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re: Who/what entity would you say is most to blame for the 2007-2009 housing crisis/recession?
Posted on 2/3/22 at 1:56 pm to secfballfan
Posted on 2/3/22 at 1:56 pm to secfballfan
quote:
Barney Frank,
But backed by Clinton. That was after he was elected in 92, on the trail, as he said everyone should own a house… Frank just got the legislation written up…
0
Posted on 2/3/22 at 1:56 pm to hubreb
quote:
Bill Clinton - in 1999 we repealed Glass Steagall which separated banks and investment banks. During the years after that - securitization of home loans, credit card debt, and auto loans became a huge industry. That allowed banks to free up balance sheet and a huge new asset class was created for investors. Banks got more and more creative in lending and created new asset classes - as long as there were investors to buy it, then they created it. In 2006 and 2007 many broker dealers teamed up with mortgage companies - and basically said underwrite to these standards and we will buy everything you create -- fraud became very prevalent. It didn't matter at that time because as long as home prices were going up, it didn't matter - no losses. Then in February 2008 home prices dipped a bit and the route was on.
Damn, I forgot about this.
This was a MAJOR issue. 2008 probably never happens if Glass Steagall doesn't get amended.
Posted on 2/3/22 at 1:57 pm to grizzlylongcut
The govt forced banks to lend to minorities who could not afford the loans.
Posted on 2/3/22 at 1:59 pm to grizzlylongcut
Timeline shows Bush, McCain warning Dems of financial and housing crisis; meltdown
Barney Frank, other dems
Barney Frank, other dems
Posted on 2/3/22 at 2:00 pm to DeltaTigerDelta
quote:
The govt forced banks to lend to minorities who could not afford the loans.
that literally had nothing to do with it
Posted on 2/3/22 at 2:01 pm to grizzlylongcut
Congress
The could have fixed this in 2004 when Bush started raising the alarm.
Unfortunately, the GOP didn't want to be called rayyyyyyysisssss for imposing any degree of credit-worthiness or income on loans.
The could have fixed this in 2004 when Bush started raising the alarm.
Unfortunately, the GOP didn't want to be called rayyyyyyysisssss for imposing any degree of credit-worthiness or income on loans.
Posted on 2/3/22 at 2:01 pm to grizzlylongcut
S&P, Fitch, Moodys
All of the rating agencies lost sight of their mission.
All of the rating agencies lost sight of their mission.
Posted on 2/3/22 at 2:03 pm to grizzlylongcut
None of that happens if the rating and regulatory agencies did their job and properly rated the mortgage backed securities based on the loans they contained.
The rest was the market doing stupid shite. If I know I can sell a bunch of flood cars to a third party….I’ll buy as many as I can find….and if they know they can sell them again….they’ll buy as many as they can find….and so on.
Repealing Glass Stegal and the govt creating incentives to loan to poor risks just added fuel to the fire.
The rest was the market doing stupid shite. If I know I can sell a bunch of flood cars to a third party….I’ll buy as many as I can find….and if they know they can sell them again….they’ll buy as many as they can find….and so on.
Repealing Glass Stegal and the govt creating incentives to loan to poor risks just added fuel to the fire.
This post was edited on 2/3/22 at 2:06 pm
Posted on 2/3/22 at 2:06 pm to squid_hunt
quote:
I was making about 50k at the time and told I could get a 300k loan
if you have the 60k downpayment, $1500 payment isn't going to much more than rent.
Posted on 2/3/22 at 2:07 pm to grizzlylongcut
Bill Clinton set the ball in motion with his policies around "everyone needs a house".
Posted on 2/3/22 at 2:07 pm to Dire Wolf
quote:
if you have the 60k downpayment, $1500 payment isn't going to much more than rent.
It was a VA loan. No down payment.
Posted on 2/3/22 at 2:10 pm to SlowFlowPro
quote:
Funny timing I was just re-watching this scene and was about to make a thread on the M/T board about it.
That is such a weirdly excellent movie. I mean for a fairly bland topic it's supremely well done.
Posted on 2/3/22 at 2:11 pm to grizzlylongcut
The gubment as usual. They incentivized and basically forced banks to give cheap mortgages to uncreditworthy borrowers in the name of housing equity.
Who knew that would result in massive defaults?
Damn near everyone.
And so they tried to dilute the risk by packing them in “tranches” and selling them. Didn’t work out so well.
Who knew that would result in massive defaults?
Damn near everyone.
And so they tried to dilute the risk by packing them in “tranches” and selling them. Didn’t work out so well.
Posted on 2/3/22 at 2:11 pm to grizzlylongcut
Hedge funds, banks, and insurance companies caused the subprime mortgage crisis. Hedge funds and banks created mortgage-backed securities. The insurance companies covered them with credit default swaps. Demand for mortgages led to an asset bubble in housing.
When the Federal Reserve raised the federal funds rate, it sent adjustable mortgage interest rates skyrocketing. As a result, home prices plummeted, and borrowers defaulted. Derivatives spread the risk into every corner of the globe. That caused the 2007 banking crisis, the 2008 financial crisis, and the Great Recession. It created the worst recession since the Great Depression.
Of course, the ultimate cause of the subprime mortgage crisis boils down to human greed and failed wisdom. The prime players were banks, hedge funds, investment houses, ratings agencies, homeowners, investors, and insurance companies.
Banks lent, even to those who couldn’t afford loans. People borrowed to buy houses even if they couldn’t really afford them. Investors created a demand for low premium MBS, which in turn increased demand for subprime mortgages. These were bundled in derivatives and sold as insured investments among financial traders and institutions.
So when the housing market became saturated and interest rates started to rise, people defaulted on their loans which were bundled in derivatives. This was how the housing market crisis brought down the financial sector and caused the 2008 Great Recession.
When the Federal Reserve raised the federal funds rate, it sent adjustable mortgage interest rates skyrocketing. As a result, home prices plummeted, and borrowers defaulted. Derivatives spread the risk into every corner of the globe. That caused the 2007 banking crisis, the 2008 financial crisis, and the Great Recession. It created the worst recession since the Great Depression.
Of course, the ultimate cause of the subprime mortgage crisis boils down to human greed and failed wisdom. The prime players were banks, hedge funds, investment houses, ratings agencies, homeowners, investors, and insurance companies.
Banks lent, even to those who couldn’t afford loans. People borrowed to buy houses even if they couldn’t really afford them. Investors created a demand for low premium MBS, which in turn increased demand for subprime mortgages. These were bundled in derivatives and sold as insured investments among financial traders and institutions.
So when the housing market became saturated and interest rates started to rise, people defaulted on their loans which were bundled in derivatives. This was how the housing market crisis brought down the financial sector and caused the 2008 Great Recession.
Posted on 2/3/22 at 2:12 pm to grizzlylongcut
Posted on 2/3/22 at 2:12 pm to squid_hunt
All depends on down payment
Posted on 2/3/22 at 2:13 pm to grizzlylongcut
quote:
GW Bush didn't reverse any of their bad policies though
quote:
Well, it was racist to try and reel em in. And as you know, there is nothing worse than being called a racist in America in the 21st Century.
This is exactly correct. I'm not a huge fan of Bush but he did give a speech during that time frame warning of a looming housing crisis if something wasn't done.
The democrats and left wing immediately accused him of not wanting black people to own homes. The blame falls squarely at their feet
Posted on 2/3/22 at 2:14 pm to SquatchDawg
quote:
None of that happens if the rating and regulatory agencies did their job and properly rated the mortgage backed securities based on the loans they contained.
they were using home price appreciation baselines - as long as that stayed true it would have never ended
the rest of the docs would have looked correct, because fraud was so prevalent
there was a huge appetite for these levered assets across the pond - SIVs were buying this stuff by the billions
Posted on 2/3/22 at 2:16 pm to grizzlylongcut
Congress repealing Glass-Steagall, the Clinton initiative creating Fannie Mae and Freddie Mac forcing banks to make subprime loans, and AIG/LIBOR being the judge, jury, and executioner for rating mortgage-backed securities as safe while also selling them.
Posted on 2/3/22 at 2:16 pm to Salviati
So it has nothing to do with the fact that the Federal Government basically forced those banks to write the loans?
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