The US Economy in the crapper starting Monday?

[MagnusVS]

[FlashLackey]

Sorry, I couldn't help but notice a flaw in your work. I've corrected it for you:

[MagnusVS]

Hehe... As I've mentioned for you earlier, I have found out that there are so many better ways to spend the hours than formulating posts for these threads

[FlashLackey]

Except that your knowledge of the threads and the time taken to draw up this image betrays you.

[Stoke Laurie]

Enuf politics, lets get back to religion or the end of the world is neigh threads!

[japangreg]

The quote says that those 30% "are not subject to routine supervision or examinations." Not that they are "exempt from the regulations."

Aplogies - rushed post and not as clear as I intended. To state it in another fashion, only about 25% of those banks who made risky loans were fully cra compliant. Of those complying with the CRA regs, their loans were less likely to be high-cost, more likely to have a lower interest rate, and twice as likely to remain in their portfolio. (source, pages 4-5). These loans were a very small part of those that had high risk coupled with excessive interest that found their way into the rest of the investment market via bundling. The loans made by the other 75% are the ones that have caused the majority of the problem.

Combine or expand. I'm not a banking expert. But, it sounds like substantial pressure to me if you are limiting your options to expand or merge by ignoring CRA.

I think you're over-stating the pressure CRA exerted, at least during the time frame you cite - look at the following graph I'm ripping from this article at WSJ:

Note that the rate of subprime mortgages as a percentage of the total number of mortgages does not spike until late 03; if CRA in general and the 90-era revisions specifically were the cause of the problem, what retarded the rise in their use?

Financial institutions aren't exactly known to be slow in responding to market pressures; if this was something that had potential back in 95, there would have been a much stronger shift to them as soon as it was possible. Something else happened in 03 that opened this door, and it had nothing to do with Clinton. What was it that sparked this peak? Not to sure - still looking for changes to laws and regulations that fit the time period.

This seems to support what I've been saying, that Democrats have fought to keep CRA pressures.

There's never been any doubt that Democrats wanted to keep CRA - the contention is that CRA was somehow at the root of all the current financial troubles, or that by opposing limiting CRA enforcement Dems were somehow blocking Republican calls for *more* regulations.

Regarding the critique, I don't think it makes any sense. What about this bill had any "welfare" aspect to it? Libertarians are often critical of Republicans. But, their assertion is even more bizarre in that they seem to be arguing for more government involvement, the exact opposite of what they usually fight for. According to basic Libertarian ideas, companies being able to merge should not be a "privilege" but a right.

I assume you're talking about the More Awful Truths About Republicans piece? I think that's explained a few paragraphs below:

...So far, the Republican solution has been to bail out lenders — wealthy financial-industry professionals for the most part — who made unwise market decisions with subsidies and election-year subventions...

Can't really speak for Libertarian vs. Republican differences.

[jAQUAN]

Finally an intelligible break down!
http://ccinsider.comedycentral.com/c...t-the-cre.html

[FlashLackey]

Aplogies - rushed post and not as clear as I intended. To state it in another fashion, only about 25% of those banks who made risky loans were fully cra compliant. Of those complying with the CRA regs, their loans were less likely to be high-cost, more likely to have a lower interest rate, and twice as likely to remain in their portfolio. (source, pages 4-5). These loans were a very small part of those that had high risk coupled with excessive interest that found their way into the rest of the investment market via bundling. The loans made by the other 75% are the ones that have caused the majority of the problem.

The fib here is in only looking at "fully" CRA compliant loans rather than all lending that would have been affected by CRA (ie. lending institutions looking to have a good "CRA Rating"). This study that you refer to includes a dodgy definition of "CRA Banks" and relies on an assertion to imply a broader conclusion. The study also only relies on data from 2006 for some reason.

If regulators (and community protesters) require a certain CRA rating for the action the banks seek (like simply building another branch to grow), they would be motivated to include all lending that qualifies to improve their rating. Not just loans that require CRA compliance that this study isolates.

This study isolates the 2006 performance of one category of mortgage lenders—banks originating loans in their Community Reinvestment Act (CRA) assessment areas, referred to herein as “CRA Banks.” Our hypothesis is that the CRA, which requires banks to help serve the credit needs of their local communities, including low- and moderate-income (LMI)
neighborhoods, consistent with safe and sound banking practices, may have deterred banks from engaging, at least in their local communities, in lending practices that fuel foreclosures.

...

In computing the lending performance of a CRA Bank, only loans originated by the bank are included. While a bank has the option of including affiliate lending in its CRA assessment (12 CFR §228.22(c)), only direct lending must be assessed. We note, however, that the conclusions of this report would not be affected by including affiliate lending in the lending performance of CRA Banks.

I realize that it's a pain. But, I'm going to have to ask you to support these findings with a study that covers more than 2006 and includes all lending that might have been affected by CRA rather than some isolated part. Their assertion alone is not enough to assume that the new data would compel the same conclusion.

It would also be nice to get some data from an apparently neutral source considering how well-heeled the CRA lobby is.

I think you're over-stating the pressure CRA exerted, at least during the time frame you cite - look at the following graph I'm ripping from this article at WSJ:

Note that the rate of subprime mortgages as a percentage of the total number of mortgages does not spike until late 03; if CRA in general and the 90-era revisions specifically were the cause of the problem, what retarded the rise in their use?

I think that both sources you have provided try to attribute fewer loans being affected by CRA than there really were.

In that chart, the rise in sub-primes approximately doubles from the time CRA was modified up to the time of the more apparent spike. So, there is a correlation between the start of CRA and rising sub-prime loans. Increasing availability of those loans was the very goal of CRA and the supporting lobby has boasted that it worked.

There are many factors involved in housing market trends and I have already pointed out that I am not arguing that CRA is the only reason for the problem. It is a significant contributor to a pattern of government manipulation that has been supported generally by Democrats (and occasionally some Republicans). Offering government supported forms of credit (for many things in addition to mortgages) goes back a long ways and has always been a liberal proposition contested by conservatives.

That said, CRA made loans available. It did not dictate when people would seek them the most. Other factors in the housing market, interest rates, etc. could have encouraged under-credited people to buy at the time of the spike you reference. Without CRA, a significant proportion of those sub-prime loans would not have been available, despite whatever reasons those people had for wanting to buy at that time.

To me, that sub-prime loans under CRA might not have been as bad as sub-prime loans not under CRA is not a good argument for CRA. Any contribution to artificially increasing bad loans is bad for the health of the finance industry. It doesn't have to be the cause for all sub-prime loans or the worst of all sub-prime loans in order for that to be true.

Financial institutions aren't exactly known to be slow in responding to market pressures; if this was something that had potential back in 95, there would have been a much stronger shift to them as soon as it was possible. Something else happened in 03 that opened this door, and it had nothing to do with Clinton. What was it that sparked this peak? Not to sure - still looking for changes to laws and regulations that fit the time period.
There's never been any doubt that Democrats wanted to keep CRA - the contention is that CRA was somehow at the root of all the current financial troubles, or that by opposing limiting CRA enforcement Dems were somehow blocking Republican calls for *more* regulations.

I disagree. I think that it is false to conclude that the increase in percentage of sub-prime loans has to be attributable to a law or regulation that occurred in 03. A previous law or regulation could have created the circumstances that allowed such an increase given other changes in climate to the market in general.

Again, I did not say that CRA is at the root of all current financial troubles. CRA is a significant factor that contributed to a specific type of trouble that we are now suffering from.

Democrats opposing limiting CRA was just them supporting something that contributed to our current problem. Their opposition to regulations that Republicans called for came later and was not related to CRA.

I assume you're talking about the More Awful Truths About Republicans piece? I think that's explained a few paragraphs below:Can't really speak for Libertarian vs. Republican differences.

They say specifically that the act would equal corporate welfare, not the other items they reference later in that paragraph.

I realize that you are short on time, but I'm hoping that you will address the fundamental arguments I made. For instance, do you believe that regulation is a better approach to maintaining health in the financial markets?

Do you agree, as I have argued, that if institutions had to suffer the consequences of their own lending practices, they would be more motivated to lend only to people who would pay back? Wouldn't there be less of a market to sell bad loans to if the government didn't attempt to standardize, guarantee and promote them as being safe investments for big time investors?

Or, do you think that the government should guarantee the loans in order to encourage investment and then hire a band of experts to watch over the process to make sure they are mostly good loans?

[david petley]

I think magnus' graph reflects the situation fine.

dp

[FlashLackey]

I think Magnus' graph reflects that he actually is interested in following these threads/subjects but is frustrated by the fact that if he contributes, someone might disagree with him. So, he resolves this internal conflict by believing that he is better than the people who choose to participate, as expressed by his occasional lamentations and now this elaborate drawing.

[Stoke Laurie]

I believe "Get over it" is what is said in these circumstances

[FlashLackey]

I agree.

The drawing was easy to get over, if that is what you are referring to. It also should be easy to get over people debating something you don't want to get involved with too.

[Frets]

Anyway the political theatre of the republicans worked.
They got more earmarks so they passed the bill.

I guess the nations economic heath was not as important as a bridge to nowhere that someone could run back home and say "Look what I did for you. A new Walmart can now be built."

[FlashLackey]

I didn't realize that tax breaks are now considered earmarks too. That break for middle-class Americans on the AMT sure was a scandalous addition!

[MagnusVS]

I think Magnus' graph reflects that he actually is interested in following these threads/subjects but is frustrated by the fact that if he contributes, someone might disagree with him. So, he resolves this internal conflict by believing that he is better than the people who choose to participate, as expressed by his occasional lamentations and now this elaborate drawing.

C'mon mate. It's a joke. I never thought that anyone could actually seem to be offended by it.

Your psycoanalysis is quite far from the truth. It was a bit of self irony in there, since I thought of myself when drawing the first graph...

[FlashLackey]

You specifically wrote my name in both graphs, basically as the butt of the joke. I don't really mind being the butt of a joke. But, when I returned the favor, you essentially said that you have better things to do than debate on forums (as you had pointed out that I do).

Anyway, no worries. Maybe it just came off differently than you thought it would. I know that you appreciate and look forward to my posts on these subjects.

And do they say 'mate' in Norway? Or, did you pick that up already?

[MagnusVS]

Good! Yes I appreciate your posts (I have agreed with you several times earlier actually)

In Norway, we speak Norwegian, so I've picked up most of the things I write here

[FlashLackey]

What is the equivalent of "mate" in Norwegian?

[MagnusVS]

kamerat/kompis

[FlashLackey]

It's all good kamerat.

Is that proper usage?