Mar
8
Bob asked:
I see several people on here blaming GOP policy for the past couple of years for the mess we are in. Hate to say this, but the foreclosures were the driving force behind this problem.
I see several people on here blaming GOP policy for the past couple of years for the mess we are in. Hate to say this, but the foreclosures were the driving force behind this problem.
Banks, thanks to the CRA, were forced to loan money to people who could not afford a house and they got into bad loans. Fannie and Freddie sold Govt Secured Mortgages that were worthless. So this all comes back to the problems of the mortgage loans.
Love how you guys still want to blame Bush for everything.
Jarrod
Comments
13 Responses to “Was it GOP policy or the foreclosures that caused the economic mess?”
Neither, it was bad lending practices on the part of lenders and borrowers in the housing market. Prior to 1999, foreclosures alone were not a major problem, because banks were required to make loans in such a way that they mitigated risk so that foreclosures would not cause the problems we see today.
It was the foreclosures that put us in this economic mess. Of course it was liberals policies that made the foreclosures happen in the first place, but liberals have very short memories and it’s easier for them to blame Bush and republicans rather than accept responsibility for their own shortcomings.
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” Home ownership is not an unalienable right.
“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.” It is not the Federal Government’s job to provide everyone with a house.
People on here forget that the CRA was enacted under Clinton with the total approval of the democrats in congress. That when congress was told by both Bush and McCain that there were problems in Freddie and Fannie all the democrats stood there and said everything was fine. Who do I blame? Primarily congress both with the republican majority and with the democrat majority. I also blame the bankers, the mortgage companies, the CEO’s that only thought of themselves and anyone who got a mortgage that they could not afford. I believe that the majority of our proglem comes from greed by all of the above.
More than enough blame to go around for this mess…. dems for forcing banks to make high risk loans, Reps for deregulating the industry, Mortgage companies for overextending themselves, consumers for borrowing more than they could afford…..
But you wont’ see a single one of them say what policy that was. The fact is, it was a Democrat policy to push banks to make too many sub prime mortgages.
Wanna know whose responsible? Barny Frank (D) would be in the top three on that list. Add to that all those politicians (mostly Democrat) who refused to listen to people like John McCain who tried to tell them 3 years ago that Fannie and Freddie were headed for a major meltdown.
Actually, I assure you that the economic mess would have not happen if gas prices would have not gone so high.
The CRA did not force banks to loan money to people who could not afford the loans. That is a bold-faced lie.
The problem occured with the Gramm-Leach-Bliley Financial Services Modernization Act, Pub.L. 106-102, 113 Stat. 1338, enacted November 12, 1999.
It allowed the banks to consolidate financial services and investment services, something the people who lived through the Great Depression, figured was part of the problem causing banks to collapse back then.
This allowed credit default swaps to emerge as a hugely profitable scam for the banks.
The more mortgages they could sell the more credit default swaps they could offer and thus sell them up the line everyone making money off them.
They knew they coud just pass off the riskier loans to Fannie Mae and Freddie Mac after collecting their fees on them by packaging the bad loans with a bunch of approved loans because the same bill reduced the amount of regulators to oversee the program.
After the loans were passed off to Fannie Mae and Freddie Mac, the banks would make money by trading the mortgage credit default swaps, which are similar to insurance on loans.
Meanwhile, as gas prices quadrupled sending the living expenses of American soaring, the GOP enacted legislation to increase the minimum payments on revolving credit accounts.
What did this do?
Cut spending as people started to struggle even more with debt and their expenses. This started the chain reaction of people not being able to pay their bills and eventually losing their homes to what?? … that is right to the foreclosures you mentioned. When the foreclosures first started to grow, anyone claiming the economy was in bad shape were denounced as “doom and gloom libs” by the right.
Foreclosures continued to grow, causing property values to fall. The lower property value made it impossible for people to refinance their ARMS and get the full value of the ARM they previously held, because their property no longer assessed at that value. This created the “people who could not afford their loans” as you people keep crying about.
Now as the foreclosures mounted, people started calling on their default swaps to be paid out. This left the banks writing them extremely undercapitalized. As banks start to get closer to being undercapitalized, their options of the types of loans they can make to make profit becomes very limited so they stop making certain types of loans.
Couple that with the banks that are in good shape scared to loan money to other banks, for fear that they might be a bad investment, you have credit freeze, and jobs loss.
The more jobs lost the worse consumer confidence gets, and the more spending falls, causing more job loss and more forclosures and property values falling even more dragging other investments and investor confidence down with them.
If you are going to comment on something, you may want to start researching the entire story, rather than some half-truth butchered version created by the GOP to point the blame elsewhere.
The bursting housing bubble and the run up in oil prices were a one-two punch that caused the economic down turn.
President Bush and the Republican party were responsible for neither. The problem with the GOP is that elected officials act like Democrats after they have been in Washington for awhile. I think there’s something in the water.
Boss H has correctly answered your question. Until the act he mentioned, investment banks were not allowed to invest capital in home mortgages. One of the causes of the great depression was the fact that banks were investing depositors money in securities. People lost their savings in bad security investments without even being invested in the market.
Since 1999, ther has been zero dollars invested in IPOs. Investment banks have invested all their money in mortgage securities, which do not create new industries or new jobs.
The only thing investment banks put money into was debt. Debt does not create wealth.
Both. Bush/the Republican congress doubled the national debt that we have to pay interest on, and pushed for more mortgages for poor people. He failed to monitor many things in the financial sector, his SEC secretary stunk, and cut the reserves that banks were required to hold. Then he sent his Treasury Secretary to present a crisis scenario to congress, as usual, and ask for a blank check. His whole administration modeled and fostered greed.
If we didn’t have the massive debt and spending from the Bush years and the yearly deficit of 450B accruing every year, with the bailout 1T,, we may have been better able to deal with a crisis. Also, all that spending that was done, yielded little to show for it, in terms of investment in our deteriorating infrastructure or country.
Trying to blame Fannie and Freddy or the CRA for everything is just a Republican talking point, and if you have any brains you’ll investigate and find that it was just part of the problem, and that the Fanny/Freddy involvement in risky loans started in 2004 under Bush, when his appointee said they were “meeting the (private) market” who were making these loans.
2002: “The President [Bush] also believes that government alone can’t close America’s homeownership gap. It is critical that our government challenge the private sector to take concrete steps to tear down the barriers to homeownership that face minority families. The President is issuing “America’s Homeownership Challenge” to the real estate and mortgage finance industries to join in his effort to increase the number of minority homeowners by 5.5 million families by the end of the decade. Many organizations have already responded to the President’s challenge by committing to:
# Substantially increase by at least $440 billion, the financial commitment made by the government sponsored enterprises involved in the secondary mortgage market, specifically targeted toward the minority market;
# Launching twenty-five different local initiatives across the nation, geared toward eliminating the specific homeownership barriers faced by minority families in those communities”
The list goes on at:
The speech where Bush is standing with reps from Freddie and Fannie in 2001 (or 2002) is no longer on the White House gov. site, but it was nothing less than a “spread the wealth” speech.
The government has a great responsiblility for what is happening now [and I don't just mean this], which makes me wonder why people are looking to them to solve the problem by printing more money and raising the debt on taxpayers.
Both are symptoms of the greater defecit: The defecits of trust and responsibility. The biggest problem we face is that our elected leaders from both sides of the aisle shirked their responsibility to be fiscally responsible. Then they blamed other people. American businesses shirked their responsibility to maintain sound business practices in response to the shareholders and their native country (the world’s largest economy). These things have led to a defecit in trust for both. We The People do not trust our elected politicians to do the job, yet We The People keep reelecting them! We The People do not trust businesses to maintain 100% US operations because they are being taxed to death by the politicians we elected. They do not trust the politicians, largely because all the politicians keep handing business is a big hatful of economic uncertainty and a massive tax bill. Why did WE elect these clowns? Because they PROMISED they would kill any business turning a profit, or drive them completely out of the US! The responsibility is largely our own, and until we accept responsibility for our own votes, We The People will continue to pay the price, and that price is building interest and severe penalties.
The simple answer to why the media has had an easy time blaming the GOP for foreclosure problems comes from their lack or regulation on mortgage lenders and banks. Decreased regulation from the SEC, and bad regulatory procedures by ex SEC chairman Christopher Cox ( appointed by George Bush) allowed home loans to be handed out like candy.