This past week Keith Ellison issued a breathless, well-worn and blatantly specious (if not utterly ignorant) monologue to justify the further distension of the bowels of the federal government via yet another bloated agency. As I read his drivel, in my ears rang the sultry voice of classic SNL fixture Jane Curtain, warbling on and on and on; aptly blunted by Dan Ackroyd’s signature catchphrase.
the American dream of home ownership, and borrowing generally, washed up on the shores of a financial disaster — the most serious since the Great Depression.
One cause (there were many) was the failure of our system of consumer financial protection. No one was there to review transactions or protect consumers. The proposed Consumer Financial Protection Agency provides the lifeline that consumers need.
Oh, someone was there. Federal regulators were there, telling banks they couldn’t borrow funds at the best rates unless they met certain ratios of mandated risky sub-prime transactions to the prudent and secure deals banks would normally seek.
A free market cannot be held culpable if it is not free.
These so-called predatory lenders Keith, were not only incented to push unqualified home buyers into loans they couldn’t afford, they were strong-armed to do so via quotas and measures put in place during the Carter administration and given teeth during the Clinton administration. Sadly, G.W. Bush failed to preemptively unwind the brewing disaster despite the behest of Senator John McCain, among others.
The government-inflated and guaranteed demand for housing and all the furnishings that go inside created a bubble with all the periphery that usually comes with one. It ended as they usually do – otherwise we’d not know it was a bubble, now would we?
If anyone needed regulatin’ it was the regulators.
The American Dream is just that, Keith. Home ownership, while beneficial to all of us, is not a Government-Given right. With rare exception, when liberals act with politically motivated and self-serving mandates under the auspice of a “lifeline”, disaster follows close behind.
…and that disaster, our Great Recession, is the direct result of exactly the same type of programs Mr. Ellison and his ilk offer as it’s “solution.”
ACORN ‘convinced’ mortgage lenders to count welfare payments and food stamps as qualifying income.
We have NEVER had a free market, and business spends a great deal of its time seeking to make the market anything but ‘free’. However, free market is what you want, correct? Ok, so when someone sells what is effectively a toxin as a cure for cancer and calls it Latril, or when someone markets currency arbitrate services on a local conservative radio station and dupes hundreds of decent people out of their life’s savings, that’s all well fine and good. The ‘free’ market only allows for monopolization, deceit and criminality, and on a blog that claims to demand respect for elected officials (such as when I was chided for referring to George Bush as ‘shrub’), I’d suggest perhaps a term other than slut is in order. He’s not getting paid by anyone to make his comments, and there are a whole host of people, most of them financial experts with far more gravitas than the average conservative ‘financial services’ worker, who agree with Ellison that our ‘unfettered’ market, with it’s lax oversight, lead to deceptive and highly risky investment practices, where short-term return was god, and no one but the investor was still around to pick up the pieces. And Roosh, the longer you keep spewing the foolishness like CRA caused this problem, the longer you will look like an ignorant… person. It didn’t, and other than right-wing whacko’s, no one credible agrees with your statement. What CRA did, if you need some education here, was create a pool of loans which a FEW investment banks SOUGHT OUT, not by force from regulators, but by design, to package into CDS – and hell yes, those caused problems, but hardly the primary problem. The fundamental problem faciing the nation, and which effectively exacertbated this issue, is flat wages against rising costs. We have a massive second round of hurt looming out there called commercial real estate, perhaps you can try to claim CRA caused commercial real estate depression too, but I suspect even you know better. The bottom line is this, you like Mexico so much, go live there.
BTW, Terry, so are those lenders not responsible for their own decisions? If my 2 year old son ‘convinces’ George Bush to invade Iraq, does Bush no longer hold culpability? Was the money being lent NOT the responsibility of the lender to properly qualify and vet the lendee to receive?
Your blather nozzle is stuck open again, Penigma.
Penny Boy says: “The fundamental problem faciing the nation, and which effectively exacertbated this issue, is flat wages against rising costs.”
You are correct if you mean that wages were flat while housing prices skyrocketed. Overall
wages, have kept ahead with inflation in general – because the CPI has remained low. It was
goverment subsidzing that artificially created a decades-long housing bubble. As housing
grew more expensive, underwriting standards were lowered. The cycle continued until BOOM!
(Note: If the formatting is screwed up, the right hand margin of the comment box is/was not
forcing a carriage return.)
Pen,
You have bought into one of the most manipulative strawmen in this whole debate:
, so when someone sells what is effectively a toxin as a cure for cancer and calls it Latril,
Question for you, Pen: is it possible to have government, and even to have government do some needed jobs, without having HUGE government?
The flaw that all proponents of unlimited government fall into is this really manipulative strawman that limiting government means abolishing it. In fact, some of y’all – Nick Coleman – make it their whole schtick; “if you want limited government, are you willing to do without the fire department/the FDA/the Supreme Court?”
It’s an absurd strawman, and it’s unfair and manipulative and treats your opponents like idiots and your supporters like infants.
Nothing about limiting government’s reach implies that there aren’t some legitimate government activities.
or when someone markets currency arbitrate services on a local conservative radio station and dupes hundreds of decent people out of their life’s savings,
Right. Because nobody’s regulating Pat Kiely these days.
Pen,
Here’s another question for you: why is it that when conservatives ask the question “let’s look at government culpability in disasters like the Great Depression” – and there was immense culpability! – why do you respond “what about the FDA?”
Pen,
One more thing: You say “we’ve never had a free market”.
Let’s accept for a moment that that’s true.
Why is your opposition held to the standard “since you’ve never been able to implement your policy perfectly, your entire point is invalid?”
If Ellison was serious about ‘consumer financial protection’ he’d be against selling mortgages to people who can’t afford to pay them.
“No one was there to review transactions or protect consumers.”
The person with the primary interest in protecting the consumer is the consumer himself. I suppose you can find few people who were stupid or desperate enough to borrow money against a house or to buy a house with no hope of paying it back, but most of the people who went for high-cost ARMs or negative amortization loans did it in the hope of making money. There is wisdom behind the saying ‘You can’t cheat an honest man’. Why is the capitalist that lent money (and lost it) considered the predator while the fool who borrowed the money & spent it is considered the victim?
Lenders did not flock to make sub-prime loans authorized by CRA during the Carter, Reagan and Bush I years. Why not? Because lenders knew those were risky loans.
Lenders started making sub-prime loans under Clinton. Why? Because Democrats sent bank rugulators out to punish banks that had too few sub-prime loans, and private “community organizers” like Barak Obama sued lenders for “red-lining” meaning your bank doesn’t make many home loans in the ghetto so you must hate Blacks.
Lenders demanded protection for making sub-prime loans so Democrats in Congress, led by Barney Frank, gave loan guarantees through Fannie Mae.
Sub-prime loans were mostly ARMS which lasted until interest rates ticked up, then they started the foreclosure cascade which led to Fannie Mae running out of money and re-insurance companies like AIG folding up.
In response, regulators at the SEC demanded lenders “mark-to-market” which made it look as if lenders had lost billions and thus caused panic so financial stocks tanked. Worse, FHA and VA now refuse to write loans unless the owner has held title for at least 90 days (to prevent “flipping”) and use appraisals from properties sold within the last 90 days, meaning the only comps available will be other foreclosures, which is further depressing housing prices and guaranteeing they won’t rise soon.
Regulators over-reacted to public pressure to do something about bank reluctance to make crappy loans, then over-reacted to public pressure to prevent future defaults in crappy loans.
Notice how the financial instututions that are NOT failing are the ones who were NOT subject to Congressional pressure to make bad loans, little state banks and credit unions.
By the way, Terry, not all of us were solely motivated by greed. when I refinanced onto a 5-year ARM in 2003, the difference between that and 30-year fixed rate was small. When we were trying to decide between the two, we made certain assumptions about future conditions over the life of the loan: that the United States government would not fall; that private ownership of property would not be abolished; that housing prices would rise or at worst remain about the same; that interest rates would remain about the same or rise only slightly; etc.
In 2003, nobody was predicting the world-wide collapse of the banking system. Guess we were idiots for not planning on that, but stupidity isn’t greed.
.
You can’t go telling people that they don’t make enough money to buy a house;
That hurts their self-esteem.
Nate,
I worked for a large bank back then and there were a lot of people taking 5-year ARMs. They made sense for certain borrowers; in some cases a 5-year ARM still makes sense, especially for someone who plans to relocate before the loan starts adjusting. I worked in corporate relocation and we did a lot of ARMs for that reason — if you were moving in a year or two, a 30-year fixed rate hardly made sense.
CRA was a big consideration for lenders back then; it still is. It did cause a lot of questionable loans to be made. The thing is, there’s plenty of blame to go around for what ultimately happened. CRA was a big factor in the number of bad loans that were made, but a number of financial institutions were also culpable for trying to turn bad loans into financial instruments that were then oversold. Bogus Doug wrote about this subject quite a lot at his old blog.
Never underestimate the blind adoration and lack of skepticism/criticism from Peevee toward the Democrats.