As I said on page 2 of this thread, look what happened during Bush's term... tax cuts spurred activity and crazy investment/growth. As a result, the tax revenue to the government was the highest in 20+ years, and corporations paid more in taxes to the govt. than ever. Look where that graph is today.
but...but...that can't be!!!
Laffer curve at work. too bad people pretend it's either nonexistent or a horrible conspiratorial lie. it'll be a cold day in hell before it gets 1/2 the attention of that phillips crock of .
pkcRAISTLIN
quote:
Originally posted by The17sss
To a degree, perhaps. But not nearly as much as Clinton's multi-cultural obsessed administration that brought us the wonderful "Community Reinvestment Act"... the true culprit of the housing bubble and the Fannie/Freddie debacle, forcing banks to lend money to s that couldn't pay it back.
75% of TARP toxic assets were for property un-related to the CRA.
Krypton
quote:
Originally posted by fbgdavidson
I was looking at this and the sister ETF today, seems they have only been trading a month or so.
I've made a lot of my gains lately on DDM, the 200% version.
Hmm, looks a little high when looking at the 52week low-high. Check out SPXU which is really close to its 52 week low. Unfortunately, these inverse ETFs are compounded daily which means investors can only stay in for short periods of time, like a maximum of a week from what I hear from some people. Which sucks because it'd be nice if they traded like normal shorted stocks. Not compounded every bloody day.
Krypton
quote:
Originally posted by The17sss
To a degree, perhaps. But not nearly as much as Clinton's multi-cultural obsessed administration that brought us the wonderful "Community Reinvestment Act"... the true culprit of the housing bubble and the Fannie/Freddie debacle, forcing banks to lend money to s that couldn't pay it back.
Another thing, the CRA had nothing to do with the subprime mortgage crisis...
quote:
Federal Reserve Governor Randall S. Kroszner
At the Confronting Concentrated Poverty Policy Forum, Board of Governors of the Federal Reserve System, Washington, D.C.
December 3, 2008
Evidence on CRA and the Subprime Crisis
Over the years, the Federal Reserve has prepared two reports for the Congress that provide information on the performance of lending to lower-income borrowers or neighborhoods--populations that are the focus of the CRA.3 These studies found that lending to lower-income individuals and communities has been nearly as profitable and performed similarly to other types of lending done by CRA-covered institutions. Thus, the long-term evidence shows that the CRA has not pushed banks into extending loans that perform out of line with their traditional businesses. Rather, the law has encouraged banks to be aware of lending opportunities in all segments of their local communities as well as to learn how to undertake such lending in a safe and sound manner.
Recently, Federal Reserve staff has undertaken more specific analysis focusing on the potential relationship between the CRA and the current subprime crisis. This analysis was performed for the purpose of assessing claims that the CRA was a principal cause of the current mortgage market difficulties. For this analysis, the staff examined lending activity covering the period that corresponds to the height of the subprime boom.4
The research focused on two basic questions. First, we asked what share of originations for subprime loans is related to the CRA. The potential role of the CRA in the subprime crisis could either be large or small, depending on the answer to this question. We found that the loans that are the focus of the CRA represent a very small portion of the subprime lending market, casting considerable doubt on the potential contribution that the law could have made to the subprime mortgage crisis.
Second, we asked how CRA-related subprime loans performed relative to other loans. Once again, the potential role of the CRA could be large or small, depending on the answer to this question. We found that delinquency rates were high in all neighborhood income groups, and that CRA-related subprime loans performed in a comparable manner to other subprime loans; as such, differences in performance between CRA-related subprime lending and other subprime lending cannot lie at the root of recent market turmoil.
In analyzing the available data, we focused on two distinct metrics: loan origination activity and loan performance. With respect to the first question concerning loan originations, we wanted to know which types of lending institutions made higher-priced loans, to whom those loans were made, and in what types of neighborhoods the loans were extended.5 This analysis allowed us to determine what fraction of subprime lending could be related to the CRA.
Our analysis of the loan data found that about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods. Such borrowers are not the populations targeted by the CRA. In addition, more than 20 percent of the higher-priced loans were extended to lower-income borrowers or borrowers in lower-income areas by independent nonbank institutions--that is, institutions not covered by the CRA.6
Putting together these facts provides a striking result: Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes. This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.
Of course, loan originations are only one path that banking institutions can follow to meet their CRA obligations. They can also purchase loans from lenders not covered by the CRA, and in this way encourage more of this type of lending. The data also suggest that these types of transactions have not been a significant factor in the current crisis. Specifically, less than 2 percent of the higher-priced and CRA-credit-eligible mortgage originations sold by independent mortgage companies were purchased by CRA-covered institutions.
I now want to turn to the second question concerning how CRA-related subprime lending performed relative to other types of lending. To address this issue, we looked at data on subprime and alt-A mortgage delinquencies in lower-income neighborhoods and compared them with those in middle- and higher-income neighborhoods to see how CRA-related loans performed.7 An overall comparison revealed that the rates for all subprime and alt-A loans delinquent 90 days or more is high regardless of neighborhood income.8 This result casts further doubt on the view that the CRA could have contributed in any meaningful way to the current subprime crisis.
Unfortunately, the available data on loan performance do not let us distinguish which specific loans in lower-income areas were related to the CRA. As noted earlier, institutions not covered by the CRA extended many loans to borrowers in lower-income areas. Also, some lower-income lending by institutions subject to the law was outside their local communities and unlikely to have been motivated by the CRA.
To learn more about the relative performance of CRA-related lending, we conducted more-detailed analyses to try to focus on performance differences that might truly arise as a consequence of the rule as opposed to other factors. Attempting to adjust for other relevant factors is challenging but worthwhile to try to assess the performance of CRA-related lending. In one such analysis, we compared loan delinquency rates in neighborhoods that are right above and right below the CRA neighborhood income eligibility threshold. In other words, we compared loan performance by borrowers in two groups of neighborhoods that should not be very different except for the fact that the lending in one group received special attention under the CRA.
When we conducted this analysis, we found essentially no difference in the performance of subprime loans in Zip codes that were just below or just above the income threshold for the CRA.9 The results of this analysis are not consistent with the contention that the CRA is at the root of the subprime crisis, because delinquency rates for subprime and alt-A loans in neighborhoods just below the CRA-eligibility threshold are very similar to delinquency rates on loans just above the threshold, hence not the subject of CRA lending.
To gain further insight into the potential relationship between the CRA and the subprime crisis, we also compared the recent performance of subprime loans with mortgages originated and held in portfolio under the affordable lending programs operated by NeighborWorks America (NWA). As a member of the board of directors of the NWA, I am quite familiar with its lending activities. The NWA has partnered with many CRA-covered banking institutions to originate and hold mortgages made predominantly to lower-income borrowers and neighborhoods. So, to the extent that such loans are representative of CRA-lending programs in general, the performance of these loans is helpful in understanding the relationship between the CRA and the subprime crisis. We found that loans originated under the NWA program had a lower delinquency rate than subprime loans.10 Furthermore, the loans in the NWA affordable lending portfolio had a lower rate of foreclosure than prime loans. The result that the loans in the NWA portfolio performed better than subprime loans again casts doubt on the contention that the CRA has been a significant contributor to the subprime crisis.
The final analysis we undertook to investigate the likely effects of the CRA on the subprime crisis was to examine foreclosure activity across neighborhoods grouped by income. We found that most foreclosure filings have taken place in middle- or higher-income neighborhoods; in fact, foreclosure filings have increased at a faster pace in middle- or higher-income areas than in lower-income areas that are the focus of the CRA.11
Two key points emerge from all of our analysis of the available data. First, only a small portion of subprime mortgage originations are related to the CRA. Second, CRA- related loans appear to perform comparably to other types of subprime loans. Taken together, as I stated earlier, we believe that the available evidence runs counter to the contention that the CRA contributed in any substantive way to the current mortgage crisis.
Yea, I'm tired of hearing the same old, "It's the government's fault" argument concerning the subprime crisis. Especially from this guy...
Krypton
Anybody who wants to make some money on Wednesday, listen up. A new IPO is coming out on Wednesday. Cramer fronted it. Ticker is going to be EM. Looks good. They are a huge player in the electronic medical billing and administration industry. They have a great vertical structure which gives them the ability to charge at every step in the medical billing and record keeping process while also saving healthcare providers money. Get ready, call your broker tomorrow, do what you gotta do. It's gonna pop.
The17sss
quote:
Originally posted by Krypton
Another thing, the CRA had nothing to do with the subprime mortgage crisis...
That is a flat out falsehood. Clinton's people wrote as part of it to REQUIRE loans be made to subprime borrowers... it was public policy that drove the market and the demand for the subprime market was created by the CRA.
Some of the provisions Clinton had in the CRA: requiring strictly numerical assessments to get a satisfactory CRA rating; using federal home-loan data broken down by neighborhood, income group, and race; encouraging community groups to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to targeted groups to collect a fee from the banks.
Subprime mortgages went from 1% of the whole to 12% in just a couple of years. Hellooooo.
quote:
The U.S. Department of Housing and Urban Development's mortgage policies fueled the trend towards issuing risky loans. In 1995, Fannie Mae and Freddie Mac began receiving affordable housing credit for purchasing mortgage bank securities which included loans to low income borrowers. This resulted in the agencies purchasing subprime securities. Subprime mortgage loan originations surged by a whopping 25 percent per year between 1994 and 2003, resulting in a nearly ten-fold increase in the volume of these loans in just nine years. As of November 2007 Fannie Mae a held a total of $55.9 billion of subprime securities and $324.7 billion of Alt-A securities in their portfolios. As of the 2008Q2 Freddie Mac had $190 billion in Alt-A mortgages. Together they have more than half of the $1 trillion of Alt-A mortgages.[82] The growth in the subprime mortgage market, which included B, C and D paper bought by private investors such as hedge funds, fed a housing bubble that later burst.
Originally posted by The17sss
That is a flat out falsehood. Clinton's people wrote as part of it to REQUIRE loans be made to subprime borrowers... it was public policy that drove the market and the demand for the subprime market was created by the CRA.
Some of the provisions Clinton had in the CRA: requiring strictly numerical assessments to get a satisfactory CRA rating; using federal home-loan data broken down by neighborhood, income group, and race; encouraging community groups to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to targeted groups to collect a fee from the banks.
Subprime mortgages went from 1% of the whole to 12% in just a couple of years. Hellooooo.
In private conversations with our friend Barry Ritholtz about these matters, he has challenged me to explain why the Community Reinvestment Act (CRA) did not create a boom (or crisis) from 1977 to 2002. This is a fair point and one that I think few (if any) have failed to address. What changed in recent years is that (i) the CRA received some teeth in 1995, (ii) the Federal Reserve lowered interest rates to historic lows for an extended period of time, and (iii) the increased use of private securitization. Ultimately, I think that (ii) and (iii) are the most important both in creating the economic shock and that (i) played a minor role in that the other two factors facilitated the compliance with government policy.
When government regulation is created, there is an immediate incentive to circumvent the regulation. However, the use of securitization essentially made it easier for banks to comply with CRA (by buying securitized mortgages that complied or by issuing the mortgages themselves and selling them off as part of an ABS in the future). Thus far all we have is lower bound estimates of the impact of the CRA on subprime loans, but this lower bound is decidedly not zero. As the link above indicates, a recent Fed study indicated that only about 8% of subprime loans can be correctly tied to the CRA. Nevertheless, as Lawrence White points out in that post, this ignores potential “demonstration” effects. In other words, once banks who are not required to comply with the CRA discover that other banks are making these loans somewhat successfully, they might be more inclined to enter the market to compete directly with these firms (this might explain why 75% of troubled mortgages originate from firms that are not required to comply with the CRA). In any event, however, it is unlikely that the percentage of subprime that originated directly as a result of CRA exceeds 20% and therefore must be deemed a relatively small factor.
lots of good info in there, not that i have the time to read every single link he's provided. but what his argument says is that the CRA contributed to lax lending standards. i could buy that.
but, what i think most of us here are arguing is repeated on that page you posted:
quote:
It isn’t losses from CRA loans that drove the crisis (although they are disproportionately responsible for losses at some banks). Instead, the CRA required lax lending standards that spread to the rest of the mortgage market. That fueled the mortgage boom and bust.
it also mentions that defaults for CRA loans were no more than regular loans.
so, you can rack up the CRA influence in the "perfect storm" scenario, but even that page makes it clear that it was far from the biggest contributor to the crisis.
