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musketee, you don't seem to have a clue as to what happened to the banks, Acorn's involvement, or Obama's, Dodd's, and Franks. Want to know why the market is tanking? Other's stay more informed than you do.
Obama Sued Citibank Under CRA to Force it to Make Bad Loans
Thanks for setting me straight. I guess you are right:
being retired and living off my investments for the last 6 years just does not qualify me to opine on the state of the nation, the economy and the markets. So, I defer to your far greater wisdom, except:
ilap: Macro-economics-101 (maybe you slept though that) suggests that if aggregate demand is in steep
decline due to spending cut by businesses and consumers, it's a good idea to have the government step in with some spending to pick up the slack. This is the lesson of the Great Depression and it's aftermath. This is the policy
of virtually every government in the world that has the tools to deal with this crisis. But maybe they should all be listening to highly qualified geniuses like you instead... and do nothing.
btpt: You hurt my feelings (and demonstrated your own ignorant lack of manners)because the one thing I am not is clueless. I see that you get your news and analysis
from FOX and mediacircus.com... so much for "fair and balanced". If you really want to understand the crisis (as distinct from bad lending practices and the real estate bubble)you shoud read this which discusses how AIG took on
the toxic risks of certain exotic securities with no regard for the systemic risks that were being created --- while republican regulators looked the other way.
Both of you: ideologies are like markets... they run cyclically. A decade of "hands-off-the-markets-republicanism" did extensive damage to our economic system,
our standing in world affairs, and our legitimacy as the world's super-power. We NEED the cycle to come around. We NEED government spending. We NEED new ideas, new leadership, a new financial regulatory framework, a better healthcare system, a better safety net for people fallen on bad times...
If you can't see that, nothing I say will change your mind. So you can go on advocating "do nothing" and blaming the party that's been out of power for the better part of a decade... or you can wake up and get with the program.
musketeer, This old lady remembers learning in macro that demand goes into decline when prices become too high, or when there is an absence of capital to purchase goods, like when we max out our credit cards. It is a normal rebalancing in a free market or anyone’s financial managing and not complicated. I was never taught the government was suppose to step in and prop demand up, or prop up credit so to maintain higher prices and encourage excess spending. And that is not what happened in the great depression. In the great depression, there was a collapse of the financial system. Probably the only thing that pulled us out of the depression was reestablishment of that via actions of the fed, laws, regulations, establishment of the FDIC, SEC etc, not all the government spending.
Also understand the Federal Reserve Act of 1913 that gave responsibility and authority to the Fed Reserve for supervising and regulating the financial institutions. The Fed was to maintain stability and regulate the nation’s banking and financial system – not Congress, nor the President. Want to have a REAL SERIOUS talk about derivatives and failure to regulate? Then lets bring the Fed Reserve into it and lets go back to what I provided where the Democrats, including Obama, were forcing banks to make bad loans.
Now to get back to macro, credit is a function of wealth. The government competes in the market place for credit to fund deficit spending. Businesses right now cannot get credit? Wonder why? The government is just like you or me. There is a limit to the amount of credit we can manage. Last year, China said no more – they saw us becoming insolvent and reaching the point that we could never pay back our debt. in the Great Depression, we did not have a federal government already with trillions of dollars of credit debt from deficit spending, bankrupt (and yes, this country is there now.) None was left for businesses. That is why the fed starting printing money here a few months ago. It is like when you have savings and credit but no debt and you get laid off of work, you draw down on your savings and increase you credit spending UNTIL you get reemployed. Than you push to pay down that credit and build your savings back. But if you have no savings and your credit is max’d to the limit and you are laid off of work, you have no other option but to cut spending, maybe live on the street for a while, unless you are the federal gov and can just print it. That is main difference in FDR and Obama.
Now the gov takes dollars from the public and spends it for them. A substantial amount of their spending is known as “entitlements”, redistribution of wealth. Entitlement spending is essentially a wash in contributing to GDP from the standpoint that it is just a matter of who is spending the dollars. Corporations invest it to enhance wealth, usually in the production of capital goods and services. When you tax them and give those dollars as entitlements, you in effect are reducing future GDP and capital wealth. Roosevelt did not get us out of the depression by spending, he prolonged it. I don’t begrude him feeding people and being a great morale booster, but lets not twist facts.
I agree we need the cycle to come around but it best be a free market correction, not a government manipulated one that is not going to work anyway.We spent ourselves into insolvency and bankruptcy, derivatives were a means to help that process. Fine if you want to blame Bush and the republicans for that but democrats were right there voting yes and now are spending exponentially more, without anything going to creation of capital,. That is the same, not change. And then they are increasing taxes on everyone. That makes lots of sense!! No, we do NOT need more government spending, we need LESS government spending. We do not need more government intervention into EVERYTHING! We need less!! New ideas? No, we need someone who knows what he is doing.
What a crock... ACORN is just the new Republican buzz word (Gays, Guns, God, and ACORN).
CRA Myth and Fact
Myth: The Community Reinvestment Act (CRA) caused the foreclosure crisis.
The majority of subprime loans were originated by non-CRA covered financial institutions. In fact, only about 25 percent of sub-prime loans were made by institutions covered by CRA.¹
CRA was passed in 1977. The explosive growth in subprime lending occurred more than two decades later, nearly doubling from 2001-2006 alone. No major changes to CRA were enacted during this time.
CRA does not mandate banks to make only home loans. Banks are encouraged to examine credit needs and lend appropriately based on these needs (for small business, home, and other types of loans).
CRA penalizes banks for reckless, irresponsible and otherwise predatory lending.
Myth: Rapid growth of subprime loans was a direct response to financial institutions efforts to expand homeownership for low and moderate and minority households.
Between 1998-2006 over half of subprime mortgage originations were for refinancing.²
In that same time, less than 10% of subprime mortgage originations went to first time homebuyers.³
Significant gains in homeownership occurred in the 1990s when prime lending was offered to low and moderate income and minority borrowers.
Myth: Federal banking agencies encouraged banks to engage in risky lending practices. In particular, a 1992 Boston Federal Reserve Bank publication, Closing the Credit Gap: A Guide to Equal Opportunity Lending, provided unsound advice to banks.
Federal Reserve Guidance: Lack of credit history should not be seen as a negative factor for potential homebuyers.
Justification: Willingness to pay debt promptly can be determined through alternative sources of information including timely rent, utility bills, and other scheduled payments.
Foreclosure Reality: Foreclosures are not a result of alternative credit scoring, but rather the product of excessive interest rates and unearned fees making loans unaffordable.
Federal Reserve Guidance: Valid income sources may include social security, second jobs, and other sources.
Justification: Many low to moderate-income households have varying sources but consistent or rising levels income throughout the year.
Foreclosure Reality: Subprime loans are not failing as a result of the use of alternative sources of income. Rather, problematic subprime loans are characterized by a lack of income verification, not source of income.