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bruce MN
Advisor

Cleaning up the office

Going through some piles of papers and ran across a print copy of something that I'm quite sure I posted a link to a year and a ahlf agp when I first saw it

 

I read it again and tried to bring it into some perspective as the debt ceiling looms, "the cliff" was allegedly averted and people are looking for easy or practical solutions. 

 

That "crisis" pales in comparisom to this meta money creation phenomenon that takes place every minute...h#ll, every second... of every day. I some sphere way out there beyond what any government, producing business or Reseve Bank does.

 

http://www.macrobusiness.com.au/2011/05/overruled/

7 Replies
r3020
Senior Advisor

Re: Cleaning up the office

Speaking of rules......

 

snip-

Democrats and the media insist the Community Reinvestment Act, the  anti-redlining law beefed up by President Clinton, had nothing to do with the  subprime mortgage crisis and recession.

But a new study by the respected National Bureau of Economic Research finds,  "Yes, it did. We find that adherence to that act led to riskier lending by  banks."

Added NBER: "There is a clear pattern of increased defaults for loans made by  these banks in quarters around the (CRA) exam. Moreover, the effects are larger  for loans made within CRA tracts," or predominantly low-income and minority  areas.

To satisfy CRA examiners, "flexible" lending by large banks rose an average  5% and those loans defaulted about 15% more often, the 43-page study found.

The strongest link between CRA lending and defaults took place in the runup  to the crisis — 2004 to 2006 — when banks rapidly sold CRA mortgages for  securitization by Fannie Mae and Freddie Mac and Wall Street.

CRA regulations are at the core of Fannie's and Freddie's so-called  affordable housing mission. In the early 1990s, a Democrat Congress gave HUD the  authority to set and enforce (through fines) CRA-grade loan quotas at Fannie and  Freddie.

It passed a law requiring the government-backed agencies to "assist insured  depository institutions to meet their obligations under the (CRA)." The goal was  to help banks meet lending quotas by buying their CRA loans.

But they had to loosen underwriting standards to do it. And that's what they  did.

"We want your CRA loans because they help us meet our housing goals," Fannie  Vice Chair Jamie Gorelick beseeched lenders gathered at a banking conference in  2000, just after HUD hiked the mortgage giant's affordable housing quotas to 50%  and pressed it to buy more CRA-eligible loans to help meet those new targets.  "We will buy them from your portfolios or package them into securities."

She described "CRA-friendly products" as mortgages with less than "3% down"  and "flexible underwriting."

From 2001-2007, Fannie and Freddie bought roughly half of all CRA home loans,  most carrying subprime features.

Lenders not subject to the CRA, such as subprime giant Countrywide Financial,  still fell under its spell. Regulated by HUD, Countrywide and other lenders  agreed to sign contracts with the government supporting such lending under  threat of being brought under CRA rules.

"Countrywide can potentially help you meet your CRA goals by offering both  whole loan and mortgage-backed securities that are eligible for CRA credit," the  lender advertised to banks.

Housing analysts say the CRA is the central thread running through the  subprime scandal — from banks and subprime lenders to Fannie and Freddie to even  Wall Street firms that took most of the heat for the crisis.

Obama officials, who are cracking the CRA whip anew against banks, insist the  law played no role in the mortgage meltdown.

Read More At IBD:  http://news.investors.com/ibd-editorials-perspective/122012-637924-faults-community-reinvestment-act...

bruce MN
Advisor

Re: Cleaning up the office

Bonkers.

r3020
Senior Advisor

Re: Cleaning up the office


@bruce MN wrote:

Bonkers.


When you tell some one they must take risk because they will be persecuted if they don't, and then tell them don't worry about that risk because we will make things right if the risk turns bad, they are inclined to take unnecessary risk and also thank you for the regulations that made the risk possible.

hobbyfarm2145365
Senior Contributor

Re: Cleaning up the office

Exact defination of the modern day govt farm crop ins.

bruce MN
Advisor

Re: Cleaning up the office

Hobby, there are seemingly a gazzilion things in both government, at all levels, and businesses everywhere that are staffed  or budgeted to presume that "the money will be there", "because it always has been".  Whether or not the "money would be there" to meet the obligations of the insurers was very likely never mentoned, much less questioned as the current program was put together.  Or, if it was, where it might possibly come from.

 

There is a growing and ever present dependncy on "the money being there" and that is what created the void that finacialsits being able to create money via leverage, away from conventional forst tieer or central banking or minting system have been able to fill and somehow get it to count into the money supply, even though no one ever authorized it's creation or planned for how to deal with it..  Absent any objection.  Actually, held hostage to.  And with the people left to beleive that "the government printed too much.".

 

The new contratians are obsessed with govt. spending and govt. deficits and long term govt. indebtedness when in reality the governments of the world pale in comparisom to the sum of the world of meta money creation. 

 

They don't question it or regulate it because they are as entrapped by it as the private sector is.  They need some of it.  Subprime mortgages IS where the big meta activity was taking place as the general servces orgs were trying to follow political directives and they became entrapped in the cloud.

 

Pray for rain.

r3020
Senior Advisor

Re: Cleaning up the office


@hobbyfarm2145365 wrote:

Exact defination of the modern day govt farm crop ins.


EXACTLY, and it will lead to the same result. Transfer of wealth from the middle class to the wealthy.

bruce MN
Advisor

Re: Cleaning up the office