Um....wasn't free markets and deregulation to blame for the last crisis?

And you sow the seeds of your response's destruction with your own words.

Is it capitalism that bails out banks or is it corporatism?
Is it capitalism that guarantees loans or is it the government?
How much of the money used to purchase assets like Countrywide came from the Fed's discount window and artificially low interest rates? The fed loaned trillions over several years
Fannie and Freddy own 100's of billions of dollars worth of loans, do you have any idea what you're talking about?
CRA propaganda - lol fancy words with no back up. Try again.

I also like how you ignored all of my other points. If you are going to refute me you need to address everything.

 

That isn't an argument, that's a statement.

How orwellian of you to deny the existence and effect the CRA had on the market.

Demand doesn't work like that. Demand isn't how much demand there is for the houses left, its the value people will *pay* for any given house. This value was directly raised by the sub-prime lending, by giving more lending to everyone, raising the amount in their wallet. It's the same effect if you give everyone $1000, no one is actually richer, everything just gets that much more expensive. Also, when you raise the proportion of people housed, housing prices go up because houses are few and far between afterwards. Raising demand, lowers supply.

Banks don't want to give sub-prime loans, the very definition of a sub-prime loan is a loan which it is *expected* not to be paid back. A bank in a free market avoids sub-prime loans in an effort to actually make money. A select few banks were given quotas for how many sub-prime loans they were supposed to hand out. All banks were required to give the same amount of loans in lower-class areas as in higher-class areas. These both raised the rate of sub-prime loans the banks had to give out. And it didn't just affect poor people either, a portion of all leasees of all incomes were given sub-prime loans, it was simply up to the leasee whether they think they could afford it or not. The whole market atmosphere forced banks to make a choice, restrict their lending practices to all leasees and make almost no loans and possibly go bankrupt *now*. Or lend a large portion of sub-prime loans and hope they don't default before all the other banks. The latter is what almost every bank chose, hoping that they would get bailed out when the (*)(*)(*)(*) hit the fan and/or the legislation fixed. When they did crash, the democrats in congress bailed them out in worry that the banks would sue them and win. Rather than risk that embarrassment they simply settled with them. Had the banks not sold CDS's they might not have gotten bailed out, because they wouldnt have had enough exposure to the market for the public to care if they crashed. Housing prices would drop and that's about it, no other goods, foreclosed leasees would sell their houses and buy an equal house of the same quality. Might even be smaller than the dotcom bubble. It was actually ingenius self-preservation that caused the CDS's.

So what you're saying is, the government should force banks to give sub-prime loans, but regulate against giving sub-prime loans?

How about we just don't force them to give sub-prime loans in the first place like we've been doing for 200 years??

 

If there are 1,000,000 people competing over 500,000 houses. Will there be higher prices or lower prices if that number raises to 1,500,000 competing over 500,000 houses? Raises, exponentially.

That is why housing prices went up after the revision of the CRA to a more aggressive approach.

 

Repeal of Glass/Steagall was a factor, but aggressive attempts by the government to promote home ownership were the major reason for the meltdown.

 

Are you sure it wasn't the martian invasion? Absolutely every study blames deregulation....

Are you lying or do you believe America is stupid. Consider posting one study. Just one. How about one with Rep. Barney Frank fighting against regulation on Fannie Mae and Freddie Mac.

 

These products were gas thrown on the fire the government started. Had the government not promoted and backed subprime loans, these products would not have been so toxic.

Like it or not, it was improper market forces by the government that innitiated the meltdown.

 

The only thing Glass/steagall would have prevented is banks selling CDS's, which in the long run saved them by forcing the bailouts. I think the outcome would have been worse with glass/steagall. It would have been a long slow depression, instead of a 2-year recession. Why? Without glass-steagall the banks would have to simply stop lending. Then the government would panic and not know what the hell to do, probably sit on their thumbs for a few years, before they finally listen to the libertarians. Its better to overlend than to not lend at all. With no lending, *no one* can buy a house or start a business, however with overlending it's *only* the ones who borrowed more than they could pay whom "lost."

 

Obviously that they think that deregulation wasn't the problem. Their thinking is limited to: Government regulates too much... When the markets that went down were the markets with less regulation. But that they will never see.

What is their receipt, even when it creates more poverty, hey you must deregulate more, and faster, for that the things are going well. Hey, that you didn't deregulate enough, you controlled so much the economy. Even when the government already doesn't have any power on it.

 

That's actually too broad a brush.
Specifically it's deregulation of the financial sector.

Don't make the same mistake as the conservatives. They treat all markets the same, and that's how their free market fundamentalism sticks together.
Liberals, centrists, and moderate-conservatives recognize that not all markets are the same. The financial market is one because of the implications it has for the rest of the economy and its relationship to government monetary policy, and because macro-level rational behavior can easily lead to macro-level disaster.

So the arguments for financial regulation do not necessarily mean we should regulate, say, retail stores any more.
Regulation needs to be a scalpel, not a club.

 

Absolutely WRONG!

The reason for the MELTDOWN was the fact that home loans were leveraged up to a hundred times OR MORE to be made into derivative financial products as "collateral".

That is the ONLY way some failing mortgages could collapse the ENTIRE ECONOMY! $100 billion in loan failures would cause a TRILLION dollars in these "AAA" derivative products to fail!

AND the interest rates these derivative products were PAYING OUT (10%) demanded that the underlying mortgage borrowers would eventually ACTUALLY PAY the monstrous interest rates that those subprime loan ballooned into after a few years. There was NO WAY that would EVER happen, and everyone KNEW IT.

Fannie and Freddy did NOT buy "LIAR" loans, and the other trash loans generated in those days, Those ALL were bought PRIVATELY by banks to create their derivative products which were paying 10% interest at a time when a savings account paid 1%.

The CRA was NOT INVOLVED in ANY OF THAT! Our UNREGULATED (in that respect) banks and financial houses did it ALL ON THEIR OWN to generate MASSIVE COMMISSIONS even though they KNEW the derivative products would ultimately FAIL!

As for the CRA involvemnet, let's ask a federal bank for an analysis:

http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4136

 

You should actually READ what you POST!

This is a lawsuit against a bank that had DISCRIMINATED against minority borrowers with GOOD CREDIT and GOOD JOBS.

 

Get a clue.
Government granted privilege in the finance industry is not deregulation.

 

Yeah, I get the mortgage meltdown. It was caused by deregulation. Just like I said in the op.

 

Yes, it was deregulation that caused the economic collapse. It is well established. Look up your own proof. I've seen it and i"m not here to educate you.
Yes, I'm fairly confident that the vast majority of america is stupid.

 

So they weren't forcing the banks to make sub-prime mortgages, they were accusing the banks of making different loans to black people than to white people.

 

Fortunately, as people have spent more time on the Internet over the last decade, theyre becoming more educated. That's why free market ideas are experiencing a revival, because people are waking up to the fact that Keynesian economics are a failure

 

No, more people are being deluded into the fantasy that free markets work.

 

actually, you have been deluded into thinking that the finance industry was operating as a free market.

 

I've read every one of them, all of them seem to miss the simple points that banks don't make money on sub-prime loans. You'd think such "educated" people could get a simple point right.

CDS's have been around for decades, if this was caused by CDS's alone, which is what every liberal "academic" claims, where were the previous collapses? Why are we still selling CDS's?

Its because that argument holds no water, and even congress knows it.

 

Of course it wasn't the problem, unless you think central banking and housing subsidies are examples of "deregulation"...

 

Subsidizing housing increases demand.

They forced some, allowed others, and incentivized them all.

 

That's an oxymoron if I've ever heard one...

 

No, it was not exactly that, but it was also not exactly not that either. What it was was the financial industry taking advantage of an incomplete market regulation mechanism that allowed them to operate in the otherwise tightly regulated mortgage finance market through unregulated non-bank mortgage lenders who intentionally misrepresented bad mortgage loans that the investment banks financed, packaged and sold to investors as perfectly sound investment vehicles.

It is actually somewhat fortunate that the investment banks bet against these vehicles because the money they got off these CDS bets from the government bailout of AIG is now being disgorged in massive settlements with investors who are lining up to sue them for fraudulent misrepresentation and lack of due diligence.

Of course, if proper regulation had still been in place none of this would have happened, as was the case for 50 or so previous years before oversight and regulations to prevent just this sort of thing from happening were removed.

 

so decry what it really is, ...........CORPORATISM.
Stop talking about "free markets".

 

Free market corporatism maybe, but an unregulated free market for sure.