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I dont even know if thats really true. I think the problems started when the government started securing more and more mortgages, and setting lower and lower parameters to obtain a mortgage. When they did this, it let the banks off the hook and allowed them to just loan to anyone simply based upon "points", rather than looking at the fundamentals.
$500,000 home with $25,000 income.. No problem, government said you have enough points, do the loan..
Yes, I've seen people that did stupid things like this..
The repeal of Glass-Stegall allowed the banks to step over the line of investing.
There was a strict separation that FDR put in place to prevent another Great Depression.
The repeal allowed the banks to create, underwrite and trade all that toxic paper backed by subprime mortgages.
The repeal of Glass-Stegall allowed the banks to step over the line of investing.
There was a strict separation that FDR put in place to prevent another Great Depression.
The repeal allowed the banks to create, underwrite and trade all that toxic paper backed by subprime mortgages.
Banks always created, underwrote and traded that paper.. Always.. The Glass Steagall Act simply removed the ability for banks to hold ownership of other banks. As much as I'd like to push this blame on Clinton, there is little evidence that banks owning multiple banks caused the economic downfall.
Banks always created, underwrote and traded that paper.. Always.. The Glass Steagall Act simply removed the ability for banks to hold ownership of other banks. As much as I'd like to push this blame on Clinton, there is little evidence that banks owning multiple banks caused the economic downfall.
Glass-Stegall separated banks into investment banks and commercial banks.
The repeal got rid of that separation.
It had nothing to do with banks owning other banks. It separated the banks by industry..commercial vs investment.
So even though Bush was in the White House, the stock market reached an all time high, explain that to me and replace White House with Congress to answer your own question
The question was directed at the post prior to mine. She stated that the economy was fine until the Dems took over congress in 2007. Total BS.
Quote:
Originally Posted by pghquest
ARM's were not the problem with the mortgage industry. ARM's are tied to the federal interest rate which has only gone down, not up..
Delinquencies worsen
Ten percent of subprime fixed-rate loans are at least 30 days past due, up from 9.7 percent a year earlier, and 13.3 percent of all subprime loans (fixed-rate and ARM) were in default, up from 11.6 percent a year earlier. These numbers show that subprime ARMs were the ones that went kablooey.
Doug Duncan, the MBA's chief economist, says the increase in delinquencies was expected.
"Increases in delinquency and foreclosure rates were noticeably larger for subprime loans," Duncan says. "Subprime borrowers are more likely to be susceptible to the cumulative increases in interest rates that we have experienced and the resultant nationwide slowing of home price, appreciation including, outright declines in some markets."
Interest rates have only gone down? Explain this chart:
Sure looks like a lot of INCREASES in rates during 2004 - 2006 to me !!!
Quote:
Originally Posted by pghquest
Wait, was the problem subprime mortgages, or ARM's, they are not the same..and do you have one bit of evidence that it was built during the "Republicans" power?
Duh.
Considering the problem worsened through 2008 ... simple arithmetic is my evidence.
Quote:
Originally Posted by pghquest
Subprime mortgage meltdown did not cause the collapse of the "industry".. In fact it was due to a $2B writedown of A credit mortgages held by a company not even based in the USA. When this writedown took place, it tightened the credit industry which caused a domino effect on required equity vs operating capital. This simply means that banks couldnt finance their operating costs even though their loans were good.
And it would have exploded regardless of who was president, especially considering it didnt even originate in the USA.
If Bush and Congress focused more on regulating financial companies between 2003 - 2006 instead of allowing the housing bubble to grow (and continually refer to it as a great economy), we might have stopped this train wreck before it ever left the station!
I know it seperated the different types of banks, but banks always traded the paper that they wrote.. Always. One could go back 20-30 years and find papers that were for sale. I know this because I bought and sold a few of them back in the mid 1990's.. (just a couple)..
I also know about structured investment vehicles, these were created by Citigroup and traded going back to the late 1980s, before the repeal of the Glass Seagall Act.
Did the Glass Seagall Act allow the banks to merge and offer different types of services, absolutely, but these types of investment paper existed well before the repeal.
All mortgages began defaulting in 2007/2008, here is a story about AltA mortgages increasing in their defaulting. Suprime mortgages did increase their deliquency rates, but they were not alone.. "US mortgage default fears grow" « naked capitalism
You want me to explain a chart which showed interest rates going down from the late 2007's? Didnt I say they went down and you come back and dispute this statement while confirming it?
Quote:
Originally Posted by RD5050
If Bush and Congress focused more on regulating financial companies between 2003 - 2006 instead of allowing the housing bubble to grow (and continually refer to it as a great economy), we might have stopped this train wreck before it ever left the station!
Do you really think Bush is responsible for a world wide recession? Do you really think that if Congress regulated the financial companies that companies outside of their jurisidction wouldnt have crashed? Banks all over the world collapsed, Canada, Europe, UK, all of these not under the "Bush" regulation world. Could it have helped, possibly, but to pretend you know for sure, considering that most of the problems are not american problems but financial ones would be a far leap.
All mortgages began defaulting in 2007/2008, here is a story about AltA mortgages increasing in their defaulting. Suprime mortgages did increase their deliquency rates, but they were not alone.. "US mortgage default fears grow" « naked capitalism
You want me to explain a chart which showed interest rates going down from the late 2007's? Didnt I say they went down and you come back and dispute this statement while confirming it?
The subprime ARMS were written when interest rates were LOW. Refer to my previous links. And interest rates continued to rise through June 2006. They rose from 1.00% up to 5.25%. So when these ARMs reset to a MUCH higher rate, these unqualified (aka Subprime) owners defaulted, and their homes went into foreclosure.
By the time interest rates started dropping in SEPTEMBER 2007, it was already TOO LATE.
Quote:
Originally Posted by pghquest
Do you really think Bush is responsible for a world wide recession? Do you really think that if Congress regulated the financial companies that companies outside of their jurisidction wouldnt have crashed? Banks all over the world collapsed, Canada, Europe, UK, all of these not under the "Bush" regulation world. Could it have helped, possibly, but to pretend you know for sure, considering that most of the problems are not american problems but financial ones would be a far leap.
ABSOLUTELY. As the saying goes ... "The Buck Stops Here".
We already had a Great Depression based on similar circumstances. Are you going to tell me that none of Bush's economic advisors could detect the similarities to the 1920's while we were repeating history back in 2003 - 2006?
However, Bush was a "master" at suppressing important information from the general public whenever the information went against him, like his desire to continually report a great economy during his State of the Union speeches.
Even if Bush knew we were headed for another Great Depression, he would do everything possible to avoid telling anyone about it.
"Cherry Picking" intelligence was the term often used to describe this quality of Bush.
The subprime ARMS were written when interest rates were LOW. Refer to my previous links. And interest rates continued to rise through June 2006. They rose from 1.00% up to 5.25%. So when these ARMs reset to a MUCH higher rate, these unqualified (aka Subprime) owners defaulted, and their homes went into foreclosure.
There were hundreds of different mortgage programs that were written during the lower interest rate period, not just subprime ARMS. I know what you are trying to say, that the subprime ARMS defaulted because of the interest rate rise, but these default rates werent any higher than other mortgage programs written. I showed you how AltA mortgage default rates were also much higher.
Quote:
Originally Posted by RD5050
By the time interest rates started dropping in SEPTEMBER 2007, it was already TOO LATE.
It was too late because housing prices dropped and avenues to refinance dried up. Had money been available and property values remained stable, there would have been adaquate equity to justify refinancing.
Do I think ARMS are good, hell no, only a fool would take out one of these mortgages, but to blame them on a world wide crisis is just not accurate.
Quote:
Originally Posted by RD5050
ABSOLUTELY. As the saying goes ... "The Buck Stops Here".
We already had a Great Depression based on similar circumstances. Are you going to tell me that no economists could detect the similarities to the 1920's while we were repeating history back in 2003 - 2006?
Which shows you dont care about the truth. The Buck does not stop HERE for banks defaulting in UK, Canada, Great Britain, and world wide..
The simularities between now and the Great Depression isnt even close. The Great Depression involved banks collapsing and depositors not being insured, thereby rushing to cash out their deposits (there were nearly 10,000 banks which collapsed). How many banks have collapsed and how many depositors have lost their deposits? ($0). We also created tarrifs which backfired causing exports to drop, and of course the stock market crash.
The great depression did not happen due to dropped property values or "tricky" banking mortgages..
The great depression did not happen due to dropped property values or "tricky" banking mortgages..
There are several theories as to the cause of the Great Depression of 1929.
One of them points to overinvestment (economic bubble) and subsequent bust.
Very similar to the housing bust...overinvestment causing a bubble. Doesn't have to be the exact same "investment".
There are several theories as to the cause of the Great Depression of 1929.
One of them points to overinvestment (economic bubble) and subsequent bust.
Very similar to the housing bust...overinvestment causing a bubble. Doesn't have to be the exact same "investment".
Very true, the reasons will always be up for a debate, but mortgages, or more precisely homes are not investments even though many mistakingly believe they are.
Investments bring in income, homes bring in debt and liabilities. They are opposite on the an economic spreadsheet.
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