Help Me Our Here! Re: the Banksters ripping off the rest of us, creating financial meltdown.

[99th_Monkey]

I have a dear friend with whom I was in a Rhythm and Blues Band called the Invaders (in Portland) 50 years
ago, who in the meanwhile worked for various banks and financial institutions, and he flatly states that "it was
Fannie Mae, Freddie Mac and FHA" (all "gov't backed entities") who "CREATED" the financial crisis in the first place,
by "insisting" that banks adhear to only minimalistic requirements to qualify for a home loans, and that said
evil quasi-gov't entities actually "forced" private banks to knowingly execute bad loans, and that they (and only they)
had the clout and were well positioned enough to make the banks do those shitty loans. And so the poor banksters simply
had no choice really, because crappy loans were the ONLY ones that Fannie Mae, et. al.. would back-up (buy) on secondary
market ... unless of course the bank was willing to simply keep the loan itself (shelve it) internally, which banks
don't like to do.

... And .. that THAT is the ONLY reason our economy collapsed ... NOT because of lax SEC oversight, NOT
due to Bankster fraud, etc. ... that the entire reason for the economic collapse was because of these
evil quasi-gov't secondary lenders and their overly lax underwriting guidelines.

What Do I say to someone who is totally fixed in their views about this, due to their "professional" experience
in the banking industry.

I know he's spouting total bullshit, but I could use some input on exactly how deep his bullshit goes, and how to
respond to this pro-bankster meme in a way that is convincing and compelling.

Thanks to all in advance who reply with something useful.

[Angry Dragon]

1. Tell your friend that there are a bunch of people on this board

that would just love to hear and see the facts to back up this claim.
Otherwise it is the banks that did the dirty deed..........

[99th_Monkey]

3. He claims to have just that: facts to back it up

I do know something about the housing mortgage markets, since I was CEO of a non--profit community development corporation
for 10 years, where we actually negotiated with Fannie Mae to get a certain lease/purchase loan product on-line that was
more accessible and beneficial to the very-low income people we were serving, first-time home buyers, mostly very low-income
families.

But these families mostly paid their payments, so how can the financial collapse be rightly blamed on them? That seems just
sick and twisted to me... like blaming the victim or shooting the messenger.

[Angry Dragon]

5. Is he willing to share these facts??

that is the question.........

[jwhitesj]

2. His bullshit runs very deep indeed

First of all. Fannie and Fredie wern't the only ones buying loans. Loans were bought and sold many times over. He was at the orrigination end I'm guessing, so he only saw the first step. I worked for a mortgage company before the collapse too. No one forced anyone to make loans. Loans were encouraged through low intrest rates and lax regulation and then by the fact that they were able to sell off the loan so that didn't have to worry about taking the risk. If it was a sellable loan, they would fund the loan. That's all that mattered to these guys.

http://economistsview.typepad.com/economistsview/2010/02/did-fanniemae-cause-the-financial-crisis.html

Here is an intresting tidbit. I need to find the orriginal source but

Criticism of mandated loans as the cause of the crisisOthers argue, however, that government-mandated loans were, at best, trivial in the explosion of subprime mortgages.<7> More than 84 percent of the subprime mortgages came from private lending institutions in 2006<7> and share of subprime loans insured by Fannie Mae and Freddie Mac also decreased as the bubble got bigger (from a high of insuring 48 percent to insuring 24 percent of all subprime loans in 2006).<7> The Community Reinvestment Act also only affected one out of the top 25 subprime lenders.<7>

In 2008, Federal Reserve Governor Randall Kroszner, said the CRA wasn’t to blame for the subprime mortgage crisis, stating that "first, only a small portion of subprime mortgage originations are related to the CRA. Second, CRA-related loans appear to perform comparably to other types of subprime loans. Taken together… we believe that the available evidence runs counter to the contention that the CRA contributed in any substantive way to the current mortgage crisis,". Only 6% of subprime loans were handed out by CRA-covered lenders to lower income people (the people the CRA is responsible for, CRA-covered banks can technically lend subprime loans to anyone).<8> Others, such as Federal Deposit Insurance Corporation Chairman Sheila Bair,<9> and Ellen Seidman of the New America Foundation<10> also argue that the CRA was not to blame for the crisis.



From the research I have done I have found the above quote to be correct.

People are allways looking for a fall guy, in this case your friends fall fingers are pointed in the wrong direction. The main cause of the collapse was banks over leverging, and the repeal of glass-stegall.

[99th_Monkey]

4. Thanks. I take this to be the heart of the matter.

Federal Reserve Governor Randall Kroszner, said the CRA wasn’t to blame for the subprime mortgage crisis,
stating that "first, only a small portion of subprime mortgage originations are related to the CRA. Second,
CRA-related loans appear to perform comparably to other types of subprime loans. Taken together… we believe
that the available evidence runs counter to the contention that the CRA contributed in any substantive way
to the current mortgage crisis,"

Thank you very much for this. ciao.

[socialist_n_TN]

13. Yeah, I was in the mortgage business too

throughout all of this (admittedly just as a grunt) and NOBODY forced any of the 80+ companies that offered sub prime loans to make those loans. Well, except for "The Invisible Hand of the Market".

When they began "bundling" the loans that spread the risk out to private investors. Which meant that EVERYBODY (well almost everybody) was offering sub prime products because everybody else was. If they DIDN'T offer the sub prime products, they lost a chance at a HUGE part of the market.

In ten years in mortgages I never ONCE heard of a loan where it was said by ANYBODY, "We have to do this one because it's a poor, black person and the government says we have to." That's just bullshit.

[ejpoeta]

6. personally i think the problems stemmed not from allowing more people to borrow

for houses, it was when the people doing the lending were not personally holding onto that loan and therefore compelled to make sure that the borrower was going to be able to pay it back. they were going to sell it off anyway. so they would either tell the lender to lie on the application about their income or fill it in themselves with false info they knew would pass. they didn't care if the person couldn't afford it. they were going to get paid anyway. then the big banks bundled up these mortgages and sold them off in bits and pieces so that no one really knew who owned what. THAT was the big problem.

And you can try to blame Fannie Mae and Freddie mac for that all you want, and you can try to blame the borrowers who couldn't even understand what they were signing. Someone from a bank or mortgage company or refi company tells you you can afford something you will more likely believe them than you would believe yourself because they should know. Why would they lie to you??? Money is only the root of all evil because of what people will do to get their hands on it.

[99th_Monkey]

8. And that's exactly what the mortgage industry was all about, back in the day ...

... telling everyone that they too could have all the American Dream they wanted,
as long as they would buy it on credit.

[girl gone mad]

7. To start with..

The biggest, baddest subprime lender in America was Countrywide. Countrywide was not a bank, therefore Countrywide was not subject to CRA compliance.

CRA compliant banks actually had fewer foreclosures and performed better than the non-CRA compliant institutions.

Barry Ritholtz has written about this very well and very thoroughly. See his http://www.ritholtz.com/blog/2009/06/100000-cra-challenge">$100,000 CRA Challenge or his http://www.ritholtz.com/blog/2009/06/cra-thought-experiment">CRA thought experiment.

[99th_Monkey]

9. Wow! Thanks a bunch.

I know CRA inside and out, worked it with the "lenders" ... most always to our (the poor folk) benefit.

God bless Pres. Jimmy Carter for getting the CRA passed into law. Now there's a true patriot.

[RegieRocker]

10. Only 70 billion was the total amount of home loans on default

at that time. This was the payoff amount of those loans! It was derivatives and still is what caused the problem, 16 trillion worth and counting. They are stealing our money to payoff their stupid casino bets.
http://www.marketoracle.co.uk/Article6495.html

[Ilsa]

11. So Fannie Mae held a gun to the banksters' heads? Or was it the lucrative

fees the banks were making in loan origination, knowing the secondary market would happily buy up the crap which got insured against default by AIG?

[bemildred]

12. You can blame the Congress, but the banksters own the Congress.

Fannie and Freddie and FHA are creatures of the Congress and they do as they are told; and the Congress is owned by the banks, and does what it is told (as has been so evident of late); so the "investment" banks got what they wanted, as they always do, and we got screwed again.