Capitol Hill Blue Forums Political Issues The Obama Administration 6,825.42 Nice job Mr. President

MA, you are so wrong about banks, business and loans. Hard to know where to start, but do you any evidence at all that banks didn't knowingly make risky loans until Janet Reno stepped in? That is absolute nonsense and you know it.

Also, which minority, low earner is it that thought up derivatives? Designed clunker cars? Drove up the home real estate market in speculation by buying 2nd and 3rd homes?

Every single study many of which have been cited here on RR several times shows that the minority loan program has had no or negligible impact on this crisis.

It is not the small amount put into such loans that caused the crash, it is greedy, lying, manipulative lenders and their investors who did it. Of course, the Fed and President Bush waved them on through the gates, but even they aren't the cause.

This may be the most succinct deconstruction of the post that initiated this thread.

I am disappointed, Ma, that you have felt the need to pursue a political/philosophical argument based on perception rather than facts, as it obscures what could be pertinent points. I am in general agreement that the President's administration has the responsibility for managing the economy - he is, after all, the "chief executive" - and that his policies are affected by the makeup of Congress and its support (although I think that persuasion and public support can do wonders - e.g., Ronald Reagan's presidency). I think your timeframes are woefully off, however - blaming President Obama for virtually any of the present downturn is not only disingenuous, but destroys the credibility of the argument. I do agree with the premise that eventually (and I agree with the 2-4 year judgment) the economy will reflect the policies and priorities of the President, but they certainly don't yet. Which is why, I think, except among die-hard Republican apologists, the majority of the population recognizes that the current economic mess is almost purely the result of pitiful economic policy of the Republican Party - and most particularly President Bush - which controlled the entire government throughout the period when the defects were created/encouraged. Blaming the Democrats, and Obama in particular, is not only intellectually dishonest, it is ridiculously juvenile and a purely partisan exercise - and I am sorry to see you perpetuating it here.

Another fatal defect in your premise, moreover, is equating the condition of the stock market to the health of the economy. It is merely one factor, which is why it is not viewed as an economic indicator by economists. Savings, spending, manufacturing, employment, inflation and monetary policies are much better indicators, and are far less volatile. All these indicators, however, cannot be viewed as "snapshots" of economic health, but are "indicators" and have to be viewed as trends. the trends, of course, defeat the argument entirely. False premises produce false results.

Please do not hold back! I can take it, but I might blush a little.

The thing is, I don't disagree with what Austin posted. We agree more than not as a matter of fact.

As for the last vestiges of de facto racial discrimination ("red-lining") , sometimes the truth hurts I guess.

Business was never meant to be "fair". Business is meant to make money. By loaning money to people who couldn't possibly repay their loans unless their every wish came true, we are is the crapper today. he rootcause is that feel good initiative spknsored by the Reno DOJ. Now, you may think that I am spouting racist lies, and I do believe that your ignoring the facts in the name political correctness and hero worship, but the facts remain that banks were made to make profits. Loaning money to people who were bad bets was never their policy until the DOJ started prosecuting them for "red-lining", another name for "good business" btw. Oh I am sure there were a few who did discriminate, but the vast majority wouldn't loan their mother money if she couldn't meet their lending criteria.

The idea that there was some inherent evil hiding in the banking industry is laughable. They were the ultimate capitalists. Their ONLY job was to create wealth, and they would take anybody's money to do so, as long as they could meet the conditions of the loan. So here come Janet reno on her white (no racial slur here) horse to save the poor and destitute from their hell on earth. Threatening banks with prosecution and encouraging protests.

You are naive. You may know the market better than I, although the market does indeed react to what any President says, but I am pretty sure I know politics better than you. I have a realistic idea of how it works and why it doesn't. Bill Clinton wanted to cement that voting block so he became the hero.

Sticks and stones Chuck, fire away. I can trace it back to almost the very beginning of the end and ultimately it was the sub-prime mess that got us into this mess, and it was the Clinton Administration who made the rules that lead directly to the sub-prime mess. No good deed goes unpunished, and I am not so sure that Clinton considered it as much a good deed as he did smart politics.

And NO, I have no sympathy for the dolts who didn't read their mortgage contracts, or knew they were making a mistake but made it anyway. As far as I am concerned they are the ones who should be prosecuted for this mess. White, black, orange, it doesn't matter, they gambled and lost and we will end up paying their debt.

I can trace it back to almost the very beginning of the end and ultimately it was the sub-prime mess that got us into this mess, and it was the Clinton Administration who made the rules that lead directly to the sub-prime mess.

The Beginning of the End: Subprime Mortgage Debacle Began With President Clinton

In July 1993, President Clinton asked regulators to reform the CRA in order to make examinations more consistent, clarify performance standards, and reduce cost and compliance burden. Robert Rubin, the Assistant to the President for Economic Policy, under President Clinton, explained that this was in line with President Clinton's strategy to "deal with the problems of the inner city and distressed rural communities". Discussing the reasons for the Clinton administration's proposal to strengthen the CRA and further reduce red-lining, Lloyd Bentsen, Secretary of the Treasury at that time, affirmed his belief that availability of credit should not depend on where a person lives, "The only thing that ought to matter on a loan application is whether or not you can pay it back, not where you live." Bentsen said that the proposed changes would "make it easier for lenders to show how they're complying with the Community Reinvestment Act", and "cut back a lot of the paperwork and the cost on small business loans".

In 1995, the CRA regulations were substantially revised to address criticisms that the regulations, and the agencies' implementation of them through the examination process, were too process-oriented, burdensome, and not sufficiently focused on actual results. The agencies also changed the CRA examination process to incorporate these revisions. Information about banking institutions' CRA ratings were made available via web page for public comment. The Office of the Comptroller of the Currency (OCC) also revised its regulations, allowing lenders subject to the CRA to claim community development loan credits for loans made to help finance the environmental cleanup or redevelopment of industrial sites when it was part of an effort to revitalize the low- and moderate-income community where the site was located.

During March 1995 congressional hearings William A. Niskanen, chair of the Cato Institute, criticized the proposals for political favoritism in allocating credit and micromanagement by regulators, and that there was no assurance that banks would not be expected to operate at a loss. He predicted they would be very costly to the economy and banking system, and that the primary long term effect would be to contract the banking system. He recommended Congress repeal the Act.
Responding to concerns that the CRA would lower bank profitability, a 1997 research paper by economists at the Federal Reserve found that "[CRA] lenders active in lower-income neighborhoods and with lower-income borrowers appear to be as profitable as other mortgage-oriented commercial banks".Speaking in 2007, Federal Reserve Chair Ben Bernanke noted that, "managers of financial institutions found that these loan portfolios, if properly underwritten and managed, could be profitable" and that the loans "usually did not involve disproportionately higher levels of default".

According to a 2000 United States Department of the Treasury study of lending trends in 305 U.S. cities between 1993 and 1998, $467 billion in mortgage credit flowed from CRA-covered lenders to low- and medium-income borrowers and areas. In that period, the total number of loans to poorer Americans by CRA-eligible institutions rose by 39% while loans to wealthier individuals by CRA-covered institutions rose by 17%. The share of total US lending to low and meduim income borrowers rose from 25% in 1993 to 28% in 1998 as a consequence.

In October 1997, First Union Capital Markets and Bear, Stearns & Co launched the first publicly available securitization of Community Reinvestment Act loans, issuing $384.6 million of such securities. The securities were guaranteed by Freddie Mac and had an implied "AAA" rating. The public offering was several times oversubscribed, predominantly by money managers and insurance companies who were not buying them for CRA credit.
Legislative changes 1999.

In 1999 the Congress enacted and President Clinton signed into law the Gramm-Leach-Bliley Act, also known as the "Financial Services Modernization Act," which repealed the part of the Glass-Steagall Act, which prohibited a bank from offering a full range of investment, commercial banking, and insurance services. The bill was killed in 1998 because Senator Phil Gramm wanted the bill to expand the number of banks which no longer would be covered by the CRA. He also demanded full disclosure of any financial deals which community groups had with banks, accusing such groups of "extortion." In 1999 Senators Christopher Dodd and Charles E. Schumer broke another deadlock by forcing a compromise between Gramm and the Clinton administration which wanted to prevent banks from expanding into insurance or securities unless they were compliant with the CRA. In the final compromise, the CRA would cover bank expansions into new lines of business, community groups would have to disclose certain kinds of financial deals with banks, and smaller banks would be reviewed less frequently for CRA compliance. On signing the Gramm-Leach-Bliley Act, President Clinton said that it, "establishes the principles that, as we expand the powers of banks, we will expand the reach of the [Community Reinvestment] Act".

And NO, I have no sympathy for the dolts who didn't read their mortgage contracts, or knew they were making a mistake but made it anyway. As far as I am concerned they are the ones who should be prosecuted for this mess. White, black, orange, it doesn't matter, they gambled and lost and we will end up paying their debt.

The sub-prime mortgage industry is a direct result of DOJ blackmail against the banking industry.

Phil,
spoken like a true lawyer.

I am positive that banks did not make as many bad loans prior to the Clinton/Reno period than after.

The sub-prime mortgage industry is a direct result of DOJ blackmail against the banking industry. The power of the US justice department was aimed directly at the banking industry with the expressed goal of forcing them to loan money to people who did not qualify for thise loans.

...I believe that it was Fannie and Freddie that made securities out of the bad loans.

The facts are simple.

I remember the editorials about the Bush recession starting right after he tok office, I am just applying the same editorial standards as the NY Times and the Atlanta Journal Constitution did.

On Election Day, the economy was by all accounts still strong. The unemployment rate was at 3.9 percent, a 30-year low. Consumer confidence was extremely high despite higher oil prices and fluctuations in the stock market. Economic growth in 2000 was expected to be the strongest since the end of Ronald Reagan's first term in 1984. A Bloomberg News survey of economists showed that they expected the economy to expand by a healthy 3.7 percent over the next 12 months.

To be fair the market closed UP today.

6,875.84 +149.82 +2.23%