California getting bailed out?

[rockon]

Understood and agreed there was not a single cause. saying banks were forced to lend money due to unworthy clients due the the CRA just isn't a valid one.

Thanks for stating your opinion but don't think I don't have a right to mine. Funny how this "rights" thingie just works one way for some.

[Driftr]

Feb 10, 2012 11:55:25 GMT -5 rockon said:

Understood and agreed there was not a single cause. saying banks were forced to lend money due to unworthy clients due the the CRA just isn't a valid one.

Thanks for stating your opinion but don't think I don't have a right to mine. Funny how this "rights" thingie just works one way for some.

You're welcome for me showing you where your opinion was wrong.

[rockon]

You did that? You have provided no evidence to my knowledge that legislation was not used to make banks provide loans against their better knowledge or preference. that should be quite evident in the simple fact that they passed legislation to begin with. If the banks wanted to do this they would have already been doing it. It doesn't take a rocket scientist to know there is much higher risk borrowing money to people who do not have good credit ratings and low incomes.

[djAdvocate]

we wouldn't need anything if we would just raise taxes.

[rockon]

How high before we could all live in a problem free world? 100%

[Deleted]

"we wouldn't need anything if we would just raise taxes."

If you're talking about California, they have one of the highest tax burdens in the nation, don't they? And they still can't manage. High property taxes due to high property values and effective state income tax rates of up to 10% for those at the top.

[djAdvocate]

Feb 10, 2012 13:54:23 GMT -5 rockon said:

How high before we could all live in a problem free world? 100%

are you vying for the title of Captain Hyperbole?

[djAdvocate]

Feb 10, 2012 14:14:28 GMT -5 @investorbob said:

"we wouldn't need anything if we would just raise taxes."

If you're talking about California, they have one of the highest tax burdens in the nation, don't they? And they still can't manage. High property taxes due to high property values and effective state income tax rates of up to 10% for those at the top.

look, there are only two ways to balance a budget. to take ONE off the table is lame, imo. but for the record, the conservative tax foundation ranks our property taxes as 17th BEST (lowest) in the US.

[Driftr]

Feb 10, 2012 13:45:33 GMT -5 rockon said:

You did that? You have provided no evidence to my knowledge that legislation was not used to make banks provide loans against their better knowledge or preference. that should be quite evident in the simple fact that they passed legislation to begin with. If the banks wanted to do this they would have already been doing it. It doesn't take a rocket scientist to know there is much higher risk borrowing money to people who do not have good credit ratings and low incomes.

Yes. I did.

If you'd bother to read the legislation it was pretty clear to me:

Sec. 802.(a) The Congress finds that—
(1) regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business;
(2) the convenience and needs of communities include the need for credit services as well as deposit services; and
(3) regulated financial institutions have continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered.
(b) It is the purpose of this title to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.

and

Sec. 804.In connection with its examination of a financial institution, the appropriate Federal financial supervisory agency shall—
(1) assess the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution; and
(2) take such record into account in its evaluation of an application for a deposit facility by such institution.

The banks made a choice to lend to people who they should have known would not pay the loans back. Fine with me. That was their choice. Perhaps they thought they could collect enough interest or generate enough revenue from the deposits they were receiving in those lower income neighborhoods. Or maybe they knew at the end of the day when it all blew up they'd get bailed out. I don't know. I do know there is nothing written in the CRA that forces them to lend to poor credit customers.

[rockon]

If you read through some more of the links you will find examples where the banks claim they were told they must meet certain thresholds of loans to minorities, low income and other home buyers or they would be investigated by the DOJ for failure to comply with this law. So you can argue anything you want about the intent of the law or the credibility of the witnesses. There are just to many factors that would make it my opinion that our government officials also bear some responsibility for this crisis. Are you suggesting that your opinion is that no one in Washington (except Bush of course) knew anything about this pending crisis or had any responsibility for it?

[Driftr]

Feb 10, 2012 15:05:50 GMT -5 rockon said:

If you read through some more of the links you will find examples where the banks claim they were told they must meet certain thresholds of loans to minorities, low income and other home buyers or they would be investigated by the DOJ for failure to comply with this law. So you can argue anything you want about the intent of the law or the credibility of the witnesses. There are just to many factors that would make it my opinion that our government officials also bear some responsibility for this crisis.

I was interested in debunking the myth that the CRA was the cause of these bad loans. I feel like that mission has been accomplished. It'd be interested to see how many banks had come forward with their threshhold protests before the loans started going bad. Any of those links talk about that?

Are you suggesting that your opinion is that no one in Washington (except Bush of course) knew anything about this pending crisis or had any responsibility for it?

Why would you choose to insert the (except Bush of course) in the above?
I believe there were many people in DC that knew there was a crisis looming. What does that have to do with whether or not the CRA forced banks to make loans to unqualified applicants?

[Savoir Faire-Demogague in NJ]

Feb 10, 2012 15:05:50 GMT -5 rockon said:

If you read through some more of the links you will find examples where the banks claim they were told they must meet certain thresholds of loans to minorities, low income and other home buyers or they would be investigated by the DOJ for failure to comply with this law. So you can argue anything you want about the intent of the law or the credibility of the witnesses. There are just to many factors that would make it my opinion that our government officials also bear some responsibility for this crisis. Are you suggesting that your opinion is that no one in Washington (except Bush of course) knew anything about this pending crisis or had any responsibility for it?

Bush called for an investigation into FNMA a long time ago. If I recall Barney's Frank lost a lung on the house floor.

[reasonfreedom]

Feb 10, 2012 14:26:06 GMT -5 djAdvocate said:

Feb 10, 2012 14:14:28 GMT -5 @investorbob said:

"we wouldn't need anything if we would just raise taxes."

If you're talking about California, they have one of the highest tax burdens in the nation, don't they? And they still can't manage. High property taxes due to high property values and effective state income tax rates of up to 10% for those at the top.

look, there are only two ways to balance a budget. to take ONE off the table is lame, imo. but for the record, the conservative tax foundation ranks our property taxes as 17th BEST (lowest) in the US.

As much as I hate taxes, I am going to have to agree with DJ. There is no way we can do this just by cutting spending or overhauling SS, medicade, welfare, ect..(it would cost money just to overhaul them). Maybe it could be done but we would basically be left in limbo and sink back to the stone age(which in some regard isn't that bad). I say taxes have to been increased for a time in order to do this and then have them brought back down. I would have the tax increases timeout after a certain year period, just in case congress thinks they can keep up their idiocy in spending. I would tax the heck out of the banks since they were extremely careless and I would cut the politicians pay in half just to show that they are not above the law. If this keeps going we are going to end up like Greece(not sure how long that would take) and Greece is in a double-edged sword situation.

[Savoir Faire-Demogague in NJ]

As much as I hate taxes, I am going to have to agree with DJ. There is no way we can do this just by cutting spending or overhauling SS, medicade, welfare, ect

Raising taxes on the wealthy to levels the radical left, and many on the not so far left, would at best raise $50 billion.

We are running annual deficits of $1 to 1.5 trillion.

We are only looking at around an 8% increase in marginal revenue.
___________________________________________________
How much would a Buffett Tax raise?
Robert Samuelson has the numbers:

www.washingtonpost.com/opinions/buffett-tax-and-truth-in-numbers/2012/01/29/gIQAikL5aQ_story.html?tid=pm_opinions_pop

Washington Post, Jan. 29, 2012

Obama’s still-vague Buffett Tax would apparently impose a minimum 30 percent tax rate on incomes exceeding $1 million....In September, the Congressional Budget Office estimated the 10-year deficit at $8.5 trillion. The nonpartisan Tax Foundation estimates that a Buffett Tax might now raise $40 billion annually. Citizens for Tax Justice, a liberal group, estimates $50 billion. With economic growth, the 10-year total might optimistically be $600 billion to $700 billion. It would be a tiny help; that’s all.

[stayput]

On the Verge of Life Changing Events

World Central Banks will Their U.S. Dollar Reserves!

And...

The Petrodollar will be Eliminated!



Petrodollars are U.S. Dollar deposits made in western banks for oil transactions.

Almost Every Country in the World Must Buy U.S. dollars to purchase Oil.

The U.S. Dollar to Oil peg, artificially keeps the Dollar Alive.

(1973 -1979)-The U.S. "Persuade" oil producing nations to sell their oil in Petrodollars ONLY. Plus, the treaty mandated nations who accepted payment in Petrodollars to "invest" their profits in U.S. treasury notes, bond and bills. In return, the U.S. would protect them from Russia and any other nation that could cause harm to their oil fields.

A Sweet Deal for the U.S., that`s coming to an END!

Oil producing nations are not happy, the current Fed Fund Rate is near Zero; treasuries are paying near Zero. Plus, the U.S. Dollar is being Massed produced at an alarming rate, it`s now seen as a liability, not an asset.

When the Oil to U.S. dollar peg is broken, the artificial demand for dollars will end. The U.S. Dollar will End!

On January 14th, senior diplomats of both Iran and Russia announced they have Replaced dollars in their Oil trade with India, Japan and China. Demand for the U.S. Dollars is diminishing daily!

President Obama is Only adding to the Imminent Collapse of Our Money, on November 28th, during the annual summit between the U.S. & Europe, President Obama announced:

"The U.S. is ready to do our part to help Europe solve its problems"

On November 30th, officials revealed the joint venture between the Swiss National Bank, European Central Bank, Bank of Canada, Bank of England, Bank of Japan and the U.S. Federal Reserve. The Plan is to Trillions of U.S. Dollars in the Hands of Weak European Banks.

President Obama and the Federal Reserve will Bailout European Banks with Tax Payer Dollars!

All participating Central Banks will their U.S. Dollars Reserves, in an effort to keep banks like Barclays, Deutsche Bank and others afloat. One key factor in this joint venture, the Only Currency being dumped in the Open Market, will be the U.S. Dollar.

Trillions of U.S. Dollars held and kept out of circulation by Central Banks, will Now Flood the Currency Markets.

The final blow could come from the IMF. On January 18th, the IMF announced it`s prepared to "Infuse" $600 Billion Dollars in the Open Market for the European Crisis.

The U.S. Dollar Dumping Scheme will take place through the "U.S. Dollar Swap Line", an Over The Counter (OTC) Currency Market. The U.S. Dollar Swap Line was specially designed after the 2008 financial scare, the sole purpose of this market is for "Emergency Infusion" of Liquidity.

Guess What Happens to the Value of Your Savings, when Central Banks their U.S. Dollar Reserves?

Guess who`s "On the Hook" for the Money, the Obama Administration will give European Banks?

Yes, Americans will get hit two ways:
1.) Higher Taxes,...someone has to pay it!
2.) Higher Costs of Living... Food & Energy are traded Against U.S. Dollars; adding Trillions of Dollars in the open market will devalue the U.S. Dollar, instantly!

IF You`re NOT Concerned... You Should Be!

World Central Banks came to this conclusion Only after a series of Non-Publicized Bank "Stress-Tests"; They Know Things Are About to Get Really Bad!



The S&P recently Downgraded 15 Major Banks, such as: Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, Wells Fargo, and JP Morgan Chase. The Non-U.S. based Banks were: Barclays, HSBC, UBS, RaboBank and others. Even Australia`s "Big Four" banks have been hit with downgrades.

If that wasn`t Bad Enough, on January 13th, the S&P Downgraded Nine European Countries. This has Never been done before!

Major European Countries and All the Major Banks, in the U.S. & Europe are in Trouble!

The Central Banks of Canada, Switzerland, England and Japan have joined forces to Bailout Banks in Europe. The Federal Reserve and the IMF will Bailout Countries in Europe.

Do you "Smell" A Major Financial Crisis?

The Obama Administration, the Treasury, and Federal Reserve, sure do!

Federal officials are "urging" U.S. banks to recapitalize Money Market Accounts- officials say they`re in "Systemic Risk".

For Many Years, U.S. Banks were taking American`s money oversees, they paid U.S. depositors 1%--1.25% on money market accounts, while depositing those funds in European Banks at an average yield of 4.75% - 5.75%. Good returns with Low Risk... so they thought!

Again, If you`re not concerned , You Should Be!

About 50% of all money market funds-$1.6 Trillion are in European Banks.

How Real is the Collapse of the European Financial System?

The head of the Financial Services Authority (FSA) told the UK`s biggest lenders to "draw up contingency plans for the collapse of the single currency".

Andrew Bailey, a senior executive at the FSA, said: "We must not ignore the prospect of the disorderly departure of some countries from the Eurozone".

When will the Financial Collapse Begin?

We could be days away! Greece will be the first "Domino" to fall, quickly spreading to Portugal, Hungary and others.

Negotiations between the Greek government and private holders of Greek Debt, shutdown after investors refused a proposed 50% "voluntary" haircut. Without this agreement, Greece will Collapse Very Quickly! The Greek 1 year Bond yield 40% last July, it`s now at 396%!!

How will A Financial Collapse in Europe affect your Money?

Remember, the Old Saying, "When the U.S. catches a cold, the world catches a Fever". The New statement is: "When the Banking System catches a cold... The World catches a Fever"

Today, All World Financial Markets, are One In The Same!


THINK ABOUT IT,.. the above mentioned Central Banks, the Federal Reserve and the IMF, would Not be joining forces and preparing for a financial Catastrophe,.. If they didn`t already Know One was Coming!

The World`s Financial System, lives on Borrowing & Lending of Money...
If the System Fails, The World Fails!

The question is...

What Have You Done to Protect Your Wealth?



For Years, you`ve heard that China has Stocked-piled Gold to Prepare for a Financial Crisis. They are now One of the World`s Largest Holders of Gold. As U.S. & European Banks were being Downgraded by S&P, the Bank of China, China Construction Bank and other China Based Banks, were Upgraded!

[rockon]

I'm for the everything including the bath water approach but it has to be prefaced with serious federal government size and spending reductions, major entitlement reductions along with very serious trade agreement modifications or we would at best water into a leaking bucket and more manufacturing jobs would just leave this country. And who running for office could even consider making these types of moves or even speak them out loud in the same sentence without their opposing political party using it to paint them as the most evil and vile person ever to walk this earth?
But then again.. Doing nothing would be better then punching more holes in the bucket like we are doing now.

[reasonfreedom]

Feb 10, 2012 15:43:30 GMT -5 Savoir Faire-Demogague in NJ said:

As much as I hate taxes, I am going to have to agree with DJ. There is no way we can do this just by cutting spending or overhauling SS, medicade, welfare, ect

Raising taxes on the wealthy to levels the radical left, and many on the not so far left, would at best raise $50 billion.

We are running annual deficits of $1 to 1.5 trillion.

We are only looking at around an 8% increase in marginal revenue.
___________________________________________________
How much would a Buffett Tax raise?
Robert Samuelson has the numbers:

www.washingtonpost.com/opinions/buffett-tax-and-truth-in-numbers/2012/01/29/gIQAikL5aQ_story.html?tid=pm_opinions_pop

Washington Post, Jan. 29, 2012

Obama’s still-vague Buffett Tax would apparently impose a minimum 30 percent tax rate on incomes exceeding $1 million....In September, the Congressional Budget Office estimated the 10-year deficit at $8.5 trillion. The nonpartisan Tax Foundation estimates that a Buffett Tax might now raise $40 billion annually. Citizens for Tax Justice, a liberal group, estimates $50 billion. With economic growth, the 10-year total might optimistically be $600 billion to $700 billion. It would be a tiny help; that’s all.

I would increase them on everyone, not just the rich. Like you said just increasing them on the rich would not be enough. This way the rich would have to explain to the mob why they are mad about it.

[reasonfreedom]

Feb 10, 2012 15:48:09 GMT -5 @stayput said:

On the Verge of Life Changing Events

World Central Banks will Their U.S. Dollar Reserves!

And...

The Petrodollar will be Eliminated!



Petrodollars are U.S. Dollar deposits made in western banks for oil transactions.

Almost Every Country in the World Must Buy U.S. dollars to purchase Oil.

The U.S. Dollar to Oil peg, artificially keeps the Dollar Alive.

(1973 -1979)-The U.S. "Persuade" oil producing nations to sell their oil in Petrodollars ONLY. Plus, the treaty mandated nations who accepted payment in Petrodollars to "invest" their profits in U.S. treasury notes, bond and bills. In return, the U.S. would protect them from Russia and any other nation that could cause harm to their oil fields.

A Sweet Deal for the U.S., that`s coming to an END!

Oil producing nations are not happy, the current Fed Fund Rate is near Zero; treasuries are paying near Zero. Plus, the U.S. Dollar is being Massed produced at an alarming rate, it`s now seen as a liability, not an asset.

When the Oil to U.S. dollar peg is broken, the artificial demand for dollars will end. The U.S. Dollar will End!

On January 14th, senior diplomats of both Iran and Russia announced they have Replaced dollars in their Oil trade with India, Japan and China. Demand for the U.S. Dollars is diminishing daily!

President Obama is Only adding to the Imminent Collapse of Our Money, on November 28th, during the annual summit between the U.S. & Europe, President Obama announced:

"The U.S. is ready to do our part to help Europe solve its problems"

On November 30th, officials revealed the joint venture between the Swiss National Bank, European Central Bank, Bank of Canada, Bank of England, Bank of Japan and the U.S. Federal Reserve. The Plan is to Trillions of U.S. Dollars in the Hands of Weak European Banks.

President Obama and the Federal Reserve will Bailout European Banks with Tax Payer Dollars!

All participating Central Banks will their U.S. Dollars Reserves, in an effort to keep banks like Barclays, Deutsche Bank and others afloat. One key factor in this joint venture, the Only Currency being dumped in the Open Market, will be the U.S. Dollar.

Trillions of U.S. Dollars held and kept out of circulation by Central Banks, will Now Flood the Currency Markets.

The final blow could come from the IMF. On January 18th, the IMF announced it`s prepared to "Infuse" $600 Billion Dollars in the Open Market for the European Crisis.

The U.S. Dollar Dumping Scheme will take place through the "U.S. Dollar Swap Line", an Over The Counter (OTC) Currency Market. The U.S. Dollar Swap Line was specially designed after the 2008 financial scare, the sole purpose of this market is for "Emergency Infusion" of Liquidity.

Guess What Happens to the Value of Your Savings, when Central Banks their U.S. Dollar Reserves?

Guess who`s "On the Hook" for the Money, the Obama Administration will give European Banks?

Yes, Americans will get hit two ways:
1.) Higher Taxes,...someone has to pay it!
2.) Higher Costs of Living... Food & Energy are traded Against U.S. Dollars; adding Trillions of Dollars in the open market will devalue the U.S. Dollar, instantly!

IF You`re NOT Concerned... You Should Be!

World Central Banks came to this conclusion Only after a series of Non-Publicized Bank "Stress-Tests"; They Know Things Are About to Get Really Bad!



The S&P recently Downgraded 15 Major Banks, such as: Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, Wells Fargo, and JP Morgan Chase. The Non-U.S. based Banks were: Barclays, HSBC, UBS, RaboBank and others. Even Australia`s "Big Four" banks have been hit with downgrades.

If that wasn`t Bad Enough, on January 13th, the S&P Downgraded Nine European Countries. This has Never been done before!

Major European Countries and All the Major Banks, in the U.S. & Europe are in Trouble!

The Central Banks of Canada, Switzerland, England and Japan have joined forces to Bailout Banks in Europe. The Federal Reserve and the IMF will Bailout Countries in Europe.

Do you "Smell" A Major Financial Crisis?

The Obama Administration, the Treasury, and Federal Reserve, sure do!

Federal officials are "urging" U.S. banks to recapitalize Money Market Accounts- officials say they`re in "Systemic Risk".

For Many Years, U.S. Banks were taking American`s money oversees, they paid U.S. depositors 1%--1.25% on money market accounts, while depositing those funds in European Banks at an average yield of 4.75% - 5.75%. Good returns with Low Risk... so they thought!

Again, If you`re not concerned , You Should Be!

About 50% of all money market funds-$1.6 Trillion are in European Banks.

How Real is the Collapse of the European Financial System?

The head of the Financial Services Authority (FSA) told the UK`s biggest lenders to "draw up contingency plans for the collapse of the single currency".

Andrew Bailey, a senior executive at the FSA, said: "We must not ignore the prospect of the disorderly departure of some countries from the Eurozone".

When will the Financial Collapse Begin?

We could be days away! Greece will be the first "Domino" to fall, quickly spreading to Portugal, Hungary and others.

Negotiations between the Greek government and private holders of Greek Debt, shutdown after investors refused a proposed 50% "voluntary" haircut. Without this agreement, Greece will Collapse Very Quickly! The Greek 1 year Bond yield 40% last July, it`s now at 396%!!

How will A Financial Collapse in Europe affect your Money?

Remember, the Old Saying, "When the U.S. catches a cold, the world catches a Fever". The New statement is: "When the Banking System catches a cold... The World catches a Fever"

Today, All World Financial Markets, are One In The Same!


THINK ABOUT IT,.. the above mentioned Central Banks, the Federal Reserve and the IMF, would Not be joining forces and preparing for a financial Catastrophe,.. If they didn`t already Know One was Coming!

The World`s Financial System, lives on Borrowing & Lending of Money...
If the System Fails, The World Fails!

The question is...

What Have You Done to Protect Your Wealth?



For Years, you`ve heard that China has Stocked-piled Gold to Prepare for a Financial Crisis. They are now One of the World`s Largest Holders of Gold. As U.S. & European Banks were being Downgraded by S&P, the Bank of China, China Construction Bank and other China Based Banks, were Upgraded!

Lol, if the financial world collapses I have a guns I don't need wealth.

[Savoir Faire-Demogague in NJ]

Have you read in the CRA where it specifically states that banks are not required to make loans that would have an adverse financial impact on them?

That is very subjective.

[Savoir Faire-Demogague in NJ]

Lol, if the financial world collapses I have a guns I don't need wealth.

I miss our old buddy Fiscan....and his famous quote...

[Savoir Faire-Demogague in NJ]

www.lewrockwell.com/dilorenzo/dilorenzo125.html

The Government-Created Subprime Mortgage Meltdown

by Thomas J. DiLorenzo

www.lewrockwell.com/dilorenzo/dilorenzo125.html

The thousands of mortgage defaults and foreclosures in the "subprime" housing market (i.e., mortgage holders with poor credit ratings) is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call "communities of color" that they might not otherwise make based on purely economic criteria.

The original lobbyists for the CRA were the hardcore leftists who supported the Carter administration and were often rewarded for their support with government grants and programs like the CRA that they benefited from. These included various "neighborhood organizations," as they like to call themselves, such as "ACORN" (Association of Community Organizations for Reform Now). These organizations claim that over $1 trillion in CRA loans have been made, although no one seems to know the magnitude with much certainty. A U.S. Senate Banking Committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the Act.

So-called "community groups" like ACORN benefit themselves from the CRA through a process that sounds like legalized extortion. The CRA is enforced by four federal government bureaucracies: the Fed, the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The law is set up so that any bank merger, branch expansion, or new branch creation can be postponed or prohibited by any of these four bureaucracies if a CRA "protest" is issued by a "community group." This can cost banks great sums of money, and the "community groups" understand this perfectly well. It is their leverage. They use this leverage to get the banks to give them millions of dollars as well as promising to make a certain amount of bad loans in their communities.

¡¡

A man named Bruce Marks became quite notorious during the last decade for pressuring banks to earmark literally billions of dollars to his organization, the "Neighborhood Assistance Corporation of America." He once boasted to the New York Times that he had "won" loan commitments totaling $3.8 billion from Bank of America, First Union Corporation, and the Fleet Financial Group. And that is just one "community group" operating in one city ¨C Boston.

Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don¡¯t comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters.

Consequently, banks in every community in America have been forced to hold a portfolio of bad loans, euphemistically referred to as "subprime" loans. In order to compensate themselves for the added risk of extending these loans, many lenders have increased the lending fees associated with mortgage loans. This is simply an indirect way of doing what banks always do ¨C and what they must do to remain solvent: charging effectively higher rates of interest on riskier loans.

But this is discriminatory!, complained the "community organizations." Thus, if one browses the ACORN web site, one can read of their boasts of having "predatory lending laws" passed in numerous states which outlaw such fees, prohibiting banks from protecting themselves from the added risk involved in making forced loans to "subprime" borrowers.

These are price control laws, and price controls always cause shortages. Normally, banks would respond to such laws by extending fewer riskier loans. But in this case the banks are forced to continue making the marginal loans by their bureaucratic masters at the Fed and the other three federal bureaucracies mentioned above. So-called predatory lending laws therefore force the banks to "eat" the losses. This is undoubtedly a contributing factor to the bankruptcy of dozens of mortgage lenders over the past year.

Then of course there is the issue of the Fed¡¯s monetary policy having created the housing bubble, characterized by a spectacular escalation of real estate values in every American city over the past decade or so. This created a further problem for the financial institutions that are victimized by the CRA. They are forced to make a certain amount of bad loans, but because of the Fed-created explosion in housing prices, many thousands of subprime borrowers no longer qualified, by a long stretch, for conventional mortgages based on their incomes.

The only way these borrowers could qualify for their mortgage loans (even ignoring their bad credit ratings) was to take out adjustable rate mortgages, some of which had astonishingly low first-year rates in the 3 percent range, and sometimes lower. This is what has largely fueled the subprime mortgage meltdown ¨C the inability of thousands of subprime borrowers to afford their mortgages now that their rates have adjusted upward. Thus, the combination of the Fed¡¯s enforcement of the CRA (with the help of political pressure groups like ACORN) and its post 9/11 monetary policy in general are the reasons for the bursting real estate bubble and the "subprime" mortgage meltdown.

Don¡¯t expect to read about this in the "mainstream media," however, which generally views groups like ACORN as heroic champions of the poor, laws like the CRA as anti-discrimination laws, and places all of the blame for the subprime mortgage meltdown on greedy capitalists, especially mortgage brokers. Encouraged by such reporting, the odious Senator Charles Schumer of New York has promised federal legislation that will reign in these miscreants, while the Bush administration is proposing an indirect bank bailout by having the Federal Housing Administration cover many of the bad "subprime" loans. This will create what economists call a "moral hazard" by encouraging even more bad loans to be extended in the future. Every banker in America will be glad to extend loans (at high rates of interest) to the most uncreditworthy borrowers if he thinks there is no possibility of default with the FHA effectively guaranteeing the loan.

September 6, 2007

Thomas J. DiLorenzo [send him mail] is professor of economics at Loyola College in Maryland and the author of The Real Lincoln; HYPERLINK "http://www.amazon.com/gp/product/0307338428?ie=UTF8&tag=lewrockwell&linkCode=xm2&camp=1789&creativeASIN=0307338428"Lincoln Unmasked: What You¡¯re Not Supposed To Know about Dishonest Abe and How Capitalism Saved America. His latest book is Hamilton¡¯s Curse: How Jefferson¡¯s Archenemy Betrayed the American Revolution ¨C And What It Means for America Today.

[Driftr]

Feb 10, 2012 16:12:21 GMT -5 Savoir Faire-Demogague in NJ said:

Have you read in the CRA where it specifically states that banks are not required to make loans that would have an adverse financial impact on them?

That is very subjective.

Delete the not from that post. What a poorly placed and unintended word.

It only gets subjective if you get it to a court. If you used a sound and consistent method for making your decision I think they'd have been fine. They chose another route.

The fact is they chose to just make crumby loans and they knew (or should have known) those loans would blow up. Did they do this because the cost/benefit analysis showed them it made sense? Did they do it because of back room deals with senior officials? Did they do it because they knew everyone else was and that there was no way all the bundles could get put back on them without destroying the entrie financial system? I don't know the answers to those questions.

[Driftr]

Thanks for the article SF. I had no idea a protest by a community group would be the basis for holding up a merger or expansion.

Looks like it was a cost/benefit thing.

Also looks like the CRA was poorly witten with 4 bodies overseeing it. More research required.

[rockon]

Of course the large banks have found many ways to use their influence as well. I read a quote from someone the other day that said.
"Give a man a gun and he can rob a bank but give a man a bank and he can rob the whole world"

[Savoir Faire-Demogague in NJ]

Feb 10, 2012 17:01:24 GMT -5 rockon said:

Of course the large banks have found many ways to use their influence as well. I read a quote from someone the other day that said.
"Give a man a gun and he can rob a bank but give a man a bank and he can rob the whole world"

The repeal of Glass-Steagal played a big role in this also.

If any entity is robbing the world it is both houses of congress, who are immune to all laws.

[djAdvocate]

Feb 10, 2012 17:05:45 GMT -5 Savoir Faire-Demogague in NJ said:

Feb 10, 2012 17:01:24 GMT -5 rockon said:

Of course the large banks have found many ways to use their influence as well. I read a quote from someone the other day that said.
"Give a man a gun and he can rob a bank but give a man a bank and he can rob the whole world"

The repeal of Glass-Steagal played a big role in this also.

If any entity is robbing the world it is both houses of congress, who are immune to all laws.

what do you mean, SF? what law is congress immune to?

i agree with you about G-S, btw.

[reasonfreedom]

Feb 10, 2012 17:11:08 GMT -5 djAdvocate said:

Feb 10, 2012 17:05:45 GMT -5 Savoir Faire-Demogague in NJ said:

The repeal of Glass-Steagal played a big role in this also.

If any entity is robbing the world it is both houses of congress, who are immune to all laws.

what do you mean, SF? what law is congress immune to?

i agree with you about G-S, btw.

I think SF is referring to them being above the law, which in most cases I agree but every once in a while they do get caught.

[nllsq]

Driftr:

"Sec. 802.(a) The Congress finds that—
(1) regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business;
(2) the convenience and needs of communities include the need for credit services as well as deposit services; and
(3) regulated financial institutions have continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered.
(b) It is the purpose of this title to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions."


I am sorry, but your interpretation is wrong. A section in a law that functions as an explanatory preamble and merely proclaims an "intended purpose" is of little effect. The applicable law is in the subsequent sections of code, followed by the regulations promulgated in connection thereto.

CRA forced a transfer from credit-worthy individuals to credit-unworthy ones, with the government recruiting the banks as an intermediary. Part of that transfer was in the fact that unqualified borrowers put pressure on the market, driving prices up, which punished first-time creditworthy borrowers to whom no subsequent "program" applied.

[djAdvocate]

Feb 10, 2012 18:01:12 GMT -5 reasonfreedom said:

Feb 10, 2012 17:11:08 GMT -5 djAdvocate said:

what do you mean, SF? what law is congress immune to?

i agree with you about G-S, btw.

I think SF is referring to them being above the law, which in most cases I agree but every once in a while they do get caught.

in what way are they above the law? seriously. i am not being a dick, i just don't understand what that means.

[nllsq]

Feb 10, 2012 20:21:24 GMT -5 djAdvocate said:

Feb 10, 2012 18:01:12 GMT -5 reasonfreedom said:

I think SF is referring to them being above the law, which in most cases I agree but every once in a while they do get caught.

in what way are they above the law? seriously. i am not being a dick, i just don't understand what that means.

www.cbsnews.com/8301-18560_162-57323527/congress-trading-stock-on-inside-information/