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  1. Havakasha is offline
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    02-13-2013, 03:00 PM #1

    Rubio continues distortions on housing crisis.

    I often had arguments with Siriuslywrong about the subject of the housing crisis.
    Rubio dispalys a similar lack of knowledge on the subject. Old myths die hard.

    Sen. Marco Rubio (R-Fla.) blamed the government for the housing crisis Tuesday during his response to President Barack Obama's State of the Union address. But Paul Krugman took issue with Rubio's assertion in a Wednesday blog post.

    "Every piece of the government-did-it thesis has been refuted," the Nobel Prize-winning economist wrote. "[And Republican politicians] have responded by rewriting history to defend their prejudices."

    To what degree Fannie Mae and Freddie Mac played a role in the housing crisis has been a source of fierce partisan debate. Congressional Republicans, including House Speaker John Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.), have blamed the mortgage giants for the housing crisis and tried to curb their influence in recent years.

    But the data suggests that big banks played a bigger role in the housing crisis. Private institutions were responsible for more than 84 percent of subprime loans issued in 2006, according to Federal Reserve data cited by McClatchy Newspapers. Countrywide Financial, HSBC, JPMorgan Chase and Wells Fargo led the way in 2008, according to data from Inside Mortgage Finance cited by McClatchy.

    Fannie Mae and Freddie Mac tried to benefit from subprime lending only when the housing boom was well under way, The Huffington Post's Ben Hallman writes in a new blog post. And their loans were often less risky, Hallman writes:

    All told, the Center for Public Integrity reported in 2011, mortgages financed by Wall Street from 2001 to 2008 were 4½ times more likely to be seriously delinquent than mortgages backed by Fannie and Freddie.

  2. Havakasha is offline
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    02-13-2013, 03:03 PM #2
    Hardyman1966 46 minutes ago ( 1:15 PM)
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    I was a mortgage underwriter for several wholesale lenders at the time and Krugman is right. Most of our loans did not meet Fannie or Freddie guidelines and therefore had to be sold off to investors. This means the government, nor any regulators if they existed, never saw these loans to scrutinize them before they funded and were sold off.

    I am telling you right now, the majority of these loans, which were usually "stated income and/or assets," WERE A TOTAL WORK OF FICTION. But as long as they met guidelines, they went through and were sold off before the ink was dry. Trust me, I had more than enough deals where I demanded a 2nd, higher-up signature over my name because I wanted to have nothing to do with it. As it turns out, housekeepers don't make $10,000/mth. Go figure.
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  3. Havakasha is offline
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    02-14-2013, 11:01 PM #3
    No, Marco Rubio, government did not cause the housing crisis
    Posted by Mike Konczal on February 13, 2013 at 8:58 am

    In his response to the State of the Union, Sen. Marco Rubio said: “This idea – that our problems were caused by a government that was too small – it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.”

    For obvious reasons, this argument is very popular on the right, but there’s precious little to back it up. The core claim can be a bit slippery, but it tends to go something like this: the existence and affordability goals of Fannie Mae and Freddie Mac (the GSEs) and the Community Reinvestment Act (CRA) were a major reason we had a subprime-driven housing bubble and then a crash. The only problem? Pretty much all the evidence on the housing crisis shows that that’s not true.
    (As I don’t believe Rubio is referencing them, I’m putting to the side the complicated debate on interest rates being “far too low for far too long” and policy, or the idea that there wasn’t enough U.S. government debt in the 2000s [!] to meet the demand for safe assets. Though those are the debates people actually engaged with these questions are studying.)
    Let’s go through some things we know.
    1. Private markets, rather than the GSEs, created the subprime mortgage boom.
    The subprime mortgage boom and the subsequent crash are very much concentrated in the private market, not the public market. Subprime is a creature of the private label securitization channel (PLS) market, instead of the Government-Sponsored Entities (GSEs, or Fannie and Freddie). The fly-by-night lending boom, slicing and dicing mortgage bonds, derivatives and CDOs, and all the other shadiness of the mortgage market in the 2000s were Wall Street creations, and they drove all those risky mortgages.
    Here’s some data to back that up: “More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions… Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.”
    As University of California, Irvine law professor David Min has argued, saying the government directly created either the housing bubble or subprime loans has a serious problem with the timing. “From 2002-2005, [GSEs] saw a fairly precipitous drop in market share, going from about 50 percent to just under 30 percent of all mortgage originations. Conversely, private label securitization [PLS] shot up from about 10 percent to about 40 percent over the same period. This is, to state the obvious, a very radical shift in mortgage originations that overlapped neatly with the origination of the most toxic home loans.”


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