How CRA led to the Crisis

Discussion in 'Politics & Religion' started by Mav88, Jun 28, 2009.

  1. Mav88

    Mav88

    I feel the need to.... well no not really. It's pretty simple really, what would motivate this subprime crap getting started in the first place? Gov't beatdowns of course. Finally somone with more time on their hands has shown it in a more substantial way. How many times must this be relived in history? Liberal economics=disaster because liberal economics is all about their vision of social justice and not wealth creation.

    http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6

    Beware folks, the same type of thinking that gave us the CRA garbage is now in power full force. Obama is setting up mortgage crisis x 10 with his leftist/multiculturist/tear-down-mean-white-america agenda.

     
  2. you should have no problem winning this 100k challenge then:

    $100,000 CRA Challenge

    http://www.ritholtz.com/blog/2009/06/100000-cra-challenge/
    I’ve run out of patience with tired memes and discredited claims by fools and partisan.

    The rhetoric of those pushing nonsense on the public in an attempt to confuse rather than illuminate — the phrase is “agnotology” – only serves to aid the lobbyists working on behalf of the Banks and Investment houses to maintain the status quo.

    All is well, nothing to see here, move along.

    Well, its time to put up or shut up: I hereby challenge any of those who believe the CRA is at prime fault in the housing boom and collapse, and economic morass we are in to a debate. The question for debate: “Is the CRA significantly to blame for the credit crisis?”

    A mutually agreed upon time and place, outcome determined by a fair jury, for any dollar amount between $10,000 up to $100,000 dollars (i.e., for more than just bragging rights).

    The nonsense rhetoric blogged about has no cost to those pushing these discredited memes — but interferes in the societal attempts to understand how these problems arose and then how to fix them. Perhaps this will help clarify the issue by forcing those with partisan agendas to stand behind their claims.

    Which of the many “CRA was a major factor” proponents have the courage of their conviction to step forward?


    I’ve run out of patience with tired memes and discredited claims by fools and partisan.

    The rhetoric of those pushing nonsense on the public in an attempt to confuse rather than illuminate — the phrase is “agnotology” – only serves to aid the lobbyists working on behalf of the Banks and Investment houses to maintain the status quo.

    All is well, nothing to see here, move along.

    Well, its time to put up or shut up: I hereby challenge any of those who believe the CRA is at prime fault in the housing boom and collapse, and economic morass we are in to a debate. The question for debate: “Is the CRA significantly to blame for the credit crisis?”

    A mutually agreed upon time and place, outcome determined by a fair jury, for any dollar amount between $10,000 up to $100,000 dollars (i.e., for more than just bragging rights).

    The nonsense rhetoric blogged about has no cost to those pushing these discredited memes — but interferes in the societal attempts to understand how these problems arose and then how to fix them. Perhaps this will help clarify the issue by forcing those with partisan agendas to stand behind their claims.

    Which of the many “CRA was a major factor” proponents have the courage of their conviction to step forward?
     
  3. fhl

    fhl


    The businessinsider article shoots this ritholz crap all to hell.
     
  4. i suppose even you can find a way to blame cra for the loans described in this video. anything to deflect blame from the lack of regulation of the bush administration:

    http://www.youtube.com/watch?v=sIVNF5eN3UY
     
  5. Mav88

    Mav88

    I don't know, I guess people just don't want to read too carefully. One cannot 'prove' something like this since economics is not the empirical science it claims to be, the challenge itself is bogus. The fact it would be like a courtroom trial shows this, and who the hell wants to go through that? Even for $100K? Does this guy have the process for even vetting out a real impartial jury established (what that would be is beyond me)? No, I'm afraid the challenge is a bunch of moronic bluster, not intended to be taken seriously.


    This was a serious look at the issue. CRA OF COURSE wasn't all by itself the problem, which probably would be enough for the moron with the challenge to claim victory, but it was a necessary condition for the mortgage crisis to happen. It was a catalyst for subprime.
     
  6. According to your theory, banks were reluctantly complying with CRA lax standards.

    How does that make it a "catalyst" for subprime? The CRA focused on poorer neighborhoods with strict loan limits. They were full doc loans.

    The jump to McMansions and no doc is just too much of a jump to be attributable to CRA - especially if you imply that banks were "forced" thus reluctant to lend with lax standards. Right or wrong, CRA had the lofty goal of expanding homeownership in poorer neighborhoods with commiserate sized loans/housing. Subprime, on the other hand, fed mostly on white middle class wannabees and their Mcmansions.

    Thus, homeownership alone wasn't the goal anymore, but owning a bigger house than your friend's house became the goal. No CRA loan would get you that McMansion - but a subprime loan would.

    Therefore, your conclusion in your first post:

    "Beware folks, the same type of thinking that gave us the CRA garbage is now in power full force. Obama is setting up mortgage crisis x 10 with his leftist/multiculturist/tear-down-mean-white-america agenda."

    Is pretty weak, not to say kind of ignorant. After all, I don't see anything "tear down mean white america-ish" when I look to who profited from lax lending, who crashed the economy, and who got bailed out the most as a result.

    The answer as to who profited? Who was bailout out the most?

    Wouldn't that be whitey? Is that a "tear down white america" policy? Obama has done more for white banksters than he has done for inner city blacks.

    You can't have it both ways. You can't call a policy a failure of reverse rascism when it really benefits a few old white bankers. (Stan O'Neil, of course, is the exception, not the rule.)
     
  7. Mav88

    Mav88

    Exacerbating factors in subprime, also necessary...mostly

    1. greenspan's easy money
    2. Glass-steagall (unknown influence, well all are unknown quantitatively)
    3. David Li's algorithm


    However CRA predates them all, fannie and freddie encouraged securitization before Li and Steagall.

    In any nonlinear process there needs to be a seeding action, Li's algorithm doesn't mean anything unless there was an existing subprime market to act upon. The fact that you cannot directly link all later period loans to CRA requirements is not relevent. The environment had to be established very much before in order for the runaway effect to be initiated.
     
  8. Not sure about that - isn't that the "post-hoc ergo propter hoc" logic fallacy - "after this, therefore because of this" - a false attribution of causality?

    By that logic, the repeal of Glass-Steagall could be attributed as the cause the subprime meltdown - letting banks become casinos again. Or securitization. If they made loans the old-fashioned way and kept them on their own books, they would have been deterred from bubbling them up.
     
  9. Mav88

    Mav88

    Wave,

    The problem is that there are no causual models, all economics is basically done like this. Certainly correlation is not casuality, however that precludes assigning any cause to this. We are left with legal type explanations and not logical.

    The key question, which can never really be answered, is would the crisis have occurred without CRA in place? My position is that given the rapid acceleration of mortgage securitization and all the pressures on banks by Clinton in the 90s, this was the cause prima facie which was later amplified way out of proportion by later factors like the Li algorithm.

    I keep asking, why did the subprime market even exist in the first place? If it was so apparently lucrative, then why did CRA even have to exist? The answer is that the subprime market had to be created by political pressure and then ways were found to make it lucrative ex post facto. Since that was successful, it took off out of control with the help of freddie and fannie.
     
  10. Thanks for info. I see where you are coming from.

    However, I am still not sure about the causal linkage.

    For instance, the easy credit and low interest rates created liquidity that was searching for return. It happened to find it's outlet this time in the subprime market.

    But the excess liquidity in the '90's found it's outlet in Internet stocks as the vehicle of that moment.

    Certainly CRA might be pointed to as a crack in the dam of the current flood - but the crushing force of the water - the loose credit pressuring the dam and looking for a crack - any crack - would have found a weak part in the wall, whether I-net stocks or subprime or whatever. The SEC letting the banks leverage-up didn't help either.
     
    #10     Jun 30, 2009