"The Banks were FORCED to make bad loans". . If I hear this pathetic,

[annabanana]

whining load of crap one more time I think I'll scream. It's always voiced with complete certitude, coupled with an astounding lack of back-up. Tell me guys, just exactly who was it that twisted your poor altruistic arm so?. . hmmm?

[DCBob]

1. That's the RW talking point to deflect from the reality that unregulated banking, Wall Street..

and real estate industry is what is mostly to blame for the crisis.

[Old and In the Way]

2. What did Bush run on in 2004?

Oh yeah, home ownership. The economy was sucking wind after his trillion dollar taxcut, so they made cheap money for home ownership and refinancing available to stimulate the only sector of the economy that wasn't going negative. Of course, he paid back his bank buddies who were making these fraudulent loans with that trillon dollar TARP bailout just before he slipped out the back door.

[Marr]

3. My right-wing cousin gave me that line last week. Can you guess his background?

He's a truck driver who makes $30k/year working practically 24/7. He lost his home when his wife got cancer and the only way they could get her medical care was to take a loan against the house. She died, partially because they still couldn't afford as much care as she needed. He now lives on my mother's couch when he's not sleeping in his truck on long runs, listens to Rush Limbaugh and Sean Hannity dutifully every day, and believes they are on his side.

[aquart]

5. Really? George Bush hold a gun to their heads?

[Dawson Leery]

4. That is the typical hard right/teabagger response.

Many hustlers in the mortgage industry were making the same bogus claims. :arhg:

[PA Democrat]

6. The banks made big bucks on loans they KNEW were risky.

But why should they care when they were able to turn around sell those bad loans repackaged as as AAA rated investments thanks to their cozy relationship with the rating agencies? Then they made even bigger bucks buying credit default swaps betting those high risk loans would go bad.

Anyone who uses the line about banks being "forced" to make bad loans is showing their complete ignorance.

[Roselma]

7. I've heard it so many times, and every time,

I remind my conservative friends by sharing a link to the Federal Reserve Board's website explaining that very few of the homes lost to the crisis were subprime loans were made through CRA-affiliated banks. In fact, it was the banks without affiliation in the CRA program that lent most of the money involved in the crisis. I explain how the banks had nothing to lose because the loans were bundled and sold as CDO's.

[Igel]

10. If you don't understand an argument, it's easy to argue against it.

Not really convincing, at least to those who understand the argument.

In the 1990s I was reading the newspaper ("Ocean Breeze," a little paper out of Santa Monica) when the entire red-lining kerfuffle broke. It was claimed that lenders had redlined, in fact if not in maps, certain minority-majority areas. It was a Big Deal. There were hearings. There were threats of invetigations.

The response was that the redlining was emergent, not imposed: That poor people tended to live in certain areas, poor people have crappy credit scores, and people with crappy credit scores have trouble getting house loans. It was a political football, and even the repubs hopped on the train as it left the station.

The result was that more loans were made. The subprime loan industry was born. Banks were reluctant, but went along with it--community advisory groups pushed it, because disproportionate impact is prima facie evidence of intent to discriminate. The arguments against its being discrimination didn't change, so the same argument kept winning and the same train left the station many, many times.

The problem was that banks had trouble with large portfolios of subprime loans. Freddie and Fanny started to buy them.

This wasn't enough. They were soon glutted. So under Clinton, after some laws were rewritten, the first CDO was authorized and issued to relieve the glut of subprime loans. It wasn't a huge glut. But a glut it was. And Clinton was proud of the change in the laws. It served a political end: It reduced discrimination. It was a Good Thing.

It's been said that tools find uses and uses find tools. I've only seen it said in the context of language--given synonyms, they differentiate meanings; given a speaker's need to express an idea, words already in use will be pressed into service. Same with financial tools.

CDOs, hmm? What a nifty way to clean out mortgage portfolios so as to make money? You offload the loans and can extend more loans. It was a nice way to let small banks write a *lot* of subprime mortgages. But it was an even nicer way to let a large bank write a hell of a lot of mortgages of any kind. In fact, since you could offload the mortgages quickly, there was more of a motivation to substitute quantity of loans written for the quality of the loan grantee.

This made a (home) ownership society possible. Everybody--black, white, brown, red, green with purple polka dots--could get a home loan. * may not have been smart enough to know how it would end, he might not have known how it began. But he knew that the train had left the station, that people liked having the train out of the station, and so he made sure he, too, was on the train.

It began with a good-hearted attempt to overcome pernicious (non-) redlining in Chicago and other urban areas. But step by step, what seemed not only reasonable but morally virtuous and even necessary to cure a non-problem became an ideological end which evolved into a greed-based profit-seeking end and ended up the toxic CDO boondoggle. The argument against it was the argument that eventually won the day: If you aren't credit-worthy you shouldn't have a home loan. It was the argument that lost in 1996, 1998, 1999, 2000, 2001, 2002... 2007. It only won when the train had crashed into a schoolbus, killing most on board. There were lots of opportunities to stop it, but the "good guys" were behind it all the way until it crashed, with the "bad guys" pushing right along with them after it became possible to offload the questionable loans under Clinton.

I thought this argument should have won in 1996. Then again, what did I know? I had the same sinking feeling when I heard Carter talk about how wonder the post-industrial economy would be, once we got rid of all those nasty dirty manufacturing jobs, and I was only 18 at the time.

[dkf]

8. 2005: Mortgage Lenders Loosen Standards

Mortgage lenders are continuing to loosen their standards, despite growing fears that relaxed lending practices could increase risks for borrowers and lenders in overheated housing markets.

Novel loan products have helped fuel much of the run-up, which continues to defy expectations, as reflected in home-sales data released yesterday. Existing-home sales hit another record in June, up 2.7% from May's heated levels, according to the National Association of Realtors. Median home prices rose 14.7% from June 2004.

But lenders are making it still easier for borrowers to qualify for a loan. They are lowering the credit scores needed to qualify for certain loans, increasing the debt loads borrowers can carry and easing the way for borrowers to get loans while providing little documentation. In some cases, lenders are easing standards not only for homeowners, but also for the growing number of people buying residential real estate as an investment.
---

Some lenders say they are being forced to relax their standards to remain competitive. U.S. Bank Home Mortgage, a unit of U.S. Bancorp, says interest-only mortgages and loans with less-than-full documentation now account for about 10% of its business, up from just 4% a year ago.

"We're just offering the product that a lot of our competitors have offered," says U.S. Bank President Dan Arrigoni. "If anything, we have to think about loosening them if we want to compete." But, he says, U.S. Bank has resisted pressures to offer increasingly popular option adjustable-rate mortgages -- which carry starting rates as low as 1% and give borrowers multiple payment choices -- because the bank considers them too risky.

http://online.wsj.com/article/SB112234272837695744.html

[annabanana]

11. +1 for really useful info!. Thank you. . . .n/t

[QC]

9. What is worse, they were forced to make bad loans to shiftless Negroes!

That's the subtext of the "argument," of course. It's always said, either explicitly or implicitly, that it was the low-income (wink wink) housing programs that caused the whole problem.

Some versions of this "argument" seek to corner the homophobia market, too, by complaining that it was Barney Frank who forced the banks to make the bad loans to the shiftless Negroes.

Um. Yeah. The world economy came to the brink of collapse because black people wanted to have homes of their own and a homo made the virtuous, upright bankers behave in sinful ways.

It's dumb, but it is perfectly calculated to appeal to the knuckledragging freepers, taking in as it does their two great hatreds.

[sabrina 1]

12. Who is saying that? n/t