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The Financial Crisis: Getting to the Roots
Yahoo.com ^ | 9/17/08 | Laura Rowley

Posted on 09/18/2008 1:22:30 PM PDT by bigbob

The root of the problem is a cocktail of debt with a chaser of pathological optimism, and many Americans got drunk on both. Awash in credit offers, they bought homes, cars, and lots of other stuff they couldn't afford, and hoped for a best-case scenario, in which their home values and rising salaries would take care of it.

There were plenty of foolish, crooked, and greedy intermediaries who played key roles in the meltdown -- from the Federal Reserve, which held interest rates too low for too long; to mortgage brokers who defrauded borrowers; to the investment houses that securitized and sold toxic mortgage derivatives; to those who aggressively pushed for deregulation, insisting the free markets would naturally behave themselves. Like, say, a compulsive shoplifter let loose in the Mall of America.

(Excerpt) Read more at finance.yahoo.com ...


TOPICS: Business/Economy; Government
KEYWORDS: crisis; econmicpolicy; financial; housingbubble; roots
Not technical financial analysis, but rather a common-sense look at the situation we're in, and how the Founders warned against it. Food for thought going forward...
1 posted on 09/18/2008 1:22:30 PM PDT by bigbob
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To: bigbob

No mention of laws forcing banks to lend to minorities, regardless of their capacity to service the debt.


2 posted on 09/18/2008 1:27:52 PM PDT by USFRIENDINVICTORIA
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To: bigbob
There's nothing in here about "How the Founders warned against" the credit markets.

There's just a description of Thomas Jefferson's personal financial bungling.

3 posted on 09/18/2008 1:29:01 PM PDT by wideawake (Why is it that those who like to be called Constitutionalists know the least about the Constitution?)
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To: USFRIENDINVICTORIA

Well, at least we’re not “red lining” anymore.


4 posted on 09/18/2008 1:31:17 PM PDT by Cedric
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To: USFRIENDINVICTORIA

No mention of laws forcing banks to lend to minorities, regardless of their capacity to service the debt.
:::::::::::
Yes, and the complicit liberal RATS that made the necessary deregulation happen which drove much of this disaster....


5 posted on 09/18/2008 1:31:23 PM PDT by EagleUSA
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To: bigbob
This article is pure bullcrap, from start to finish.
6 posted on 09/18/2008 1:35:35 PM PDT by Cedric
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To: bigbob

Not to mention that her “quote” from Jefferson is fake.


7 posted on 09/18/2008 1:35:36 PM PDT by wideawake (Why is it that those who like to be called Constitutionalists know the least about the Constitution?)
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To: Cedric

See post 7. It contains a “quote” from Jefferson that he never wrote.


8 posted on 09/18/2008 1:36:16 PM PDT by wideawake (Why is it that those who like to be called Constitutionalists know the least about the Constitution?)
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To: wideawake

No kidding? Thanks for point this out. Filed under “Bullcrap” - right alongside the DNC talking points and Obama speeches ;-)


9 posted on 09/18/2008 1:38:30 PM PDT by bigbob
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To: USFRIENDINVICTORIA

Copied from a news story where Tony Sanders at Arizona State University made the following statement. This is the Professor that was on the Mark Levin Show a couple of days ago. If Obama supporters are “getting into indies and Republicans face, they are REALLY going to hate this guy!! Carter, Clinton and Obama - eat this suckers!!!

“As the subprime meltdown takes down Lehman, Merrill Lynch, AIG and now others are in trouble, we need to ask the following question: how did this get so bad?

I offer the following suggestion: we STILL have too much regulation and government intervention in the economy. In fact, the Democratic Party created the current financial mess through intervening in the private market and perverse regulations.

The subprime crisis began when the Federal government began to interfere in the private market (a trend set in motion by Franklin Roosevelt and his advisors including Rex Tugwell, A Columbia University economist). Prior to Federal government intervention in the mortgage market, the private market was very hesitant to originate mortgage loans to households with low income or poor credit, a large number of these households are in the inner-cities. The Home Mortgage Disclosure Act (HMDA) was passed in 1975 in order to monitor where lenders were making mortgage loans in order to check to see if the lenders were “redlining,” an alleged practice that lender draw a red line around certain neighborhoods and refuse to lend in those areas. The Community Reinvestment Act (CRA), enacted by Congress in 1977 under President Jimmy Carter (12 U.S.C. 2901) began the trend for subprime lending in the United States in order to, hopefully, improve the rate of homeownership in the inner-city. The Clinton Administration updated the Community Reinvestment Act and entered into active enforcement of the CRA resulting in an increase in loans to subprime borrowers. Armed with the HMDA data (a detailed database which lists where mortgage loans are originated, the race of the borrower and the lender), the CRA began a serious weapon in trying to get more subprime loans to be originated.

The boom in the subprime mortgage market was fueled by the fact that financial institutions could get CRA “credit” by originating subprime loans, even if they sold the loans to someone else (through loan securitization). Hence, lenders actually got credit from the Federal government by making subprime loans in the inner-city and selling the loans and risks to someone else! Although there were subprime loans made outside the inner-city, Federal government intervention clearly was a primary cause of the subprime debacle that took down Bear Stearns, Lehman Bros and AIG.

Perhaps it is time for Federal agencies such as the Federal Housing Administration and the Federal Deposit Insurance company to fade into oblivion along with the Community Reinvestment Act and HMDA.”


10 posted on 09/18/2008 1:44:28 PM PDT by whitedog57
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To: bigbob
It seemed far too modern for his writing style, so I googled the quote.

It was written by someone on a UVA website as their opinion of what Jefferson's stance was.

11 posted on 09/18/2008 1:45:12 PM PDT by wideawake (Why is it that those who like to be called Constitutionalists know the least about the Constitution?)
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To: bigbob

I think I want to disagree with her position a bit in that I see government politicians as the root of the problem. There are always a huge number of people who can be accumulated as a winning constituency for your election, if you just provide them enough financial incentive. I think we have a case of institutionalizing the principle of “walking around” money, such as provided by Boss Tweed in the days of Tammany Hall. Only now we cloak it in packages called the Community Reinvestment Act. The most devious part is that at least the crooks of old gave out real cash, while the modern edition uses loans which can not be repaid and damaged countless lives.


12 posted on 09/18/2008 1:48:53 PM PDT by Retain Mike
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To: bigbob

Fox News had a radio talk show host on yesterday,whose name I missed,who said something to the effect that Fannie and Freddie were the “nuclear core” of this crisis.

That is a great description!


13 posted on 09/18/2008 1:59:11 PM PDT by Bob from De ((All liberals may not be narcissists...but it sure seems to help))
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To: Bob from De
USA financial institutions have been dealing with third world countries, and this is the reason for the financial flops. The third world wants to gamble, but does not want to deal with the losses. USA has laws regarding mortgages and insurance, but when the financials start dealing in the third world it is a different ballgame, and the third world thinks they can not accept the losses, so the rich Americans can pay. George Bush is not protecting Americans, and he is caving in to the enemies, just as Obama has Senate Bill 2433 that wants to give billions of dollars as “hand outs” to the world's poor people. So many of them are so used to handouts that they no longer even wish to support themselves. They had rather to fight. Stop this now! No more bail outs and no more hand outs!
14 posted on 09/18/2008 2:42:50 PM PDT by tessalu
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To: Bob from De
USA financial institutions have been dealing with third world countries, and this is the reason for the financial flops. The third world wants to gamble, but does not want to deal with the losses. USA has laws regarding mortgages and insurance, but when the financials start dealing in the third world it is a different ballgame, and the third world thinks they can not accept the losses, so the Americans can pay. George Bush is not protecting Americans, and he is caving in to the enemies, just as Obama has, Senate Bill 2433 that wants to give billions of dollars as “hand outs” to the world's poor people. So many of them are so used to handouts that they no longer even wish to support themselves. They had rather to fight. Stop this now! No more bail outs and no more hand outs!
15 posted on 09/18/2008 2:45:25 PM PDT by tessalu
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To: Cedric

Start in the 1913/14 era and the establishment of the Federal Reserve Banking System. Forward to the 1930’s era and the leadership of FDR. Citizens, worry no more the government will take care of you from birth to death. Couple this with Congessional actions of unlimited spending and a resulting national debt out of sight, a press that brainwashes us every day about our benevolent government verified by bailouts over and over again and you do not a have a recipe for sound fiscal responsibility or thinking on the part of individuals or business organizations. And that brings us up to September 2008, a big mess.


16 posted on 09/18/2008 3:55:56 PM PDT by mulligan (A)
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