Government usually is the problem

[fskimospy]

It is disingenuous of you to dismiss a scholary article/magazine because of it's slant. I have never in my life met a politically neutral economist dismissing the piece because of how the paper leans is unfair. Therefore, your counterargument should suffer the same fate.

It is disingenuous to describe The American Spectator as scholarly. It is a news opinion and commentary magazine. That's like calling the Huffington Post scholarly. Scholarly articles are subject to external review by objective evaluators, which this was clearly not.

So yes, I will dismiss an unreviewed piece in a right wing political advocacy magazine as one that, to be charitable, perhaps does not give the most accurate or unbiased evaluation of the causes of the financial crisis. You should also reconsider taking information from openly biased sources more skeptically.

As far as the GSEs are concerned, the underlying changes in the 1990s did great damage, as mentioned in the article. Furthermore, government turned a blind eye to the packaging of contracts and the relevant algorithms because it complemented their home-ownership policy. This allowed banks to spread the risk and Uncle Sam cheered them on. All the regulatory bodies looked at these contracts and gave them a thumbs up.

Saying that the government is at fault instead of the banks because it didn't stop them from making ruinously bad decisions is like saying the government is at fault for a murder because it didn't stop the guy first.

While government regulation of the finance sector has been woefully inadequate, that in no way absolves the finance sector of its irresponsibility and bad judgment.

Finally, as to your second point. Mexico is a 3rd world country and coming from a lower base. Canada's growth is 1-dimensional. Also, those two countries did not have an explicit home ownership policy. Finally, Germany's biggest market, the Eurozone, was roiling in deep recession during that time just as Germany was getting its groove back. So that specific time-frame is bias and, therefore, inadmissible.

You linked to a single year of housing data and tried to make a point. I evaluated it in light of all the OECD data going back seven years, including both sides of the financial crisis and you're going to complain about my timeframe? Give me a break.

You're coming up with excuses for why the data doesn't match your story. What was your basis for your hypothesis other than eyeballing it?

Finally, as to your last point, I disagree. I remember back in Feb or March 2008 when that happened. Some people from the NY Fed came to talk to us. Seeing that BoA was amongst the healthiest and largest bank, and with Countrywide imploding, Feds and Treasury officials talked the people at BoA into doing their patriotic duties by staving off panic with a purchase of that company. But, at this stage, it was simply of whack-a-mole. When one issue was brought under control another popped up. Unfortunately for BoA, when the good people of the Bush Administration left Obama came in and blamed them for everything, which was unfair.

So one of the largest and most powerful corporations in the world was duped into a ruinously bad financial decision by someone saying that it would be patriotic? If our banks are really led by people who are so easily manipulated and so incapable of basic due diligence this seems to be an indictment of the whole industry.

Nobody made BoA sign a contract, but contracts have consequences.

 

[senseamp]

BoA was nowhere near Wall Street when all this was going down, literally. They were in North or South Carolina doing pretty well for themselves. But everyone knew they had Wall Street envy. So when the Feds and Treasury came knocking, they were more than happy to oblige. But to take their goodwill and turn around and sue them for billions is extremely unfair. The government had no contingency plans. I remember Larry Summers, before the crisis, used to berate Japan for failing to let the "zombie" banks and other financial firms go under. When it was America's time to do the same he pussied out and did exactly what the Japanese were doing. Why? Because, letting firms fail can have a domino effect in finance. However, unlike Japan, the US government unfairly took the side of those who bought things they simply could not afford and used the banks as scapegoat. They sued them for political reasons. The government could've easily fixed its mistake by dismantling the GSEs or downsizing them. And cleaned up house at the Treasury, Federal Reserve, and other regulatory agencies as well. But, instead, they went on a political witch hunt and double downed on providing subsidized homes for those who could least afford it.

So what's the story here? Did BofA buy Countrywide or not? They did. Did they get any immunity from Countrywide's problems when buying it? They did not. You can blame the government, but BofA agreed to buy Countrywide not out of the goodness of its heart, but because it either was already getting something from the government, or it was hoping to get something. In any case, no returns, no refunds.

 

[pauldun170]

So what's the story here? Did BofA buy Countrywide or not? They did. Did they get any immunity from Countrywide's problems when buying it? They did not. You can blame the government, but BofA agreed to buy Countrywide not out of the goodness of its heart, but because it either was already getting something from the government, or it was hoping to get something. In any case, no returns, no refunds.

BoFa checked out Countrywide but wanted to back out of the deal. Political pressure and some maneuvering resulted in the deal going through.

At the time, folks had been familiar with CW's garbage for years. Ken Lewis thought the long term value outweighed the initial shock of cleaning up Countrywide's obligations. Plus the "goodwill" pays off when you send lobbyists to Washington.

 

[Dari]

These overpriced medallions are sinking small businesses. They should ask for their money back.

link

In major cities throughout the United States, taxi medallion prices are tumbling as taxis face competition from car-service apps like Uber and Lyft.

The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. Previous figures published by the city’s Taxi and Limousine Commission — showing flat prices — appear to have been incorrect, and the commission removed them from its website after an inquiry from The New York Times.

In other big cities, medallion prices are also falling, often in conjunction with a sharp decline in sales volume. In Chicago, prices are down 17 percent. In Boston, they’re down at least 20 percent, though it’s hard to establish an exact market price because there have been only five trades since July. In Philadelphia, the taxi authority recently failed to sell any medallions at its asking price of $475,000; it will try again, at $350,000...

 

[doubledeluxe]

It would take over 20 years to break even. Those prices make no sense.

 

[Sonikku]

Isn't our fault we were behaving this way, nobody was holding us accountable.

 

[Newell Steamer]

Leave it up to the market - they know what they are doing. We left it up to the market - we got the '08 Financial Crisis.

I thought anti-government folks wanted the private sector to police itself? Again, it did and we got '08.

Kick and scream all you want, but '08 happened because of greed from the private sector.

Yes, a person who makes $35K a year should not be asking for a $1M home loan,.. but, more importantly, the lender (aka, the Professional, The Market, The Gate Keeper frankly) should not have allowed it. And, to pass the blame of allowing it off to the government, means that the government should have been involved. OK - which is it; Big Government? Or Small Government?

You can't pick either / or, depending on when you feel like bashing the government.

 

[MagnusTheBrewer]

So, the OP blames the government for not making laws to keep the banks from doing stupid things? Makes sense.

 

[Bitek]

So, the OP blames the government for not making laws to keep the banks from doing stupid things? Makes sense.

It's an amazing insight to the self-rationalizations bankers are using to excuse themselves from any wrongdoing and shift the blame somewhere else.

 

[fskimospy]

So, the OP blames the government for not making laws to keep the banks from doing stupid things? Makes sense.

If the government acts and bad things happen it's the fault of the government for doing bad things. If someone else acts and bad things happen it's the fault of the government for letting them do bad things.

At no time is private industry, finance above all, expected to accept responsibility for their bad behavior.

 

[Dari]

So, the OP blames the government for not making laws to keep the banks from doing stupid things? Makes sense.

No. Government should not be encouraging home ownership with massive tax breaks, setting up colossal GSEs, and browbeating honest bankers to make loans for those who have no intentions of paying back the money.

We're not in the 1800s anymore and the federal government should not continue expansionist policies from that era.

 

[Meghan54]

No. Government should not be encouraging home ownership with massive tax breaks, setting up colossal GSEs, and browbeating honest bankers to make loans for those who have no intentions of paying back the money.

We're not in the 1800s anymore and the federal government should not continue expansionist policies from that era.

Just curious, what massive tax breaks? How was the gov't forcing banks or other lending institutions to make any loans at all, much less browbeating, or forcing, lenders to make sub-prime loans?

Did the gov't threaten to remove the banks' FDIC insurance coverage if sub-prime loans weren't made?

 

[Dari]

Just curious, what massive tax breaks? How was the gov't forcing banks or other lending institutions to make any loans at all, much less browbeating, or forcing, lenders to make sub-prime loans?

Did the gov't threaten to remove the banks' FDIC insurance coverage if sub-prime loans weren't made?

Here's a government website to get you started on the tax breaks:
http://www.usa.gov/shopping/realestate/mortgages/mortgages.shtml

here is another one:
http://www.makinghomeaffordable.gov/pages/default.aspx

and another:
http://www.rurdev.usda.gov/hsf_sfh.html

I'm sure your state and city have similar tax breaks as well.

As for the browbeating, I've seen it many times (and witnessed it one time during a private dinner). It's gotten worse since the financial crisis because, with balls the size of the moon, legislators feel that bankers owe the American people for saving them and should lend more money to them so they can buy more mcmansions. these people don't have a clue and are thankless.

 

[Newell Steamer]

As for the browbeating, I've seen it many times (and witnessed it one time during a private dinner).

,... well, which is it?

Did you see "it many times"? Or, did you "witness" it once?

 

[ralfy]

FWIW, we are only looking at the tip of the iceberg:

"Top Derivatives Expert Estimates Size of the Global Derivatives Market at $1,200 Trillion Dollars … 20 Times Larger than the Global Economy"

http://www.washingtonsblog.com/2012...he-size-of-the-global-derivatives-market.html

 

[Meghan54]

Here's a government website to get you started on the tax breaks:
http://www.usa.gov/shopping/realestate/mortgages/mortgages.shtml

here is another one:
http://www.makinghomeaffordable.gov/pages/default.aspx

and another:
http://www.rurdev.usda.gov/hsf_sfh.html

I'm sure your state and city have similar tax breaks as well.

As for the browbeating, I've seen it many times (and witnessed it one time during a private dinner). It's gotten worse since the financial crisis because, with balls the size of the moon, legislators feel that bankers owe the American people for saving them and should lend more money to them so they can buy more mcmansions. these people don't have a clue and are thankless.

Dari, did you even read any of the links you posted?

Obviously not, because if you had, you'd have noticed not ONE was relevant to the topic YOU brought up...massive tax breaks for the banks and/or homeowner and browbeating by the gov't forcing banks and other lending institutions to make specific types of loans.

This is the opening paragraph from the first link, an information page from a gov't website, USA.gov., called

Finding a mortgage is one of the first steps involved in buying a home. The Department of Housing and Urban Development (HUD) is the nation's housing agency. They have a helpful list of 9 steps to buying a home, which includes figuring out how much you can afford, knowing your rights, shopping for a loan, making an offer, getting a home inspection, and much more.

The second link is for a part of the mortgage modification program that Obama put into place to help people restructure mortgages instead of walking away from the contract and property.

Again, this info has NOTHING to do with the overall subject, which is your contention that the gov't caused the housing collapse. This program was instituted AFTER the collapse.


Now, the third link. The USDA housing programs website. So what? That's been around since 1934 and doesn't show any massive tax breaks that caused anything. Those are programs that have been around for decades, directly aimed at a low/mid income and/or elderly rural population.

So what was your point with those links? Just to show you have no evidence at all for your contentions other than an irrational hatred of some faceless entity?

 

[brycejones]

Awesome how the OP bumped his thread with some unrelated whining about taxi medallions.

Posting in Dari's thread of random rants and justification for avoiding accountability.

 

[First]

No. Government should not be encouraging home ownership with massive tax breaks, setting up colossal GSEs, and browbeating honest bankers to make loans for those who have no intentions of paying back the money.

We're not in the 1800s anymore and the federal government should not continue expansionist policies from that era.

Virtually no one has much sympathy for bankers, nor are many particular deserving. Honest bankers are great for the economy, absolutely. But sad reality is this; the profession itself doesn't particularly attract the most honest folk, with each medium varying in the degrees to which they are dishonest. Just my humble observation.

EDIT: As far as GSEs/Fannie/Freddie/Ginnie are concerned, they are extraordinarily good for the economy and create a stabilizing force. You have to look at it from the lens of history; the secondary mortgage markets that Fannie/Freddie dominate keep the primary lenders from keeping loans on their portfolios thereby increasing the number of loans/financing available to middle class Americans, because they can sell these loans to secondary market GSE participants (freeing up their capital and ability to create new money) but do so in a way that adheres to basic underwriting standards such as good credit scores, letting GSE take first position and taking out PMI (mortgage insurance) if down payment is too low. Keeping credit markets flowing in this way is something other nations envy and are actively attempting to copy. It has worked for nearly a century, and it's hard to see it stopping unless we do something monumentally stupid unrelated to this secondary GSE market activity. Because the activity itself seems entirely sound.

 

[piasabird]

Where have you guys been for the last 30 years? There have been tons of news articles about making it easier for minorities and others like low income earners to be able to purchase houses i.e. the American dream. Almost every president from Carter to Bush bragged about this great program. I would not blame it on the banks. The banks do what they are forced to do by the government. This was an era of a housing market where every year the real estate prices went up and up. There was no such thing as a bad investment. Then the housing market just collapsed like a deck of cards. The warning signs were everywhere. Whenever a market is priced more than the property is really worth, the balloon has to deflate sooner or later. It is simple economics.

On shows about the stock market they are always warning about stocks that become over-valued. It is the same thing for housing prices. If you think about it the governments loved the high housing prices because they could do nothing and the property tax just went higher and higher with the value of the houses. When something seems like it is too good to be true, it probably is.

 

[thraashman]

No I get the difference, women are allowed to wear revealing clothes, therefore women should expect to be raped.

If business can't keep itself from raping then obviously more government is the solution. The problem isn't with women, that is the government, the problem is with the rapist, that is, the problem is with businesses who rape.

I realized by his second post this is exactly the argument he's making.

Conservative logic, it's not the fault of the person committing the crime, it's the fault of the victim. Provided the person committing the crime is white.

 

[First]

Where have you guys been for the last 30 years? There have been tons of news articles about making it easier for minorities and others like low income earners to be able to purchase houses i.e. the American dream. Almost every president from Carter to Bush bragged about this great program. I would not blame it on the banks. The banks do what they are forced to do by the government. This was an era of a housing market where every year the real estate prices went up and up. There was no such thing as a bad investment. Then the housing market just collapsed like a deck of cards. The warning signs were everywhere. Whenever a market is priced more than the property is really worth, the balloon has to deflate sooner or later. It is simple economics.

This trope of "Lending to the poor and minorities caused the crisis" has been debunked so many times as to be old hat at this point. There has been no evidence that in the past 30 years low-end borrowers were an outsized or even significant part of the financial/real estate crises we've experienced. CRA loans themselves simply didn't default at inordinate rates or even comprise enough of the mortgage market to matter (see here) and sub-prime defaults by themselves didn't directly instigate the 08 financial crisis; it was, far and away, the transfer of unknown derivatives that spread the sub-prime MBS risk in mathematically exponential fashion to globally interconnected financial firms and insurance companies that instigated this crisis. Any other cause was quite beign by comparison.

 

[alzan]

No. Government should not be encouraging home ownership with massive tax breaks, setting up colossal GSEs, and browbeating honest bankers to make loans for those who have no intentions of paying back the money.

We're not in the 1800s anymore and the federal government should not continue expansionist policies from that era.

Oxymoron

 

[glenn1]

Government usually is the problem

Making a blanket statement that "government is the problem" without context why is like saying "temperature is the problem" without saying why - is it too hot or too cold? And what problem is it causing exactly?

As for the '08 housing crisis there's blame aplenty to go around for pretty much every actor in the system. A booming real estate market was good for everyone (well, unless you were a buyer looking to get into the market that is) and basically everyone purposely overlooked problems they instinctively knew were there in a great act of nationwide willful blindness. For whatever self-serving reasons, everyone had reason to ignore the no-doc loans, insane valuations, and ridiculous regulatory environment. Buyers wanted to make a quick buck on a flip, realtors and builders were making bank, politicians got to take credit for "increased home ownership" and the ensuing higher taxes generated by it, regulators wanted to get along with the banks and hopefully line up their next jobs - basically everyone had a finger in the pie. Singling out "the government" for blame is both stupid and self-serving.

 

[Dari]

Dari, did you even read any of the links you posted?

Obviously not, because if you had, you'd have noticed not ONE was relevant to the topic YOU brought up...massive tax breaks for the banks and/or homeowner and browbeating by the gov't forcing banks and other lending institutions to make specific types of loans.

This is the opening paragraph from the first link, an information page from a gov't website, USA.gov., called




The second link is for a part of the mortgage modification program that Obama put into place to help people restructure mortgages instead of walking away from the contract and property.

Again, this info has NOTHING to do with the overall subject, which is your contention that the gov't caused the housing collapse. This program was instituted AFTER the collapse.


Now, the third link. The USDA housing programs website. So what? That's been around since 1934 and doesn't show any massive tax breaks that caused anything. Those are programs that have been around for decades, directly aimed at a low/mid income and/or elderly rural population.

So what was your point with those links? Just to show you have no evidence at all for your contentions other than an irrational hatred of some faceless entity?

I'm not an accountant but those websites I linked have a bunch of corresponding links and documents where individuals of all stripes can minimize their taxes wrt buying a home. This isn't my purview but all it took was one search to come out with 3 federal sites on how to make it easy to buy a home. It shouldn't be this way. The government should not be a cheerleader for home purchases. And bankers should not be the fall guy for doing what they're legally entitled to...making an honest buck.

Seriously, governments only make things worse. And these useless politicians are so venal that they put themselves above and beyond the health of the nation and financial system. Make stupid promises to stupid voters on how they can attain the "American Dream" of a huge house in the suburbs on a McDonald's salary. That should be illegal. We need more self-respecting politicians who won't whore themselves out by leveraging the nation to the hilt on the promise of more mortgage tax breaks. Ridiculous.

 

[MagnusTheBrewer]

I'm not an accountant but those websites I linked have a bunch of corresponding links and documents where individuals of all stripes can minimize their taxes wrt buying a home. This isn't my purview but all it took was one search to come out with 3 federal sites on how to make it easy to buy a home. It shouldn't be this way. The government should not be a cheerleader for home purchases. And bankers should not be the fall guy for doing what they're legally entitled to...making an honest buck.

Seriously, governments only make things worse. And these useless politicians are so venal that they put themselves above and beyond the health of the nation and financial system. Make stupid promises to stupid voters on how they can attain the "American Dream" of a huge house in the suburbs on a McDonald's salary. That should be illegal. We need more self-respecting politicians who won't whore themselves out by leveraging the nation to the hilt on the promise of more mortgage tax breaks. Ridiculous.

You've fallen into the trap of "those who make money are obviously smarter than those who spend money." You're still blaming the government for allowing the bankers to make stupid long term business decisions. You also think operating legally is the pinnacle of banking competence when it's the bare minimum. Any idiot can acquire money, it's how you do it that matters.