Quote:
Originally Posted by saden1
LOL...this post is full lies and not backed up by reality. The gov never ever told or foced the banks to give LIAR Loans.
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Wrong. from wiki
Government policies
Main article:
Government policies and the subprime mortgage crisis
U.S. Subprime lending expanded dramatically 2004-2006
Both government failed regulation and deregulation contributed to the crisis. In testimony before Congress both the
Securities and Exchange Commission (SEC) and
Alan Greenspan conceded failure in allowing the self-regulation of investment banks.
[103][104]
Increasing home ownership has been the goal of several presidents including Roosevelt, Reagan, Clinton and G.W.Bush. In 1982, Congress passed the Alternative Mortgage Transactions Parity Act (AMTPA), which allowed non-federally chartered housing creditors to write adjustable-rate mortgages. Among the new mortgage loan types created and gaining in popularity in the early 1980s were adjustable-rate, option adjustable-rate, balloon-payment and interest-only mortgages. These new loan types are credited with replacing the long standing practice of banks making conventional fixed-rate, amortizing mortgages. Among the criticisms of banking industry deregulation that contributed to the
savings and loan crisis was that Congress failed to enact regulations that would have prevented exploitations by these loan types. Subsequent widespread abuses of predatory lending occurred with the use of adjustable-rate mortgages.
[2][37][105] Approximately 80% of subprime mortgages are adjustable-rate mortgages.
[2]
In 1995, the GSEs like Fannie Mae began receiving government tax incentives for purchasing mortgage backed securities which included loans to low income borrowers. Thus began the involvement of the Fannie Mae and Freddie Mac with the subprime market.
[106] In 1996,
HUD set a goal for Fannie Mae and Freddie Mac that at least 42% of the mortgages they purchase be issued to borrowers whose household income was below the median in their area. This target was increased to 50% in 2000 and 52% in 2005.
[107] From 2002 to 2006, as the U.S. subprime market grew 292% over previous years, Fannie Mae and Freddie Mac combined purchases of subprime securities rose from $38 billion to around $175 billion per year before dropping to $90 billion per year, which included $350 billion of
Alt-A securities. Fannie Mae had stopped buying Alt-A products in the early 1990s because of the high risk of default.
By 2008, the Fannie Mae and Freddie Mac owned, either directly or through mortgage pools they sponsored, $5.1 trillion in residential mortgages, about half the total U.S. mortgage market.[108] The GSE have always been highly leveraged, their net worth as of 30 June 2008 being a mere US$114 billion.
[109] When concerns arose in September 2008 regarding the ability of the GSE to make good on their guarantees, the Federal government was forced to place the companies into a conservatorship, effectively nationalizing them at the taxpayers' expense.
[110][111]
The
Glass-Steagall Act was enacted after the
Great Depression. It separated
commercial banks and
investment banks, in part to avoid potential conflicts of interest between the lending activities of the former and rating activities of the latter. Economist
Joseph Stiglitz criticized the repeal of the Act. He called its repeal the "culmination of a $300 million lobbying effort by the banking and financial services industries...spearheaded in Congress by Senator
Phil Gramm." He believes it contributed to this crisis because the risk-taking culture of investment banking dominated the more conservative commercial banking culture, leading to increased levels of risk-taking and leverage during the boom period.
[112] The Federal government bailout of
thrifts during the
savings and loan crisis of the late 1980s may have encouraged other lenders to make risky loans, and thus given rise to
moral hazard.
[38][113]
Conservatives and Libertarians have also debated the possible effects of the
Community Reinvestment Act (CRA), with detractors claiming that the Act encouraged lending to uncreditworthy borrowers,
[114][115][116][117] and defenders claiming a thirty year history of lending without increased risk.
[118][119][120][121] Detractors also claim that amendments to the CRA in the mid-1990s, raised the amount of mortgages issued to otherwise unqualified low-income borrowers, and allowed the securitization of CRA-regulated mortgages, even though a fair number of them were subprime.
[122][123]
Both Federal Reserve Governor
Randall Kroszner and
FDIC Chairman Sheila Bair have stated their belief that the CRA was not to blame for the crisis.
[124]
[125]
Economist
Paul Krugman argued in January 2010 that the simultaneous growth of the residential and commercial real estate pricing bubbles undermines the case made by those who argue that
Fannie Mae,
Freddie Mac, CRA or predatory lending were primary causes of the crisis. In other words, bubbles in both markets developed even though only the residential market was affected by these potential causes.
[126]
I never said "forced", but there were definitely programs/pressure. I never said this was the "single" reason for the economic crash. I also never blamed a specific politcal party or mentioned race.