When will the US financial baillout occur?

[Bangkoktraveler]

Thats a good system. In the U.S., we have the dems pushing for mortgage loans to low income people who could not otherwise qualify. Because the dems care about people and want the gov to help.

 

But the Barney Franks and the Bill Clintons don't care much about the obvious consequences of having the gov lower lending standards. So americans pay $700b to wall st. to buy the shitload of junk loans that flooded the market. To add injury, the bill clintons and barney franks blame it all on deregulation. Yeah right.

 

Can you provide evidence that is was the Democrats who "push[ed] for mortgage loans to low income people who could not otherwise qualify."

 

[kamui]

Thats a good system. In the U.S.' date=' we have the dems pushing for mortgage loans to low income people who could not otherwise qualify. Because the dems care about people and want the gov to help.

 

But the Barney Franks and the Bill Clintons don't care much about the obvious consequences of having the gov lower lending standards. So americans pay $700b to wall st. to buy the shitload of junk loans that flooded the market. To add injury, the bill clintons and barney franks blame it all on deregulation. Yeah right. [/quote']

 

Can you provide evidence that is was the Democrats who "push[ed] for mortgage loans to low income people who could not otherwise qualify."

 

 

As far as I know both parties supported loans to people who usually would not be eligible.

 

But as we know this is only one side of the coin. The other side was the deregulation of the financial market for the financial institutes to be able to bundle and to sell these extreme risky loans to other institutions.

And we all know which party won elections with the call to deregulate the US markets...

[chelseafan]

Actually' date=' it is 100% the banks fault. The banks paid the mortgage brokers higher commissions on these toxic loans instead of the 30y fixed rates. Some mortgage brokers were faking the income levels of loan applicants. The banks never checked the info on the loans. The banks were getting rich selling the loans and collecting fees for managing the loans.

 

Those that should sink are the flippers, not 3-5 years but 3 to 6 months, and those home buyers that got money at closing, ie >100% mortgage.[/quote']

 

That's why there is no loan crisis in Germany. In Germany for to finance a house you always need to bring a substantial amount of money.

 

With this system we have two results:

- People who never could afford a house never will own one.

- Real estate price increases are in the 5% bracket or less. This prevents short term speculation and a mortgage bubble like in the UK or Ireland.

 

Sometimes it has it's advantages to live in a society which is a little boring because it is fond of regulations.

 

Its different in Europe (outside the UK) as most people rent rather than buy, we (in the UK) have this inbuilt ethos that we have to buy a home to be successful, we can then pass it on to our family. Mind you, after taxes, being thrown into a old peoples home, there's not much left.

 

Generally, renting is also more expensive in the long run and doesn't offer security. I believe that its a lot cheaper to rent in somewhere like spain for example than to buy.

 

I have just come off my 2 year tracker mortgage (Bank of England rate+0.5%), so was paying around 5.5%, now switching to a fixed 5 year at 6.2%. Seems like I am one of those being screwed and there's nothing I can do about it as theres no competition with the banks at the moment. They are all too scared to loan to me

 

 

[mongon]

Thats a good system. In the U.S.' date=' we have the dems pushing for mortgage loans to low income people who could not otherwise qualify. Because the dems care about people and want the gov to help.

 

But the Barney Franks and the Bill Clintons don't care much about the obvious consequences of having the gov lower lending standards. So americans pay $700b to wall st. to buy the shitload of junk loans that flooded the market. To add injury, the bill clintons and barney franks blame it all on deregulation. Yeah right. [/quote']

 

Can you provide evidence that is was the Democrats who "push[ed] for mortgage loans to low income people who could not otherwise qualify."

 

The New York Times predicted this would happen when Clinton started pushing for mortgage loans for low and moderate income people back in 1999. The bubble started shortly after (also caused by subprime loans which Dems favored for low income people and Rs favored so Wall St could make profits). The low income crowd and the left leaning housing organizations that advocate for them were Clinton's and the Dems base and Clinton wanted to solidify/reward support.

 

So Fannie was given its marching orders and the housing bubble commenced.

 

This article is extremely interesting to read with the benefit of hindsight.

 

 

New York Times

September 30, 1999

 

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

 

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

 

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

 

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

 

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

 

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

 

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

 

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

 

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

 

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

 

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

 

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

 

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

 

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

 

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

 

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

 

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

 

 

[mongon]

I have mentioned this before. When the Fannie bailout was authorized two months ago, the Dems thru Barney Frank added a provision requiring that hundreds of millions of dollars be siphoned from Fannie revenue to go to a new Affordable Housing Trust Fund that Barney created.

 

The abuse of the taxpayer whom guarantees Fannie never stops even in the middle of a crisis. The organizations that will receive and administer these housing trust funds are very political and engage in Dem voter registration drives etc. It was important that they be rewarded and funded prior to the elections.

[Steve]

I have a question regarding your article. Were banks in the '90s doing stated income to get minorities into homes? Little or no money down? I don't know. I know I cosigned for my brother to get a loan in the '90s because his application wasn't strong enough and even though I had good credit (then, can't say the same today..lol), they went over my income with a fine tooth come. Some would even argue that minorities with strong applications weren't getting loans as others would have. The average home price in my old neighborhood in Philly is about 40k for a rowhouse now. It was much cheaper back when I was young. My parents bought our house for 12k. Even though there were many people in the neighborhood who could make the payments and in fact the payments were lower than what rent was. Many had stable city jobs and/or union jobs. Local banks just didn't like lending to buy homes in bad areas. My area was hit hard by the crack epidemic and crime shot up and it had a bad rep. Not blaming a bank loan officer who only knows from what he reads in the paper or hears on the news but the fact was that there were qualified people who couldn't get a bank loan.

 

The article seems to suggest that the problem was due to that. If so, we would have seen this implosion much sooner.

 

I know several people who started doing refis and other mortgage related jobs about 5 years ago because of the amount of money that was being made. The mortgage brokers became the new 'investment banker' making 6 figure incomes.

 

The problem wasn't about what happened in the '90s. It was about what happend over the last several years.

 

If it was due to what the article says then all the people with bad mortgages would have been the minority home buyers mentioned. Its not.

 

What has pissed me off is the Republican party. I know its not good to say you f**ked up. Publicly they gotta say that I guess. The Dems would probably do the same. However, that's for the talking heads. Privately, Republicans still can't admit to others they f**ked up. I have lost what little respect I have for the party. Its Dem or 3rd party for me. I have voted Republican in the past but there is NO WAY I can see doing that for some time.

 

What I hear is having it both ways. Give me credit when it goes well like the '80s economy, however don't give credit when its a Dem as in the '90s.

 

I am 100% certain had the past 8 years been a Dem administration we'd see an impeachment or two and so many congressional hearings it would slow down real work. How do I know? It was done to Clinton. Travel gate was time wasting bullshit. Whitewater happened before they were even in the whitehouse. Who gives a f**k?! The impeachment was bullshit.

 

Now the shoe is on the other side of the foot and they want to either still blame the Dems (how that can be is beyond me) or at best share blame.

 

Everyone knows the rules. Whether its fair or unfair, the administration in power gets the credit or the blame. If its not so, then don't stop giving Reagan credit for shit. He did it with a Dem congress.

 

Take a little advice from someone who has no problem voting for either party. Get your house in order. There are a few brave souls who will admit it (Hagel for example).

 

I have a lot of problems with parts of the Dem platform but I know what to expect. It can't get worse.

 

Finally, the balls on the party to ask for 700 billion no strings attached. The fear tactics that worked with Iraq suggests they think it can still work and to a large extent it does. I am still not buying this meltdown bullshit. I would rather wait and see what the market would actually do. We don't know.

 

Dems, word of advice (to the politicians). Show some balls. Show some anger. The Republicans know they can question your patriotism at anytime by suggesting that any time you disagree with anything they propose you're unpatriotic.

 

Had to vent. Sorry. The whole thing pisses me off.

 

 

 

[mongon]

On the bailout, it appears the fearless republican leaders in the House have caved. McCain has caved. The bailout will pass, with some added christmas ornaments to make it look nice. Bottom line is $700b goes to Wall St and very quickly. Lots of people will be breaking out the champagne.

 

Have to say I am extremely disappointed in McCain. He had a career in the Senate as a budget hawk. When this stupid "choice" between a bailout and disaster was first presented by Paulson, McCain almost immediately agreed. He will likely lose the election that could have been turned in his favor had he made a stand.

 

As you can see from the above posts, this situation was created and/or enabled by the gov. After creating the catastrophe, the gov comes in and holds a gun to Americans head and demands $700b to fix the catastrophe or else "you lose your jobs, your retirement, your savings". Yeah. Very bad time for Americans.

 

As I said before, if we could go back to the founding principles of America, with a very limited gov and self reliance, it would be impossible for any of this to happen. Instead, we have a gov that is an 800 pound monkey breaking our backs.

 

Next act: the monkey takes over management of the health care system.

[chuckwoww]

Now Old Grumpy will be acting humble and taking credit simultaneously.

[Bangkoktraveler]

mongon, as far as government regulation is concerned, I believe we need regulation, but it has to be honest regulation if such a thing exist.

If there was no regulation, blacks and other minority groups in most areas, would not be allowed to own a house.

 

You seem to claim that the democrats demanded loans which the people could not afford. You still have not proved this happen. What I have seen is banks got lax in taking loans, but I don't think that was because a democrat politican was holding a gun to their head. What I have seen is a total lax in regulation in the last five years.

 

Do you really believe Republicans are 'guiltless' in what has happened?

 

And why would a Republican President be the one to first ask for a bailout?

[shygye]

The House Republicans solution had no clothes. Let's give Wall St and the rich CEOs huge tax cuts. Tax cuts that will place 99% of the burden on middle class taxpayers. But we have to call it freeing capital or Main St may not like that we are really increasing the take home bonuses of the CEOs.

 

AIG, a trillion dollar company, was brought down by insuring this toxic debt. That sounds good to the House Republicans so let's offer Federal insurance on this same toxic debt.