Bank Bail Out Bid Succeeds after rejig

[zion]

Giving a loan to someone with sub-prime credit at a higher fixed rate of interest is not automatically the problem, dilute_micro. There might even be public policy reasons why one might want to allow or promote that.

Giving them a loan which they can't plausibly pay back, or won't be able to pay back when the loan resets, is a problem.
Deceiving them about what their payments will be is a problem.
Intentionally not doing due diligence about their ability to pay is a problem.
Worst of all, not needing to care whether they can pay it back or not, because you'll be selling the mortgage on to someone else as part of a mortgage-backed security, so that no-one in hell knows where the risk is or how big it is, is a HUGE problem.

Why don't you focus on the people doing the screwing here, rather than the people getting screwed?

Here, the people doing the screwing are the nice, overwhelmingly white middle-class people in suits, not the mostly-nonwhite "losers" in thrift-store sweatpants. They're the people networking at the country club and on the golf course, not the people barely making ends meet and trying to find a way out of a financial hole.

 

[dilute micro]

Yes yes yes we know how terrible lenders can be. Why didn't congress?

 

[zion]

Well, some Congressmen did. And it took me less than one minute to find a bill coauthored by Barney Frank that tried to address some of these issues, that's making its way through the House. Voting against it? Oh, that's right. Republicans.

Comprehensive Mortgage Reform and Anti-Predatory Lending Legislation

Washington, DC - Reps. Brad Miller (D-NC), Mel Watt (D-NC) and Barney Frank (D-MA) today introduced comprehensive legislation to combat abuses in the mortgage lending market, and to provide basic protections to mortgage consumers and investors. The bill, H.R. 3915, the “The Mortgage Reform and Anti-Predatory Lending Act of 2007” will reform mortgage practices in three areas. First, the bill will establish a federal duty of care, prohibit steering, and call for licensing and registration of mortgage originators, including brokers and bank loan officers. Second, the new legislation will set a minimum standard for all mortgages which states that borrowers must have a reasonable ability to repay. Third, the legislation attaches limited liability to secondary market securitizers who package and sell interest in home mortgage loans outside of these standards. However, individual investors in these securities would not be liable. Finally, the bill expands and enhances consumer protections for “high-cost loans” under the Home Ownership and Equity Protection Act and includes important protections for renters of foreclosed homes.

The bill also contains foreclosure protections for renters. In case of foreclosure, any successor who takes over the property will have to honor preexisting leases. Tenants without a lease will have at least 90 days before being required to vacate. In addition, the bill will incorporate recommendations by Rep. Melissa Bean (D-IL) to require counseling for certain first time homebuyers; and Rep. Chris Murphy’s (D-CT) anti-steering legislation. (October 2007)

 

[david dissadent]

Oh so it IS the republican's fault? Who wouldn't have guessed? Did anybody bother fighting the sub-prime lending? Who might that have been?

Yes it was the Republicans fault. Most specificaly the loose monetary policy that fuelled every kind of credit excess. The fact you are still going on about subprime says you are clueless about the current crisis. There are several excellent threads on the subject. Get yourself up to speed.

 

[dilute micro]

Yes it was the Republicans fault. Most specificaly the loose monetary policy that fuelled every kind of credit excess. The fact you are still going on about subprime says you are clueless about the current crisis. There are several excellent threads on the subject. Get yourself up to speed.

You're right of course it's not the loans that got us 700 billion buyout. Again, if there's nothing wrong with it let's keep doing it.

 

[david dissadent]

You're right of course it's not the loans that got us 700 billion buyout. Again, if there's nothing wrong with it let's keep doing it.

It was largely the securitisation into CDOs and being rated at triple A. And as I say you are a dumb fuck who does not realise that the Alt A and Option ARM markets are bigger than subprime and also blowing up. Cling to your Fox News talking point. Its called cognative dissonance.

 

[dilute micro]

It was largely the securitisation into CDOs and being rated at triple A. And as I say you are a dumb fuck who does not realise that the Alt A and Option ARM markets are bigger than subprime and also blowing up. Cling to your Fox News talking point. Its called cognative dissonance.

No you can spin spin spin it all you like but you're out to lunch. It wasn't "largely the securitisation into CDOs". Nothing in fact says you have to give high-risk loans - except congress.

 

[elbows]

The subprime lending was a problem, and the securitization and triple A ratings given to this junk amplified the problem by a huge amount. It was not just about lending money to the wrong people, but being hugely over leveraged, conjeuring up the money that was leant without sufficient real stuff to backup the loans.