Global economic crisis

[george_r_1961]

Dow down under 600 now near the close. I'm glad the bailout failed. I hope they let it die. It's time to let the bleeding occur and get it over with.

I agree 100 percent The government is already carrying a huge debt and now many want to increase that debt to bail out banks who issued bad loans.

To all the banks who issued huge loans to people who cleary did not have the ability to repay them: Suck it up. You made your bed now lie in it. Dont make your problem the taxpayers problem.

[gtalum]

The $ overnight LIBOR rate is back down to 3.8% (it had jumped from ~2.5% to 6.8% yesterday morning). That's the rate that banks use to lend each other money in the very short term.

Imagine that: no bailout and the markets are correcting themselves. I'm simply shocked, SHOCKED I say!

[mf_dolphin]

What we saw yesterday was people bottom feeding and snapping up bargains. If some form of the bill doesn't pass soon then the markets will tank once more IMO. Let's remember this whole mess was triggered because banks were forced to lend to people that couldn't qualify for loans under the normal rules.....

[gtalum]

They weren't forced to, they chose to. The CRA does not require that banks use "creative" loans to lend to the unqualified, despite what pundits have claimed.

[mf_dolphin]

I'm sorry but you're wrong. You need to check your facts. In fact ther are penalties in place if banks don't comply.

[Chacor]

Dow currently down 160 points (1.48%).

[gtalum]

I'm sorry but you're wrong. You need to check your facts. In fact ther are penalties in place if banks don't comply.

I have checked my facts. The CRA does not say what certain pundits tell us it says.

[mf_dolphin]

Fact - The CRA does require banks to lend to people and businesses in the local community that would not otherwise qualify.
Fact - If banks do not meet their quota for these types of loans then they are subject to penalties.

The whole intent of the CRA was to force banks to lend to the local community regardless of the financial qualifications of the applicant. And now we wonder why there's a crisis?????

[gtalum]

Fact - The CRA does require banks to lend to people and businesses in the local community that would not otherwise qualify.

Half true. It requires banks to lend money in all neighborhoods where they take deposits. It does not, however, require them to change approval standards for those loans. It simply forbids a bank from so-called "redlining", where they either flat-out refuse to lend money to anyone in certain specific neighborhoods or jack up the interest rates to do so.

Further, a vast majority of subprime loans were made by groups who are not and have never been subject to the CRA. Most subprime loans are made by mortgage service companies, not banks. The CRA applies only to banks.

[mf_dolphin]

Banks were given quotas to meet regardless of the applicants qualification. Failure to meet those quotas would result in fines. You can dress it up anyway you want but the end result was being forced to reduce the financial qualifications to meet the quotas. Since when does your credit score not impact the loan rate you pay? Answer = CRA. Loan rates get raised on higher risk loans to make up for the percentage of people in high risk categories that default. This normal check and balance was undermined by CRA pure and simple.

As to your other point, the mortage service companies just leveraged the sub-prime market that was created by CRA. Even though they were not directly under the CRA it was that piece of legislation that created the sub-prime market to begin with.

[gtalum]

That is simply not true. There are no quotas in the CRA.

It only required that banks consider the applications of people in previously "red-lined" neighborhoods, but there were no quotas for approval or forced relaxation of approval standards.

Edit: Please feel free to point out the clause that requires banks to meet quotas or to relax approval standards: Community Reinvestment Act of 1977.

[lurkey]

Dow Jones now only -9.56 at 10,841.10 (20 minute delay). . . .

[Ed Mahmoud]

That is simply not true. There are no quotas in the CRA.

It only required that banks consider the applications of people in previously "red-lined" neighborhoods, but there were no quotas for approval or forced relaxation of approval standards.

Edit: Please feel free to point out the clause that requires banks to meet quotas or to relax approval standards: Community Reinvestment Act of 1977.

CRA enforcement and standards were amended under Clinton. I do believe I read any community group can file a protest against a bank, claiming they failed to meet the goals of the CRA, and delay the opening of new branches or mergers until a hearing is done. I read the Marxist front group also involved in massive voter fraud, ACORN, extorts money from banks this way.

CRA, especially the interpreation of it during the Clinton years didn't have hard formulas or quotas, but left it to an examiners discretion, and encouraged banks to make loans that weren't neccesarily prudent.



I'd go further, pointing out how a certain Arizona senator in 2005 attempted to institute new over-site and regulations at Fannie and Freddie, and how the opposition party, because of personal conflicts of interest (one Massachusetts Congressman's "husband" was a top official at the time, members of the previous adminstration were on the board, and certain senators from states like Illinois and Connecticut received large campaign donations from Freddie and Fannie) shot the reforms down, but to go into detail would, by definition, mean getting political.

[gtalum]

CRA enforcement and standards were amended under Clinton. I do believe I read any community group can file a protest against a bank, claiming they failed to meet the goals of the CRA, and delay the opening of new branches or mergers until a hearing is done. I read the Marxist front group also involved in massive voter fraud, ACORN, extorts money from banks this way.

CRA, especially the interpreation of it during the Clinton years didn't have hard formulas or quotas, but left it to an examiners discretion, and encouraged banks to make loans that weren't neccesarily prudent.

There may have been market pressure, but there were no quotas. Teh banks (and the borrowers) got greedy. Simple as that.

I'd go further, pointing out how a certain Arizona senator in 2005 attempted to institute new over-site and regulations at Fannie and Freddie, and how the opposition party, because of personal conflicts of interest (one Massachusetts Congressman's "husband" was a top official at the time, members of the previous adminstration were on the board, and certain senators from states like Illinois and Connecticut received large campaign donations from Freddie and Fannie) shot the reforms down, but to go into detail would, by definition, mean getting political.

In 2003 and 2005, one party had complete control of the US federal government. I do agree that Fannie and Freddie, not to mention banks and mortgage service companies in general, needed more oversight. One party had the opportunity to fix it both years and didn't. This baby rests with everybody in DC. They're all crooks and incompetents, regardless of affiliation.

[Chacor]

Dow ends the day down by less than 20 points.

[Cryomaniac]

There is no way in my mind that the Senate doesn't pass this bill tonight. The House may be another question, especially since the passing of the bill tonight will cause a huge market rally tomorrow.

As someone who is not American, I'm not in a great position to have an opinion, but I'm not entirely in favour of this bailout. It's jus delaying the inevitable really, since if anything it will make banks be even less responsible because they'll just think "oh, the government will bail us out again".

[somethingfunny]

I would appreciate a bailout the next time that I make a big mistake.

[Ed Mahmoud]

In 2003 and 2005, one party had complete control of the US federal government. I do agree that Fannie and Freddie, not to mention banks and mortgage service companies in general, needed more oversight. One party had the opportunity to fix it both years and didn't. This baby rests with everybody in DC. They're all crooks and incompetents, regardless of affiliation.

The political party in question in power in 2005 did not do what their supporters sent them to Washington to do, and as a consequence, they did not receive a whole lot of support when they ran. Gay congressman scandals (really, of lower magnitude than Jerry Studds or Barney Frank's pecadilloes, but if one considers how Gingrich got dumped by his own side after he was caught cheating on his wife, one side is less forgiving of immorality, IMHO)) didn't help any, but when sent to Washington to limit spending and control growth of government, and a Republican Congress and President did neither, they are not going to get enthusiastic support in fund raising and get out the vote and the such.

CRA was just one ingredient, private and public sector greed went along way. I hope we get Enron style hearings, and maybe criminal prosecutions, both from the private banks and Freddie and Fannie.

[gtalum]

The political party in question in power in 2005 did not do what their supporters sent them to Washington to do, and as a consequence, they did not receive a whole lot of support when they ran. Gay congressman scandals (really, of lower magnitude than Jerry Studds or Barney Frank's pecadilloes, but if one considers how Gingrich got dumped by his own side after he was caught cheating on his wife, one side is less forgiving of immorality, IMHO)) didn't help any, but when sent to Washington to limit spending and control growth of government, and a Republican Congress and President did neither, they are not going to get enthusiastic support in fund raising and get out the vote and the such.

CRA was just one ingredient, private and public sector greed went along way. I hope we get Enron style hearings, and maybe criminal prosecutions, both from the private banks and Freddie and Fannie.

I think for the most part you just agreed with my main and final point that both parties have seriously dropped the ball leading us into this crisis.

[Cryomaniac]

I will be hugely surprised if this now doesn't pass the house. It will be close, but I think it will pass.