You have been elected to Senate. You have been asked to write a bill.

[LOsborne]

School House Rock!!!!!

Ya'll gotta remember

Lolly-lolly-lolly get your adverbs here!

[Palehorse]

I find it impossible to follow the bastardized logic of some people. . . (oops, I thought this was the random comments topic!)

[LOsborne]

You talkin' to me? You talkin' to me? You talkin' to me? Then who the hell else are you talking... you talking to me? ...

[Palehorse]

You talkin' to me? You talkin' to me? You talkin' to me? Then who the hell else are you talking... you talking to me? ...

[me]

Here ya go  http://www.dallasfed.org/research/eclett/2007/el0711.html

http://homebuying.about.com/od/findingalender/qt/0307subprime.htm

http://www.marketoracle.co.uk/Article372.html

[Moonglow]

It took u 2 days to find just those articles?

[me]

Nope just looked tonight.

[LOsborne]

If you actually read your articles, instead of just googling key words, you would have found each one of them said exactly what I did: the mortgage meltdown was caused by non-conforming loans, fantasy accounting to paint a false picture of profits, and synthetic CDOs, not by the government "mandating" (or even encouraging) loans to non-qualified buyers. The culprits were the greedy brokers and fund managers, stupid people who really believed what these con-men told them, and accountants who answer the question "How much is 2 plus 2?" with the words "How much do you want it to be?"

[Moonglow]

Clinton did admit that he encouraged loans to the poor and minority but he didn't intend for $500,000 dollars homes for those that could afford a $50,000 dollar home.

[The Troll]

Clinton did admit that he encouraged loans to the poor and minority but he didn't intend for $500,000 dollars homes for those that could afford a $50,000 dollar home.

  Moonglow, we have one real problem here in the Unknown Zone.  We have people who's only source of political news and information about what going on in this world is.  Fox News,  Sean Hannity, Bill O'Reilly, Rush Limbaugh, Sara Palin, Michell Backman and teacher/preacher with a blackboard, Glen Beck.  These poor people are caught in a cycle like the movie, Groundhog Day.


                                                        

[me]

If you actually read your articles, instead of just googling key words, you would have found each one of them said exactly what I did: the mortgage meltdown was caused by non-conforming loans, fantasy accounting to paint a false picture of profits, and synthetic CDOs, not by the government "mandating" (or even encouraging) loans to non-qualified buyers. The culprits were the greedy brokers and fund managers, stupid people who really believed what these con-men told them, and accountants who answer the question "How much is 2 plus 2?" with the words "How much do you want it to be?"

It may not have been what you meant but I took your one statement to mean that the government didn't encourage or have anything to do with the non complying loans.  Did you read this part of the first article?

[These new practices opened the housing market to millions of Americans, pushing the homeownership rate from 63.8 percent in 1994 to a record 69.2 percent in 2004. Although low interest rates bolstered homebuying early in the decade, the expansion of nonprime mortgages clearly played a role in the surge of homeownership.

Two crucial developments spurred nonprime mortgages' rapid growth. First, mortgage lenders adopted the credit-scoring techniques first used in making subprime auto loans. With these tools, lenders could better sort applicants by creditworthiness and offer them appropriately risk-based loan rates.

By itself, credit scoring couldn't have fostered the rapid growth of nonprime lending. Banks lack the equity capital needed to hold large volumes of these risky loans in their portfolios. And lenders of all types couldn't originate and then sell these loans to investors in the form of residential mortgage-backed securities, or RMBS—at least not without added protection against defaults.

The spread of new products offering default protection was the second crucial development that fostered subprime lending growth. Traditionally, banks made prime mortgages funded with deposits from savers. By the 1980s and 1990s, the need for deposits had eased as mortgage lenders created a new way for funds to flow from savers and investors to prime borrowers through government-sponsored enterprises (GSEs) (Chart 2, upper panel).

Chart 2: Mortgage financial flows

Fannie Mae and Freddie Mac are the largest GSEs, with Ginnie Mae being smaller. These enterprises guarantee the loans and pool large groups of them into RMBS. They're then sold to investors, who receive a share of the payments on the underlying mortgages. Because the GSEs are federally chartered, investors perceive an implicit government guarantee of them. Fannie Mae and Freddie Mac, however, haven't packaged many nonprime mortgages into RMBS.

Lacking the same perceived status, nonagency RMBS—those not issued by Fannie Mae, Freddie Mac and Ginnie Mae—faced the hurdle of paying investors extremely large premiums to compensate them for high default risk. These high costs would have pushed nonprime interest rates to levels outside the reach of targeted borrowers.

This is where financial innovations came into play. Some—like collateralized debt obligations (CDOs), a common RMBS derivative—were designed to protect investors in nonagency securities against default losses. Such CDOs divide the streams of income that flow from the underlying mortgages into tranches that absorb default losses according to a preset priority.

The lowest-rated tranche absorbs the first defaults on the pool of underlying mortgages, with successively higher ranked and rated tranches absorbing any additional defaults. If defaults turn out to be low, there may be no losses for higher-ranked tranches to absorb. But if defaults are much greater than expected, even higher-rated tranches may face losses.

Having confidence in the ability of quantitative models to accurately measure nonprime default risk, a brisk market emerged for securities backed by nonprime loans. The combination of new credit-scoring techniques and new nonagency RMBS products enabled nonprime-rated applicants to qualify for mortgages, opening a new channel for funds to flow from savers to a new class of borrowers in this decade (Chart 2, lower panel).]

What was the gain to the government? How does anybody win with a bunch of repo-ed crappy houses back on the books? This financial CF was brought about by greed. Worthless houses on the market do not fill anyone's piggy bank.

The government does not and can not mandate loans. The CRA loans are conforming and scrutinized within an inch of privacy law violations. The mortgage melt-down was caused by non-conforming loans, fantasy accounting to paint a false picture of profits, and synthetic CDOs. It was not caused by "the government so everyone could afford a house."

They were government backed and encouraged by the government so more people could afford housing.

SANDY!! You're supposed to warn me (that's me-Lolly, not me- who believes something is true because she believes it despite all evidence to the contrary) before I start getting spittle on my keyboard!

[The Troll]

  Now let us sing, one, two, three,   M   I   C ___   K    E    Y ____   M    O    U    S    E.   Mickey Mouse, Mickey Mouse, let hold our banner high.         People who can't see what they won't see.     

The Troll, let's for them.

[LOsborne]

It may not have been what you meant but I took your one statement to mean that the government didn't encourage or have anything to do with the non complying loans.  Did you read this part of the first article?

Yes, I did.

These new practices opened the housing market ... expansion of nonprime mortgages clearly played a role in the surge of homeownership.

... mortgage lenders adopted the credit-scoring techniques first used in making subprime auto loans. With these tools, lenders could better sort applicants by creditworthiness and offer them appropriately risk-based loan rates.

... the rapid growth of nonprime lending. ... mortgage-backed securities, or RMBS
...
. Fannie Mae and Freddie Mac, however, haven't packaged many nonprime mortgages into RMBS

... nonagency RMBS—those not issued by Fannie Mae, Freddie Mac and Ginnie Mae... collateralized debt obligations (CDOs), a common RMBS derivative—were designed to protect investors in nonagency securities...

The combination of new credit-scoring techniques and new nonagency RMBS products enabled nonprime-rated applicants to qualify for mortgages...

There. I reduced it to the operative phrases, and put the culprits in bold. Now do you get it? Non-conforming sub-primes and non-primes (neither of which carry government guarantees,) CDOs -- especially synthetic CDOs which are artificial constructs holding NO real assets, used to "lay-off" (that is, bet against) the fund making money so the brokering house makes money either way, and creative accountants who screwed around with the way credit-worthiness is assessed.

Funny how you underlined the sentence about the GSE's guaranteeing loans and pooling them into RMBS's, but somehow missed the following sentence which states Fannie, Freddie and Ginnie don't package non-primes.

I just can't understand why you want to make the gubment the bad guy here, instead of taking a real hard look at the folks who made money off the game.

[followsthewolf]

Well said.

[Palehorse]

. . .
I just can't understand why you want to make the gubment the bad guy here, instead of taking a real hard look at the folks who made money off the game.

Yes you can; just think about it for a second or two. . .

(Hint: If the Shrub was still in or Johnny boy. . .)