RedShirtMIT,No banks I know of keep mortgage loans in house. Not to
say some bank somewhere does not do so, but most only warehouse them for long
enough to get them sold.Also, none of this addresses the many
mortgage companies (which are not subject to bank regulation).The
LONG history of banking is not the govt. forcing lower standards. It is of
maintaining strong standards to retain confidence in the system.My
experience here is simple. When times are good and money is to be made, the
standards fly out the window for all but the most circumspect bankers. No one
wants to miss out on the profit party.Also, remember that many of
the large institutions that failed were NOT banks. And who gave the rating
agencies the wink to keep ratings high on products they could not really analyze
fully?Sorry, there might have been minor influence here from govt.
push but the real govt. problem was not pushing for loans to be made but in less
regulation and an unfounded confidence in laissez faire economics.There are only two significant forces in the markets. Greed and fear. We had
too little fear, too much greed.
To "merich39" but not all banks sell of their mortgages. Some keep them
in house.But that isn't the point. The point is that the
government either through edict or through court cases have forced banks to
lower their lending standards.If lower lending standards were part
of the cause for the meltdown, why should we continue to allow government to
mandate the same low standards?If your kids beg you for a pony do
you go out and buy one? Do you have enough internal strength to resist them?
Redshirt...If a bank makes a mortgage loan, then packages and sells
that mortgage loan, I don't think they really care too much whether that
loan defaults or not. It's become the problem of the loan buyer. And when
the housing market is booming on paper, as it was, then the buyers and sellers
are all making money hand over fist. It's all just on paper, of course.
But the bonuses being paid to bank execs for manufacturing these paper gains was
definitely real. Then when the paper gains bubble burst, the taxpayers bailed
out the banks for those paper losses and then bank execs turned around and paid
themselves huge bonuses for securing those taxpayers bailouts. Finally, what connection are you trying to make between government regulations
and the banks begging myself and literally millions of other Americans to
over-extend our credit to purchase a motor home? Maybe you know of some
government regulation that required banks to beg me to over-extend my credit?
If yes, please share. If not, then please don't deflect.
To "Shaun" if you looked more into that case, you find that Citibank had
policies where they didn't like making loans for certain geographical areas
because of the higher rates of defaults. The bank didn't want to make the
loan.You appear to agree that Obama was on the legal team that did
in fact force the bank to make a loan that it didn't want to. Thanks for
confirming my original statement.If you want to look at what Obama
has done as President to further force banks into making loans they don't
want to we can do that too.From the Washington Post we read
"Obama administration pushes banks to make home loans to people with weaker
credit". Here we have Obama using the power of the Government to tell banks
to lower their lending standards.
@redshirt. Alright redshirt, in Buycks-Roberson vs. Citibank Federal Savings
Bank, the complaint is:This is a civil action brought by Selma
Buycks-Roberson, on behalf of herself and all other African Americans who made
home loan applications to Cititbank, and whose applications were rejected
because of their race or color, or because the racial composition of the
neighborhood in which their property was located. This action seeks injunctive
relief and monetary damages for violations of 42 U.S.C 1981 " Equal rights
under the law";42 3605 " Discrimination in residential real
estate-related transactions" and U.S.C 15 1691a "Scope of
prohibition"So this lady sued citibank because of denying her
credit based on race. If you would of actually read the complaint you would have
read the plaintiff was rejected because of adverse credit. She followed up with
citibank providing extensive financial documentation proving her
creditworthiness and ability to repay. She was denied again.In
addition Barack Obama was a junior member at the law firm that initiated this
case and only did research for the case. So basically he was doing his job.
To "merich39" go and read about what the government has done to regulate
minimum loan qualifications. Look at the percent of mortgages that have
defaulted over the past 100 years. Prior to government regulation of mortgages
few were sub-prime and few were defaulted on. As the government took over
credit and lending standards, the number of defaults went up. Do you think that
banks want loans to default? If banks don't want bad loans, then what has
pushed them to make so many bad loans?
Redshirt...You appear to be making an argument that if one bank was
forced to make a loan that shouldn't have been made, then all loans made by
all banks were forced. I doubt you have any factual data to support such a
claim since it would be a false claim to being with. Ask anyone who has
experienced predatory lending. I'd have a difficult time believing you
have never experienced predatory lending, since it is so prevalent in our
The author makes it sound like banks had their doors unlocked but their lights
turned off hoping poor people would stop by for a home loan for which the bank
would be powerless to deny. This is completely opposite from the
truth. The truth is that the banks were practicing predatory lending with wild
abandon. I can't tell you the number of unwanted junk mailers I received
from banks practically begging me to refinance my home at 120% of it's
appraised value so I could buy that boat or motor home I'd always wanted.
I've worn out multiple shredders shredding all the pre-approved Visa card
notices I've received. I wasn't seeking out over extending my credit
from the banks. The banks were seeking out over extending my credit for me.The banks were riding a wave of credit spending... a wave they helped
create and extend. When that wave inevitably crashed on the shores of economic
reality, the banks were rescued from financial harm while individuals were left
to suffer for their poor financial decisions. Bankers rewarded themselves with
huge bonuses from those taxpayer subsidies while foreclosing on those homes they
To "Shaun" Obama was part of the legal team in the case of
Buycks-Roberson vs. Citibank Federal Savings Bank. It was after that lawsuit
the bank changed its lending standards. If the bank thought that their lending
standards were good before the lawsuit, and changed them to relax those
standards after being sued and forced todo so, doesn't that mean that banks
were forced to loan money that they didn't want to loan?Now,
since the collapse, we see that Obama has been adding to the problem of forcing
banks to lower their lending standards. Read "Clinton Added Teeth To CRA,
Obama Turned Them Into Fangs" at IBD.Remember, if banks thought
that their practices were good, why did they have to be sued to lower their
lending standards? By forcing lower lending standards, are you not by default
forcing them to loan money they would rather not loan out?
@redshirt. You are wrong. What is the case number in the Acorn/Obama case? Banks
got greedy plain and simple. All the banks wanted to do is to originate as many
loans as possible and then bundle them and sell them. They made
money selling them, servicing them, and tons more if the loan went into default.
This is why the home loan modifications really never worked. The banks
didn't care if homeowners went into default because they made tons of money
if the home went into foreclosure.
To RedShirt:Well-placed commas enhance readability.
To "Roland Kayser" actually they were. Obama was involved in several
lawsuits while he worked with ACORN to force banks into making loans that they
didn't want to make.Also, Clinton used the Justice Department
to force banks to lower their lending standards and make loans that they
didn't want to make.To "Kent C. DeForrest" it is called
Fascism. This is a form of socialism where the government picks their favored
businesses, micromanages those companies as if they own them, then ensures that
they do not fail.
Someone recently said that free enterprise should not be confused with free
trade. I agree with that statement. Free trade is best between and within the
states of the union. Formerly federal taxes were largely or
entirely collected from import duties which protected our workers and
businesses. Nowadays we destroy our economy by obliging domestic businesses to
trade with nations that pay employees relatively little and are not so bogged
down with regressive taxes, environmental regulations etc. It surprises me that
either a conservative or a liberal would support such policies.At
any rate our economy would thrive under free enterprise tempered only by the
usual safeguards against monopolies. Our level of employment would benefit
greatly, also, by ending free trade with certain nations, especially mainland
China, and ending illegal immigration by punishing employers who connive with
such illegality for personal profit.So bring our corporations home
by making it unprofitable for them to outsource and reduce our domestic
corporate taxes dramatically. Disburden our economy by removing the most
egregious obstacles and ceasing to micromanage domestic businesses small and
large. Place reasonable protective tariffs on imports.
Has anyone noticed that the Wall Street banks that did the most damage also came
out of this mess smelling like a rose? They are once again reeling in huge
profits through speculative adventures (knowing that the taxpayer will be there
to bail them out), while Average Joe American is worse off (perhaps still
unemployed). Finance used to exist to support the production of real
products. But now money is the most sought-after product, even though it is not
really a product at all. The financial sector passed manufacturing as the
biggest sector in the economy several years ago. That is certainly a sign that
we've got a few things upside down in our economy. Regulation, anyone?
Eric and Roland got this right. Thanks.
Utter nonsense. Do some research. Read up on Washington Mutual, or Long Beach
Bank and Trust, and the tens of thousands of bad loans they made, knowing they
would never have to service those loans, knowing those loans would be bundled
into CDOs and sold on bond markets. The government is, however complicit
in one sense. They passed Gramm-Leach-Bliley, the worst piece of legislation
passed since the Smoot-Hawley tariff. They abandoned sound principles of
finance embodied in Glass-Steagall, and the results were devastating. They
deregulated, stupidly and without forethought.
The examples provided have had surprisingly little effect on free enterprise or
the economy in general. You got your chance to throw rocks at the President,
though, so it's all good.
The real truth is that virtually nothing is done by government other than those
things done at the behest of businessmen. A government guaranteed
loan is a win/win loan for the lender, a bank. When there is a guaranteed
payback, there is no incentive to make only good loans. Further by having the
government make a rule to make bad loans, at the behest of the banks, the banks
absolve themselves of any guilt. The words Free Enterprise covers
all the different ways and means of transferring the wealth of people to the
rich and powerful. Inflation, deflation, recession and depression are tools
used for the purpose. They are contrived and executed at the will of
No bank was ever forced to make a loan to a buyer who couldn't repay it.
They did so willingly because they made the bank more money, and the loan could
be sold off to Wall St., meaning the bank didn't lose if the buyer
defaulted. The whole thing fell apart because every bank, acting on their own
best interest, made so many bad loans that the volume of bad loans swamped the
system.The entire world economy has been severely hammered by the
recession. Compared to most other developed countries, our economy is doing
comparatively well. No one is doing great. That is not the fault of the Obama