deregulation and the current credit crisis

Additionally, this was a major push from ACORN, and, at the time, Obama was working for Woods, which funded this push by ACORN. It can be easily be concluded that, at least to a major extent, this Obama funded push from ACORN to lessen the lending standards is at the base of our current economic problems.

Elizabeth Richardson

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Reply to
Elizabeth Richardson
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The NY Times article does not assign blame as you do. Its focus, as far as today's crisis is concerned, is on foreclosures on low income homeowners. The Times article does not examine speculation, for one.

We continue to disagree on the other article, which examines both low income foreclosures and speculators, placing the bulk of the blame on speculators. Re-reading the last few sentences of the abstract you quoted makes this clear.

Elizabeth, if it only were that simple.

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Reply to
honda.lioness

I think so many factors came together that we can't narrow it down to even just a few.

The interest-only option ARMs were a financial time bomb defying any law of common sense. Common sense forces me to ask "what is the normal, non-bought-down rate on this loan, and all else being the same, what will it adjust to if rates stay the same in two years?" then "what if rates are up, what is my maximum payment?" The fact that loans were made which could not be paid after the first rate adjustment was criminal. I don't know what percent of failed loans fall into this category.

The subprime loans that were offered at a higher rate due to bad credit or undocumented income were not quite as bad, but any change in income, any brief period of unemployment and these were ready to default as well.

Whatever the motivation, there are better ways to get people into their own homes. In hindsight, a rate buydown to permanently lower the fixed rate mortgage would have been a bargain for the taxpayers. In hindsight, neighborhoods of McMansions would be better off with zoning waivers allowing a set of smaller homes instead of fighting lower income housing and now having the foreclosed mansions around them.

Joe

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Reply to
joetaxpayer

It is not realistic to blame the mortgage meltdown on just one thing. Undoubtedly a combination of economic influences were at work. While the push for home ownership by minorities and equitable lending practices may have contributed to some degree, it surely is not the only factor and probably not even the major factor.

There are considerations here that go beyond what is best for the nation economically and financially. Greater minority home ownership and well being is desirable for the general improvement of our society and for the nation's overall welfare, irrespective of its financial impact.

Beware of authors who want to blame our financial troubles on minority groups and turn attention away from scams and the corporate greed at the root of the problem. Some of those authors may feel guilty about the questionable business practices of themselves or their associates. And some may be using the lending crisis as an opportunity to spread their personal prejudices and distase for various minority groups.

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Reply to
Don

Don wrote: > Greater minority home ownership and well > being is desirable for the general improvement of our society and for > the nation's overall welfare, irrespective of its financial impact.

This is something that I can't quite bring myself to grips with. Why is a greater rate of home ownership, above some rate that doesn't require relaxing mortgage rules, a greater good? (Note I'm leaving out the question of minorities here.)

-Will

william dot trice at ngc dot com

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Reply to
Will Trice

-Will

william dot trice at ngc dot com

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Reply to
Will Trice

In a just society, one would expect home ownership to be attained by the people of various minority groups to about the same extent as the population as a whole. If this is not the case, and if certain minorities are noticeably excluded from priviliges such as home ownership, for whatever reason, something is out of balance, and corrective measures are in order for the health and well being of the nation. One can argue that this is a more important long-term goal than the current financial health of banks. But it seems to me that lenders could have helped minorities to some extent (along the lines of "affirmative action") without subprime lending as a whole getting out of control like it did.

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Reply to
Don

FROM THE MODERATORS:

Posters are reminded that this is a financial planning newsgroup; there are other newsgroups available for those who wish to discuss other topics.

Thank you.

-HW "Skip" Weldon Columbia, SC

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Reply to
HW "Skip" Weldon

Strictly in terms of financial planning (I agree, Skip), doesn't home ownership leads to greater stability in the economy. People are less prone to give up an asset (however defined) they have invested time, labor, and money in. The volatility in the current markets is what is making everybody crazy. Surely stability is a good thing economically.

Chip

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Reply to
Chip

An article from Commentary magazine "Speculators, Politicians, and Financial Disasters" by historian John Steele Gordon at

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the current crisis in context. Here is an excerpt: Even after the end of Jim Crow in the 1960?s, the effect of redlining lingered, perhaps more out of habit than of racial prejudice. In 1977, responding to political pressure to abolish the practice, Congress finally passed the Community Reinvestment Act, requiring banks to offer credit throughout their marketing areas and rating them on their compliance. This effectively outlawed redlining.

Then, in 1995, regulations adopted by the Clinton administration took the Community Reinvestment Act to a new level. Instead of forbidding banks to discriminate against blacks and black neighborhoods, the new regulations positively forced banks to seek out such customers and areas. Without saying so, the revised law established quotas for loans to specific neighborhoods, specific income classes, and specific races. It also encouraged community groups to monitor compliance and allowed them to receive fees for marketing loans to target groups.

...

Forward again to the Clinton changes in 1995. As part of them, Fannie and Freddie were now permitted to invest up to 40 times their capital in mortgages; banks, by contrast, were limited to only ten times their capital. Put briefly, in order to increase the number of mortgages Fannie and Freddie could underwrite, the federal government allowed them to become grossly undercapitalized?that is, grossly to reduce their one source of insurance against failure. The risk of a mammoth failure was then greatly augmented by the sheer number of mortgages given out in the country.

That was bad enough; then came politics to make it much worse. Fannie and Freddie quickly evolved into two of the largest financial institutions on the planet, with assets and liabilities in the trillions. But unlike other large, profit-seeking financial institutions, they were headquartered in Washington, D.C., and were political to their fingertips. Their management and boards tended to come from the political world, not the business world. And some were corrupt: the management of Fannie Mae manipulated the books in order to trigger executive bonuses worth tens of millions of dollars, and Freddie Mac was found in 2003 to have understated earnings by almost $5 billion.

Reply to
beliavsky

He seems to put put a new book every 2-3 years and may be due. I wonder what he's coming up with next.

Reply to
BreadWithSpam

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