PeakTrader.com

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PeakTrader:

Baffling, an important part of a politician’s job is blaming others, e.g. “the private sector,” which explains why you’re baffled.

Why would banks lend money to people with no income and no downpayment without the encouragment and support of government?

Borrowers were able to to buy houses they couldn’t really afford, and lenders were able to make lots more money on more loans.

Lenders knew they’d be bailed-out, by “too-big-to-fail,” which they were, with TARP, and knew the music would eventually stop.

Politicians like Dodd and Frank facilitated and accelerated the housing boom, creating massive moral hazard, and then when the economy crashed, went to the other extreme over-regulating the financial industry and creating uncertainty.

Bush Administration Tried to Reform Freddie and Fannie Five Years Ago
February 19, 2009

“Fannie Mae and Freddie Mac accelerated their imprudent behavior after we attempted to regulate them. They bought almost as much mortgage debt from 2005 through 2008 as they bought in their first 30 years of their existence.

In 2003, when we sent our first members of the Cabinet up to talk about this on Capitol Hill, Barney Frank had a hearing in which they basically beat up everybody we sent up there in pretty vociferous language.

In fact, we moved aggressively in 2004 to regulate Fannie and Freddie, actually got a bill through the Senate Banking and Finance Committee only to have it filibustered by [Sen.] Chris Dodd.”

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Michael Bloomberg, former Mayor of New York City:

“It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.

Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.

But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it’s one target, it’s easy to blame them and Congress certainly isn’t going to blame themselves.”

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“By 2007, 55 percent of all loans made by Fannie and Freddie had to be “affordable.” By June 2008, there were 27 million subprime housing loans outstanding (19.2 million of them directly owed by government or government-sponsored agencies), with an unpaid principal amount of $4.6 trillion.

Almost 50 percent of all mortgages outstanding in the United States in 2008 were subprime or otherwise deficient and high-risk loans.

Two-thirds of these mortgages were on the balance sheets of government agencies, or firms required to buy them by government regulations.”

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PeakTrader:

Baffling, “you conveniently ignore” the fact Congress created the conditions for people to commit fraud, including borrowers.

And, it was rational to diversify risk. For a time, investors made a lot of money.

It’s people like you “rewriting history,” including dismissing “too-big-to-fail.”

Of course, many people took advantage of the conditions Congress created, including many homeowners, who also benefited enormously.

What Caused the Financial Crisis
November 16, 2010

“Starting in the late 1990s, the government, as a social policy to boost homeownership, required Fannie Mae and Freddie Mac to acquire increasing numbers of “affordable” housing loans. (An “affordable loan” is made to people who normally would not qualify.)”

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“As long as the music is playing, you’ve got to get up and dance.”
– Charles O. Prince, July 2007, CEO of Citigroup

Citigroup avoided the dance, because it knew it would end in disaster. Eventually, it was forced to dance to compete, was late to the dance, and lost the most. Government throws very expensive dances.

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Baffling, you remain firmly, and hopelessly, in denial.

Millions of people behaving rationally was not the cause of the crisis.

And, the government didn’t seem to mind financing fraud for millions of “affordable” loans.

The real fraud was politicians believing they could create a giant social program without paying for it.

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Baffling says: “peak, according to your logic since we have laws against murder, and yet thousands of people are murdered every year, it is the government’s fault. this is simply faulty logic. people are responsible for their own behavior, and people know when they are acting fraudulently. they either choose to act that way, or they choose not to act that way. it is absurd to blame the government for such behavior!”

So, according to your logic, since we have laws against speeding, and yet thousands of people drive too fast every year, it is the police’s fault. This is simply faulty logic. People are responsible for their own behavior, and people know when they are driving too fast. They either choose to drive fast or they choose not to drive fast. It is absurd to blame the police for such behavior!

(And, according to your logic, when there are no cops giving out speeding tickets, more people won’t drive faster).

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