Sometimes not-very-well-intentioned policies can also have disastrous consequences. Go figure.

This is the Bush administration we’re talking about. Well intentioned progressive policies? Not likely.

The Bush administration had a serious balance of trade issue. They needed somebody to loan the USA money, and what foreigners particularly wanted was risk-free loans. Foreigners believed mortgages were risk-free, so the Bush administration gave them more and more mortgages. They pumped up the price of existing mortgages, and created as many new mortgages as they could. When they ran out of plausible citizens to get mortgages they went for implausible ones and eventually the whole thing blew up.

Do you seriously imagine they did it because they wanted US citizens to own homes? No way. They wanted to sell mortgages to china, so they needed mortgages they could sell to china. Nothing progressive or well-intentioned there except as part of the smokescreen.

I have already happily conceded that perhaps Frank’s cheer leading for bad loans has absolutely nothing to do with the current crisis. That absent that cheer leading all those bad loans would have been made.

That the repackeging of these loans for and buy investment banks creating widespread but opaque risk was the bigger problem.

Though I would like to note without that problem, we might not be talking about recssion vs depression, but we would still would be on the hook for 100s of billions in bad loans and a potential depression.

But even if no part of the bad loans resulted from government pressure, an extremely dubious assumption, that wasn’t from a lack of effort. Certainly nothing was done by Frank and Dodd, responsible for oversight, to prevent 100s of billions in bad loans.

But appearently suggesting that giving more control to those folks, the folks demanding more bad loans, isn’t a panacea is trolling. That pointing out that sometimes well intentioned progessive policies can have disaster consequences is trolling.

At least the private actors who got us into this mess will make few millions less. At least they are generally despised.

Frank and Dodd are completely untouchable. The mess they presided over stinks up the whole room but it cannot even be mentioned because to do so would cast doubts on the ideological panaceas being offered up.

“Don’t let the trolls drive this thread off-subject”.

But apparently they succeeded with me. Sigh.

Tiresome, isn’t it.

Well, the good thing about the internets is that we get to see these right-wing myths created in real time, so we aren’t as gobsmacked when we see them prattled about among otherwise decent but clueless co-workers.

The data has been sliced, diced, cooked and served, and still they ignore it for the quick fill of empty calories.

1) accepting undocumented assertions from borrowers about their financial situation. These are the so-called “stateds” – stated income, stated asset, even stated (fact of) employment. In all cases, the lack of documentation was paid for with a hit to the interest rate that was presumed to cover the increased risk of default. What happened, of course, is that buyers lied. These, then, would not count towards any government program or “encouragement” to lend to low-income buyers, as these buyers were not, on paper, low-income, though they sometimes were in actuality.

2) Various schemes that made payments escalate over time and/or kept the principle unpaid: adjustable rates, interest-only, balloons, neg ams, all that stuff. All of this stuff would normally be considered exploitative of low-income buyers, and I would like to see documentation that any government program encouraged this. These schemes are also, sans unanticipated rates of default, wildly profitable for lenders, which strongly suffices for an explanation – government interference is a wholly superfluous postulate, so Occam slices it away. Also, these loans were also often stateds.

No, hubris and greed were the proximate causes—but the distal cause that set the whole
train of events in motion and created the psychological predicate necessary to inculcate
an entire generation of people in the financial industry in the belief that the “sub-prime” mortgage mkt was an acceptable sandbox not only to play in, but to vastly enlarge to accommodate the rest of the public—originated in Congress and Congress alone.

Would they have made loans that any semi-prudent loan officer would assume would have a high rate of default, and then use the process to aid in concealing that risk? Or perhaps, would they have been more “honorable”? I know both credit unions we bank with are quite healthy and did and do make loans in areas / for folks generally considered in the higher risk category, just not with high risk pump and dump instruments designed only for max commission and fee generation.

If it isn’t true it wasn’t from a lack of effort. (and it certainly appears to be at least in part true.)

Now maybe the banks would have made all those bad loans with or without that effort. Fair enough. Lets say that is true.

Now what if the banks had been owned by bunch of those well intentioned folks who were demanding all those loans?

Well intentioned folk who were more concerned with promoting “socially responsible” policies than profit.

A bit of a recipe for disaster, isn’t it?

Or try this thought –
Imagine if GWB and co had been in charge of the finance sector for the last 8 years?

So far as I understand, the Fed’s role in the crisis was keeping interest rates low and refusing to examine risky practices like debt securitization, and the Fed in turn was pressured by an administration encouraging home ownership.

We have all these bad loans that were made in part based on well intentioned government pressure in the name of “socially responsible” policies.