Why It's Called Bush's Housing Bubble

[DEATH ROW JOE]

Bill Clinton is the unquestionable architect of the housing crisis. Your continued denial of that in the face of all the evidence and reality is tribute to your willful ignorance to the party you support.

LMFAO, you're the one in denial. You have Bush taking full credit for inflating the housing bubble and you want to pin the blame on Clinton.

Let's review it again dumb ass.

1) Private Sector sheds 3 million jobs during the first 2 years of Bush's presidency. Hard to imagine such drastic job losses during a housing boom. Bush clearly did not inherit a housing boom from Clinton.



2) With the 2004 election less than 18 months away, Bush tells banking regulators to back off the mortgage industry. In July 2003, banking regulators pose for a photo in which they take a chainsaw and hedge cutters to a stack of paper wrapped in red tape to send a message to banks that regulations are not going to be enforced.



3) Home prices then explode in big bubble cities like Phoenix and Las Vegas


4) Private sector stops shedding jobs and starts to add jobs



5) Conservative pundits announce "The Bush Boom."



6) Bush takes FULL CREDIT for the housing boom at the 2004 GOP convention.

"Thanks to our policies, home ownership in America is at an all- time high.

Tonight we set a new goal: 7 million more affordable homes in the next 10 years, so more American families will be able to open the door and say, "Welcome to my home."


Hear for yourself in this clip:

http://www.youtube.com/watch?v=w1ag29b_-lg

[Sheep_Mafia]

I've posted the reality of this for your dumb ass over and over. Are you incapable of understanding? Hilarious that you keep clinging to that Bush comment when Clinton's numbers were far more aggressive than his. Clinton himself put blame on the Democrats for the housing bubble.

Why some people here can't see through your commical ignorance is beyond me. This is another attempt for you to waste your time when you should be doing something to get off the government dole that's not going to work out for you. You are wrong once again.

Clinton is the architect of the housing collapse--fact. Bush simply doubled down on Clinton's irresponsible policies just like Obama has done with the Bush/Cheney doctrine in numerous cases.

Moron.

[Danzig in the Dark]

I've posted the reality of this for your dumb ass over and over. Are you incapable of understanding? Hilarious that you keep clinging to that Bush comment when Clinton's numbers were far more aggressive than his. Clinton himself put blame on the Democrats for the housing bubble.

Why some people here can't see through your commical ignorance is beyond me. This is another attempt for you to waste your time when you should be doing something to get off the government dole that's not going to work out for you. You are wrong once again.

Clinton is the architect of the housing collapse--fact. Bush simply doubled down on Clinton's irresponsible policies just like Obama has done with the Bush/Cheney doctrine in numerous cases.

Moron.

Needs more straws.

[DEATH ROW JOE]

Hilarious that you keep clinging to that Bush comment when Clinton's numbers were far more aggressive than his.

LMFAO @ "clinging" to Bush taking full credit for the housing bubble. You can't get around the fact that Bush took full credit and gave none to Clinton. Also, that is hardly the only piece of evidence which supports the claim that it was Bush's housing bubble.

Clinton's numbers were not "far more aggressive" than Bush's numbers.

Here is the contribution residential real estate investment made to GDP from 1995 to 2006. Housing investment was on the decline at the end of Clinton's second term. Bush revved it up and it made major contributions to GDP growth.

http://www.bea.gov/iTable/print.cfm?fid ... 5899BA4743

Clinton himself put blame on the Democrats for the housing bubble.

LMFAO, you're funny. You're very stupid but very funny.

Here's the home price index for Phoenix, Las Vegas and Miami. Notice how the growth explodes shortly after Bush told the regulators to back off the banks. There is no indication of a housing bubble in these cities during Clinton's second term.

This is another attempt for you to waste your time when you should be doing something to get off the government dole that's not going to work out for you. You are wrong once again.

LMFAO @ now resorting to making up personal info. Talk about desperate.

Clinton is the architect of the housing collapse--fact.

It's true because it's true! FACT! Funny you can't provide any data to support this "obvious" fact. Funny that the voters rejected the GOP in 2008 and 2012 because they blamed Bush for the shitty economy which is a consequence of a housing bubble collapse.

Bush simply doubled down on Clinton's irresponsible policies

It was the doubling down that created the housing bubble dumb ass. Every president since Hoover has had some policy to expand home ownership and "achieve the American dream." Bush took it too far because he needed votes in 2004. So you admit that Bush is responsible for the housing bubble. Open mouth and insert foot.

[Sheep_Mafia]

First of all, while I know its impossible for you to understand any concept of personal responsibility, but it mainly comes down to individuals making poor financial decisions. Yes the Clinton administration created the policies and yes Bush doubled down and yes the Democrats in Congress most certainly fought any attempt to clean it up, but ultimately the consumer brought a lot of the crash on themselves. Yes there was bad policy began in the Clinton years that continued and was expanded with Bush and yes the lenders acted in a predatory, irresponsible fashion but a lot of otherwise intelligent people bought more house than they could afford and/or took the short term gain of adjustable rate loans.

As to your assertion about not seeing a housing bubble during Clinton's second term, that's just an illustration of your ignorance. You seek to blame Bush for things that happen 5 years in to Obama but can't see the light that things unquestionably got going in the wrong direction and it took some time for those policies to show their effect.

Again, I have posted articles here from the late 90's as it was happening where these policies were being questioned and videos of Democratic members of Congress fighting tooth and nail to reign in any of this. Some--imagine this--called it racist. Sounds like a familiar tool for the liberals when exposed. I don't know what you are failing to understand as again Clinton himself assigns some blame to the Democrats for in his words, not listeneing to the GOP warnings.

This tells the story all the way back to 1994:
"The National Homeownership Strategy began in 1994 when Clinton directed HUD Secretary Henry Cisneros to come up with a plan, and Cisneros convened what HUD called a "historic meeting" of private and public housing-industry organizations in August 1994. The group eventually produced a plan, of which Mason sent me a PDF of Chapter 4, the one that argues for creative measures to promote homeownership.

The very worst idea in the plan, which fortunately never gained approval, was to let first-time homebuyers freely tap their IRA and 401(k) retirement-savings plans with no penalty to scrounge up a downpayment. That, HUD estimated, would have "benefited" 600,000 families in the first five years.

Plenty of other ideas in the plan did become reality, though. Knowing what we know now about the housing bust, the earnest language in the document seems faintly ridiculous. Here's an excerpt. Read it closely and you can see the seeds of disaster being planted:

For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership.

Note the praise for "creativity." That kind of creativity in stretching boundaries we could use less of. Mason puts it well: "It strikes me as reckless to promote home sales to individuals in such constrained financial predicaments."
http://www.businessweek.com/the_thread/ ... drive.html

Clinton was the architect, plan and simple.

[Danzig in the Dark]

As to your assertion about not seeing a housing bubble during Clinton's second term, that's just an illustration of your ignorance.

I too would like to see the evidence of this Clinton housing bubble. By evidence, I mean hard facts, not your usual bloviation.

[Sheep_Mafia]

As to your assertion about not seeing a housing bubble during Clinton's second term, that's just an illustration of your ignorance.

I too would like to see the evidence of this Clinton housing bubble. By evidence, I mean hard facts, not your usual bloviation.

You saw the evidence in the Bush/Obama years. You've seen links, videos and Bill Clinton himself saying Democrats should have listened. You just choose to ignore all that instead of having any integrity about it. Just because you are too stupid too follow along has no bearing on that fact. Hell I guess following the incredibly flawed logic you liberals are using here Bush has no blame at all for the millions of jobs that were shed after Obama came into office. No, I'm sure you and DRJ can magically comprehend how policies that began in the previous administration can show up down the road.

Obama promised the most transparent administration in history and while thats been shown to be a lie of historic proportions, his followers are sure transparent with their blind ignorance.

[Danzig in the Dark]

As to your assertion about not seeing a housing bubble during Clinton's second term, that's just an illustration of your ignorance.

I too would like to see the evidence of this Clinton housing bubble. By evidence, I mean hard facts, not your usual bloviation.

You saw the evidence in the Bush/Obama years. You've seen links, videos and Bill Clinton himself saying Democrats should have listened. You just choose to ignore all that instead of having any integrity about it. Just because you are too stupid too follow along has no bearing on that fact. Hell I guess following the incredibly flawed logic you liberals are using here Bush has no blame at all for the millions of jobs that were shed after Obama came into office. No, I'm sure you and DRJ can magically comprehend how policies that began in the previous administration can show up down the road.

Obama promised the most transparent administration in history and while thats been shown to be a lie of historic proportions, his followers are sure transparent with their blind ignorance.

No evidence. I expected this. The problem with your false analogy is that the job hemorrhage, real estate collapse, and the catastrophic failure of the economy in general started during Bush's second term, not years after.

[Sheep_Mafia]

No evidence. I expected this. The problem with your false analogy is that the job hemorrhage, real estate collapse, and the catastrophic failure of the economy in general started during Bush's second term, not years after.

Evidence is a policy was started, people started acting on those polices and adverse reactions occured. You are incapable of seeing things as they are with Obama and apparantly Clinton as well.

[DEATH ROW JOE]

First of all, while I know its impossible for you to understand any concept of personal responsibility, but it mainly comes down to individuals making poor financial decisions.

Wrong. It comes down to Wall Street figuring out how to make easy money off mortgages that were not likely to be paid back and that created a demand for these mortgages. Innovations in mortgage securitization drove the housing bubble. Ratting junk mortgages AAA and then insuring them with credit default swaps enabled the big banks to make a lot of money trading junk mortgages. Failure to regulate this shadow banking system drove the housing bubble. Bush made a decision not to regulate this activity because housing bubble created jobs and helped him win re-election.

It's laughable that you speak of personal responsibility while refusing to acknowledge that Bush's policies drove the housing boom.

Yes the Clinton administration created the policies and yes Bush doubled down

There you go again admitting that Bush inflated the housing bubble while arguing that he did not.

and yes the Democrats in Congress most certainly fought any attempt to clean it up, but ultimately the consumer brought a lot of the crash on themselves.

LMFAO, the GOP had majority control of Congress. The Democrats fought to regulate credit default swaps, bond insurance which played a great role in inflating the housing bubble.

Yes there was bad policy began in the Clinton years that continued and was expanded with Bush

Clinton and the GOP failed to regulate credit default swaps and also repealed Glass–Steagall. Both played a role. Beyond that, Clinton's policies were not the problem. Again, to the extent Clinton is to blame, it was Clinton acting with a Congress controlled by the GOP.

and yes the lenders acted in a predatory, irresponsible fashion but a lot of otherwise intelligent people bought more house than they could afford and/or took the short term gain of adjustable rate loans.

Again, Bush was warned of predatory lenders and did nothing.

As to your assertion about not seeing a housing bubble during Clinton's second term, that's just an illustration of your ignorance. You seek to blame Bush for things that happen 5 years in to Obama but can't see the light that things unquestionably got going in the wrong direction and it took some time for those policies to show their effect.

Bush is to blame for what he took credit for dumb ass. How many times does that have to be explained to you? Bush created a 1.4 trillion dollar deficit with his wars, tax cuts and bad economic policies. He inflated a housing bubble and took full credit for it. He started a war in Iraq for no reason and declared Mission Accomplished! You have to be a racist imbecile to blame Obama for any of these things.

So far as 5 years, it's going to take a lot longer than 5 years to clean up the mess made by Bush. It will take a full decade, at least.

Again, I have posted articles here from the late 90's as it was happening where these policies were being questioned and videos of Democratic members of Congress fighting tooth and nail to reign in any of this.

You idiot. Those videos of Democrats "fighting" to expand home ownership have zilch to do with the housing bubble. Since the end of WW II, politicians have always fought to expand home ownership. It was not until Wall Street got heavily involved in the mortgage market that a housing bubble was created.

So far as articles forecasting doom, you can always find articles like that. People are always predicting doom. They mean nothing.

The data speaks for itself. If a housing bubble was taking place when Bush took office, the private sector would not have shed 3 million jobs during his first year.

Some--imagine this--called it racist. Sounds like a familiar tool for the liberals when exposed. I don't know what you are failing to understand as again Clinton himself assigns some blame to the Democrats for in his words, not listeneing to the GOP warnings.

Republicans controlled Congress, ass wipe. They merely needed to pass a law to reign in Wall Street if they wanted to slow the housing boom.

This tells the story all the way back to 1994:
"The National Homeownership Strategy began in 1994 when Clinton directed HUD Secretary Henry Cisneros to come up with a plan, and Cisneros convened what HUD called a "historic meeting" of private and public housing-industry organizations in August 1994. The group eventually produced a plan, of which Mason sent me a PDF of Chapter 4, the one that argues for creative measures to promote homeownership.

Stupid, all presidents since Hoover have had a plan to expand home ownership.

Note the praise for "creativity." That kind of creativity in stretching boundaries we could use less of. Mason puts it well: "It strikes me as reckless to promote home sales to individuals in such constrained financial predicaments."
http://www.businessweek.com/the_thread/ ... drive.html

You fucking dunce. No mention of Wall Street in the article yet Wall Street was so heavily involved in mortgage securitization that they needed a massive bailout to stay afloat and are still, 5 years later, on shaky ground.

What a dunce like you does not realize is that you have been duped by the Wall Street PR machine to blame govt policies to expand home ownership for the housing mess. Those policies have been in place for decades without generating a housing bubble.

Bush gets the blame because he not only stood back and allowed Wall Street to inflate the housing bubble, he also encouraged them to boost his re-election chances.

Clinton was the architect, plan and simple.

Face facts dumb ass. If Democrats were to blame, then the GOP would not have gotten shellacked in 2008 and 2012.

When things went well, Bush and the GOP took all the credit. It was a "Bush Boom!" Then when it went south, they looked for a scape goat.

You're a fucking dunce.

[Sheep_Mafia]

Classic deflection and passing of the buck---"GOP controlled Congress". Yeah sure, they should of just passed a bill. It's that simple isn't it? You need that "how a bill becomes a law" refresher...

So when Bush makes home ownership a priority, it's a sham but when Clinton did it in the manner he did that started all this, "all Presidents" do it? Weak sauce right there.

You are so weak minded and predictable it's pathetic. You will say an article that predicts doom--and was based in sound reason and turned out to be 100% true--as meaning nothing, yet you cling to anything anyone says negative about the GOP. You can't be as simple minded as you come off with in this stuff.

The fact is that the articles in the 90's as well as the criticism that was out there then were proven correct. You can side step that reality all you'd like but it's fact.

The panel that was charged with looking into the causes didn't just blame Bush. They included Clinton and the consumer. Two things you are unable to do for some reason. And once again, Clinton says the Democrats have blame.

http://www.bankrate.com/finance/mortgag ... sis-1.aspx

[DEATH ROW JOE]

Classic deflection and passing of the buck---"GOP controlled Congress". Yeah sure, they should of just passed a bill. It's that simple isn't it? You need that "how a bill becomes a law" refresher...

Actually it is you who needs a how a bill becomes law refresher, dumb ass. Apparently you think legislation originates in the executive branch.

So when Bush makes home ownership a priority, it's a sham but when Clinton did it in the manner he did that started all this, "all Presidents" do it? Weak sauce right there.

Who said it was a "sham" when Bush made home ownership a priority? Nobody. Learn to read, asswipe. Get back to us when you have 2nd grade reading comprehension.

You are so weak minded and predictable it's pathetic. You will say an article that predicts doom--and was based in sound reason and turned out to be 100% true

It was not 100% true. It made no mention of credit default swaps, rating agencies giving AAA ratings to junk bonds. Nothing about the shadow banking system. Nothing about the mortgage brokers like Countrywide who played a major role in inflating the housing bubble.

Those articles were vague and failed to foresee Wall Street's involvement in the crisis.

The fact is that the articles in the 90's as well as the criticism that was out there then were proven correct. You can side step that reality all you'd like but it's fact.

No, it was not proven correct. The articles you are referring to referred to pressure put on the GSEs to purchase high risk mortgages. The GSEs did not respond to that pressure. That is what a dunce like you can not comprehend.

Here is a 2006 Moody's assessment of Freddie Mac:
http://www.freddiemac.com/investors/pdf ... moodys.pdf

Moody's was concerned that Freddie (the same applied to Fannie) was losing market share to the private issuers because they were not big actors in "adjustable-rate loans and other hybrid products [i.e. junk]." In other words, the GSE were losing money because they were avoiding the high risk junk.

Freddie Mac has long played a central role (shared with Fannie Mae) in the secondary mortgage market. In recent years, both housing GSEs have been losing share within the overall market due to the shifting nature of consumer preferences towards adjustable-rate loans and other hybrid products. For the first half of 2006, Fannie Mae and Freddie Mac captured about 44 percent of total origination volume -- up from a 41 percent share in 2005, but down from a 59 percent share in 2003. Moody’s would be concerned if Freddie Mac’s market share (i.e., mortgage portfolio plus securities as a percentage of conforming and non-conforming origination), which ranged between 18 and 23 percent between 1999 and the first half of 2006, declined below 15 percent. To buttress its market share, Freddie Mac has increased its purchases of private label securities. Moody’s notes that these purchases contribute to profitability, affordable housing goals, and market share in the short-term, but offer minimal benefit from a franchise building perspective. (p 6)

The panel that was charged with looking into the causes didn't just blame Bush. They included Clinton and the consumer. Two things you are unable to do for some reason. And once again, Clinton says the Democrats have blame.

http://www.bankrate.com/finance/mortgag ... sis-1.aspx

This is what they say about the Clinton administration's fault:

Paulson, Bernanke, the Clinton administration and the George W. Bush administration also came under fire, first for failing to perceive and address the danger posed by the housing bubble and then for an uneven response that injected uncertainty into financial markets by saving some financial institutions like Bear Sterns, but allowing others, like Lehman Brothers, to fail, the report says.


You fucking dunce. Clinton's name does not even belong on that sentence. He was not in office when Bear Sterns failed or when TARP was passed. If there was a bubble in 2001 when Clinton left office, that increases Bush's culpability.

Here is who they blame in that article:

1) Government regulators, including Treasury Secretary Henry Paulson, Federal Reserve Chairmen Alan Greenspan and Ben Bernanke.

2) Mortgage lenders

3) "Shadow banking" issuers of mortgage-backed securities.

4) Issuers of credit default swaps.

5) Ratings agencies.

6) American consumers. Investment banks

MINOR PLAYERS:
1) Fannie Mae and Freddie Mac.
2) The Community Reinvestment Act.

Hate to break the news to you princess but you just proved my point with that link.

The articles you are referring to from the late 90s point the finger at the GSEs and the CRA. The article you linked characterizes them as "minor players." This is where the Democrats were allegedly involved and YOUR article says their involvement was minor. You fail again bitch.

Now go look at who gets most of the blame according to that article and read my posts. You'll see I mention all those parties.

You fucked up bitch. Put your foot in your mouth again.

Why is it called Bush's housing bubble? The #1 culprit is government regulators, including Treasury Secretary Henry Paulson.

[Sheep_Mafia]

Sheep_Mafia has been the recipient of maximum ownage on this thread!

Why are you so dumb? Is it just some routine are or you really this ignorant? I really want to know.

Also, do you too think that Clinton was not the architect of the housing crisis as the facts undeniably show? Let's see just how intelligent you are. Look up the facts and then give an actual opinion instead of your irrelevant arm chair cheerleading that highlights nothing but your stupidity.

[Sheep_Mafia]

Hilarious how these dumb liberals acted while this was ramping up:

http://www.youtube.com/watch?v=cMnSp4qEXNM

[Danzig in the Dark]

Hilarious how these dumb liberals acted while this was ramping up:

http://www.youtube.com/watch?v=cMnSp4qEXNM

Time you did some research. Well, time for you to see how it's done, that is.
http://www.nytimes.com/2011/11/10/us/po ... bates&_r=1&

Making Bad Loans

Several candidates made the argument at the debate that the government forced mortgage lenders to make bad loans. But in reality, most subprime loans were made by companies that were not subject to any kind of federal regulation.

Furthermore, there was no need to force anyone to make the loans. Financial companies jumped into the market. The major investment banks lined up to purchase subprime lenders, the major retail banks created subprime lending divisions, and a generation of upstart subprime lenders like Ameriquest and Countrywide were briefly celebrated as rising stars of American business.

No executive of a major mortgage company said at the time that the government was forcing them to make subprime loans. They said they did it because they thought they would make money. And even now, after the crash of the housing market, with all the temptation to point fingers, it is awfully hard to find a mortgage executive who echoes the argument of the Republican candidates.

Studies of the financial crisis do assign a significant measure of responsibility to the government, but mostly for its failure to regulate these lenders.

Fannie Mae and Freddie Mac, the government-backed mortgage finance companies, did provide financing for large numbers of subprime loans, mostly by purchasing mortgage securities for their investment portfolios. But the historical record shows that they came late to the party, diving into subprime lending because private companies were stealing their business and profits. As such, most experts have concluded that they helped to expand the bubble, but they did not create it.

http://www.washingtonpost.com/business/ ... story.html

Barry Ritholtz

Barry Ritholtz
Columnist

What caused the financial crisis? The Big Lie goes viral.

View Photo Gallery — A look back at the financial chaos in 2008 and the $700 billion bank bailout that followed.

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By Barry Ritholtz, Published: November 5, 2011

I have a fairly simple approach to investing: Start with data and objective evidence to determine the dominant elements driving the market action right now. Figure out what objective reality is beneath all of the noise. Use that information to try to make intelligent investing decisions.

But then, I’m an investor focused on preserving capital and managing risk. I’m not out to win the next election or drive the debate. For those who are, facts and data matter much less than a narrative that supports their interests. One group has been especially vocal about shaping a new narrative of the credit crisis and economic collapse: those whose bad judgment and failed philosophy helped cause the crisis.

Rather than admit the error of their ways — Repent! — these people are engaged in an active campaign to rewrite history. They are not, of course, exonerated in doing so. And beyond that, they damage the process of repairing what was broken. They muddy the waters when it comes to holding guilty parties responsible. They prevent measures from being put into place to prevent another crisis.

Here is the surprising takeaway: They are winning. Thanks to the endless repetition of the Big Lie.

A Big Lie is so colossal that no one would believe that someone could have the impudence to distort the truth so infamously. There are many examples: Claims that Earth is not warming, or that evolution is not the best thesis we have for how humans developed. Those opposed to stimulus spending have gone so far as to claim that the infrastructure of the United States is just fine, Grade A (not D, as the we discussed last month), and needs little repair.

Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.

Indeed, the arguments these folks make fail to withstand even casual scrutiny. But that has not stopped people who should know better from repeating them.

The Big Lie made a surprise appearance Tuesday when New York Mayor Michael Bloomberg, responding to a question about Occupy Wall Street, stunned observers by exonerating Wall Street: “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”

What made his comments so stunning is that he built Bloomberg Data Services on the notion that data are what matter most to investors. The terminals are found on nearly 400,000 trading desks around the world, at a cost of $1,500 a month. (Do the math — that’s over half a billion dollars a month.) Perhaps the fact that Wall Street was the source of his vast wealth biased him. But the key principle of the business that made the mayor a billionaire is that fund managers, economists, researchers and traders should ignore the squishy narrative and, instead, focus on facts. Yet he ignored his own principles to repeat statements he should have known were false.

Why are people trying to rewrite the history of the crisis? Some are simply trying to save face. Interest groups who advocate for deregulation of the finance sector would prefer that deregulation not receive any blame for the crisis.

Some stand to profit from the status quo: Banks present a systemic risk to the economy, and reducing that risk by lowering their leverage and increasing capital requirements also lowers profitability. Others are hired guns, doing the bidding of bosses on Wall Street. They all suffer cognitive dissonance — the intellectual crisis that occurs when a failed belief system or philosophy is confronted with proof of its implausibility.

And what about those facts? To be clear, no single issue was the cause. Our economy is a complex and intricate system. What caused the crisis? Look:

●Fed Chair Alan Greenspan dropped rates to 1 percent — levels not seen for half a century — and kept them there for an unprecedentedly long period. This caused a spiral in anything priced in dollars (i.e., oil, gold) or credit (i.e., housing) or liquidity driven (i.e., stocks).

●Low rates meant asset managers could no longer get decent yields from municipal bonds or Treasurys. Instead, they turned to high-yield mortgage-backed securities. Nearly all of them failed to do adequate due diligence before buying them, did not understand these instruments or the risk involved. They violated one of the most important rules of investing: Know what you own.

●Fund managers made this error because they relied on the credit ratings agencies — Moody’s, S&P and Fitch. They had placed an AAA rating on these junk securities, claiming they were as safe as U.S. Treasurys.

• Derivatives had become a uniquely unregulated financial instrument. They are exempt from all oversight, counter-party disclosure, exchange listing requirements, state insurance supervision and, most important, reserve requirements. This allowed AIG to write $3 trillion in derivatives while reserving precisely zero dollars against future claims.

• The Securities and Exchange Commission changed the leverage rules for just five Wall Street banks in 2004. The “Bear Stearns exemption” replaced the 1977 net capitalization rule’s 12-to-1 leverage limit. In its place, it allowed unlimited leverage for Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns. These banks ramped leverage to 20-, 30-, even 40-to-1. Extreme leverage leaves very little room for error.

•Wall Street’s compensation system was skewed toward short-term performance. It gives traders lots of upside and none of the downside. This creates incentives to take excessive risks.

• The demand for higher-yielding paper led Wall Street to begin bundling mortgages. The highest yielding were subprime mortgages. This market was dominated by non-bank originators exempt from most regulations. The Fed could have supervised them, but Greenspan did not.

• These mortgage originators’ lend-to-sell-to-securitizers model had them holding mortgages for a very short period. This allowed them to get creative with underwriting standards, abdicating traditional lending metrics such as income, credit rating, debt-service history and loan-to-value.

• “Innovative” mortgage products were developed to reach more subprime borrowers. These include 2/28 adjustable-rate mortgages, interest-only loans, piggy-bank mortgages (simultaneous underlying mortgage and home-equity lines) and the notorious negative amortization loans (borrower’s indebtedness goes up each month). These mortgages defaulted in vastly disproportionate numbers to traditional 30-year fixed mortgages.

●To keep up with these newfangled originators, traditional banks developed automated underwriting systems. The software was gamed by employees paid on loan volume, not quality.

●Glass-Steagall legislation, which kept Wall Street and Main Street banks walled off from each other, was repealed in 1998. This allowed FDIC-insured banks, whose deposits were guaranteed by the government, to engage in highly risky business. It also allowed the banks to bulk up, becoming bigger, more complex and unwieldy.

●Many states had anti-predatory lending laws on their books (along with lower defaults and foreclosure rates). In 2004, the Office of the Comptroller of the Currency federally preempted state laws regulating mortgage credit and national banks. Following this change, national lenders sold increasingly risky loan products in those states. Shortly after, their default and foreclosure rates skyrocketed.

Bloomberg was partially correct: Congress did radically deregulate the financial sector, doing away with many of the protections that had worked for decades. Congress allowed Wall Street to self-regulate, and the Fed the turned a blind eye to bank abuses.

The previous Big Lie — the discredited belief that free markets require no adult supervision — is the reason people have created a new false narrative.

http://www.motherjones.com/kevin-drum/2 ... nd-big-lie

As longtime readers with good memories will remember, Peter Wallison of AEI has spent several years pushing the preposterous idea that Fannie Mae and Freddie Mac were responsible for the subprime bubble. (See here and here for background.) After Wallison's latest jeremiad, Joe Nocera has finally decided he can't take it anymore:

So this is how the Big Lie works.

You begin with a hypothesis that has a certain surface plausibility. You find an ally whose background suggests that he’s an “expert”; out of thin air, he devises “data.” You write articles in sympathetic publications, repeating the data endlessly; in time, some of these publications make your cause their own. Like-minded congressmen pick up your mantra and invite you to testify at hearings.

....Thus has Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis....Allies? Start with Congressional Republicans, who have vowed to eliminate Fannie and Freddie — because, after all, they caused the crisis! Throw in The Wall Street Journal’s editorial page, which, on Wednesday, published one of Wallison’s many articles repeating the Big Lie. It was followed on Thursday by an editorial in The Journal making essentially the same point. Repetition is all-important to spreading a Big Lie.

What's most remarkable about this is how brazen it is. As Nocera notes, Wallison's latest piece is about the charges the SEC brought last week against six former Fannie and Freddie executives. That's a plausible hook for Wallison's hobbyhorse, but even a casual reading of the case shows that the SEC isn't claiming that government mandates for affordable housing drove Fannie and Freddie headlong into the subprime market. Just the opposite: Starting around 2002, Wall Street banks started their subprime binge and Fannie and Freddie began to lose market share. A few years later, when Fannie and Freddie joined the subprime orgy, they were doing it to compete with their private sector rivals, not because Congress or anyone else was forcing them to.

How brazen is this? Just look at the chart on the right. In 2002, Wall Street banks start the subprime bubble. That same year, Fannie and Freddie see their market share start to plummet. It's not until 2005, at the tail end of the bubble, that Fannie and Freddie get back into the game.

This is butt simple stuff. All you have to do is look at one simple chart to see exactly what happened. And yet, conservatives don't care. As Paul Krugman says, this "isn’t just a case where different people look at the same facts but reach different conclusions. Instead, we’re looking at a situation in which one side of the debate just isn’t interested in the truth, in which alleged scholarship is actually just propaganda."

Fannie and Freddie were bad actors in a lot of ways, and that makes them an easy target for conservatives who are desperate to absolve the private sector of any blame for the financial crisis. But when it comes to assigning blame for the housing bubble, the evidence against them is laughably thin. Like it or not, this was Wall Street's fault.

What you suffer from is cognitive dissonance, Sheep_Moggio.

They all suffer cognitive dissonance — the intellectual crisis that occurs when a failed belief system or philosophy is confronted with proof of its implausibility.

[tylamonroe]

Pro tip:

If you are ever within ear shot of Cheer Leader Joe, never say something like "I love my nephew like he was my own damn kid" Next thing you know you will be on the hook for his College education.

[DEATH ROW JOE]

Hilarious how these dumb liberals acted while this was ramping up:

http://www.youtube.com/watch?v=cMnSp4qEXNM

LMFAO @ relying on a Fox News clip. All those quotes are taken out of context.

Here is Bush in May 2002 praising the GSEs, particularly for "increasing their commitment to minority markets by 440 billion dollars."
http://www.youtube.com/watch?v=QYvtvcBK ... age#t=254s



However, Fannie and Freddie had an Enron style accounting scandal in 2002-03. The calls to regulate the GSEs in your Fox News clip related to an accounting scandal, not their participation in the mortgage market. GSEs were publicly traded corporation owned by shareholders. Management ripped off the shareholders. They are called government sponsored because their debt is guaranteed by the federal govt. They were otherwise part of the private sector (before being put into conservatorship in 2008).

Bush was very tight with the GSEs until the scandal broke in 2002-03.

He distanced himself because they had an Enron style accounting scandal. Fox News takes statements related to an accounting scandal and makes them appear as if they are calls to rein in the GSEs and keep them from inflating a housing bubble.

All this is common knowledge to anyone who followed the financial news in 2004-05. Here is an article to educate you since you were probably about 12 during that time, and way too young to follow the mortgage industry. It's written by the same woman who uncovered the Enron scandal.

The Fall of Fannie Mae
January 24, 2005
http://money.cnn.com/magazines/fortune/ ... 4/8234040/




In 2006, Peter Wallison of the conservative American Enterprise Institute called for the GSEs to do more to help low income families. Fact is conservatives were calling for the GSEs to get more involved in low income mortgages.

Higher GSE Limits Would Hit Those Who Need Help
March 03, 2006
http://www.aei.org/article/economics/fi ... need-help/