People Power

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Originally Posted by airshifter

As much as some of you wish to simply deny anything Anthonyvop states as fact, anyone that had actually looked into the issue much would have found there are quite a number of credible sources that have had this same opinion for quite some time.

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Which does not mean they are true.

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Originally Posted by anthonyvop

Let me ask you a simple question. How can a collapse in the credit default market lead to 100's of thousands of Foreclosures?

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CDS's were collated debt securities. The thing was no-one who traded these had the financial prudence to check on the underlying backing.
It was a bit like putting a whole heap of lamb chops into boxes and then passing the boxes around. No-one bothered to open the boxes to look and see if the meat had gone off.

When defaults started to happen, it caused a tightening of credit markets, which again tightened up the credit on which people's mortgages was financed by.

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Originally Posted by anthonyvop

Are the people losing their homes for failure to make payment because they had invested in CDS's?

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No. This is a non-sequitur.
You give part of the reason below though.

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Originally Posted by anthonyvop

To put it simply it was the collapse of the housing bubble(which was so predictable that even I knew it was coming). Combined this with the jump in property taxes and you have an accelerated foreclosure collapse which then killed the Credit Default Swap Market

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A few defaulters will cause a credit crunch and an accompanying flight to quality which is precisely what happened. In that respect the 2008 credit crunch was similar to the credit crunches of the 1960s.

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Originally Posted by anthonyvop

And yes.....The top lenders were FORCED to lend to less than creditworthy people. That is an undisputed fact. It is what Fannie Mae and Freddie Mac were forced to do.

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Did you bother to read the document you posted?

"Lenders must continue to ensure that their lending practices are consistent with safe and sound operating policies"
The document advises for the most part that factors like race, creed and colour should not be the basis to discriminate when lending. Not once does it suggest as you make out that Fannie Mae and Freddie Mac were forced to lend to anyone.

Lenders lent to people who should have never have been lent to in the first place. That's not the fault of regulation but rather a lack of it. I also note that there is no subprime market at all in Australia because bankruptcy rules mean that even if someone defaults and hands back the keys to the house, they're still liable for the debt as a result of the mortgage; even if the house is sold for less than the value of the mortgage.

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Originally Posted by airshifter

My personal opinion is that with the government pressure involved in the sub-prime loans, many of these financial institutions banked on the fact that the government would be somewhat forced to help them out when the bubble burst.

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I think that this is quite a valid opinion.

Penn Central (1970), Lockheed (1971), Chrysler (1980), the Financial Institutions Reform Recovery and Enforcement Act in 1989, all support this opinion nicely. There wasn't any reason to think that if a bank went bust, that the government wouldn't step in. In fact it did just that when Continental Illinois exploded in 1984.

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Originally Posted by BDunnell

In what sense does any of what you've posted in your last couple of contributions state that, as you say above, lenders were forced to offer mortgages regardless of creditworthiness and because of race or sex? All I can see is that they were obliged not to refuse on discriminatory lines, which is a very different thing.

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But in the eyes of the government, just about anything is discrimination.

Age, sex, marital status, national origin, and religion are all included. Thus the companies were forced to treat everyone the same, regardless of statistical information which would show them that there are always certain demographics that would tend to be more or less credit worthy. That leaves them in a position to either overcharge the persons they deem more credit worthy, or extend the reasonable rates to people they might deem less credit worthy.

I'm glad such laws have somehow been avoided by the auto insurance industry. If they existed an 18 year old with a clean driving record would get the same rates as a 50 year old with a clean driving record. Which would mean the older drivers would pay more, since statistics show younger drivers in a higher risk group.

Why should older people pay more for life insurance? That is age discrimination! Charging people who skydive more for medical insurance is discrimination based on sex, since somewhere around 80 percent of people that skydive are men.


Discrimination happens every day. Often it is based on facts. Those facts aren't represented in laws that disallow discrimination as such laws are not inclusive of all the facts.

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Originally Posted by BDunnell

In what sense does any of what you've posted in your last couple of contributions state that, as you say above, lenders were forced to offer mortgages regardless of creditworthiness and because of race or sex? All I can see is that they were obliged not to refuse on discriminatory lines, which is a very different thing.

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Did you even read it?
Do you grasp what it means?

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Originally Posted by airshifter

But in the eyes of the government, just about anything is discrimination.

Age, sex, marital status, national origin, and religion are all included. Thus the companies were forced to treat everyone the same, regardless of statistical information which would show them that there are always certain demographics that would tend to be more or less credit worthy. That leaves them in a position to either overcharge the persons they deem more credit worthy, or extend the reasonable rates to people they might deem less credit worthy.

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So the banks ignored the line that Rollo posted which stated they should carry on with safe and sound operating practices which include risk stratification?

Or are you trying to argue something else, that even matched for creditworthiness some ethnic groups, nationalities or religions are still more likely to default than others?

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Originally Posted by anthonyvop

Did you even read it?
Do you grasp what it means?

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Please point out (a) my error, and (b) where the documentation you provided states that lenders were forced to do anything of the sort.

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Originally Posted by airshifter

But in the eyes of the government, just about anything is discrimination.

Age, sex, marital status, national origin, and religion are all included. Thus the companies were forced to treat everyone the same, regardless of statistical information which would show them that there are always certain demographics that would tend to be more or less credit worthy. That leaves them in a position to either overcharge the persons they deem more credit worthy, or extend the reasonable rates to people they might deem less credit worthy.

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But in no sense did that legislation compel, force, order, call it what you will, the lenders to do anything. The fact, for example, of it now being illegal for landlords to discriminate against potential tenants on grounds of race does not mean that a landlord is therefore forced to let a property to, say, an Afro-Caribbean person over and above a white Caucasian person.

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Originally Posted by Malbec

Or are you trying to argue something else, that even matched for creditworthiness some ethnic groups, nationalities or religions are still more likely to default than others?

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In which case, surely individuals from those ethnic groups, nationalities and religions would never be allowed credit under any circumstances.

What we have here, I think, is an example of people twisting the meaning of a piece of legislation to suit their own ends.

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Originally Posted by BDunnell

But in no sense did that legislation compel, force, order, call it what you will, the lenders to do anything. The fact, for example, of it now being illegal for landlords to discriminate against potential tenants on grounds of race does not mean that a landlord is therefore forced to let a property to, say, an Afro-Caribbean person over and above a white Caucasian person.

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But if a landlord has a history of statistical evidence showing that one race group is more reliable in paying their rent on time, they can't act on that, as it would be labeled discrimination. Thus they must rent to everyone with equal financial means and debt load, etc or not rent at all. Being all business desires to make money, they are tied and bound by government regulation stating that discrimination is against the law.

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Originally Posted by BDunnell

But in no sense did that legislation compel, force, order, call it what you will, the lenders to do anything. The fact, for example, of it now being illegal for landlords to discriminate against potential tenants on grounds of race does not mean that a landlord is therefore forced to let a property to, say, an Afro-Caribbean person over and above a white Caucasian person.

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What part of this do you not understand?

"HUD is authorized to direct Fannie Mae and Freddie Mac to undertake various remedial actions, including suspension, probation, reprimand or settlement, against lenders found to have engaged in discriminatory lending practices," the official policy statement warned.

If you knew anything about Washington if they think you discriminated you did. It is up to you to prove otherwise. One can go broke hiring lawyers to lend the money to anyone and let Washington worry about the consequences which is exactly what happened.
Remember the U.S. is now a country where if one calls a member of a minority or underpriviledged a word the member does not like, one can be sued and it is up to the one to prove the one did nothing wrong. The accuser suffers nothing.
If said same member of a group says the member was discriminated against in lending, the memeber can sue no questions asked and it is up to the accused to prove otherwise.

To say this would not happen is ignorance of U.S. politics in a gross manner.