BBC draws you pictures of the sub-prime crisis

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http://news.bbc.co.uk/2/hi/business/7073131.stm?src=rss

and dubya explains the crisis in terms he understands, kindergarten terms. :lol

http://rawstory.com/news/afp/Bush_sees_storm_clouds_over_US_econ_12172007.html

[JoeChalupa]

Can someone explain this to me.......like I'm a six year old?

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Bill Scher (http://www.huffingtonpost.com/bill-scher)|


(http://www.huffingtonpost.com/syndication/) The Mortgage Crisis: Yet Another Conservative Failure (http://www.huffingtonpost.com/bill-scher/the-mortgage-crisis-yet-_b_77400.html)
Posted December 18, 2007 | 05:59 PM (EST)

On Sunday, ABC's This Week failed (http://commonsense.ourfuture.org/weekend_watchdog_wrap_34) to hold Alan Greenspan accountable for his role in the mortgage crisis. But today, the New York Times (http://www.nytimes.com/2007/12/18/business/18subprime.html) did, picking up where Salon.com left off. (http://www.salon.com/tech/htww/2007/12/12/greenspan_didn_t_do_it/index.html)

And as the NYT report shows -- like every other failure of the Bush Era -- Greenspan's failure was not one of incompetence, but the conservative ideology of reckless government.

Greenspan received several direct warnings about the looming crisis, but did nothing (http://www.nytimes.com/2007/12/18/business/18subprime.html) to regulate irresponsible corporations:
Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford.
But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman.

....

And leaders of a housing advocacy group in California, meeting with Mr. Greenspan in 2004, warned that deception was increasing and unscrupulous practices were spreading.

John C. Gamboa and Robert L. Gnaizda of the Greenlining Institute implored Mr. Greenspan to use his bully pulpit and press for a voluntary code of conduct.

"He never gave us a good reason, but he didn't want to do it," Mr. Gnaizda said last week. "He just wasn't interested."

...

An examination of regulatory decisions shows that the Federal Reserve and other agencies waited until it was too late before trying to tame the industry's excesses. Both the Fed and the Bush administration placed a higher priority on promoting "financial innovation" and what President Bush has called the "ownership society."

...

Mr. Greenspan and other Fed officials repeatedly dismissed warnings about a speculative bubble in housing prices. In December 2004, the New York Fed issued a report bluntly declaring that "no bubble exists." Mr. Greenspan predicted several times -- incorrectly, it turned out -- that housing declines would be local but almost certainly not nationwide.

The Fed was hardly alone in not pressing to clean up the mortgage industry. When states like Georgia and North Carolina started to pass tougher laws against abusive lending practices, the Office of the Comptroller of the Currency successfully prohibited them from investigating local subsidiaries of nationally chartered banks.

Virtually every federal bank regulator was loathe to impose speed limits on a booming industry.

It was not always this way. As John Atlas and Peter Dreier explain in The American Prospect this week (http://www.prospect.org/cs/articles?article=the_conservative_origins_of_the_s ubprime_mortgage_crisis), our government once practiced regulation. And it was good.
There was a time, not too long ago, when Washington did regulate banks. The Depression triggered the creation of government bank regulations and agencies ... After World War II, until the late 1970s, the system work[ed]. The savings-and-loan industry was highly regulated by the federal government, with a mission to take people's deposits and then provide loans for the sole purpose of helping people buy homes to live in. Washington insured those loans through the FDIC, provided mortgage discounts through FHA and the Veterans Administration, created a secondary mortgage market to guarantee a steady flow of capital, and required S&Ls to make predictable 30-year fixed loans. The result was a steady increase in homeownership and few foreclosures.Those glory days became a distant memory once Ronald Reagan brought the conservative movement to town:
...by the early 1980s, the lending industry used its political clout to push back against government regulation. In 1980, Congress ... eliminated interest-rate caps and made sub-prime lending more feasible for lenders. The S&Ls balked at constraints on their ability to compete with conventional banks engaged in commercial lending. They got Congress -- Democrats and Republicans alike -- to change the rules, allowing S&Ls to begin a decade-long orgy of real estate speculation, mismanagement, and fraud...
...The deregulation of banking led to merger mania, with banks and S&Ls gobbling each other up and making loans to finance shopping malls, golf courses, office buildings, and condo projects that had no financial logic other than a quick-buck profit. When the dust settled in the late 1980s, hundreds of S&Ls and banks had gone under, billions of dollars of commercial loans were useless, and the federal government was left to bail out the depositors whose money the speculators had put at risk.

The stable neighborhood S&L soon became a thing of the past. Banks, insurance companies, credit card firms and other money-lenders were now part of a giant "financial services" industry, while Washington walked away from its responsibility to protect consumers with rules, regulations, and enforcement. Meanwhile, starting with Reagan, the federal government slashed funding for low-income housing, and allowed the FHA, once a key player helping working-class families purchase a home, to drift into irrelevancy.

Into this vacuum stepped banks, mortgage lenders, and scam artists, looking for ways to make big profits from consumers desperate for the American Dream of homeownership. They invented new "loan products" that put borrowers at risk. Thus was born the sub-prime market.

To review:

When our government follows progressive principles, represents the public interest and protects consumers from irresponsible corporate behavior, the system works.

When conservatives allow our government to be co-opted by irresponsible corporations, the system falls apart.

And you can take that to the bank.

http://www.huffingtonpost.com/bill-scher/the-mortgage-crisis-yet-_b_77400.html

======================

iow, the free (unregulated) market, because of the Reagan/conservative lie "all government is bad", allows corps to fuck over clients, fuck themselves up (eg, dereguated US airline industry), then get bailed out by .... that very same big bad government.

Laissez-faire is very often laissez-fucker

[boutons_]

And today the Fed is imposing new regulations, how un-neo-cunt/un-conservative of them, on the market, after the horse is out of the barn:

===========

December 18, 2007

Fed Approves Plan to Curb Risky Lending

By EDMUND L. ANDREWS and DAVID STOUT

WASHINGTON — The Federal Reserve moved Tuesday to impose new restrictions intended to curb unfair and deceptive home-lending practices and prevent a recurrence of this year’s meltdown in subprime mortgages.

By a 5-to-0 vote, the Fed approved a plan that would tighten provisions meant to protect borrowers and apply them to a far larger share of home loans — whether from banks, mortgage companies or other lenders — than under current regulations.

Late this afternoon, the House passed legislation to spare homeowners who restructure their mortgages to avoid foreclosure from having to pay taxes on the forgiven debt. The legislation, approved by voice vote, may have to be reconciled with a Senate version. President Bush has said he will sign the bill that emerges from Congress.

The proposed Fed rules underscore the more assertive role the agency is now prepared to take in regulating lending, in a big shift from the central bank’s approach in the past.

In general, the rules are meant to deter unscrupulous lenders from persuading people that they can afford loans that ought to be out of their reach. By extension, the rules are also intended to keep would-be buyers from deceiving themselves about the debt burdens they can shoulder.

“Our goal is to promote responsible mortgage lending, for the benefit of individual consumers and the economy,” the Fed’s chairman, Ben S. Bernanke, said. “We want consumers to make decisions about home mortgage options confidently, with assurances that unscrupulous home mortgage practices will not be tolerated.”

The plan includes provisions that would require more extensive disclosures, restrict advertising and make it harder to lend to borrowers with little or no documentation and a questionable ability to repay. It would also allow borrowers, in some circumstances, to sue lenders who violate the rules.

The Fed acted under provisions of the Truth in Lending Act and the Home Ownership Equity Protection Act of 1994. In the past it had been quite cautious about using its authority to clamp down, and the rules had last been revised in 2001.

Details of the proposed rules, which could take effect next year after a period for public comment and possible revisions, can be read on the Fed’s Web site, www.federalreserve.gov (http://www.federalreserve.gov).

“Unfair and deceptive practices have harmed consumers and the integrity of the home mortgage market,” a Fed governor, Randall S. Kroszner, said. “We have listened closely and developed a response to abuses that we believe will facilitate responsible lending.”

( so the dog decides to start barking AFTER the the house has been burgled! How much do these watchdogs get paid? :lol )

The action puts the Fed a step ahead of Congress, which is considering its own steps to tighten restrictions on the home loan industry. A bill put forward by Representative Barney Frank, a Massachusetts Democrat and chairman of the House Banking Committee, would expose mortgage brokers and lenders to legal liability if borrowers are unable to repay.

The Fed did not go as far as proposals by some consumer groups, which sought, for example, an outright ban on prepayment penalities.

What the Fed has been hearing in recent months is a complex blend of personal hardship and dire news for the nation as a whole, as waves of foreclosures have swamped the housing market and threatened to mire the economy in a recession. The housing boom of the first several years of the decade seems almost as distant as the boom in technology stocks — but economists have warned that the fallout from the housing slump could be much worse than that from the “dot com” bubble.

Many home-buyers whose little slice of the American dream has turned into a nightmare were undone by “teaser rates” dangled in front of “balloon mortgages.” When the tempting original rates were supplanted by much higher rates built into the loan, many homeowners could not make the monthly payments.

But those personal misfortunes — whether the result of individual misjudgment, excessive optimism, shady lending or all of those — have mushroomed into a national problem, further complicated by the packaging and reselling of mortgages in ways that are so arcane that even some bankers acknowledge they are befuddled by them.

[JoeChalupa]

Those bastards!!!