The return of sub-prime lending

[Azathoth]

Community activists in St. Louis became concerned a couple of years ago that local banks weren't offering credit to the city's poor and African American residents. So they formed a group called the St. Louis Equal Housing and Community Reinvestment Alliance and began writing complaint letters to federal regulators.

Apparently, someone in Washington took notice. The Federal Reserve has cited one of the group's targets, Midwest BankCentre, a small bank that has been operating in St. Louis's predominantly white, middle-class suburbs for over a century, for failing to issue home mortgages or open branches in disadvantaged areas. Although executives at the bank say they don't discriminate, Midwest BankCentre's latest annual report says it is in the process of negotiating a settlement with the U.S. Justice Dept. over its lending practices.

http://www.businessweek.com/magazine/co ... 594062.htm

What the fuck is wrong with these idiots. The reason that these people can't get a mortgage is because they don't have any money not because they are fucking black. Banks are quite happy to take money off anyone. It is exactly this kind of shit that just blew up the world economy and it seems that nobody has learnt a thing from it.

[Seth]

Community activists in St. Louis became concerned a couple of years ago that local banks weren't offering credit to the city's poor and African American residents. So they formed a group called the St. Louis Equal Housing and Community Reinvestment Alliance and began writing complaint letters to federal regulators.

Apparently, someone in Washington took notice. The Federal Reserve has cited one of the group's targets, Midwest BankCentre, a small bank that has been operating in St. Louis's predominantly white, middle-class suburbs for over a century, for failing to issue home mortgages or open branches in disadvantaged areas. Although executives at the bank say they don't discriminate, Midwest BankCentre's latest annual report says it is in the process of negotiating a settlement with the U.S. Justice Dept. over its lending practices.

http://www.businessweek.com/magazine/co ... 594062.htm

What the fuck is wrong with these idiots. The reason that these people can't get a mortgage is because they don't have any money not because they are fucking black. Banks are quite happy to take money off anyone. It is exactly this kind of shit that just blew up the world economy and it seems that nobody has learnt a thing from it.

It's the Barney Frank, Chris Dodd Show, Part 2. Nobody should be surprised at this, this was Frank and Dodd's intention all along. They don't give a fuck about the economy or banks, they want to redistribute the wealth, and forcing banks to make toxic loans is how they plan to bring down the economy.

[Jason]

Fire
Water
Burn.

Burn mother fucker. Burn. Those little green bits of cloth-paper with pictures of dead guys on em? You might want to trade them for something else while they still have some value.

[PsychoSerenity]

What the fuck is wrong with these idiots. The reason that these people can't get a mortgage is because they don't have any money not because they are fucking black. Banks are quite happy to take money off anyone. It is exactly this kind of shit that just blew up the world economy and it seems that nobody has learnt a thing from it.

As I understand it, from a capitalist perspective anyway, there's nothing wrong with sub-prime lending. As long as the investors know the risks and are prepared to foot the bill if it goes wrong - investing in the poor is good for society.

What caused the problem was the banks paying companies to give sub-prime derivatives AAA ratings, then passing them on to investors who were obviously left unaware of the risks, while at the same time the banks were betting on them to fail.

But personally I'd just scrap the whole system. Any investment where you expect to get more money out than you put in, just ends up forcing people into slavery.

[Seth]

What the fuck is wrong with these idiots. The reason that these people can't get a mortgage is because they don't have any money not because they are fucking black. Banks are quite happy to take money off anyone. It is exactly this kind of shit that just blew up the world economy and it seems that nobody has learnt a thing from it.

As I understand it, from a capitalist perspective anyway, there's nothing wrong with sub-prime lending. As long as the investors know the risks and are prepared to foot the bill if it goes wrong - investing in the poor is good for society.

What caused the problem was the banks paying companies to give sub-prime derivatives AAA ratings, then passing them on to investors who were obviously left unaware of the risks, while at the same time the banks were betting on them to fail.

But personally I'd just scrap the whole system. Any investment where you expect to get more money out than you put in, just ends up forcing people into slavery.

The problem is that the Obama administration, and Barney Frank and Chris Dodd want to kill the small private banking system by driving small, independent banks out of business so that all we will be left with is the six or so "bigs," which are far easier for the Fed and the government to control and coerce.

The "Community Reinvestment Act" is Jimmy Carter's way of forcing banks to redistribute wealth by forcing them to make loans to people who don't deserve to have loans and can't pay them off if they get them.

Banks "discriminate" against people based on their ability to pay back their loans, not on their race. That many minority groups do not have the ability to pay back loans doesn't mean that refusing to loan them money is based in racial discrimination. It's not. It's based in pure economics and risk management.

But that's not good enough for the redistributionists like Frank and Dodd, they don't give a fuck if making toxic loans LATER causes the Fed banking examiners to shut down the bank because it's "insufficiently capitalized" and has a high percentage of non-performing loans...that the feds forced them into making...because their whole purpose is to SHUT DOWN THE INDEPENDENT BANKS. So far this year more than 800 independent banks have been shut down and sold off by the feds.

This isn't about discriminatory lending, it's about destroying independent banking in the US and driving all banking business to the large international conglomerate banks that are firmly under the thumb of (and likely are members of) the Federal Reserve.

[Coito ergo sum]

What the fuck is wrong with these idiots. The reason that these people can't get a mortgage is because they don't have any money not because they are fucking black. Banks are quite happy to take money off anyone. It is exactly this kind of shit that just blew up the world economy and it seems that nobody has learnt a thing from it.

As I understand it, from a capitalist perspective anyway, there's nothing wrong with sub-prime lending. As long as the investors know the risks and are prepared to foot the bill if it goes wrong - investing in the poor is good for society.

What caused the problem was the banks paying companies to give sub-prime derivatives AAA ratings, then passing them on to investors who were obviously left unaware of the risks, while at the same time the banks were betting on them to fail.

But personally I'd just scrap the whole system. Any investment where you expect to get more money out than you put in, just ends up forcing people into slavery.

There is nothing inherently wrong with it, although when the system is set up like it is so that lenders can't freely choose NOT to lend money to sub prime folks, then that's not free market capitalism. Oh, and it's not capitalism when banks are told by the government that they MUST extend loans to people with shit credit.

There is nothing inherently wrong with a lender lending to someone who filed bankruptcy yesterday, has never paid a bill, has no job and swears on the Qu'ran, the Bible, and the Book of Mormon stacked on top of each other that he has no intention on paying a dime. That's up to them and that's up to the bank. Just don't ask for any bailouts when they don't pay, and we'd need to refurbish the federal insurance system on mortgages because the government ought not be insuring such high risks. But, if it's a conventional loan, no FHA or HUD insurance/money involved, no chance of a bailout if they don't pay - then the deal ought to be wholly private.

"Investing in the poor" may or may not be good for society. It's too broad a term, and some investments in the poor will not be good for society and some will be neutral or have no impact, and some may be good. I think what you really mean to say is "investing in the poor" is a nice sentiment because most of us share the view that it would be nice if "the poor" were less, well, less "poor."

An investment where you expect to get more money out than you put in is what an investment is. If there is no expectation, why would you put your own money at risk?

[Azathoth]

Forcing banks to make bad investments helps nobody because you can be sure that the losses that they make wont be coming out of their shareholder's bonuses. It just means that everyone else who is actually paying their debts ends up paying more to cover the defaulters

[Coito ergo sum]

Forcing banks to make bad investments helps nobody because you can be sure that the losses that they make wont be coming out of their shareholder's bonuses. It just means that everyone else who is actually paying their debts ends up paying more to cover the defaulters

In some folks' minds that's "good" because the people who are actually paying their debts are "the rich" and the "defaulters" are "the poor."

[PsychoSerenity]

An investment where you expect to get more money out than you put in is what an investment is. If there is no expectation, why would you put your own money at risk?

"A society grows great when old men plant trees in whose shade they know they shall never sit."

I think in recent decades, like many other times throughout history, too many people have been corrupted, by the idea that money can simply make more money (without acknowledging that that makes demands of work from others), into greed - taking from society rather than giving to it.

Though I do realise this is a slightly ideological point on my behalf, and until questions of political philosophy can be fully answered (perhaps never), in a fair society, pluralism needs to be taken into account.

[Coito ergo sum]

An investment where you expect to get more money out than you put in is what an investment is. If there is no expectation, why would you put your own money at risk?

"A society grows great when old men plant trees in whose shade they know they shall never sit."

Sure, but they don't plant trees expecting them not to grow.

I think in recent decades, like many other times throughout history, too many people have been corrupted, by the idea that money can simply make more money (without acknowledging that that makes demands of work from others), into greed - taking from society rather than giving to it.

A valid general sentiment. But, investments do good as well. If I take my money and invest it in a venture, and that venture succeeds, it does good for me and for many other people. If I simply give my money away, then it won't be too long before I don't have any more to give. Without the expectation of growth and return on investment, even Bill Gates would run out of money pretty quickly.

Money is a "medium of exchange." It's a tool to assign value. People can either trade things with other people directly (barter) or they can use a medium of exchange so that barter doesn't have to be done face to face, a person can distribute something to person X on one day and then some other future day receive something else from person Y by using the medium of exchange.

Investments allow lots of money to be accumulated so people can use other people's money to do things. If I want to buy a house, I can use other people's money to do that. What's asked for in return is that I pay for that product and service. Why shouldn't I? The price I pay is the "interest" on the loan. Sounds very reasonable and fair. What WOULD be greedy is if I demanded the use of someone else's money and said that I should have that money for free. If I do that, why in the world would it be greedy for that someone else whose money I want to use to say "I'm sorry, I want to use my money for something else?"

[

Though I do realise this is a slightly ideological point on my behalf, and until questions of political philosophy can be fully answered (perhaps never), in a fair society, pluralism needs to be taken into account.

Well, I just think it's divorced from reality. I mean, do you give your money away? Maybe some of it, but certainly not all of it, I bet. Most people don't. And most people use most of their money for what they want to use it for. They also don't live, generally, at the bare minimum subsistence level. They live at a level they can sustain within their means. Most people, of course, don't think of their own life as being excessive, but in comparison to many of "the poor" the "average" person lives like a king. Is that "greedy?"

[Seth]

Forcing banks to make bad investments helps nobody because you can be sure that the losses that they make wont be coming out of their shareholder's bonuses. It just means that everyone else who is actually paying their debts ends up paying more to cover the defaulters

Or, in the case of the latest "bank panic," the taxpayers end up bailing THE BANKS out, but not the people who are underwater on their mortgages. If we're going to appropriate taxpayer money to deal with a mortgage crisis caused by banks "securitizing" toxic mortgages, the LAST people who ought to be bailed out are the investors in toxic securitized mortgages and the banks that issued the securities. That money SHOULD have gone to simply paying off, or paying down the mortgages involved, so the homeowners could stay in their homes and the housing market could be kept from crashing due to massive foreclosures.

The fucking overseas investors in securitized mortgages should have taken the whole loss right up their asses, and the banks should have been allowed to fail.

[Santa_Claus]

[Azathoth]

I agree with Seth

[Warren Dew]

As I understand it, from a capitalist perspective anyway, there's nothing wrong with sub-prime lending. As long as the investors know the risks and are prepared to foot the bill if it goes wrong - investing in the poor is good for society.

That's not how this particular system works on this side of the Atlantic. The investors aren't voluntarily giving these loans. They are being forced into them. Knowing the risks and being prepared to foot the bill just aren't happening.

It's hardly "investing in the poor" either. In fact, this was the exact cause of all those loans that people viewed as "exploitative" last time around, because the only way to satisfy the federal regulators was to provide loans set up to have low payments for a few years and then either huge increases in the payments or huge balloon payments at the end.

What caused the problem was the banks paying companies to give sub-prime derivatives AAA ratings, then passing them on to investors who were obviously left unaware of the risks, while at the same time the banks were betting on them to fail.

What caused the problem here in the U.S. was that the government was forcing banks to make bad loans in the first place.

[Seth]

As I understand it, from a capitalist perspective anyway, there's nothing wrong with sub-prime lending. As long as the investors know the risks and are prepared to foot the bill if it goes wrong - investing in the poor is good for society.

That's not how this particular system works on this side of the Atlantic. The investors aren't voluntarily giving these loans. They are being forced into them. Knowing the risks and being prepared to foot the bill just aren't happening.

This is precisely why "credit default swaps" were invented. They are an unregulated insurance product that the FTC overlooked. The CDS scheme said in essence to overseas investors who put money into buying pools of "securitized" mortgages, "if these mortgages go bad, AIG will cover the losses with a CDS." Well, when the housing bubble burst, and the chickens came home to roost in the form of people who committed felony fraud and filing a false financial statement to get a home loan quit paying when their balloon payments came due, AIG didn't have enough "insurance" money in their cash reserves to pay off the claims of the toxic mortgage investors, and AIG went belly-up, and threatened to take down some of the "Big Six" international banks with them as the investors came after their money.

Bush, then Obama, bailed out AIG and the banks to protect THE BANKS and the INVESTORS, rather than letting the whole house of cards collapse as a free market system would have done. That would have shaken out the investors, and the banks that made toxic mortgages, and the mortgage scammers who wrote them then sold them to the banks, and people would have stayed in their homes because nobody would have been able to figure out who actually owns the homes (which is a current problem for banks that advantages defaulting homeowners who are demanding the actual signed note in foreclosure proceedings...which the banks can't find), and the TARP money could have gone towards settling at least some of those mortgage defaults.

This was all CAUSED by the Community Reinvestment Act, which is a bunch of laws and regulations enacted during the Carter administration to stop "redlining," which is where banks simply refused to issue loans in slum communities, and "mortgage discrimination" which is actually banks refusing to loan money to people who have no steady paycheck or credit history. Because the vast majority of slums and poor credit risks are African Americans and other minorities living in minority neighborhoods, the Progressives in Congress decided to force banks to make bad loans so the appearance of discrimination would be avoided. They did offer to federally back SOME of the worst of the loans, and through a byzantine series of events, Fannie and Freddie, the two "government" loan guarantors have ended up owning something like 90 percent of all mortgages in the US, including the toxic, defaulted ones, and both organizations have been given, quite literally, carte blanche to borrow as much money as they want, without even asking Congress, from the Fed, which will print money at their request to cover any losses in the toxic paper.

So, in short, the taxpayers are on the hook for nearly a trillion dollars in toxic mortgages "owned" (guaranteed) by the government, and people who should never have been allowed to get a mortgage in the first place, and should have continued renting, now are having their homes paid for or subsidized by the taxpayers. More dependent class entitlement spending we simply cannot afford.

And who avoids nearly ALL financial liability for this fiasco? The Big Six international conglomerate banks.