Other than Reagan appointee greenspan keeping interest rates low, how did the govt. cause the housing bubble?
"2008 Nobel Prize in Economics winner Paul Krugman states that the notion "has been refuted up, down, and sideways."[104] He also noted in November 2009 that 55% of commercial real estate loans were currently underwater, despite being completely unaffected by the CRA.[105] According to San Francisco Federal Reserve Bank Governor Randall Kroszner, the claim that "the law pushed banking institutions to undertake high-risk mortgage lending" was contrary to their experience, and that no empirical evidence had been presented to support the claim.[100] In a Bank for International Settlements (BIS) working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust", relying partly on evidence that the housing bust has been a largely exurban event.[106] Others have also concluded that the CRA did not contribute to the financial crisis, for example, FDIC Chairman Sheila Bair,[101] Comptroller of the Currency John C. Dugan,[107] Tim Westrich of the Center for American Progress,[108] Robert Gordon of the American Prospect,[109] Ellen Seidman of the New America Foundation,[110] Daniel Gross of Slate,[111] and Aaron Pressman from BusinessWeek.[112]"
Furthermore, if any conservative can actually explain how fannie mae caused it, be my guest.
Ashley Jade: Explain
@conservacunt: Then care to explain why milton friedman got a nobel prize?
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8 comments
The MobFather on August 10, 2010 at 2:39 am
Add President Clinton to the long list of people who deserve a share of the blame for the housing bubble and bust. A recently re-exposed document shows that his administration went to ridiculous lengths to increase the national homeownership rate. It promoted paper-thin downpayments and pushed for ways to get lenders to give mortgage loans to first-time buyers with shaky financing and incomes. It’s clear now that the erosion of lending standards pushed prices up by increasing demand, and later led to waves of defaults by people who never should have bought a home in the first place.
President Bush continued the practices because they dovetailed with his Ownership Society goals, and of course Congress was strongly behind the push. But Clinton and his administration must shoulder some of the blame.
In writing this blog entry, I’m following the lead of Joseph R. Mason, who is a finance professor at Drexel University’s LeBow College of Business, a senior fellow at the University of Pennsylvania’s Wharton School, and a consultant at Criterion Economics. Here is a link to a piece that he wrote on Feb. 26.
The Clinton-era document that Mason cites—“The National Homeownership Strategy: Partners in the American Dream”—was hiding in plain sight
on the website of the Department of Housing & Urban Development until last year, when according to Mason it was removed (probably because the housing bust made it seem embarrassing to the department). Mason credits Joshua Rosner of Graham Fisher & Co. with saving a copy of it before it was expunged.
The National Homeownership Strategy began in 1994 when Clinton directed HUD Secretary Henry Cisneros to come up with a plan, and Cisneros convened what HUD called a "historic meeting" of private and public housing-industry organizations in August 1994. The group eventually produced a plan, of which Mason sent me a PDF of Chapter 4, the one that argues for creative measures to promote homeownership.
The very worst idea in the plan, which fortunately never gained approval, was to let first-time homebuyers freely tap their IRA and 401(k) retirement-savings plans with no penalty to scrounge up a downpayment. That, HUD estimated, would have "benefited" 600,000 families in the first five years.
"" For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership.
Note the praise for "creativity." That kind of creativity in stretching boundaries we could use less of. Mason puts it well: "It strikes me as reckless to promote home sales to individuals in such constrained financial predicaments."
Ashley Jade on August 10, 2010 at 2:39 am
LOL: Paul Krugman? The guy is a joke.
The thought of Paul Krugman winning the Nobel Prize is as absurd as Obama winning it. It’s meaningless. It’s a Left-wing Mutual Admiration Society.
Get a real education, little guy.
DNC Donkey on August 10, 2010 at 2:39 am
I walked away from my house because of the predatory lenders.
Freedom Wins IV on August 10, 2010 at 2:39 am
This help you?
http://iusbvision.wordpress.com/2008/09/30/obama-sued-citibank-under-cra-to-force-it-to-make-bad-loans/
http://www.youtube.com/watch?v=hxMInSfanqg&feature=related
Meet Reality on August 10, 2010 at 2:39 am
How old are you?
Paul on August 10, 2010 at 2:39 am
You mean by pressuring the banks to give mortgages to people that couldn’t afford them?
JimSock on August 10, 2010 at 2:39 am
Considering that Klugman, Gore and Obama have all ‘won’ the nobel, I reject the notion that the nobel prize is any sort of a credential but is rather a communist validation.
Toxicpanduh #2 on August 10, 2010 at 2:39 am
Low interest rates encouraged borrowing but at some point in time you have to realize that responsibility principally lies with the consumer & banking institutions. Governments failure was not regulating the financial institutions to insure that the loans banks were offering weren’t predatory in nature & that the individuals had the means to re-pay the loans. It is crazy the banks were allowed to give individuals & couples housing loans that when you do the math (mortgage, insurance, food costs etc.) that they would be left with little money to emergencies / other costs. Those loans should NOT have been approved.