interest to compensate the More Balls Than Brains Club for buying it. When junk bonds first were identified they were called "fallen angels" - bonds issued by good companies at "investment grade" that had been downgraded because their companies had come into hard times. The junk bonds issued for LBOs started out life as sub-investment-grade paper...and some of really WAS junk, like the "pay in kind" security that made its quarterly interest payments in more junk bonds rather than in cash like investment-grade bonds do.

The first golden age died when the junk market died in the 1990s. To replace it, raiders like Mitt Romney (who was one of the pioneers in using what I am about to describe) realized they could securitize mortgages and write bonds against them. These bonds were called "collateralized debt obligations."

If you were to write a CDO on prime-rate mortgages you'd have a nice solid investment-grade note, suitable for insurance companies and other investors legally required to buy safe paper. And it would pay T-bills plus 40 basis points, which would be 3.58 percent on the day I wrote this. People who buy into LBOs do NOT want to make three-and-a-half percent on their money...with the risk inherent in an LBO, you'd be a fucking idiot to take T-bills-plus-40. So to get the money they need to buy a company and fire all its workers, they need to offer twelve to twenty percent...and the only way you can do that is to write CDOs with extremely risky mortgages underlying.

So in short...Mitt Romney needed money to buy companies, the only way to get it was to write risky-as-hell CDOs, and the only way to write them was to talk way too many people into taking un-retirable mortgages. With the help of the GOP, he could do it.

When Mitt was running for president he claimed he could fix the economy. Hiring that man to be president would have been like hiring a fireman who puts out all the fires he starts. Yeah, he could fix the economy because he knew how he broke it in the first place.