Sub-prime lending debacle
This post stems from an email I wrote to a elist. I'm trying to avoid online politics, but the idiocy of people who say that what is happening now is all because of the Bush economic policies.
With that said, I can comment on the sub-prime credit problems.
I'm sure it's no surprise that I'm voting for McCain. He wasn't my first choice or even my third choice. But, given the choice today, he's my pick.
As to Obama, there are too many bad bad things about him for me to go into here.
But, someone mentioned the sub-prime mortgage crisis. ...and don't for a minute think it isn't crisis. It impacts across so many area that we are FAR FAR from being done with this entire economic morass. There is blame for this mess on both sides of the aisle
Let me start with the Federal National Mortgage Association (i.e., Fannie Mae) & Federal Home Loan Mortgage Corporation (i.e., Freddie Mac) since they are the foundation of the problem.
Fannie Mae was created under FDR as a government agency. In 1968 it was converted to a private corporation under the Johnson administration. Freddie Mac was create in 1970 under Nixon, but was actually contemplated and create under Fannie Mae. So, the Democrats
created the foundation of the problem even though the initial intention may have been good. Side note: With the privatization of Fannie Mae, the govenment didn't get out of the business, they then created Government National Mortgage Association (Ginnie Mae) that's
also showing signs of problems. Also, don't get me started on the b*tch, Sallie Mae.
Then the Dems really F'd up and laid the groundwork for today's problems with the passage in 1977 of the Community Reinvestment Act(i.e., CRA). The effect of this Act was to mandate the availability of housing credit (i.e., mortgages) without regard to the creditworthiness of borrowers, requiring the making of loans that lenders would not normally make. It forced the lenders to make loans to people who couldn't even afford to pay the mortgage. Bad business!!!
To compund the problem, the Clinton administration expanded the Act in 1995. In fact, under Cuomo, Sec of HUD, the MANDATORY sub-prime lending almost doubled.
So, the Dem's created the problem of sub-prime lending.
Lest anyone think I'm being completely partisan (which is pretty common for me), let me look to my fellow Republicans. The first question is: If Fannie Mae, Freddie Mac and the CRA are so bad, why didn't the Rep's try to do something about them? They tried (half-heartedly IMO), but didn't try hard enough. For example, in 2003 the Bush administration attempted to restrict the CRA, but was blocked by Dem's. Why did they only try once??? Added to that is the deregulation that gave free-reign to predatory lending.
In the VP debates, the moderator asked Palin who was to blame: homebuyers who couldn't afford mortgages or the lenders? Palin indicated the lenders. I disagree to an extent. I think the homeowners are partially to blame (IF YOU CAN'T AFFORD THE PAYMENTS DON'T SIGN THE NOTE) and the lenders are to blame for making those bad loans (i.e., Predatory - IF THEY CAN'T AFFORD THE PAYMENTS DON'T LEND THE MONEY). But above all, I blame the government because they MANDATED the lending and deregulated the process by which the lenders could impose the draconian (i.e., predatory) requirements and results.
So, there is the basis of the sub-prime lending debacle.
On top of that we now have the real booga boo... Credit Default Swaps (CDS). These are hard to understand, and are even more complicated when viewed in reference to the sub-prime problem. For a reasonable description of the CDS's, try the wikipedia article (http://en.wikipedia.org/wiki/Credit_default_swaps) with typical accuracy disclaimers. Rather than going on and on with another 10 paragraphs about CDS's, I'll just say that we're a LONG way from this being over.
Just one more thing... As an example of how far-reaching this is, the price of the corn market (I think it is 90-day corn) just dropped from ~$7.20 to around $3.50. That will kill the farmer's budgets and operations. Get ready for farm foreclosures in the near future.
This ain't pretty people.
Bottom line... both parties are to blame and I need a BIG drink...
With that said, I can comment on the sub-prime credit problems.
I'm sure it's no surprise that I'm voting for McCain. He wasn't my first choice or even my third choice. But, given the choice today, he's my pick.
As to Obama, there are too many bad bad things about him for me to go into here.
But, someone mentioned the sub-prime mortgage crisis. ...and don't for a minute think it isn't crisis. It impacts across so many area that we are FAR FAR from being done with this entire economic morass. There is blame for this mess on both sides of the aisle
Let me start with the Federal National Mortgage Association (i.e., Fannie Mae) & Federal Home Loan Mortgage Corporation (i.e., Freddie Mac) since they are the foundation of the problem.
Fannie Mae was created under FDR as a government agency. In 1968 it was converted to a private corporation under the Johnson administration. Freddie Mac was create in 1970 under Nixon, but was actually contemplated and create under Fannie Mae. So, the Democrats
created the foundation of the problem even though the initial intention may have been good. Side note: With the privatization of Fannie Mae, the govenment didn't get out of the business, they then created Government National Mortgage Association (Ginnie Mae) that's
also showing signs of problems. Also, don't get me started on the b*tch, Sallie Mae.
Then the Dems really F'd up and laid the groundwork for today's problems with the passage in 1977 of the Community Reinvestment Act(i.e., CRA). The effect of this Act was to mandate the availability of housing credit (i.e., mortgages) without regard to the creditworthiness of borrowers, requiring the making of loans that lenders would not normally make. It forced the lenders to make loans to people who couldn't even afford to pay the mortgage. Bad business!!!
To compund the problem, the Clinton administration expanded the Act in 1995. In fact, under Cuomo, Sec of HUD, the MANDATORY sub-prime lending almost doubled.
So, the Dem's created the problem of sub-prime lending.
Lest anyone think I'm being completely partisan (which is pretty common for me), let me look to my fellow Republicans. The first question is: If Fannie Mae, Freddie Mac and the CRA are so bad, why didn't the Rep's try to do something about them? They tried (half-heartedly IMO), but didn't try hard enough. For example, in 2003 the Bush administration attempted to restrict the CRA, but was blocked by Dem's. Why did they only try once??? Added to that is the deregulation that gave free-reign to predatory lending.
In the VP debates, the moderator asked Palin who was to blame: homebuyers who couldn't afford mortgages or the lenders? Palin indicated the lenders. I disagree to an extent. I think the homeowners are partially to blame (IF YOU CAN'T AFFORD THE PAYMENTS DON'T SIGN THE NOTE) and the lenders are to blame for making those bad loans (i.e., Predatory - IF THEY CAN'T AFFORD THE PAYMENTS DON'T LEND THE MONEY). But above all, I blame the government because they MANDATED the lending and deregulated the process by which the lenders could impose the draconian (i.e., predatory) requirements and results.
So, there is the basis of the sub-prime lending debacle.
On top of that we now have the real booga boo... Credit Default Swaps (CDS). These are hard to understand, and are even more complicated when viewed in reference to the sub-prime problem. For a reasonable description of the CDS's, try the wikipedia article (http://en.wikipedia.org/wiki/Credit_default_swaps) with typical accuracy disclaimers. Rather than going on and on with another 10 paragraphs about CDS's, I'll just say that we're a LONG way from this being over.
Just one more thing... As an example of how far-reaching this is, the price of the corn market (I think it is 90-day corn) just dropped from ~$7.20 to around $3.50. That will kill the farmer's budgets and operations. Get ready for farm foreclosures in the near future.
This ain't pretty people.
Bottom line... both parties are to blame and I need a BIG drink...