Economics business.The Sub-prime Crisis. How bad is it?

[Moontanman]

Questor do you really believe this racist, elitist BS? Does anyone but rich conservatives live in your world? Do you have a heart or even a reflection when you look in a mirror.
Every time I think I met some one who is an easy win in the "Worst person in the world" contest another contender pops up. Is there anything at all that conservatives don't do better than anyone else? Do conservatives ever make mistakes? Are any of the worlds problems due to conservatives? I feel so dirty and ashamed to be a liberal, I should just go ahead and cross over.

[pgrmdave]

Moontanman - do you really think that it's a good idea to give houses to people who cannot afford them? As to Questor being racist - I see nothing about race in his post, short of the sad fact that due to racism, it is more likely for a poor person in the US to be a minority. His post, in my opinion, highlights some of the basic problems with the sub-prime mortgages. The lenders made money, not just through outrageous loans, but through selling those loans so that they weren't holding them when the borrowers couldn't pay. This should have been regulated better - not everybody should have a home, especially if they cannot afford it. Would you advocate that everybody have a luxury car? Of course not. Why then is it a good thing that credit be so free that poor people are given a chance to own a home that is well outside their price range?

[Moontanman]

Originally Posted by pgrmdave

Moontanman - do you really think that it's a good idea to give houses to people who cannot afford them? As to Questor being racist - I see nothing about race in his post, short of the sad fact that due to racism, it is more likely for a poor person in the US to be a minority. His post, in my opinion, highlights some of the basic problems with the sub-prime mortgages. The lenders made money, not just through outrageous loans, but through selling those loans so that they weren't holding them when the borrowers couldn't pay. This should have been regulated better - not everybody should have a home, especially if they cannot afford it. Would you advocate that everybody have a luxury car? Of course not. Why then is it a good thing that credit be so free that poor people are given a chance to own a home that is well outside their price range?

I never said it was a good idea to give houses to people who cannot afford them I question that the problem was created by liberals who insisted that blacks get equal treatment under the law. Questor consistently squirms his way out of every situation that looks like he might be wrong by assigning guilt for everything bad to liberals. He's about as hard to nail down as jello. He has no real agenda other than to be "correct" and to blame every bad thing in the world on liberals and claim conservatives are the font of all that is good and wise. I am tired of seeing everyone try to wrestle with him, every one is getting dirty and he likes it. I am beginning to think he is Rush Limbaugh in disguise.

[pgrmdave]

Rather than look at questor's unabashed conservative agenda, why not look at his actual ideas? While I do think that his accusations of the liberal for all problems is not respectable, I have seen members make similar accusations toward the conservatives. And once again, in this thread I have not seen him make any claims about race, merely poverty. In fact, he seems to take the typically 'liberal' route of claiming that more regulation of lenders was needed by washington, but that, in an attempt perhaps to help the poor, they lessened regulation, leading to a short upswing in home ownership (and HUGE corporate profits), but long-term problems that we're now feeling.

[questor]

Moon, you may be surprised to know that I do not support George Bush on many of his policies. He, too, was involved in our current financial debacle by supporting de-regulation and the easy credit, lax qualification that brought it about. I am sure many of the crooks who participated in the sub-prime scam call themselves conservative. You seem to think that just because people do not think your way makes them evil. You are only speaking from your own viewpoint, if you have not run a business or been involved in real estate investments you are lacking perspective from that point. I'm not against the less privileged, I would like to see them become more privileged the same way I did.. by earning it. And by the way, my only privileges have been the good fortune to be born in a country where I could become what I wished to be.

[freeztar]

Originally Posted by questor

Could it be that some members of congress wanted to give the less fortunate a chance at home ownership and loosened the regulations on lending and encouraged freer credit...

I do agree that it was a problem with Congress lessening regulations, but you have it backwards. It was Republicans who championed the bill. I doubt they had the poor in mind, but rather, the rich.

Here's some background info on what I'm talking about:

The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub.L. 106-102, 113 Stat. 1338, enacted 1999-11-12, is an Act of the United States Congress which repealed part of the Glass-Steagall Act, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.

Gramm-Leach-Bliley Act - Wikipedia, the free encyclopedia

Economist Robert Kuttner (among others) has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.[5] Economists Robert Ekelund and Mark Thornton have made similar criticisms, arguing that while "in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act would have made "perfect sense" as a legitimate act of deregulation, under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly". [6]

Gramm-Leach-Bliley Act - Wikipedia, the free encyclopedia

[Moontanman]

Originally Posted by questor

Moon, you may be surprised to know that I do not support George Bush on many of his policies. He, too, was involved in our current financial debacle by supporting de-regulation and the easy credit, lax qualification that brought it about. I am sure many of the crooks who participated in the sub-prime scam call themselves conservative. You seem to think that just because people do not think your way makes them evil. You are only speaking from your own viewpoint, if you have not run a business or been involved in real estate investments you are lacking perspective from that point. I'm not against the less privileged, I would like to see them become more privileged the same way I did.. by earning it. And by the way, my only privileges have been the good fortune to be born in a country where I could become what I wished to be.

You are correct Questor, in every one of my posts I have dwelt on saying that anyone who isn't a Liberal is evil. I bow to your superior knowledge of life and liberty. I would love to stick around and have my nose rubbed in even more of the flaws of liberalism but I must figure out a way for my lazy liberal dumb ass to survive this economic situation provided by all the hard working Conservatives who have brought this wonderful economic challenge to fruition. What would we all do without the dog eat dog philosophy of the conservative capitalist. We might have been swept up in the horror of socialism for the masses, instead we get socialism for the rich and powerful. I am so glad this has worked out to their glorious all powerful advantage. Possibly I can make money in the glorious future by finding a conservative who needs his ass kissed on a regular basis.

[pgrmdave]

I must admit, I do not quite understand how the repeal of the Glass-Steagall act contributed to the current credit crisis - could somebody explain it please? How did the increased competition lead to this?

[Essay]

Originally Posted by pgrmdave

I must admit, I do not quite understand how the repeal of the Glass-Steagall act contributed to the current credit crisis - could somebody explain it please? How did the increased competition lead to this?

I don't know if this is technically correct; but....

The "competition" you speak of was within the "creativity" of financial instruments.
Thus a home loan could be leveraged 30-40 times its value in the high-end global market.

By distributing the mortgages across a wide range of "bonds," an instrument was created which itself was then traded (and used as collateral for more investments) which then inflated the worth of the financial institutions that were doing this, allowing them to invest wildly in the stock market, inflating that also, which drove their value even higher, etc., etc.

One key point that I think Questor might ponder is that these sub-prime loans weren't pushed on poor people to help the poor.
Loans were pushed on anyone who would take one (2nd and 3rd homes, etc.) because home loan mortgages were the
only commodity left in the US economy that had enough capital to keep the pyramid of creative financial competition going. [Ag. is less than 1% of GDP; mining and oil < 2% GDP!]

The financial wizards took a program designed to help the poor and ramped it up to frenzy so as to provide capital and liquidity for themselves to keep increasing their competitively creative leverage.

~

p.s. This pyramidal house-of-cards accounted for most of the "growth" in our economy; hence the phenomenon of a "jobless recovery."

p.p.s. ...and the pension, hedge, and union funds were invested in investments (creative instruments) which were themselves just investment in the (other creative instruments) securitized (split up) mortgages, which were... "over-valued."
It's even more convoluted globally... stock based on bond funds which were themselves based on stock mutual funds which were based on the bonds created by the sub-prime loans ...or even more levels of investing in investments....

[questor]

There have been a number of laws passed to encourage home ownership for the poor. I gave a link earlier about redlining. The Acorn group was in this endeavor along with a local groups across the country. My own county has numerous programs including demanding that builders of new residential complexes set aside a percentage of their units for low cost housing. This forces a mixture of buyers which does not always enhance the resale value
of the units.