October 13, 2008

Liebowitz: Anatomy of a Train Wreck: Causes of the Mortgage Meltdown

Paul Krugman just won the Nobel Prize in economics, but they should have given it to the economist who has been hollering since the 1990s about the government's mortgages for minorities and the poor policies, Stan J. Liebowitz.

He's got a new analysis out that's fairly definitive.

UT Dallas economist Stan J. Liebowitz's witty report on how "relaxed lending standards" to increase home ownership among minorities and low income whites led to the collapes is now online (1 meg PDF).

Anatomy of a Train Wreck: Causes of the Mortgage Meltdown
by Stan J. Liebowitz

PDF Download PDF File (29 pages)

Why did the mortgage market melt down so badly? Why were there so many defaults when the economy was not particularly weak? Why were the securities based upon these mortgages not considered anywhere as risky as they actually turned out to be?

This report concludes that, in an attempt to increase home ownership, particularly by minorities and the less affluent, virtually every branch of the government undertook an attack on underwriting standards starting in the early 1990s. Regulators, academic specialists, GSEs, and housing activists universally praised the decline in mortgage-underwriting standards as an “innovation” in mortgage lending. This weakening of underwriting standards succeeded in increasing home ownership and also the price of housing, helping to lead to a housing price bubble. The price bubble, along with relaxed lending standards, allowed speculators to purchase homes without putting their own money at risk.

The recent rise in foreclosures is not related empirically to the distinction between subprime and prime loans since both sustained the same percentage increase of foreclosures and at the same time. Nor is it consistent with the “nasty subprime lender” hypothesis currently considered to be the cause of the mortgage meltdown. Instead, the important factor is the distinction between adjustable-rate and fixed-rate mortgages. This evidence is consistent with speculators turning and running when housing prices stopped rising.

Anatomy of a Train Wreck is included in the forthcoming Independent Institute book, Housing America: Building Out of a Crisis, edited by Randall G. Holcombe and Benjamin Powell.


Stan J. Liebowitz is Research Fellow at The Independent Institute, Ashbel Smith Professor of Economics and Director of the Center for the Analysis of Property Rights and Innovation at the University of Texas at Dallas, and co-author with Stephen Margolis of Winners, Losers, and Microsoft: Competition and Antitrust in High Technology, published by the Independent Institute.

Keep in mind that 15 years ago Peter Brimelow debunked the original report/hoax on discrimination against minorities in mortgage lending that set off this chain reaction catastrophe. See his 1993 Forbes article The Hidden Clue.

My published articles are archived at iSteve.com -- Steve Sailer

64 comments:

DCS said...

Paul Krugman is certainly a very smart man. He contributed some sage economic ideas.....30 years ago! While it's true that the Nobel committee often delays giving awards for many years, it's also hard not to be cynical about the timing of this award. After all, Al Gore didn't have to wait 30 years for his Nobel. What's next, a physics prize for Michael Mann and the "hockey stick?"

Captain Jack Aubrey said...

Liebowitz's report makes mention of the supposed "landmark study" in the early 90s, one of whose author's was Alicia Munnell, who is now director of the Center for Retirement Researc at Boston College.

Munnell is back in the news. Her faulty (falsified?) study helped encourage the lowering of home lending standards, which caused the mortgage collapse, which caused the recent mrket collapse. And what does she have to say about the market collapse, caused in part by her?

"I think what this catastrophe in the financial markets highlights is how vulnerable this approach to retirement makes people...Their welfare depends on market gyrations. They can be very responsible and still end up being hurt."

In America today, you only fail upwards.

Anonymous said...

The economics nobel should probably be given every five years, because for every Black/Scholes award, there are 20 awards for comparatively middlebrow, Kahneman/Krugman type work.

Krugman's famous Foreign Affairs article arguing that asian growth resulted from unsustainable increases in factors of production rather than productivity also reflected a good idea but wasn't blindingly incisive. If only the world were so simple that Krugman and Francis Fukayama could solve economic policy problems by trading some general concepts over coffee.

Captain Jack Aubrey said...

McCain speaking today in Virginia Beach:

These are hard times. Our economy is in crisis. Financial markets are collapsing. Credit is drying up. Your savings are in danger. Your retirement is at risk. Jobs are disappearing. The cost of health care, your children's college, gasoline and groceries are rising all the time with no end in sight. While your most important asset — your home — is losing value every day.

The economy is in crisis! It's all the GOP's fault! No blame for the Democrats anywhere. More big government!

The next President won't have time to get used to the office. He won't have the luxury of studying up on the issues before he acts. He will have to act immediately.

I can't be bothered to study the issues. I'll just act, like Bush! Think upon how wonderful he was!

I've been fighting for this country since I was seventeen years old, and I have the scars to prove it.

Vote for me because you pity me!

I'm not going to spend $700 billion dollars of your money just bailing out the Wall Street bankers and brokers who got us into this mess.

I'm not "just" gunna bail out the crooks on Wall Street. I'm gunna buy their worthless paper for what they claim it's worth!

I'm going to make sure we take care of the people who were devastated by the excesses of Wall Street and Washington. I'm going to spend a lot of that money to bring relief to you, and I'm not going to wait sixty days to start doing it.

Then I'm gunna bail out the idiots who couldn't afford the homes they were buying, and do it with your tax money!

I have a plan to hold the line on taxes and cut them to make America more competitive and create jobs here at home.

I'm gunna continue the policy of deficit spending ad infinitum!

Read the whole piece of crapola here.

It's over, folks. It's over, it's over, it's over. And unless any serious revelations come out or major mistakes are made, Obama has won. Get out to the polls, cast your vote for the good candidates down ballot, for whatever protest presidential candidate you prefer, then go home and drink a whole bottle of Cab to the great nation that the USA once was.

How we ever managed to nominate this guy is beyond comprehension. Blame Huckabee. Blame the idiots who wouldn't vote for a Mormon. Most of all, blame McCain himself.

Born Again Democrat said...

I read the whole report, and conclude that your "diversity recession" theory is only partially correct. The relaxation of lending standards may have begun as a response to lower homeownership rates for low-income families, but these new standards were extended to all borrowers, prime and subprime alike. The prime borrowers who took adjustable rate mortgages were, presumably, not NAM's for the most part, yet their default rates increased in the same proportions as the sub-primes. These were the speculators -- as were, in effect, the big brockerage houses who securatized these loans and sold them to unsuspecting pension funds, etc., around the world. So there were two sets of chumps (NAM's and foreigners) plus the investment bankers themselves who kept the most risky loans on their balance sheets (go figure?) -- all of them abetted by lax government oversight (of banks, hedge funds, credit agencies, and of course of the lending standards themselves.) Those responsible for the latter include Greenspan, Rubin, Summers, Clinton, and what's-his-name from Texas, to mention only the biggest names. Volker was the lone exception.

Anonymous said...

You can blame NAM's all you want, but the real question is -- as usual -- cui bono

The fact is that there are plenty of whites who are all too happy to increase their power, prestige, and wealth by jumping on the diversity train.

David said...

Anonymous, you make a good point about cui bono.

But, is anyone blaming NAMs?

Also, why is it being implied by the defenders of diversity that NAMs who got liars loans are victims - while Whites who got liars loans are greedy exploiters?

Always with the blame Whitey. Always.

And what's this locution "low-income" all about? No one was doing anything for the White poor. The relaxations of homelending standards were explicitly intended to help racial groups, including "victims of racism." Racial groups. Not "low-income." Racial.

Mark Seecof said...

Darn it, I wish you holier-than-thou "anti-racism" guys would read what Mr. Sailer writes before you denounce him.

Sailer never "blamed NAM's" for the mortgage or financial crises. He has consistently blamed misguided social action schemes (frequently but not at all exclusively enforced by the government) aimed at NAM's by white people for promoting and exacerbating the mortgage/ financial crises.

Do you think Sailer is so stupid as to think that impecunious NAM's issued large mortgages on laughable terms to each other and to whites as well?

No. White people (whiter people), eager to prove how very, very non-racist they were by condescending to NAM's, decided to loan poor NAM's big money even though the experience of decades demonstrated that people too poor to make down payments and even too poor to make monthly payments could not, in fact, be expected to pay back mortgage loans!

Some white people trying to get a leg up on other white people accused lenders (all white) of racism. The aggressive white people first challenged, then compelled lenders to "prove" that they were "not racist" by giving loans to unqualified NAM borrowers. The whiter people even insisted that lenders go out and recruit NAM customers. That launched a price spiral as the new borrowers used the money to bid up housing prices. Rising prices at the bottom prompted less-poor people to "trade up," pushing up prices in all tiers. Easy credit for NAM's meant easy credit for everyone due to retail competition. Rising prices masked credit problems for a few years, because borrowers who couldn't make payments were able to sell out and retire their crazy mortgages, even profiting from appreciation, so default rates remained low even for unqualified borrowers. Those resale profits attracted speculators (and Liebowitz documents that there were more speculators at the low end than the high end-- which I (not Sailer) attribute to the lesser foresight and risk aversion of the low-end participants, many of them NAM's). Speculators bid up prices even more, concealing the weakness of borrowers by suppressing the default rate, but prompting lenders to relax credit requirements more and more to keep NAM's in the game as prices went up. Whiter people kept pressing lenders to re-demonstrate their lack of "racism" by showing that the percentage of loans they made to NAM's remained constant or even increased (FNMA) as prices went up-- even though rising prices should have driven a higher proportion of NAM's out of the market because a greater percentage of NAM's than whites are poor.

Now, as Mr. Sailer has acknowledged, the growing bubble generated its own positive feedback, as financial firms promoted MBS and CDO products and traded for their own accounts with extreme leverage, lenders/ brokers/ appraisers/ salespeople earned huge fees for writing dubious loans, builders lobbied for easy credit to potential buyers, and politicians sought to please voters with easy credit and please contributors with government largesse. However, all of those influences had been available for decades and were never sufficient to generate a housing bubble like the one from ~1996 to 2007. The only significant change, the constant flame under the retort which propelled the complex reactions inside it, was the whiter people's decision to give mortgage loans-- big loans, big money-- to NAM's who could never pay that money back from their earnings.

So will you all please stop saying Mr. Sailer is racist? He did not, and I dare say, will not blame NAM's for the problem. The NAM's were pawns of whiter people. That is why Mr. Sailer coined the term "diversity recession." The crises have been produced, in no small degree, by the diversicrats-- nearly all white folks (though they employ plenty of NAM stooges like Michelle "affirmative action manager" Obama)-- eager to beat other white folks over the head with the rhetorical club labelled "racism." Those of you swinging the same club are part of the problem, not part of the solution.

(Oh, yes, the monetary bubble Greenspan launched, which provided some of the funds which poured via derivative debt instruments into housing after the dot-com bubble, helped too-- but again, look at the timing. The unprecedented upward trend in housing prices began with the initiation of forced lending to NAM's and tracked the escalation of regulatory pressure for such lending. House prices started going up years before the stock market flopped. Indeed, part of the money going into the stock market was leveraged off housing "assets" which were marked to ever higher values due to the bubble.)

Truth said...

Meanwhile; halfway around the world:

The nefarious and serreptitious NAM plot on the global economy led by MECHA and the NOI continues!...

http://www.bloomberg.com/apps/news?
pid=20601087&sid=aVFtDRGwcc50&refer=
home

Voodooman said...

Three words: Disneyland for Dummies.

eh said...

OT, but...

Hispanics, and particularly Mexicans, are academic underachievers because their culture does not value education.

Paging Steve Sailer! Paging Steve Sailer!

tommy said...

A video worth watching: Andrew Cuomo, Clinton's man in HUD, on forcing "affirmative action" on the mortgage industry.

Anonymous said...

Besides the lowering of standards, one thing I notice about American stocks is they are still priced assuming an aggressive increase in wealth for the country in the future. For example the historic average of stock price earnings has been 14.. well the market is currently at over 20 going into what looks to be a brutal recession.

And that 21 price earnings or so, is with extremely liberal accounting which takes many charges as 'one time charges.'
But for most of the stock exchange's history one time charges were simply included in earnings.

And also has questionable definitions of profits, as we've seen with bank market to model accounting. In other words profits that are not actually cash sitting in the company's account somewhere. So in historic accounting methods the market is more like 40 or 50 times price earnings right now.

So it is assuming spectacular growth of earnings going forward for these existing companies. But what if America gradually becomes a poorer and more socialist nation because it is changing demographically. Then we'd have to assume falling profits. And for that a real price earnings of more like 5 or 7 would be better. Which would be an 80-90% fall from these levels on the market.

So Sad said...

"relaxed lending standards" to increase home ownership among minorities and low income whites led to the collapes is now online
-----------------------------
I'm very happy that you added the part in bold. Lets not pretend that Bush and others were on TV nonstop talking about how every American should own a home. People who could not afford a home had the wool pulled over the eyes because:
1. They did not do the research.
2. They were told they could refinance before the payments shot up. Along with some BS story like “everyone is doing it” “ you are going to find yourself unable to afford a home if you wait until you have money for a down payment” or “this is something you can pass down to your children” “ this is a quick way to build wealth”

Let us not forget about those who were trying to flip houses but could not move that last load fast enough. There are too many high IV people on Wall Street for this to have gone down. This was just another way for the very wealthy and high IQ to get over on the not so bright.

So sad said...

Captain Jack said:How we ever managed to nominate this guy is beyond comprehension. Blame Huckabee. Blame the idiots who wouldn't vote for a Mormon. Most of all, blame McCain himself

If you Republicans had voted for Giuliani you would not be in this mess. Giuliani has the clout to pull a lot of Dem, Independents and undecided voters.

Mr. Anon said...

"Born Again Democrat said...

I read the whole report, and conclude that your "diversity recession" theory is only partially correct. The relaxation of lending standards may have begun as a response to lower homeownership rates for low-income families, but these new standards were extended to all borrowers, prime and subprime alike."

Hey, congratulations. After careful perusal of Liebowitz's report, you've independently discovered........what Steve and just about everyone else here has been telling you for the last two weeks.

Uncreditworthy minorities were no more the cause of the meltdown than were the very poor the cause of the welfare state. It is not in the power of the poorest to change the rules in their favor. Only their betters, who know better than they (and us) can do that.

Reason, yes. Cause, no.

So Sad said...

Also, why is it being implied by the defenders of diversity that NAMs who got liars loans are victims - while Whites who got liars loans are greedy exploiters?

Always with the blame Whitey. Always.


Where did you get that from?

I think both groups where victims and but also idiots for not doing research into the pros&cons/do &don'ts of home ownership. There has got to be a Homebuying for Dummies book sold somewhere.

voodooman said...

so sad:
"relaxed lending standards" to increase home ownership among minorities and low income whites led to the collapes is now online

Kurt Saxon said it first in 1980, and I'll say it again a million times if necessary. Disneyland for Dummies.

Nobody has the right to own a house, and banks have no obligation to give a mortgage to anyone. This is just another form of low-IQ entitlement. In densely-packed Eurasia, owning any sort of real property is a mark of the ultimate elite. I do not suggest that land-rich America follow the same path, but still a house is something to be earned and revered, not given to every Tom, Dick, and Harry.

In the early 1990s, I do not recall any such largess on the part of government or corporattions towards Generation X.

jimbo said...

The main problem I see with this theory is that you saw a simultaneous housing buble in virtually every country in the Western world. So how is it that American liberals managed to affect lending statndards in, say, Spain?

Anonymous said...

this may be irrelevant, but Krugman's wife is black

Captain Jack Aubrey said...

Is the Monkeywrech Gang (i.e., NAMs) to blame? Not entirely, but without the massive increase in Gang membership there'd be no one to pander to. These politicians weren't gunna lower lending standards just for a bunch of white people.

Yes plenty of playas in the mess were white, but without the Gang members it could not have happened.

If you Republicans had voted for Giuliani you would not be in this mess. Giuliani has the clout to pull a lot of Dem, Independents and undecided voters.

Yeah, except that for some silly idea we wanted to elect someone who was, ya know, conservative. McCain and Giuliani were going after the same voters, and Giuliani lost. So blame the McCain voters, not the Romney/Huckabee crowd.

The main problem I see with this theory is that you saw a simultaneous housing buble in virtually every country in the Western world. So how is it that American liberals managed to affect lending statndards in, say, Spain? - "Jimbo"

Hey, folks, RKU is back after having all his other arguments throughly demolished by Steve's VDare article! Welcome back, RKU!

1) Spain saw a housing bubble. Did it see a mortgage meltdown? Please provide links if so.

2) We've already discussed Spain's massive population growth due to immigration (and only to immigration), which equaled 2.1% in a single year. Britain, the other housing bubble victim, saw massive immigration, too, including 600,000 immigrants in one 12 month period.

Anonymous said...

Captain Jack Aubrey ......Regarding Britain, massive and unprecented immigration combined with strict land use policies (London's Green Belt, for example) have led to an enormous increase in housing prices that make housing prices here in the New York City area look like a Wal-Mart bargain. I was looking at London's population increase forecast (almost entirely due to immigration) for the next 20 years and it is absolutely mind boggling. Where are they going to put these people? I don't know about you guys but I would kind of like having an pretty decent environment and would rather not bulldoze every tree to make way for a council estate, as they call them in Britain. Have the British elites even thought about this? And why do the environmentalists support these guys?

Mr. Anon said...

"So sad said...

If you Republicans had voted for Giuliani you would not be in this mess."

Yeah, voting for a straight-up democrat would be the answer. Then we would have a choice between a far-left socialist and a liberal who on occasion dresses up as a woman.

Instead, we get this guy:

http://www.youtube.com/
watch?v=L2VXZ6YlWUE&
feature=related

Captain Jack Aubrey said...

And why do the environmentalists support these guys?

Aren't the projections something like 77 million (up 16 million) by 2030? Over twice the population of California on an island the size of Utah?

Anyhow, as they say of environmentalists, "the green tree has red roots." Or more succinctly, "watermelons" - green on the outside, red on the inside.

There is no conservatism in an overcrowded nation. The more people bump up against each other, the more they want government to control each other's actions, and the more impossible it is to get away and set out on your own. It takes a very strong tank to hold gas at high pressure.

Matt Parrott said...

Anatomy of a Train Wreck is very lucid and persuasive, adding a lot of clarity for anybody attempting to make sense of the mortgage crisis. The only insufficiency in the article, and it's more of an opportunity for further analysis than a flaw, is that it sort of left me unconvinced that the analysts were merely stupid or herd-like.

Did the finest minds in the financing world really just obliviously fall for the transparent subterfuge? Obviously, hind-sight is 20/20, but it seems to me that these people would have been smart enough to see that this whole thing was a bubble.

I suspect that there are two inefficiencies in the finance industry which made it vulnerable to this bubble. The first is that analysts who play conservatively during a bubble are demoted while analysts who are the most irresponsible get slopped with praise, promotions, and perks.

The second is that the compensation structure for analysts innately inclines them toward inappropriate risk. If you ride a bubble, you get a considerable slice of the action. If your portfolio implodes, the worst they can do is fire you. There's vast exposure to profit, limited exposure to risk.

If you're an analyst in, say, 2000, and you have the clarity and foresight of, say, Steve Sailer, what do you do? If you dismiss the bubble altogether, you're likely to be humiliated for years while your peers get enviable perks and promotions. Eventually you're let go for underperforming the "mavericks" with their "innovations" and resign yourself to writing a science blog and driving a used car.

Sure, the bubble burst, but not in the faces of the analysts. Since only a public spectacle of tarring, feathering, and chasing with pitchforks could really redeem the lavish compensation they had received for participating, and since they didn't get that, they're not quite as dense as this article would lead one to believe.

They will all hop into their Smart cars and drive to one of numerous places that pay brilliant people with awesome resumes big money. The shit rolls up through the stooges running the company, the stooges running the country, the stooges purchasing our national deficit, and finally to the stooges playing on playgrounds and watching Baby Einstein videos.

Concerned said...

Steve,

I promise to read the entire article. But from a quick scan, I see that Liebowitz says,

"That problem is the fact that subprime loans did not perform any worse than prime loans. Let’s
take a look."

So why are you blaming this on minority borrowers?

Also, how does this explain Iceland's meltdown?

Tanstaafl said...

Mark Seecof wrote: Darn it, I wish you holier-than-thou "anti-racism" guys would read what Mr. Sailer writes before you denounce him.

. . .

The NAM's were pawns of whiter people.


Darn it, I wish you euphemism-loving "race-realist" guys would speak plainly.

By so cleverly dancing around naming the particular "minorities", ie. who is warring on whom, you do more harm than good.

The use of the "whiter people" euphemism above epitomizes the problem. Who are "whiter people"? The liberal, cosmopolitan, xenophile, revolution-loving, churn-thriving, internationalist, globalist, materialists with white skin? Or did you have someone else in mind?

The straightforward answer to "you just want to blame brown people" anti-White anti-racists is "you just want to blame Whites".

James B. Shearer said...

The problem with this theory is just because you can think up a way A could have caused B doesn't mean A did cause B. Here the claim is (lower credit standards for poor and minorities) -> (lower credit standards for everybody) -> (housing bubble). But you could just as plausibly reverse the arrows. This is like Levitt's legal abortion reduces crime claim. Perhaps worth investigating but not convincing as it stands.

Reg C├Žsar said...

Reason, yes. Cause, no. --Mr Anon

"Cause never was a reason for the evening, or the tropic of Sir Galahad..."

Anonymous said...

Stuff White People Like #467:
Bailouts.

tommy said...

The problem with this theory is just because you can think up a way A could have caused B doesn't mean A did cause B. Here the claim is (lower credit standards for poor and minorities) -> (lower credit standards for everybody) -> (housing bubble). But you could just as plausibly reverse the arrows.

Your idea has merit and is worth further consideration, but certain prerequisites (motivated by diversity) had to be in place prior to the housing bubble to bring about the failures of Freddie and Fannie.

We can all understand the chain of causation in the scheme you initially outline, but reversing that chain leads to the question: whence the housing bubble? Was it strictly the result of low interest rates? If it was the result of low interest rates, then why did Freddie and Fannie buy in to bad loans beginning near the end of the Clinton administration? Standards were being lowered before the housing bubble was underway.

So SAD said...

mr anon:Yeah, voting for a straight-up democrat would be the answer. Then we would have a choice between a far-left socialist and a liberal who on occasion dresses up as a woman'

Guillani is a social liberal but fiscal conservative. Look at how he was a pillar of strength following 9/11.
Don't overly concern yourself about what he does in his bedroom(bar children or animals). Worry about how he is running the country.

If the choice is between a gay president who likes to wear a big bird suit while copulating but can clean up the deficit, find bin Laden, and end the wars in Iraq and Afghanistan, I will take him any day of the week over "the same ole same ole".

Tanstaafl said...

Here the claim is (lower credit standards for poor and minorities) -> (lower credit standards for everybody) -> (housing bubble). But you could just as plausibly reverse the arrows.

Plausible only if you reverse the actual sequence of events.

Anonymous said...

Captain Jack Aubrey ......I read reports from across the pond that Britain plans to build something like 3 million new homes by 2020. My guess is that around 40% of them will be subsidized. Well, why do they have to be subsidized? Because housing has reached outrageous levels relative to the nation's median income. Well, why has it reached such levels? Because Britain has imported millions and millions of people who demand housing. Well, where are you going to put these mostly unskilled immigrants from Pakistan, Poland, Nigeria, etc. who can't afford market rate housing? In subsidized housing of course! Yup, western civilization's immmigration policy makes perfect sense to me...

Anonymous said...

Concened - you wrote:

"That problem is the fact that subprime loans did not perform any worse than prime loans."

Subprime loans did perform much worse. Gary Gorton of Yale has a very detailed manuscript prepared for NBER that describes the role of derivatives.

http://www.kc.frb.org/publicat/sympos/2008/Gorton.08.04.08.pdf

Gorton's paper is rich in data. I'd encourage people in this discussion to download it. For example on page 72 he shows a mind-boggling loss of $3.2 trillion in the sub-prime market. On page 52 he tracks the increases in defaults from 2003 to late 2007. For the prime market it went from 2.62 to 3.24%. For the subprime one it went from 13.04 to 17.31%.
On Zillow’s blog:

http://www.zillowblog.com/delinquency-rates-for-various-mortgage-types/2008/07/

There is data on mortgage delinquency rates with the types of loans and FICO scores. It’s an abstract from a Deutche Bank brochure starting on page 17:

http://www.zillowblog.com/files/rmbs_obs_21july.pdf

As you can see the subprime Alt-A and subprime ARM (page 22) the delinquency rates are much higher than prime loans. The prime ARM’s delinquency rates don’t seem to differ much from the fixed rate ones. My guess is that delinquency rates strongly correlates with loan defaults.

-Frank

James B. Shearer said...

We can all understand the chain of causation in the scheme you initially outline, but reversing that chain leads to the question: whence the housing bubble? Was it strictly the result of low interest rates? If it was the result of low interest rates, then why did Freddie and Fannie buy in to bad loans beginning near the end of the Clinton administration? Standards were being lowered before the housing bubble was underway.

Here (via bronte captial) is a graph of cumulative Fannie Mae default rates by year of origin. The worst years were 2006 and 2007 near the peak of the housing bubble. Lower loan standards may have extended the bubble but I am not convinced they started it.

Martin said...

"So SAD said...

Don't overly concern yourself about what he does in his bedroom(bar children or animals). Worry about how he is running the country."

Only a liberal believes that it is the job of the president to "run the country". The president does not "run the country". The president ain't my boss.

And I'll overly concern myself with any damn thing I want. I don't want a president - a chief magistrate of the republic - who gets himself up in frocks and goes out in public. And there is a concise term for a polictician who is "socially liberal", like Giuliani ...........liberal.

Concerned said...

"Concened - you wrote:

"That problem is the fact that subprime loans did not perform any worse than prime loans."

Subprime loans did perform much worse. "

I am continually astonished at the inability of people to read before they spout off.

I DID NOT WRITE THAT.

I QUOTED THE ARTICLE THAT STEVE HAS APPROVINGLY LINKED TOO.

FOR CRISSAKES, READ BEFORE YOU POST.

Now, if someone can explain the quote I quoted, I'd appreciate it.

Born Again Democrat said...

Here is a good piece that puts the blame on the rule change allowing mortgage brokers to keep their fees as long as the mortgages they brokered didn't go bad within 90 days. It was an incentive for adjustable rate mortgages with teaser rates that were sold by local banks to investment banks to be securitized and resold to pension funds, etc. Makes a lot of sense.

http://bigpicture.typepad.com/comments/2008/10/goal-increase-m.html

SFG said...

Guillani is a social liberal but fiscal conservative. Look at how he was a pillar of strength following 9/11.
Don't overly concern yourself about what he does in his bedroom(bar children or animals). Worry about how he is running the country.

Giuliani is not gay or even close; he's a NYC mayor and a womanizer, much more in the Bill Clinton mold. Drag isn't nearly as big a deal out here and the Saturday Night Live bit was an ironic joke at his image as an authoritarian. Remember, this is the guy who wanted to close down the Brooklyn Museum for displaying dung as the Virgin Mary. He's socially conservative FOR NEW YORK. Which isn't saying much, I know, but his instincts are law-and-order conservative (remember he was elected to clean up NYC, and largely succeeded), and he probably would have made a reasonably Republican president. At the very least being from a blue state might have given him some crossover appeal, which I think would have helped you guys out about now... what if he grabbed upstate and the Democrats had to waste money fighting over New York?

So Sad said...

Martin
I don't believe you are naive enough to think that there is any human being who doesn't have a dark side.
Only a liberal believes that it is the job of the president to "run the country". The president does not "run the country". The president ain't my boss

The president has control of 1/3 power in theory.

So are you an anarchist or a libertarian Martin?

sfg, I am well aware of Giuliani short comings, his marriage to his first cousin for one. The gay example was just that an example. Your comment should be addressed to Martin as he has a problem with Giuliani.

do your own homework said...

I promise to read the entire article. But from a quick scan, I see that Liebowitz says,

"That problem is the fact that subprime loans did not perform any worse than prime loans. Let’s
take a look."

The problem is the fact that this one quote taken out of context is meaningless. If you had bothered to read further or, hint, gone to the conclusions section at the end of the article you might have gotten the gist of Liebowitz's argument.

In his discussion he compares subprime and prime loans with the caveat that subprime borrowers always default at a greater rate than prime. What he is comparing is the acceleration in the default rate. Subprime borrowers always default at something like 10:1 compared to those with more traditional loans.

More important, and what you missed entirely was the effect of ARM type loans given to both types of borrowers. These are the ones responsible for the increase in defaults for both groups but there are still more subprime defaults by a factor of about 10.

There is also a list of standards that were deliberately compromised in order to encourage lending to the unqualified as well as some discussion about the subgroup of borrowers the author blames for the defaults. But the sentence you used doesn't explain anything by itself.

"Now, if someone can explain the quote I quoted, I'd appreciate it."

Obviously, you still haven't read the article so we can assume you are a liar as well as an irresponsible person who is willing to use a quote that you just admitted you don't understand.

BTW, great article Steve. Unlike some people, I actually read it.

Anonymous said...

Concerned,

You said on 10/14: "So why are you blaming this on minority borrowers?"

What you trying to imply from your 10/14 post? You pulled that quote from Liebowitz's train wreck article. Then asked why should minorities be blamed for this present crisis based on his assertation that subprime loans didn't perform any worse than prime ones.

Go back and read your own words.

I can't agree with Liebowitz's statement. Clearly from the data from Gorton's paper and Deutsche Bank they clearly did perform worse - that's why their called subprime.

Best,
Frank

Captain Jack Aubrey said...

and he probably would have made a reasonably Republican president. At the very least being from a blue state might have given him some crossover appeal, which I think would have helped you guys out about now...

And what you keep missing is that the element of the Republican Party he was going after was the libertarian element that wanted low taxes, national security, didn't care about social issues, and didn't care about immigration, either - in other words, a big overlap with McCain.

And then of course there was his strategy - ignore all the early small states and target Florida, which bombed.

Would Giuliani have made a good president? Quite possibly. Better than McCain? Undeniably. Better than Romney? Possibly, but not, for social conservatives, likely enough to offset his more liberal tendencies.

So the Party went for McCain/Romney/Huckabee over Giuliani. Don't blame the whole party, blame the segment of voters that he was competing with McCain for, and even then only those in Florida, because that's the only state he contested, and he bombed.

My personal preference would've been a Romney/Giuliani showdown, with Romney winning; but for a variety of reasons, some annoying (anti-Mormonism) and some mundane, that's not how it worked out.

Concerned said...

Frank,

Thanks for at least addressing the issue I brought up. And yes, I admit, I didn't read the entire article. I will, when I have time. The quote I pulled jumped out at me, and I appealed for an explanation. Which at least you gave, even if I don't accept it.

"You said on 10/14: "So why are you blaming this on minority borrowers?"

Look dude, I've made it clear that I think the US has many problems due to low-IQ minorities. But I'm not sure that this train-wreck is entirely due to them. I'm just posing questions.

"What you trying to imply from your 10/14 post?"

Nothing. It was a question.

"You pulled that quote from Liebowitz's train wreck article. Then asked why should minorities be blamed for this present crisis based on his assertation that subprime loans didn't perform any worse than prime ones."

Because that's what he wrote.

"I can't agree with Liebowitz's statement."

Fair enough. But don't accuse me of distorting Liebowitz by pulling a quote out of context and then disagreeing with him. Which is it?


"Clearly from the data from Gorton's paper and Deutsche Bank they clearly did perform worse - that's why their called subprime."

Their should be "they're."

Otherwise, fair enough. I'll have to look into Gorton's paper.

cn99

Martin said...

"So Sad said...

The president has control of 1/3 power in theory."

The president is chief executive of the government.

The government.

The government is not the country. It is a statist, liberal view - and a pernicious one - that makes the government synomous with the country. The country is a thing bigger than, and predating, the government. You have swallowed the Clinton era line that the president is some all-knowing, all-seeing potentate who knows when every sparrow falls in the woods, and has a policy for it.

"So are you an anarchist or a libertarian Martin?"

I am neither. I am a reactionary. What are you, oh worshipper of state power? A Bolshevik, or a Facist.

David said...

I wrote

why is it being implied by the defenders of diversity that NAMs who got liars loans are victims - while Whites who got liars loans are greedy exploiters?

Always with the blame Whitey. Always.


And so sad responded by asking

Where did you get that from?

Perhaps I should have phrased it this way: NAMs who got liars loans are victims (hapless teary-eyed pursuers of an American Dream gone horribly wrong and denied them) - while Whites who got liars loans are greedy exploiters (crafty flippers and the like). That would have given my point a little more helpful concreteness.

But to answer your question, so sad: It's passim. Read every single story related to this, published by the mainstream media. If you want a specific cite, try "cnn.com". (Or just read the comments right here 'bout the eeevil whiterpeople takin' advantage of po' innocent NAMs, er, "lower income persons" - which, on balance, is actually true as far as it goes, by the way.)

Anonymous said...

Thanks for this link, Steve. This paper really clarified some things for me. I'm gritting my teeth every time I open up the paper and read something like Harold Meyerson's recent WaPo op-ed blaming this crisis on "unregulated capitalism." Every bone in my body wants to scream out "BULLSHIT!" in response to assertions like this, but being only semi-literate in economics, I'm often unable to fully express why. One thing I'd like to see is a Liebowitz-like examination of the role that monetary policy played. It seems to me that if the Fed weren't so hell-bent on cutting interest rates at every palpitation of the economy, it might at least have taken some of the edge off the housing bubble. It still would have been bad, but maybe not as bad as it is.

On a side note, I remember reading long ago an evisceration of the Boston Fed discrimination study in Thomas Sowell's The Vision of the Anointed, which came out in 1996. That this study should have become the basis of so much awful policy is astounding.

Sebastian said...

Wow, poor people caused the global meltdown.

You all seem pretty smart, answer me this (taken from The Big Picture):

• Did the 1977 CRA legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?

• 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by either CRA or GSEs ?

• What about "No Money Down" Mortgages (0% down payments) ? Were they required by the CRA? Fannie? Freddie?

• Explain the shift in Loan to value from 80% to 120%: What was it in the Act that changed this traditional lending requirement?

• Did any Federal legislation require real estate agents and mortgage writers to use the same corrupt appraisers again and again? How did they manage to always come in at exactly the purchase price, no matter what?

• Did the CRA require banks to develop automated underwriting (AU) systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?

• How exactly did legislation force Moody's, S&Ps and Fitch to rate junk paper as Triple AAA?

• What about piggy back loans? Were banks required by Congress to lend the first mortgage and do a HELOC for the down payment -- at the same time?

• Internal bank memos showed employees how to cheat the system to get poor mortgages prospects approved that shouldn't have been: Titled How to Get an "Iffy" loan approved at JPM Chase. (Was circulating that memo also a FNM/FRE/CRA requirement?)

• The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act ?

• Did the GSEs require banks to not check credit scores? Assets? Income?

• What was it about the CRA or GSEs that mandated fund managers load up on an investment product that was hard to value, thinly traded, and poorly understood

• What was it in the Act that forced banks to make "interest only" loans? Were "Neg Am loans" also part of the legislative requirements also?

• Consider this February 2003 speech by Countrywide CEO Angelo Mozlilo at the American Bankers National Real Estate Conference. He advocated zero down payment mortgages -- was that a CRA requirement too, or just a grab for more market share, and bad banking?

All of you who believe "gubmint" lending to minorities is the reason we're in the problem we're in please respond. I've bookmarked this blog and will return to check comments.

Here's a blast from the past, a little farther past the Clinton years. It will tell you that the goal of--should tell you that the goal of increasing low-income and/or minority home ownership is a decent goal. There are ways to administer these programs to mitigate defaults. But Fannie/Freddie/CRA didn't start this fire.

"More and more people own their homes in America today. Two-thirds of all Americans own their homes, yet we have a problem here in America because few than half of the Hispanics and half the African Americans own the home. That's a home ownership gap. It's a -- it's a gap that we've got to work together to close for the good of our country, for the sake of a more hopeful future. We've got to work to knock down the barriers that have created a home ownership gap.

I set an ambitious goal. It's one that I believe we can achieve. It's a clear goal, that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families . . .

Home ownership is also an important part of our economic vitality. If -- when we meet this project, this goal, according to our Secretary of Housing and Urban Development, we will have added an additional $256 billion to the economy by encouraging 5.5 million new home owners in America; the activity -- the economic activity stimulated with the additional purchasers, the additional buyers, the additional demand will be upwards of $256 billion. And that's important because it will help people find work."

- George W. Bush, U.S. President

SO SAD said...

Captain Jack AubreyAnd what you keep missing is that the element of the Republican Party he was going after was the libertarian element that wanted low taxes, national security, didn't care about social issues, and didn't care about immigration, either - in other words, a big overlap with McCain
McCain is a social conservative unlike Guillani. The social conservatives are the same group who McCain turned his back on when he challenged Bush in 2000(?). Oh how fast we forgive and forget.

Guillani is good for men who like to sleep around but pay fewer taxes.

Why was Romney so hesitant to talk about his religion? It would of been in his best interest to have a sit down with Dianne Sawyer or Katie Couric


MartinThe government is not the country. It is a statist, liberal view - and a pernicious one - that makes the government synomous with the country
I didn't say the government is synomous with the country. Anyone with half a brain would know that the president (+advisors and cabinet members) don't know everything. We only have to revisit the kidnappings of suspected Muslim extremists during Clinton's term, of which he was ignorant of to understand that the President is not all seeing.



President= 1/3
Supreme Court=1/3
US Congress=1/3

I am neither. I am a reactionary. What are you, oh worshipper of state power? A Bolshevik, or a Facist
So I take it you don't vote? If not why do you complain so much.

SO SAD said...

David, I am black. I don't know of any black person who is faulting a poor/working class white person for taking a liar loans as anything other than lazy to "read up" before purchasing a home. Incidentally, it is the same criticism being issued at poor blacks by other blacks.

Now the wealthy who wanted to build McMansions and flippers who drove up home prices are being criticized but not for being white(&sometimes black), but for being greedy and "having eyes which were bigger than their stomachs".

I think you are too paranoid when it comes to black people.

tommy said...

All of you who believe "gubmint" lending to minorities is the reason we're in the problem we're in please respond.

Stop with the straw men. No one is talking about the government "lending to minorities," no one has stated that minorities, by themselves, caused the crisis, and no one has argued that Fannie and Freddie demanded subprime mortgages. The Clinton administration used the CRA to hammer banks who were denying loans to minorities at a greater rate than whites, activist groups like ACORN pushed banks to loan money to subprime buyers (frequently employing the threat of lawsuits for failing to comply with the CRA), and Freddie and Fannie, under the direction of the Clinton and Bush administrations, loosened their standards so that private subprime lenders could "guarantee" these bad mortgages with the government. It isn't surprising, then, that even those lenders in no way involved with the government jumped into the fray in what initially seemed a profitable venture.

I've bookmarked this blog and will return to check comments."

Good for you.

• The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act ?

Non-minority regions? You don't visit this blog or those cities often enough.

Sebastian said...

Tommy,

ACORN and CRAs affect are overstated other than the fact that they began as small and targeted programs to help spur minority ownership. What happened after that is more the fault of the market than the "gubmint." The government is in the mix, but if we're thinking that the market can regulate itself, then the fault is more on the former.

You do help illustrate the fact that advertising works. Banks and pseudo-lenders ran millions of dollars in commercials to bring the people in.

And they came, and the lenders sold them their crap. Any way they could. Sold them double helpings even if they could only afford a single.


The abdication of reliable lending standards isn't the fault of the gov't demanding more minorites in homes. Somehow, if bank arms were actually being twisted they should have found a sympathetic ear during the last 7 years under TOTAL Republican rule.

Because if banks had made a public case that the government was pushing them to make no-doc loans, the potential political embarrassment for the Bushies would have seen the practice stopped.

They wanted to lend the money as much as the Bushies didn't want to pay attention to what was going on.

Here's something else. Valueing this toxic crap is a huge problem in trying to determine value. The problem is in how they split mortgages in each subprime traunch.

Our mortgage would have been rated "A". It would have been split into a number of pieces and sold in different traunches of different offerings, and sold them to 3 different people across the globe with no way to put the pieces back together.

Not bad, as long as things went well for the B and C portions of the traunch.

But as we know it didn't. So if my morgage was split into 3 chunks, now the problem is in trying to rejoin the chunks in order to determine original and current value.

This wasn't directly caused by loaning to poor people. It was caused by idiotic thinking on the banks part. Had there been more logic and transparency, perhaps the mortgages would have been kept whole within a single traunch. Would have made it a lot easier to determine value.

There's so much to this train wreck it is hard to see where one body ends and the other begins.

And, BTW it IS good for me!

Martin said...

"SO SAD said...

I didn't say the government is synomous with the country."

Then you would agree that the president doesn't "run the country" - he runs the executive branch of the government.

"So I take it you don't vote? If not why do you complain so much."

I always vote, I just cast very few votes that I don't end up regretting. And in case you hadn't noticed, a great deal of all blog posts are complaints. You are afterall complaining about my complaining.

Mr. Anon said...

"Sebastian said...

Our mortgage would have been rated "A"......Not bad, as long as things went well for the B and C portions of the traunch.......This wasn't directly caused by loaning to poor people. It was caused by idiotic thinking on the banks part."

I think you're missing the purpose of splitting the MBSs into tranches in the first place. It was done in order to limit the risk, or rather to more accurately define it for the investor. Tranche A would be paid back first, and in preference to B and C if there were too many defaults. Likewise for B, it would be paid back before C and in preference to C, if necessary. Consequently, the risk for the A bonds were less risky than B, and B less than C. Naturally, the coupons on these bonds went the other way - C paid more than B paid more than A. That is my understanding of how these things work at least.

It wasn't stupid of the I-banks to do this - it was clever (perhaps too clever, as you say). It's not new either. MBSs (formerly known as CMOs) go back at least to the 80s, if not earlier. Michael Lewis wrote about selling them in his memoir "Liars Poker".

And as to your question: where was the law that compelled banks to lend to minorities. I believe the answer is: it wasn't necessarily in the law. The DOJ doesn't necessarily have to have a law to compel companies and individuals to do what it wants - it just has to threaten to investigate and prosecute. A lot of companies will just comply to avoid the litigation (as indeed they do with hiring quotas). And the Clinton administration did just that.

I agree that the lenders thought they could make money with these loans (by repackaging and selling mortgages, raising fees, etc.), but the original impetus for them to change their old business model did indeed come from Uncle Sam.

do your own homework said...

"ACORN and CRAs affect are overstated other than the fact that they began as small and targeted programs to help spur minority ownership. What happened after that is more the fault of the market than the "gubmint." The government is in the mix, but if we're thinking that the market can regulate itself, then the fault is more on the former. " - Seb


The market can regulate itself. Right now that would be evident in the form of higher interest rates which we would see if the government wasn't interfering. This past decade or so of hyper growth has been maintained artificially b/c the fed kept reducing interest rates. Then, banks were forced to comply with CRA by lending to people who are bad credit risks which helped keep the demand for housing much higher than it would've been without government intervention.

The banks had no choice in the matter. They couldn't protect themselves from bad debt because of the effort to redefine credit worthiness so that unqualified minorities could get home loans. Instead, they worked with the circumstances that were forced on them - increase lending to minorities who don't really qualify for mortgages or be sued by the likes of Obama who did in fact sue Citigroup for supposed discriminatory lending practices.

The system was working before creative Marxists designed and legislated for a system of credit rating that made it impossible to deny anyone a loan. And along with false measures of credit worhiness, the fraudulently increased demand for housing created false home values. I don't know why you persist in vilifying banks. Bankers are very careful with money left to their own devices. Those piggy back loans had to be created because poor minorities couldn't be expected to have any sort of down payment. And Liebowitz discusses research demonstrating that people who don't come up with the traditional downpayment have a much greater default rate for various reasons.

All the standards that determine what makes a person a good credit risk had to be suspended so we could bridge that gap in the rate of minority home ownership vs that of whites and asians. This is well documented in the article that you still haven't read. Aren't you the least bit curious?

Political correctness is a cancer (for instance, people with past bankruptcies being declared credit worthy for political expediency) and just like cancer causes random, uncontrolled, purposeless growth (read about those empty mcmansions in an undesirable part of CA, yet?) that may well lead to the destruction of our economy.

Anonymous said...

The market can regulate itself.

Not really. Part of the problem with the recent lending craze is that it was generating so much cash that many lenders felt they couldn't afford not to do it. If they had sat on the sidelines they wouldn't have been able to pay depositors higher interest rates and the depositors would have fled to...the irresponsible lenders.

Markets frequently need regulation.

tommy said...

There's so much to this train wreck it is hard to see where one body ends and the other begins.

I agree with that much. Obviously, interest rates played a large role, for instance. There is no single independent variable that can be isolated in a situation this complex. Steve, the proprietor of this blog, likes to look at the racial angle of things because that part of the story is frequently left unexplored by the PC media. I don't think Steve himself would argue that minority lending and the CRA was the only thing that caused this crisis, but it is the "diversity" aspect that the MSM has largely refused to touch.

Somehow, if bank arms were actually being twisted they should have found a sympathetic ear during the last 7 years under TOTAL Republican rule.

Not under president Jorge Arbusto, I'm afraid. I think you underestimate the grip that PC has on the entire political system.

What is clear is that prior to the late 90s, banks were reluctant to lower their credit standards in spite of pressure from minority groups to do so. Something changed. Around the same time, Clinton directed Fannie and Freddie to lower their standards in relation to what they were willing to buy from the banks. Bush and Rove, anxious to win Latinos to the party, did little to reverse course. NAM home ownership rates, largely stagnant before these changes, began to rise significantly. The growth of subprimes among minorities was explosive even before the housing bubble:

"By 1999 the proportion of black borrowers receiving loans from subprime lenders was six times what it was in 1992," the researchers wrote in a paper they published in the journal Social Forces.

tommy said...

Sebastian,

As for the Clinton administration attacking banks using the CRA, I once again recommend watching the first few minutes of this video featuring a satisfied Andrew Cuomo talking about the size of settlements against banks during the Clinton versus the pre-Clinton years.

You want more regulations, but if the CRA had not existed, banks would not have been able to set their own credit standards without the threat of government lawsuits. If Freddie and Fannie had not existed, banks would have had to exercise more caution in making loans.

dyoh said...

"Not really. Part of the problem with the recent lending craze is that it was generating so much cash that many lenders felt they couldn't afford not to do it. If they had sat on the sidelines they wouldn't have been able to pay depositors higher interest rates and the depositors would have fled to...the irresponsible lenders."

And the lending craze was fueled by the leftists threatening legal action if lending standards weren't lowered so that just about everyone could qualify for a home loan. You are seeing the result of numerous interventions of one form or another not the result of the evils of capitalist greed. You are also seeing why the government should stay out of the market because the interventions lead to bad decisions and ultimately prove to certain people that we need more not less government control.

As I've heard someone else describe it, this is the result of people buying homes they couldn't afford with money they didn't have - the catalyst being an organized effort by ACORN and activists such as Obama using CRA in order to intimidate banks into assuring the desired outcome of increased minority home ownership using the only means possible at the time, bad debt.

Another alternative I guess would've been to require banks or the state to give minorities homes or have them purchase them at a fraction of their actual value. You could think of it as some sort of reparations tax. Limited to a specific population it probably would've been a better option. But the market itself isn't the issue here.

I'm against reparations but as a lesser evil to destroying the economy I might consider them acceptable.

g said...

Anonymous said...
The economics nobel should probably be given every five years, because for every Black/Scholes award, there are 20 awards for comparatively middlebrow, Kahneman/Krugman type work.

10/13/2008

Is this a joke post? Black/Scholes? They created a model that doesn't even work and wrote down on paper stuff a lot of traders already knew.

They helped blow up LTCM. They even freely admit their model doesn't work.

topset72

American Goy said...

Bull.

It wasn't for the love of the black man that these white collar criminals lobbied (successfully) for relaxation (really, obliteration) or rules and regulations.

And guess what?

They are at it again, as AIG is using the bailout money - MY F**KING MONEY - for lobbying Congress to lessen regulation.

It worked so well, right?

So please, piss off of the "poor Jerome and Jose and Latishia and Maria caused ALL of this!".

Please.

Don't insult my intelligence, Mr. Sailer.

Anonymous said...

Sebastain, quoes GWB - I set an ambitious goal. It's one that I believe we can achieve. It's a clear goal, that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families

but then goes onto say:

The abdication of reliable lending standards isn't the fault of the gov't demanding more minorites in homes. Somehow, if bank arms were actually being twisted they should have found a sympathetic ear during the last 7 years under TOTAL Republican rule.

Im seeing something of an inconsistency there.

tommy said...

It wasn't for the love of the black man that these white collar criminals lobbied (successfully) for relaxation (really, obliteration) or rules and regulations.

And guess what?


And guess what? The banks resisted subprime lending initially. Back in the bad old days, this was called redlining and was the cause of much hand-wringing and muttering about "institutional racism" among leftists.

Oh, but if only the merciless lobbying efforts of AIG hadn't forced the hands of the Barney Franks, Andrew Cuomos, and Jorge Bushes of the world!

Please.

Yes, just indignantly point and sputter.