The Democrats Caused The Current Financial Crisis

[Bill Call]

Perhaps the those that doubt that the government was the master of this disaster will believe the New York Times:

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260

I forgot to add that the article was published in 1999.

[ryan costa]

The real problem is not the mortgage issue, it's the unsecured credit given to hedge funds which are on the verge of collapse. The end to the cash and carry trade in Japan and the 2000:1 credit to capital ratio have created a nearly $750 trillion dollar hole that this economy will never dig its way out of. Keep blaming the "democrats" or the "republicans". The real blame lies with those whores in both parties that voted to create the corrupt PRIVATE institution in 1913 called the federal reserve. Fiat currency with no actual value and the feds policy of constricting the money supply are the root cause to economic fluctuations. Throw in the move away from the gold backed currency and inflation and you have the biggest transfer of physical assets from the middle class into the hands of those who manipulate the value and supply of the currency.

The gold standard is the same as a restrictive monetary policy. production and productivity have risen for most of the last 220 years. this wouldn't have been possible with a pure gold standard.

Unless people constantly wrote down the value of their assets: one day your house is worth 22 ounces of gold. next year it is worth 20 ounces of gold. that is the only way for "growth" in a gold standard economy.

the nature of a bank is that it loans out more money than it keeps in deposits. banks failed left and right throughout the 19th century in america. land was frequently so cheap it didn't matter as much as if this had happened in europe.

the constitution gives congress power to regulate currency.
There is a need for some central bank or monetary organization. It can either do a better job or a worse job.

a lot of the present crisis is hysteria. day to day hysteria and cumulative hysteria. information is calculated faster and communicated across greater distances faster. and people get hooked on it.

[ryan costa]

it might be easier to simply make these big banks own the foreclosed properties. technically they would then possess "assets" whose last sale price was at least 700 billion dollars. it seems easier than paying these big banks 700 billion dollars to not own foreclosed properties.

they say the mortgage-back securities are made of blending the mortgages into mortgage stew then selling mortgage stew by the spoonful.

A computer program can count how many houses are in each price range. the price ranges can increment by 10,000 dollars. The mortgage-backed securities are bundled into packages equal to number of homes and distribution of home values. They are randomly paired up. wall street owns the homes. wall street can't sell the houses for without incurring a loss. but at least they own assets. maybe they can rent the homes out for enough to pay off the interest due on their mortgage backed securities.

[Ryan Salo]

Ryan,

I am a little confused about your last post.

Correct me if I am wrong but don't the banks already "own" the properties?

They gave money to the seller to "buy" the houses and the "buyer" is paying back on that debt.

Most loans have an acceleration clause in them so they can call a loan due for a simple late payment if they wanted to.

The problem is that most of these investment firms were leveraged 30 to 1.

That is like if my house was worth 100k and I had a 3 million loan on it. Then 3-5% of that debt was called due and I had to spend the $100,000 "asset" I had and now I am left with no asset and a huge bill.

Once financial institutions are blocked from borrowing to stay liquid things get backed up very quickly.

It is sad that greedy people that took high public risks with no personal risks are getting bailed out, but we do need to do something to get the money flowing again.

I do believe in the compensation cap for the officers of any company that is "bailed" out. Some of these people need to be put in jail.

My solution would be to stretch the FHA requirements to allow people that are upside down to still refinance. The problem with most people is not that they owe more then it is worth it is that they either have an outrageous interest rate with someone like beneficial or their ARM loans went up and no one will help.

If FHA would take people that have been on time with their loans and shown the ability to pay regardless of LTV it would get things moving again.

Beneficial stays in business because they had fixed rate loans, most are near double digit but they are fixed. People will pay to stay in their homes if lenders will let them before it is too late.

If only our elected officials knew anything about the real issues they could have fixed this months ago instead of passing that joke of a "bailout" program they did.

I blame both sides, they only care about ratings and news sound bites.

It is sick how greedy our nation has become.

[ryan costa]

Ryan,

I am a little confused about your last post.

Correct me if I am wrong but don't the banks already "own" the properties?

They gave money to the seller to "buy" the houses and the "buyer" is paying back on that debt.

Most loans have an acceleration clause in them so they can call a loan due for a simple late payment if they wanted to.

The problem is that most of these investment firms were leveraged 30 to 1.

That is like if my house was worth 100k and I had a 3 million loan on it. Then 3-5% of that debt was called due and I had to spend the $100,000 "asset" I had and now I am left with no asset and a huge bill.

I had not know it was possible to borrow 3 million dollars to buy a 100K house.

my understanding of the foreclosure process is that the bank calls the sheriff, the sheriff evicts the residents, the sheriff's office auctions the house, and the bank applies the proceeds of this auction toward the mortgage. I don't know what they did to the rest of the mortgage.

My understanding of the "big wall street" guys is that they don't own simple mortgages. they own something called "mortgage backed securities", not exact mortgages tied to exact properties. they explained it on Sixty Minutes a few times. it is sophisticated and abstract and the reason I was never smart enough to work on wall street.

[Ryan Salo]

You are correct about the foreclosure process. If the house sells for more then the balance the previous "owner", or the guy that foreclosed, gets a check for the difference. The loss is written off.

An option that is available but not used often is a deed transfer in lieu of foreclosure. This basically transfers the ownership from the buyer to the lender, which saves everyone time and money. It is like a voluntary repossession.

The MBS's are groups of mortgages that were packaged and sold by places like Bear Sterns. The MBS market is actually what controls the interest rates that banks and lenders offer on a daily basis. If the yield is up then rates go down if yield is down then the rates go up.

One of the problems with the MBS were that the details of the loans were not included, they were sold as A paper when some of the loans thrown in may have been fixed income stated loans that were going to be first payment defaults.

Individuals are not allowed to be leveraged 30 to 1 but it is amazing that investment firms were allowed to be.

I think banks are allowed to be leveraged 10-13 to 1, but I may be incorrect.

[Steve Hoffert]

The gold standard is the same as a restrictive monetary policy. production and productivity have risen for most of the last 220 years. this wouldn't have been possible with a pure gold standard.

Unless people constantly wrote down the value of their assets: one day your house is worth 22 ounces of gold. next year it is worth 20 ounces of gold. that is the only way for "growth" in a gold standard economy.

the nature of a bank is that it loans out more money than it keeps in deposits. banks failed left and right throughout the 19th century in america. land was frequently so cheap it didn't matter as much as if this had happened in europe.

the constitution gives congress power to regulate currency.
There is a need for some central bank or monetary organization. It can either do a better job or a worse job.

a lot of the present crisis is hysteria. day to day hysteria and cumulative hysteria. information is calculated faster and communicated across greater distances faster. and people get hooked on it.

That's the growth fallacy. It's still the same house. It's still the same car or loaf of bread. Inflation is a necessity of fiat currency or it doesn't work. Growth must cease at some point because it is also self destructive and any system based on intangibles will eventually collapse. The value added (or lost) is due to inflation of the currency, not change in physical state.

As one who farms bacteria I can tell you that there comes a point where growth must cease or the entire colony will suffer collapse.

Our current monetary system is designed to transfer the wealth upwards and eventually fail.

If the nature of a bank is to loan out more money than it has and it loans this non-capitalized money to another bank that loans out more than it has in uncapitalized credit than our banking system is nothing more than a Pyramid Scheme.

[Stephen Eisel]

Ann's opinion...

http://www.anncoulter.com/

[Stephen Eisel]

Fannie Mae and Freddie Mac Invest in Democrats

http://pfds.opensecrets.org/092408.html

[Stephen Calhoun]

I was hoping the Eisel Standard Operating Procedure would weigh in here.

Ann Coulter: Instead of looking at "outdated criteria," such as the mortgage applicant's credit history and ability to make a down payment, banks were encouraged to consider nontraditional measures of credit-worthiness, such as having a good jump shot or having a missing child named "Caylee."

Threatening lawsuits, Clinton's Federal Reserve demanded that banks treat welfare payments and unemployment benefits as valid income sources to qualify for a mortgage. That isn't a joke -- it's a fact.

Actually her claim is unsourced and not likely to be factual. There's a lot riding in this racist meme upon the actual mechanics of what Coulter means by "encouraged."

Of course proponents of the propaganda approach to rationality and research seem unaware of what the mortgage market looked like each year from 1977-2007.

But keep hacking away at the 'it's the fault of Carter and Clinton's Fannie and Freddie, and black folks' meme. This op says a lot more about you then it does about the financial world.

Such efforts are both dismaying, and shocking and hilarious.

[Bret Callentine]

Actually her claim is unsourced and not likely to be factual.

Are you suggesting that Clinton did not push for minority and low income home ownership?

Or suggesting that such a program did not lead to any financial problems.

Or perhaps, is your argument that because she did not attached a long list of links to previous printed articles, her entire premise is a lie.

Perhaps you can tell me what to do with stories such as this...

http://articles.latimes.com/1999/may/31/news/mn-42807

[Bill Call]

Actually her claim is unsourced and not likely to be factual. There's a lot riding in this racist meme upon the actual mechanics of what Coulter means by "encouraged."

Here is a program summary for the homebuyers assistance program:

http://www.newportky.gov/PDF_Files/HomeBuyersAssoc.pdf

The program offers down payment assistance to homebuyers. The loans are provided by the bank or mortgage company. Since the bank wants to be able to sell the mortgage to Fannie Mae the bank must adhere to the income guidelines established by Fannie Mae.

Income to be included for loan qualification includes:

"Welfare Assistance"

While you might think including welfare assistance as qualifing income is a good idea I do not. As someone pointed out here on the board what happens when the roof leaks or the sewers back up or the furnace breaks (ooopss never mind the government has a program to pay for new furnaces for homeowers).

[sharon kinsella]

Bill -

Welfare assistance is sometimes given for raising grand kids. This is not usually the family's sole source of income, it is a component until the children are 18.

There are other reasons for this kind of aid that do not comprise the entirety of income.

[Stephen Eisel]

I was hoping the Eisel Standard Operating Procedure would weigh in here.

Why let the facts get in the way??

Clinton's secretary of Housing and Urban Development, Andrew Cuomo, investigated Fannie Mae for racial discrimination and proposed that 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low- to moderate-income borrowers by the year 2001.

What is wrong with this picture? They completely ignored the credit history / credit score of the borrower... a recipe for disaster.....

[Stephen Eisel]

PS I hope that part of this "bail out" plan includes funds for low income borrowers in foreclosure.. ...