Throwing dirt on a lie that should be dead and buried … but will rise again

Wall Street analyst Barry Ritholz, author of “Bailout Nation,” offers a pretty entertaining and damning assessment of the claim that the Community Reinvestment Act, Fannie Mae and Freddie Mac helped drive the housing collapse.

As he notes, people such as Kevin Hassett (co-author of the infamous “Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market (1999) continue to peddle that line of nonsense, but offer no data to support it.

After pointing out that he has offered a $100,000 reward for proof of a major role played by Fannie, Freddie and the CRA — proof that has yet to be forthcoming — Ritholz concludes:

“Of course, folks like Hassett hate this factual history, as it conflicts with their goals and politics. Rather than produce evidence, they create story lines unsupported by facts. But Monkeys love a good narrative, and so they give that to them.

However, as an investor, I demand evidence, data and facts. The blame Fannie & Freddie crowd have managed to remain blissfully data free. They have steadfastly ignored all calls for proof.

Its way past the time to call out their intellectual dishonesty. If you cannot show any data, if you cannot prove what you are alleging with actual facts, you need to be called out for what it is you actually are: Proponents of a failed philosophy.”


Go read it.

448 comments Add your comment

Normal

May 13th, 2010
3:34 pm

“Its way past the time to call out their intellectual dishonesty. If you cannot show any data, if you cannot prove what you are alleging with actual facts, you need to be called out for what it is you actually are: Proponents of a failed philosophy.”

Kinda like some here, huh?

Normal

May 13th, 2010
3:37 pm

This is the trouble with the information age and the few corporations that control it. Too many kooks given air time to fit one agenda or another. Goodnight Chet, Goodnight David…no more, sadly.

RB from Gwinnett

May 13th, 2010
3:39 pm

Bosch and USinUK. from my 9:24 post earlier today….

“The people from the party that says Bush planned and executed 9/11, Bush blew up the levee’s in NO, the war was for Bush’s big oil buddies, ”

Is there some part of that “war was for Bush’s big oil buddies” you need help reading or comprehending?

Geez you people are slow.

Midori

May 13th, 2010
3:43 pm

RB –

it’s well known that facts have a liberal bias.

josef nix

May 13th, 2010
3:49 pm

The whole mess resembles nothing quite so much as a shell game. Those of us in the netherlands will ever get anything resembling the truth for one simple reason. Nobody knows the truth,

Bosch

May 13th, 2010
3:52 pm

RB, dude, what? 9:24 – like this a.m.? Move on dude.

Bosch

May 13th, 2010
3:52 pm

RB,

But you still dodged it. Go back and look – that is if you can see your own hypocrisy.

Normal

May 13th, 2010
3:52 pm

Goodnight Irene… :D

See y’all in the morning.

Scout, bugetti, Chuck,

Che!!!

Bob

May 13th, 2010
3:53 pm

Does this mean that Fannie and Freddie are actually making Billions and not losing Billions, those lying repubs !

stands for decibels

May 13th, 2010
3:53 pm

Go read it.

Kind of hard to do without a link.

looks like this is it…

http://www.roubini.com/financemarkets-monitor/258884/get_me_rewrite

Carter is a Fool

May 13th, 2010
3:54 pm

What do you think will happen when you loan money to people who cannot afford to pay it back? You get greedy people buying houses above their means. This inflates housing prices. You make money available and lower standards and you get greedy banks, loan officers making these loans. Then you get these ugly notes packaged with good notes just like putting the bad fruit in the bottom of the bag at the grocery store. Then the greedy wall street types sell this perfumed fancy package of junk to the unknowing public.

Finally the pressure cooker overheats and the bubble bursts and the walls come tumbling down. All started with Carter in the desire to help the (awful political correct term) less fortunate. This was then expanded by Clinton and protected by the idiots Frank and Dodd.

There is enough blame to go around from those who bought more than they knew they could afford to those that greedily loaned them the money to those who packaged the mess and sold the notes to the public to the Politicians who had to do a good dead to help the “less fortunate.”

No myths in this awful scenario.

Carter is a Fool

May 13th, 2010
3:55 pm

The main problem — Government, followed by Greed that killed COMMON SENSE.

hmm

May 13th, 2010
3:57 pm

I don’t recall ever needing to bail out poor people when they lived in projects.. just when the gov’t tried to put them in houses.

Bosch

May 13th, 2010
3:57 pm

Government followed by greed, yeah whatever Carter – yeah, it’s all the guvmint’s fault – God, how original is that?

:roll:

Bosch

May 13th, 2010
3:58 pm

hmm,

Yeah, it’s all the poor folks fault…yeah how original – yeah, no one in those McMansion world subdivisions or nothing forclosing – yeah, no not there…….

:roll:

Kamchak

May 13th, 2010
4:00 pm

Fannie, Freddie, CRA, ACORN—SQUIRREL!

md

May 13th, 2010
4:01 pm

Yeah, it’s all the corporations fault – yeah how original……………

Sorry, I wanted to play too and beat someone else to the talking point.

Bosch

May 13th, 2010
4:03 pm

md,

Geez, I didn’t say it was all the corporations fault. And you forgot the rolly eyes.

md

May 13th, 2010
4:03 pm

“What do you think will happen when you loan money to people who cannot afford to pay it back? ”

Funny how some seem to interpret that as “those people”, when it includes folks from all walks of life – rich and poor alike.

Carter is a Fool

May 13th, 2010
4:05 pm

The government started this powder keg and made monetary policy so that money was readily available. This coupled with no-one with Common Sense and Greed touched off the storm.

Anyone who bought more than they could afford from the “poor” to those participated in buying the McMansions to the Flippers and the no money down crowd have a portion of the blame. The banks should have followed the previous lending guidelines, but no GREED got involved and they did not tell these folks NO.

Banks were initially afraid the government would sue them or regulate them if they did not make some of these questionable loans. It took off from there with almost everyone wanting to get involved.

TaxPayer

May 13th, 2010
4:05 pm

Jay,

Hassett is just another one of those AEI finger puppets. Like Newt, et al.

Carter is a Fool

May 13th, 2010
4:08 pm

Those people are any people who borrowed money they knew that they could not afford to pay back. Runs across all incomes and classes. The CRA was initially designed for the poor, but it led to this mess when many rich, poor and middle bought more than they could afford because they could easily get a loan.

How do you loan money to anyone who just has to state their income and have no proof that they earn this figure?

RB from Gwinnett

May 13th, 2010
4:10 pm

Bosch, Didn’t dodge anything and stand by everything I said. I can’t help it if you people want to ignore the facts and can’t read.

Bosch

May 13th, 2010
4:11 pm

Carter is a Fool,

“How do you loan money to anyone who just has to state their income and have no proof that they earn this figure?”

You don’t — just who is it that you are saying did this? Freddie and Fannie? Because you would be wrong!

A private sector employee

May 13th, 2010
4:11 pm

So, I guess the New York Fed was lying:

“These changes have combined to weaken the link between mortgage lending and the branch based
deposit gathering on which the CRA was based. Today, less than 30 percent of all home purchase loans are subject to intensive review under the CRA.”

http://www.newyorkfed.org/research/epr/03v09n2/0306apga.pdf

It was the Community Reinvestment Act AND a series of banking changes that were LED BY DEMOCRATS AND PASSED BY BILL CLINTON that “weaken the link between mortgage lending and the branch based deposit gathering on which the CRA was based.” The REPUBLICANS went along with every change because they were making money hand over fist. They were in charge in Congress through most of this debacle, and while they didn’t lead the charge they certainly went along with it and profited.

But to your point, Jay, it is not a lie and it will not go away just because Barry Ritholz, says something that you like to hear. The CRA, in a vacumn, did NOT cause the financial collapse. But the CRA, in combination with a whole series of banking reforms, DID cause the collapse. P.S. It was NOT Bush’s fault. If any PRESIDENT is to blame, you can lay that squarely on Clinton, as most of the regulatory change took place during his presidency.

Bosch

May 13th, 2010
4:11 pm

“Didn’t dodge anything and stand by everything I said.”

Sigh. So apparently RB can’t see his own hypocrisy. I can not help him anymore.

Paul

May 13th, 2010
4:13 pm

“Wall Street analyst Barry Ritholz, author of “Bailout Nation,” offers a pretty entertaining and damning assessment of the claim that the Community Reinvestment Act, Fannie Mae and Freddie Mac helped drive the housing collapse.”

Key phrase: “helped drive.” Not solely responsible for. Not major. But helped drive.

But, when it comes time to place a bet, Mr. Ritholz changes “helped drive” to ‘played a MAJOR role.’ NOT ‘helped drive.’

Of course, Mr. Ritholz knows that by simply following their mission of purchasing and securitizing mortgages and being players in expanding the secondary market, both with the aim to increase the funds available for new loans, F&F are part of the process. Question is, was it causative or participative?

I go with participative. They played a part in the fiasco. Without them, not as many funds would have been available for new loans. But the other institutions would still have gone on their merry way with not following proper standards for middle and upper income loans and the outcome would likely have occurred, just not as severe.

But play a role they did, which is likely why even Rep Franks and Sen Dodd have called for some pretty hefty reforms.

Kamchak

May 13th, 2010
4:14 pm

Banks were initially afraid the government would sue them or regulate them if they did not make some of these questionable loans.

Nope—private mortgage companies made 84% of sub-prime loans.

Federal Reserve Board data show that:

* More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

* Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

* Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.

Jay

May 13th, 2010
4:15 pm

I fixed the link, sfd. Thanks.

Interesting that the link you found is to the site run by Nouriel Roubini, who decided the piece was so good he wanted to post the whole thing himself. Roubini was one of the few in high finance who actually predicted the collapse and is considered a guru by many as a result.

His endorsement of RItholz’ post says a lot.

Matilda

May 13th, 2010
4:15 pm

But but but… it’s a key pillar of the “Blame the poor!” strategy. How else are you going to make the scheissters at Goldman Sachs and Lehman Brothers look honorable? “Who told these POOR people they should become homeowners?” *Gasp!* The nerve! The consequences!

Scout

May 13th, 2010
4:15 pm

TaxPayer

May 13th, 2010
4:16 pm

I wonder if Bill Clinton knew he had a Democrat Congress during all his time in office. Perhaps A Private Sector Employee is needed to inform him. :roll:

josef nix

May 13th, 2010
4:17 pm

md

“Funny how some seem to interpret that as “those people”, when it includes folks from all walks of life – rich and poor alike.”

This has always been a thorn in my side, too. Whatever the credit line, when it’s maxed, it’s maxed. Somehow, though, when the crunch hits, it’s poor management and lack of “education” or unscrupulous lenders at “fault” with the less affluent, and another series of “faults” at work with the better off, but it’s always “they” who did it…

Bosch

May 13th, 2010
4:18 pm

Kamchak,

I didn’t see this until you posted it:

“Banks were initially afraid the government would sue them or regulate them if they did not make some of these questionable loans.”

That deserves an:

Oh my freaking God.

Scout

May 13th, 2010
4:18 pm

Speaking of data, how about Block #23 ?

Del

May 13th, 2010
4:19 pm

I think Ritholtz originally said that CRA wasn’t “significantly” the reason not that they were off the hook completely. Maybe he’s saying something different now. Anyway he’s kind of an opinionated blow hard who wouldn’t make good on a $100,000.reward. There is culpability among many. The White House, the Congress, the regulators, the banking community, Fanny Freddy and yeah, CRA who pushed for looser underwriting standards.

jconservative

May 13th, 2010
4:21 pm

No one has ever produced a single mortgage that was granted on the basis of the Community Reinvestment Act, not one. Nor will anyone ever do so.

md

May 13th, 2010
4:21 pm

“Without them, not as many funds would have been available for new loans. But the other institutions would still have gone on their merry way with not following proper standards for middle and upper income loans and the outcome would likely have occurred, just not as severe.”

And with less funds available for new loans, does the market even heat up enough to bring in the speculators? If ROI was not as astronomical as it was, those dollars may very well have gone elsewhere, and the bubble never happened.

RB from Gwinnett

May 13th, 2010
4:21 pm

Why don’t you point it out for me Bosch instead of making idiotic claims based in the fantasy world you live in.

Kamchak

May 13th, 2010
4:25 pm

About those CRA loans:

In a speech last March, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked the notion that the push for affordable housing created today’s problems.

“Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans,” she said. “The CRA has increased the volume of responsible lending to low- and moderate-income households.”

In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, “that this new lending is good business.”

A private sector employee

May 13th, 2010
4:27 pm

TaxPayer, I pretty clearly stated that the Republicans were in control in Congress during the Clinton Administration… and they looked the other way while Barney Frank and Chris Dodd were working their wonders on our financial system.

N-GA

May 13th, 2010
4:27 pm

Paul,

It amuses me to no end when people blame the borrowers for getting loans they couldn’t repay. As a retired banker, I place most of the blame on the people making these loans (mortgage brokers, originators, bankers). Most of them were earning commissions/fees and/or bonuses for production, so the incentive was for the lenders at every level to approve loans. The added incentive was that most of the loans were then packaged and sold as Mortgage-backed Securities, so the lending institution had virtually no risk. Where they ran into trouble was in construction lending, property loans, commercial lending, etc.).

The bottom line is: If the bankers/lenders rated the loans properly, most of the risky loans would never have been made!

Abrazos

May 13th, 2010
4:29 pm

$100K, and all I have to do is prove that the BS I’ve chewed up and spat out for the past two years has some merit? Sign me up! Uh-oh, on second thought…

http://www.ritholtz.com/blog/2009/06/100000-cra-challenge/

Barry Ritholz says:

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?

md

May 13th, 2010
4:31 pm

“The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.). To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance, and take this information into consideration when approving applications for new bank branches or for mergers or acquisitions (Section 804.).[6]”

To think this had no bearing on the calamity, is foolish. The act is basically a strongarm tactic by gov’t. No loans – then no new bank branches,mergers or acquisitions. Although the act states “consistent with safe and sound operation”, reality dictates otherwise.

N-GA

May 13th, 2010
4:31 pm

jconservative – You are absolutely right! The primary focus of CRA was to provide credit to the local people who were depositing money in the local branch. Most of the credit was for cars, furniture, etc. (what we bankers would categorize as installment credit).

Bosch

May 13th, 2010
4:33 pm

“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?””

Oh snap.

Paul

May 13th, 2010
4:33 pm

Based on that fixed link, I need to rewrite what I wrote earlier.

“Helped drive” wasn’t Mr. Ritzholz’s phrase. Wasn’t even ‘major.’ Here’s the scenario he challenged and his bet:

““The worst financial crisis in generations was set off by a massive government effort, led by the two mortgage giants, to make loans to homebuyers no matter whether they could make the payments. Lenders were willing to lend money to just about all comers, no matter how low their income. Why? Because the lenders knew Fannie and Freddie would purchase the loans from them for a high price before bundling them into securities to sell to investors.”

followed by: “Over the past 2 years, I have repeatedly asked the people who push this narrative to provide some evidence for their positions. I have offered a $100,000 if they could prove their case.”

It’s a pretty specific assertion and a pretty specific challenge.

So I stand by my initial reaction that F&F were participants, not causative agents.

N-GA

May 13th, 2010
4:33 pm

md – Please stop posting about stuff you know nothing about. I worked in banking from the time CRA was enacted. There was little or no pressure AT ALL!

Bosch

May 13th, 2010
4:35 pm

Paul,

Aren’t you supposed to be watching Oprah?

md

May 13th, 2010
4:35 pm

“The bottom line is: If the bankers/lenders rated the loans properly, most of the risky loans would never have been made!”

I’d take it a step further – had all institutions been required to either service or guarantee their loans, far fewer would have been risky.

$0 down on one end and pass the loan on the other end = bad policy.

jewcowboy

May 13th, 2010
4:35 pm

“The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is.” ~ Winston Churchill

DoggoneGA

May 13th, 2010
4:36 pm

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

None that have anything of substance to say. If they did, they’d produce the proof required and claim that $100,000.

Bosch

May 13th, 2010
4:37 pm

jewcowboy,

If Union starts his snarkiness again, all we have to do now is go

“Hey Union? Is that a bear behind you?”

:-)

Pogo

May 13th, 2010
4:37 pm

Jay, F&F afforded sloppy/greedy bankers in the private sector a safety blanket under the auspices of the CRA for their poorly researched loans. The bankers had nothing to lose because they could loan money to anyone, whether the person could pay or not and the banks would still make their money. They simply shoved the loans off to F&F using the CRA as the reason and their story was that they were merely doing what the government mandated they do (at least that is their take on it). No, the CRA and the nationalized Fannie and Freddie are not fully responsible for what has happened to us but they are a part. In a nutshell, the CRA’s purpose is basically to encourage lending institutions to make very risky loans to people who may very well not be able to afford them and that in many cases don’t even understand the loan applications themselves. Yes, out of pure greed, the private banks took advantage of it but so did the liberal community activist organizatons and politicians such as Frank, Obama and a host of others (mostly democrat). The banks knew they always had old Fannie and Freddie to back them up so there was no accountability at either the public banking institutions nor at the two Government sponsored banking institutions (Fannie and Freddie). Fannie and Freddie always knew they had access to that great un-ending cash machine, the Amerian taxpayer. There are many many reasons for our financial fall and the biggest one is the American publics hunger for easy credit, no matter the social status. To ignore that the CRA, Fannie and Freddie had something to do with the collapse is stupid.

Fannie and Freddie, the gifts that just keep on taking. It is time to get rid of both of them. The CRA, while an honorable idea, is way too open to abuse, which it was, and it should be abolished as well. There were just too many that abused all three of these things for their political and monetary advantage and the taxpayers lost once again.

DoggoneGA

May 13th, 2010
4:38 pm

“Rather than produce evidence, they create story lines unsupported by facts. But Monkeys love a good narrative, and so they give that to them.”

Jay posts this quote…and then all the “don’t have a clue, but I can repeat the baloney” crowd comes here and proceeds to prove the truth in that quote. Amusing, to say the least.

md

May 13th, 2010
4:38 pm

“md – Please stop posting about stuff you know nothing about. I worked in banking from the time CRA was enacted. There was little or no pressure AT ALL!”

So your experience equals 100% of transactions? Please…………….

Perception of the standards did play a part in more situations than one may realize, regardless what your personal experiences dictate. There are others that did not have the same experiences you did, and are just as correct.

Del

May 13th, 2010
4:39 pm

N-GA,

Of course many greed driven mortgage brokers, originators, and bankers are responsible but so are the greed driven borrowers who took advantage of lax lending standards thinking they could make quick money buying and flipping property. Many of those types didn’t have any or little operating capital and many got caught holding when the bottom dropped out. They didn’t hang around to feel the pain. They walked on the loans.

Paul

May 13th, 2010
4:41 pm

md 4:21

“And with less funds available for new loans, does the market even heat up enough to bring in the speculators? If ROI was not as astronomical as it was, those dollars may very well have gone elsewhere, and the bubble never happened.”

That’s speculation. So’s mine. But when I look at all the middle class and upper middle class and upper class foreclosures, I think it pretty safe to say the bubble would’ve burst. I don’t think there were enough low income loans out there that failed to have driven this. So removing those from the mix, we still had a problem.

Hello, N-GA

That’s pretty much my understanding. People made $$ at each step of the way, then, because the loans were sold off, had no risk if they did poorly. But… they already had their commission.

DoggoneGA

May 13th, 2010
4:42 pm

“but so are the greed driven borrowers who took advantage of lax lending standards”

What part of “lax lending standards” don’t you comprehend, even though you just said it? It doesn’t matter how greed driven a borrower is, if no one will lend them the money they just have to sit on their greed and let it fester. It was LAX LENDERS who were the cause of the crisis. If they’d been prudent and careful, there would have been NO CRISIS in the first place.

Paul

May 13th, 2010
4:45 pm

Bosch

Nah, I’m working a project that needs to be done this evening. I recorded it so I can run thru it in 10 minutes.

N-GA

“Please stop posting about stuff you know nothing about.”

Man, oh man, if everyone agreed to that, this blog would implode!

Me, I’m kinda fond of the idea that a passionately held belief transmogrifies into a fact if you wish really, really hard!

Curious Observer

May 13th, 2010
4:46 pm

Those who want to assert that the poor were primarily responsible for the housing bubble and collapse need to pay a visit to Miami Beach. Go there and look at all the 24-story buildings filled with empty condos. This was the hunting land of the flippers, the semi-affluent who bought condo after condo on speculation because of easy money made available by private mortgage companies. That easy money had nothing to do with CRA.

Next, pay a visit to any upscale subdivision in the metro Atlanta area and observe the empty houses—those built “on spec” and never sold as well as those repossessed. It wasn’t the poor who moved in to such subdivisions. Even the most rapacious poor person knew better than to pay or take out a mortgage for three-quarters of a million dollars.

Pointing at CRA and Fanny and Freddie is just an illustration of ignorance. The truth is that Wall Street and private mortgage bankers and speculators went insane—no one verified the income of buyers and no one cared. There was money to be made. Some of those private mortgage companies were under pressure from Wall Street to turn out even more mortgages for bundling, and securities ratings agencies willingly colluded with Wall Street to declare a huge pile of horse manure pure gold. The taxpayers, municipalities, states, and even country governments that bought into the junk investments ultimately paid the price of this negligence, while those who committed the fraud and negligence walked away rich but ultimately unscathed.

Bosch

May 13th, 2010
4:46 pm

“transmogrifies”

Paul, dude, excellent word. I’d even go as far as you getting “Word of the Week” Award.

md

May 13th, 2010
4:47 pm

“It amuses me to no end when people blame the borrowers for getting loans they couldn’t repay.”

Banker or no banker, folks know how much money they make, and how much they can afford to spend, so to put “most” of the blame elsewhere is ridiculous. You want to distribute equal blame – so be it.

jewcowboy

May 13th, 2010
4:47 pm

Bosch,

““Hey Union? Is that a bear behind you?” ”

:) I have a way of sending people to therapy, don’t I?

http://www.youtube.com/watch?v=FGzK8FT9Wd8

A private sector employee

May 13th, 2010
4:48 pm

The CRA was not primarily or even a major cause of the mortgage meltdown. It was the the
“first domino” …. the start of “slippery slope”. But it WAS a factor. That said, it was a feel good idea that did legitimately help some people… including ME. In 1994, I got a mortgage with 5% down and no PMI on a $100,000 house with $40k of income… due primarily to CRA. But I had already had a home, a credit card, a job with 10 years at the same company and a good credit record. I was a great credit risk (I paid that house off in about 10 years).

The Rush’s and Neal’s of the world like to focus on the CRA, but it was the general relaxing of mortgage standards BEGINNING with the CRA that was the real problem. The repeal of Glass-Steagall is far more to blame than the CRA.

Bosch

May 13th, 2010
4:49 pm

“Some of those private mortgage companies were under pressure from Wall Street to turn out even more mortgages for bundling, and securities ratings agencies willingly colluded with Wall Street to declare a huge pile of horse manure pure gold”

Curious Observer,

Now, I’m no financial expert, nor do I play on TV, but isn’t that what Goldman Sachs is in the pooper for now? Didn’t they create some kind of voodoo whatever so they could bet on the bad debt and make money off of it somehow? Again through magic not known to me.

DoggoneGA

May 13th, 2010
4:49 pm

“Banker or no banker, folks know how much money they make, and how much they can afford to spend, so to put “most” of the blame elsewhere is ridiculous.”

All the banker has to do is say NO.

Bosch

May 13th, 2010
4:50 pm

jewcowboy,

I am SOOOO not clicking on that. :-)

I’m still recovering from the Luckovich stripper cartoon.

jewcowboy

May 13th, 2010
4:50 pm

Bosch/Paul,

“Paul, dude, excellent word. I’d even go as far as you getting “Word of the Week” Award.”

I concur!

jewcowboy

May 13th, 2010
4:51 pm

Bosch,

“I am SOOOO not clicking on that”

Wise man…

larry

May 13th, 2010
4:52 pm

Hello, Im a mortgage broker. Say you want to buy a 200,000 dollar home. mmmmmm, sweet commissions. You only make 30,000 a year? Hmmm….. I can fix that. There!!! Now you make 300,000 a year. Congratulations. Here are the keys to your new home!!

AmVet

May 13th, 2010
4:53 pm

Who would have guessed that we had so many brilliant economists here?

Where were these minds during September 2008? They could have saved the day!

But then I guess it’s not all that surprising considering how many of these same folks are also highly credentialed climatologists as well as exceptionally bright geopolitical and military strategists…

Bosch

May 13th, 2010
4:53 pm

jewcowboy,

And those spandex videos…..I’ve got a couple more sessions to get that one burned out of my brain.

jefferson

May 13th, 2010
4:53 pm

The banks caused the problems, not the gov’t or the borrowers.

Abrazos

May 13th, 2010
4:54 pm

It’s a safe bet that the $100K won’t be handed out since no one can prove “Is the CRA significantly to blame for the credit crisis?”. Would this Ritholz guy be willing to offer that money to Sean Hannity maybe? Hannity said he’d be willing to be waterboarded on TV to show that it’s not torture. Then he kind of forgot about his offer to get himself waterboarded. If he won’t do it for principle’s sake, maybe $100K will sweeten the deal. That’s a FOX News show I’d definitely set on my DVR.

md

May 13th, 2010
4:54 pm

“It was LAX LENDERS who were the cause of the crisis.”

Takes 2 to make a legal contract, one side did not “cause” anything without participation from the other side as well.

Del

May 13th, 2010
4:54 pm

@DoggoneGA,

What part of this discourse don’t you understand. Oh, I get it, you think that masses must be protected from themselves and if they screw up and get burnt, why it’s never their fault. What part of individual responsibility don’t you understand.

Paul

May 13th, 2010
4:54 pm

Bosch

Thank you, thank you kindly.

Calvin and Hobbes were good teachers.

josef nix

May 13th, 2010
4:55 pm

Bosch–

Agreed, Had to go look it up. It fits perfectly…

Kamchak

May 13th, 2010
4:55 pm

I am SOOOO not clicking on that.

I gotta confess that I did.

Heh…heh…heh….

md

May 13th, 2010
4:57 pm

“All the banker has to do is say NO.”

Again, works both ways. I was told I qualified for twice what I was asking for, but I knew darn well I couldn’t make the payments.

2 parties with equal blame. No one forced anyone to sign any contracts.

Jay

May 13th, 2010
4:58 pm

“All the banker has to do is say NO.”

It’s the banker’s DUTY to say no. Since the very first loan was made thousands of years ago, people have wanted to borrow more money than they should. That didn’t change in this recent mess.

What changed is that lenders stopped saying no. They stopped doing their jobs, because there was so much more money in saying yes.

jewcowboy

May 13th, 2010
4:59 pm

josef nix

May 13th, 2010
4:59 pm

jewcowboy

Sick! Does the Bruin know about this…? Sick, I tell you… :-)

DoggoneGA

May 13th, 2010
5:01 pm

“but it was the general relaxing of mortgage standards BEGINNING with the CRA that was the real problem”

But remember, CRA did not apply to privately held mortgage companies. It only applied to REGULATED banks. It was not the even the beginning of any kind of “slippery slope” of lax lending standards. There is NOTHING in the CRA to even encourage banks to use anything other than careful and prudent banking practices. What the CRA did was force those regulated banks to apply those prudent practices fairly across their customer base and not exclude borrowers because of where they LIVED.

jewcowboy

May 13th, 2010
5:03 pm

Hi josef nix!

“Does the Bruin know about this…?”

I feel I should kn ow this, but who is the Bruin?

saywhat?

May 13th, 2010
5:04 pm

The recurrent “Fannie and Freddie and CRA caused the meltdown” nonsense is just another product of the same paranoia machine you exposed earlier today Jay.If only the conservative base weren’t such non-critical thinking sheep, this lie would have been put to rest long ago. Unfortunately, this lie and may others like it are so appealing to them as a narrative, that they just WANT to believe it without question, for as long as they can, sort of like kids and Santa Clause.

Paul

May 13th, 2010
5:04 pm

“What changed is that lenders stopped saying no. They stopped doing their jobs, because there was so much more money in saying yes.”

Yet, when a woman stops saying “No” and says “Yes” because there’s more money in it, we arrest her AND the guy she said yes to.

There’s no justice in the world…

jewcowboy

That strip always made me laugh.

md

May 13th, 2010
5:04 pm

“What changed is that lenders stopped saying no. They stopped doing their jobs, because there was so much more money in saying yes.”

Yes, and the “me” generation also changed to want more than they could afford. The “keep up with the Joneses” syndrome was alive and well.

John Birch

May 13th, 2010
5:04 pm

Depends on Ritholz definition of ‘proof’, think Clinton’s definition of ‘is’. But if he doesn’t recognize the role of Fannie and Freddie in th disaster, his analysis is about as good as his DOW 36,000 prediction! Proximate cause? No, but they certainly facilitated it. Does anyone believe the banks and mortgage loan companies would have made all those high risk reverse equity, ninjas and interest only ARM’s if Fannie and Freddie hadn’t been sitting there ready to buy them up? the originators made a point or mor eupfront and then dumped the risk on Fannie and Freddy, aka the US taxpayers.

saywhat?

May 13th, 2010
5:05 pm

Foxy Lady is #1

May 13th, 2010
5:05 pm

Everyone knows that CRA and ACORN caused the collapse. That and the poor people!

DoggoneGA

May 13th, 2010
5:05 pm

“Takes 2 to make a legal contract, one side did not “cause” anything without participation from the other side as well”

All the lender has to do is say No. The lender is the one with ALL the power. He has the money. If he makes a risky loan, it’s his problem. Remember this: you make the decision, you have to live with it. Sound familier?

David Granger

May 13th, 2010
5:05 pm

Hard to say which is more ludicrous:
The fanatic right-wing nutcase conservatives claiming that the Community Reinvestment Act was completely and totally responsible for the economic collapse, or
The fanatic left-wing giggle-sissy liberals claiming that it had nothing whatsoever to do with it.

Jay

May 13th, 2010
5:05 pm

Bircher, Ritholtz didn’t write the Dow 36000 book.

The guy claiming CRA is at fault wrote the Dow 36000 book.

josef nix

May 13th, 2010
5:06 pm

jewcowboy–

Oh, the Bruin knows all, sees all and js directing me to write this…

jewcowboy

May 13th, 2010
5:06 pm

Paul,

“That strip always made me laugh.”

Me too…as well as Bloom County.

http://www.captainscomments.com/images/683-BloomCounty-StoneCrab.jpg

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin....

May 13th, 2010
5:06 pm

But Monkeys love a good narrative, and so they give that to them.

You know you mealy mouthed little punk liberals are really pushing it.

I could really make this bad really quick but I got more common decency than you do.

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin....

May 13th, 2010
5:08 pm

Kookman gets off on the monkey bulls*&^, don’t he?

Del

May 13th, 2010
5:09 pm

It’s really an asinine argument that borrowers had no culpability in this mess or that the CRA, Fannie and Freddy were squeaky clean.