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6 comments:
Start around 1995. Groups involved with civil rights issues and activities for poor people began to complain that poor people and especially non-white poor people got mortgages much less often than white well to do people. Many economists, including me, explained that it was not at all surprising that poorer, less credit worthy people were often turned down for credit. That's how credit is supposed to work: you lend to people who will pay you back.
But the advocates for poor and black people had immense political clout. Under President Bill Clinton, they passed legislation that called on banks to be required to lend to non credit worthy borrowers. The laws, including the Community Reinvestment Act, the CRA, required two large government sponsored enterprises, Fannie Mae and Freddie Mac, to buy those lower quality mortgages from the banks, guarantee them, and sell them to the public. These were bundled into immense pools of subprime mortgages as they were called, and sold all over the world.
Soon, the private sector got into the act in a vast way. They also went to banks and bought their subprime loans, packaged them, and sold them as Collateralized Mortgage Obligations all over the world.
Supposedly, the subprime collateralized mortgage obligations (CMOs) were sliced up in such a way that buyers could have a very high likelihood that they would be repaid even if many of the mortgages in the portfolio defaulted. This assumption was based on a misunderstanding of poor quality credit that had been popularized during the era of the junk bond investment powerhouse, Drexel Burnham Lambert.
Interesting.
Is this the article you are referencing?
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1
Obama claims he wrote a letter to the Fed and Treasury about further regulation however:
"...nowhere in his letter did Mr. Obama suggest that the government should stop subsidizing loans to people who can't repay them.
This is the latest fad among Beltway liberals who spent years encouraging noneconomic mortgage loans. They now proudly announce that at critical moments they issued a press release, or wrote someone, suggesting that somebody do something. Since soured mortgage loans are a root cause of this panic, and since Democrats did so much to encourage mortgage lending, the most politically useful of these archived warnings are the ones blaming something other than housing.
But derivatives are the irresistible story now, because they offer the opportunity to shift the blame from bad housing policy, and they suggest that a lack of financial regulation was the problem.
The left's hope is that derivatives are so poorly understood that people can be convinced that turmoil in the market for credit default swaps -- an effect of soured mortgage loans -- is actually a cause of this crisis. Credit default swaps (CDS) are insurance policies against companies or investment vehicles going bankrupt and being unable to pay their creditors. This insurance is cheap when things are going well, and very expensive when investors expect the relevant entities to fail. Turns out that the markets for CDS and other derivatives not tied to the housing crisis are functioning normally.
Meanwhile, in an amazing coincidence, it is the failure -- or the expected failure -- of entities with heavy exposure to toxic mortgages that is putting extreme financial strain on those who sold insurance. But the problem can't possibly be the toxic mortgages encouraged by Washington, according to the politicians. It must be the system of insuring against the collapse of those who bought the mortgages."
-WSJ.com
I'm not voting for McCain or Obama.
I feel sorry for people like Mr. Henry Yee, a small business owner with an AGI > $250,000 who not only has to pay double self employment tax, will now have his capital gains taxed at a ridiculous rate along with his regular income. How can any small business owner survive in this environment? Maybe we should all just become activists on Chicago's southside. I mean look what Barack did down there, not like we had a missing Hudson child this week or more murders in the last 6 months in the warzone of Chicago than in the entire country of Iraq. Maybe the solution is to sit around and do nothing but write 2 memoirs about it. Yeah, that's the ticket.
In the words of Wyclef ... It doesn't matter (if you're voting in Illinois)
Republican talking points:
1) Redistribution of wealth
2) Taxes
3) Bill Ayers
Republican talking points that resonate with non-Republicans:
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