kEiThZ
Superstar
Keep in mind many of the market de-regulations (including the creation of mortgage backed securities) came from the Clinton/Greenspan era.....
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Financial Crisis
- Thread starter BobBob
- Start date
Keep in mind many of the market de-regulations (including the creation of mortgage backed securities) came from the Clinton/Greenspan era.....
kEiThZ
Superstar
Meh, they are going to have approve the bailout. They just don't want to do it with the Congressional elections 5 weeks away. Who wants to be the one to say he bailed out Wall Street when many on Main Street are suffering? But it's going to be interesting to see what happens if they hold out and credit starts drying up. Public opinion will start changing when commercial banks start to fail, mortgage and consumer credit thresholds rise, and capital for business expansion dries up. If they were smart they would bite the bullet now instead of in 5 weeks when there may be a lot more blood on the floor.
Mot
Active Member
They were Republican policies and Republican bills that Clinton should have put a veto on. Clinton was hardly an enemy to big business.
Admiral Beez
Superstar
Exactly. Now is the time to buy some stocks, since you're not going to see prices these low for a generation.
kEiThZ
Superstar
Some serious opportunities to be had...investors are just irrational these days. RIM dropped 20% last week because they missed their earnings by 1 cent! Talk about panicked investors.....
Prometheus The Supremo
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is it possible that if people follow that advice, the money pumped into the economy by those who buy low will lift it up again so the bailout won't be needed?
Hipster Duck
Senior Member
At the local Chili's (in the heart of McCain country), you would hardly have known that the economy was in tailspin. Everyone was watching the football game and stuffing themselves on free Tostitos.
H
Hydrogen
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Brandon716
Senior Member
There were a series of deregulation laws passed in the late 1990s, ironically many of which were helped with none other than John McCain.
Republicans controlled Congress in the late 1990's and Bill Clinton went along with most of it, unfortunately. They were busy impeaching him and all, so he had limited power at the very end of his Presidency.
The particular bill I am referring to was passed in 1999 just as Clinton was exiting.
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
If you want to blame a bill pushed through a Republican Congress and enacted in November 1999 on Bill Clinton, a year after he was impeached, okay...
This is just one example, but it lead to the mortgage crisis.
If you want to know who voted for it in the US Senate, here is the roll call:
http://www.govtrack.us/congress/vote.xpd?vote=s1999-105
Glen
Senior Member
No. The issue is liquidity and the price/value of the the collateral that banks lent money on. The broader equity market is responding to the fallout from that and thus lowered share prices due to the implications.
kEiThZ
Superstar
Brandon,
It's not quite easy as one or two bills which de-regulated the industry....Greenspan's efforts to ward off deflation directly contributed to the current crisis:
http://www.realestatejournal.com/buysell/mortgages/20070808-ip.html
And the largely Asian savings glut didn't help either....
My point is that there is plenty of blame to go around. Simply blaming the current administration is rather weak analysis....
It's not quite easy as one or two bills which de-regulated the industry....Greenspan's efforts to ward off deflation directly contributed to the current crisis:
http://www.realestatejournal.com/buysell/mortgages/20070808-ip.html
And the largely Asian savings glut didn't help either....
My point is that there is plenty of blame to go around. Simply blaming the current administration is rather weak analysis....
cacruden
Senior Member
I am not sure you can put the blame on the current crisis at the doorsteps of this particular bill. If CitiBank or Bank of America were the route cause of the flop - then yes - because institutions like these used the repeal of that act to merge like crazy. But most of the problems related to right now are related to Mortgage Backed Securities. Fannie Mae and Freddy Mac (and the insurance of) are the center of the storm. There is enough blame to go around on all sides on this one....
Basically the politicians created a climate where they tried to stretch the limits allowing people with less than stellar credit to stretch to the limit and acquire a place to live - banking that property prices will always go up (first fallacy) - i.e. 100% financing, 40+ year mortgages, etc. etc. etc. That coupled with relatively low interest rates fueled a bubble within the property market - with a lot of people leveraged to the hilt. Banks are limited in what they can lend, which means that a new vehicle had to be found to move the loans off-book. This is where the Mortgage Backed Securities came in, they were bundled and sold off on the debt markets. This is the job of investment banks, they bought this and sold it off from inventory. Only problem is once the bubble popped, the house of cards caving in (sometimes in foreseen ways, sometimes not). The problem with the Mortgage Backed Securities is not that they are all bad - there is a lot of good debt in there as well.... It is that no-one really knows what is good or bad. It has created a situation where there is a mine-field - but no map. People are afraid to walk through the mine-field (in this case - lend) because of the uncertainty.
Now you have a bunch of politicians saying it was the other guys fault, that they are better than the other guy. But I don't recall a reform bill failing - which means that nobody in Congress really saw this as a problem ahead of time.
It was just good politics to get people into their own homes....
Admiral Beez
Superstar
I'd like to see regulation of mortgages in Canada (yes, even those right of centre like government intervention sometimes 
), with a max term of 25 years, and a requirement of 10% as down payment, along with rules outlawing the borrowing or financing of the down payment amount.
If you want a $400,000 house, you need $40,000 in savings as down payment, and have 25 years to pay back the rest. Sure, some poor folks won't ever be able to own a house, but home ownership is not a right, you need to earn it, and some by birth, poor money skills, bad luck or poor life circumstances will never have the chance.
), with a max term of 25 years, and a requirement of 10% as down payment, along with rules outlawing the borrowing or financing of the down payment amount.If you want a $400,000 house, you need $40,000 in savings as down payment, and have 25 years to pay back the rest. Sure, some poor folks won't ever be able to own a house, but home ownership is not a right, you need to earn it, and some by birth, poor money skills, bad luck or poor life circumstances will never have the chance.
cacruden
Senior Member
They have started to move back in that direction - but I gather in steps. 40 year mortgages are a thing of the past, but you can still get a 35 year mortgage. I am guessing that they are moving in baby steps as not to create a situation by moving too quickly.
I am not sure what the percentage should be - but 100% financing should not be allowed. Maybe 95% would be fine - as long as you have no credit card debt (maybe mortgage + non-secured debt <= 95% of house value). Basically if you have 95% then your max credit on credit card has to be $0 (which can only be increased by paying down mortgage). I would like the 95% mortgages only to be allowed for first time purchasers - where the person is at the beginning of his career (i.e. has more income upside). But yes, I agree with you that credit has to be tightened.
kEiThZ
Superstar
I don't agree with stricter timelines or higher minimum downpayments. These are extremely beneficial practices if the creditworthiness and the ability to handle debt, of the applicants is assessed properly. In the US, this was not the case. Lenders routinely assessed the individuals ability to pay based on the ARM teaser rates. That was the unsound decision.
There is nothing wrong with giving an individuals with a steady job and good credit a 0 down, 40 year mortgage. Why make him pay rent for another 2-3 years just to meet some artificial bar for home ownership? What is wrong is assessing his ability to pay based on an artificially low rate, not taking into account his ability to pay if the already low rate doubles, basing his ratios on the payment for an interest only mortgage, etc.
Let's not react to improper and lax regulation with poor over-regulation. That would do us no good either.
There is nothing wrong with giving an individuals with a steady job and good credit a 0 down, 40 year mortgage. Why make him pay rent for another 2-3 years just to meet some artificial bar for home ownership? What is wrong is assessing his ability to pay based on an artificially low rate, not taking into account his ability to pay if the already low rate doubles, basing his ratios on the payment for an interest only mortgage, etc.
Let's not react to improper and lax regulation with poor over-regulation. That would do us no good either.