Political Roundtable Part XXVII

[popper]

Crazy times. We may see a lifelong Republican (Bloomberg) representing the D party running against a lifelong Democrat (Trump) representing the R party. Go figure.

[dckingsfan]

You know he was right. There was a direct relationship between the subprime mortgage crisis, legislation (and HUD support) and Freddie and Fannie and (low-risk) securities.

That quote doesn't make him racist. BTW, who got hurt the most by those government policies? Those in those redlined areas... Maybe it makes him the opposite saying that you shouldn't loan money to someone that can't afford a house. If you do that the price of houses in those areas will fall.

He is saying that government policies enabled banks to go in and sell subprime mortgages and that hurt those we should have been protecting.

I don’t disagree with him about the cause of the mortgage crisis, but you need to put the blame on the banks. Redlining is racist and unconstitutional full stop. So defending the practice is not going to get support from black people. If you read up on the history of it set black people back decades and some communities still haven’t recovered.

https://www.washingtonpost.com/news/wonk/wp/2018/03/28/redlining-was-banned-50-years-ago-its-still-hurting-minorities-today/

Redlining should be banned. No question.

But that isn't how the government policies worked to fix it... they lowered the qualifications to get a loan. That raised prices in those same areas and burdened those same people with loans they couldn't afford.

Bloomberg was right, the policies put in place to solve the problem created a much, much worse problem.

Could he have been more articulate? Absolutely.

1) Redlining is bad and should be banned
2) Under secured Mortgages are bad
2a) Don't have federal programs that promote 2

[pancakes3]

what policies/programs lowered qualifications to get a loan?

as far as i know, the only "qualification" that the government got rid of in response to redlining was to treat applicants race-neutrally. there was ample evidence that banks were denying loans to african americans who were financially similarly situated to white applicants. that's all, no more/no less.

and not to dive too deep on what caused the recession but it's my understanding that de-regulation (repealing Glass-Steagall, enacting Commodity Futures Modernization Act) that led to banks to make bad loans, not by any enacted regulation. there was no rule that forced banks to give out loans to poor people. instead, through deregulation, banks were allowed to invest/reinvest/use money (repealing Glass-Steagall) allowing them to reap profits off other people's cash. Securities were regulated, but derivatives were not regulated (CFMA), so a lot of the banks' investments went to trading derivatives. the banks would take their residential loans, assign them as "mortgage-backed securities" (a derivative) and profit. when they ran out of good loans, they issued bad loans to keep the derivative train going.

[dckingsfan]

what policies/programs lowered qualifications to get a loan?

as far as i know, the only "qualification" that the government got rid of in response to redlining was to treat applicants race-neutrally. there was ample evidence that banks were denying loans to african americans who were financially similarly situated to white applicants. that's all, no more/no less.

and not to dive too deep on what caused the recession but it's my understanding that de-regulation (repealing Glass-Steagall, enacting Commodity Futures Modernization Act) that led to banks to make bad loans, not by any enacted regulation. there was no rule that forced banks to give out loans to poor people. instead, through deregulation, banks were allowed to invest/reinvest/use money (repealing Glass-Steagall) allowing them to reap profits off other people's cash. Securities were regulated, but derivatives were not regulated (CFMA), so a lot of the banks' investments went to trading derivatives. the banks would take their residential loans, assign them as "mortgage-backed securities" (a derivative) and profit. when they ran out of good loans, they issued bad loans to keep the derivative train going.

I will answer with Jeopardy questions to make it fun.

Subprime mortgages for $200
When did Freddie & Fannie begin receiving affordable housing credits for buying subprime securities?

HUD for $400
When did HUD suggest the company (Freddy Mac) was lagging behind and should "do more"?

The intent of the CRA was good. Getting rid of redlining was good. But it was implemented poorly with the government pushing Freddie and Fannie to take subprime mortgages. To do that - they had to roll back regulations. Don't get me wrong - they had to have complicit greedy banks to get the deed done. Kind of like the government paying the mobsters...

And hence my response when folks say that questioning this policy makes you racist. The policies that Bloomberg was questioning were racist (as an unintended consequence).

[Pointgod]

You know he was right. There was a direct relationship between the subprime mortgage crisis, legislation (and HUD support) and Freddie and Fannie and (low-risk) securities.

That quote doesn't make him racist. BTW, who got hurt the most by those government policies? Those in those redlined areas... Maybe it makes him the opposite saying that you shouldn't loan money to someone that can't afford a house. If you do that the price of houses in those areas will fall.

He is saying that government policies enabled banks to go in and sell subprime mortgages and that hurt those we should have been protecting.

I don’t disagree with him about the cause of the mortgage crisis, but you need to put the blame on the banks. Redlining is racist and unconstitutional full stop. So defending the practice is not going to get support from black people. If you read up on the history of it set black people back decades and some communities still haven’t recovered.

https://www.washingtonpost.com/news/wonk/wp/2018/03/28/redlining-was-banned-50-years-ago-its-still-hurting-minorities-today/

Redlining should be banned. No question.

But that isn't how the government policies worked to fix it... they lowered the qualifications to get a loan. That raised prices in those same areas and burdened those same people with loans they couldn't afford.

Bloomberg was right, the policies put in place to solve the problem created a much, much worse problem.

Could he have been more articulate? Absolutely.

1) Redlining is bad and should be banned
2) Under secured Mortgages are bad
2a) Don't have federal programs that promote 2

Bloomberg is a very smart and articulate person. I have no doubt that if he wanted to say it a different way then he would have. Instead of blaming the banks for predatory lending practices, risky behavior and lack of regulations he showed his contempt for the poor essentially treating the victims of the financial crises as part of the problem. That should speak volumes to how the type of policies he’ll put in place. Other than gun control and climate change, he’s not really in line with the policies the Democratic base want to see. The only reason he’s so popular in places like SC is that he’s been spending a ton of money on ads where as the rest of the Democratic field has been focused on Iowa and New Hampshire. He’s built is momentum off name recognition and his record has not been put under a national spotlight. I don’t see how his comments about race and his alleged sexist behavior will win him a large amount of support with the Democratic base.

[Pointgod]

I found this admission interesting since we have so many Bernie supporters in this thread. For a long time the talking point from Sanders supporters has been if you don’t support Medicare for all you’re a corporate shill, now you have AOC admitting that a public option would still be a desirable outcome. This is what bothers me about the hypocrisy of the far left. Somehow Elizabeth Warren got trashed for wanting to implement Medicare for all in a more deliberate manner, but if Bernie fails to deliver on a key campaign platform he gets a pass?

https://www.axios.com/aoc-medicare-for-all-public-option-bernie-sanders-6f94493e-96d3-4329-8c29-d17891d43fc9.html

"The worst-case scenario? We compromise deeply and we end up getting a public option. Is that a nightmare? I don’t think so."

[pancakes3]

what policies/programs lowered qualifications to get a loan?

as far as i know, the only "qualification" that the government got rid of in response to redlining was to treat applicants race-neutrally. there was ample evidence that banks were denying loans to african americans who were financially similarly situated to white applicants. that's all, no more/no less.

and not to dive too deep on what caused the recession but it's my understanding that de-regulation (repealing Glass-Steagall, enacting Commodity Futures Modernization Act) that led to banks to make bad loans, not by any enacted regulation. there was no rule that forced banks to give out loans to poor people. instead, through deregulation, banks were allowed to invest/reinvest/use money (repealing Glass-Steagall) allowing them to reap profits off other people's cash. Securities were regulated, but derivatives were not regulated (CFMA), so a lot of the banks' investments went to trading derivatives. the banks would take their residential loans, assign them as "mortgage-backed securities" (a derivative) and profit. when they ran out of good loans, they issued bad loans to keep the derivative train going.

I will answer with Jeopardy questions to make it fun.

Subprime mortgages for $200
When did Freddie & Fannie begin receiving affordable housing credits for buying subprime securities?

HUD for $400
When did HUD suggest the company (Freddy Mac) was lagging behind and should "do more"?

The intent of the CRA was good. Getting rid of redlining was good. But it was implemented poorly with the government pushing Freddie and Fannie to take subprime mortgages. To do that - they had to roll back regulations. Don't get me wrong - they had to have complicit greedy banks to get the deed done. Kind of like the government paying the mobsters...

And hence my response when folks say that questioning this policy makes you racist. The policies that Bloomberg was questioning were racist (as an unintended consequence).

um, just trying to nail down the argument here.

Bloomerg said that redlining was when banks refused to make loans to poor people, and that when government said that was bad, it led to the financial crisis.

1) That's not what redlining is - redlining is specifically treating people differently based on race and race alone. Trying to justify redlining by calling it a defensible business decision to not lend to the poor, and the secondary racial impact is an unintended consequence is just flat out wrong.

2) The government said that you can't redline pretty explicitly with the 14th amendment and the civil rights act. However, the gov't has never, and still never dictates who private lenders can or cannot lend to, or set regulations on how private loans are made. Gov't loans like FHA and Ginny Mae can set their own standards, but BoA/Chase is going to do whatever they want.

to answer your question, and to respond to your invocation of Freddie Mac, and how HUD said "they should do more..." that came after the banks started making subprime loans. Freddie's mortgages followed the corporate greed, not lead it. HUD saw that the mortgage backed securities from private lenders were taking up an increased market share of the outstanding mbs's, and because the private lenders' derivatives weren't guaranteed like Freddie's were, was worried that a mass default would be catastrophic, and wanted Freddie to (yes) make more subprime loans so they could cushion the blow if/when the bubble burst.

but none of this really addresses how wrong Bloomberg was in his initial statement that tied redlining, and the government's enforcement to prevent redlining led to the financial crisis. it's not even a matter of inarticulation. it's a falsehood predicated on untrue stereotypes of the poor, and frankly rings trumpian in how wrong it is, and how it plays off people's biases.

and i really hate it when people say the blame for the crisis is 50/50, and that the people taking the loans need to be accountable as well, when Trump is probably the single biggest beneficiary of low interest lending in the history of mankind. the only instance where he talks about economics with any degree of certainty is about the fed rate, and how he wants low interest rates (read: free money) because that's all he understands, as a scuzzy real estate developer. where's the disdain for him when he takes out loans that he's not accountable for? why isn't he demonized? why isn't he, with his literal billions in unrealized debt, disqualified from future loans?

[pancakes3]

I found this admission interesting since we have so many Bernie supporters in this thread. For a long time the talking point from Sanders supporters has been if you don’t support Medicare for all you’re a corporate shill, now you have AOC admitting that a public option would still be a desirable outcome. This is what bothers me about the hypocrisy of the far left. Somehow Elizabeth Warren got trashed for wanting to implement Medicare for all in a more deliberate manner, but if Bernie fails to deliver on a key campaign platform he gets a pass?

https://www.axios.com/aoc-medicare-for-all-public-option-bernie-sanders-6f94493e-96d3-4329-8c29-d17891d43fc9.html

"The worst-case scenario? We compromise deeply and we end up getting a public option. Is that a nightmare? I don’t think so."

this is a bad look for AOC, not bernie. it's absurd that health care is handled via an insurance framework at all. if you want to split it up between public and private hospitals, fine. but the fact that everything is filtered through an insurance company instead of direct connection between us and the health care providers is insane.

[dckingsfan]

um, just trying to nail down the argument here.

Bloomerg said that redlining was when banks refused to make loans to poor people, and that when government said that was bad, it led to the financial crisis.

I just want to say what "I" thought he meant and from other articles that he posted on the subject in the past (specifically when he was rolling out affordable housing in New York City, he did a pretty good job on that). But, I could be wrong.

I think that he meant that "how" the government chose to deal with redlining was the issue. My opinion isn't that he was defending not loaning money to those in redlined areas, rather lending money to those that can't afford it was bad policy.

I will answer the rest in another post.

[dckingsfan]

what policies/programs lowered qualifications to get a loan?

as far as i know, the only "qualification" that the government got rid of in response to redlining was to treat applicants race-neutrally. there was ample evidence that banks were denying loans to african americans who were financially similarly situated to white applicants. that's all, no more/no less.

and not to dive too deep on what caused the recession but it's my understanding that de-regulation (repealing Glass-Steagall, enacting Commodity Futures Modernization Act) that led to banks to make bad loans, not by any enacted regulation. there was no rule that forced banks to give out loans to poor people. instead, through deregulation, banks were allowed to invest/reinvest/use money (repealing Glass-Steagall) allowing them to reap profits off other people's cash. Securities were regulated, but derivatives were not regulated (CFMA), so a lot of the banks' investments went to trading derivatives. the banks would take their residential loans, assign them as "mortgage-backed securities" (a derivative) and profit. when they ran out of good loans, they issued bad loans to keep the derivative train going.

I will answer with Jeopardy questions to make it fun.

Subprime mortgages for $200
When did Freddie & Fannie begin receiving affordable housing credits for buying subprime securities?

HUD for $400
When did HUD suggest the company (Freddy Mac) was lagging behind and should "do more"?

The intent of the CRA was good. Getting rid of redlining was good. But it was implemented poorly with the government pushing Freddie and Fannie to take subprime mortgages. To do that - they had to roll back regulations. Don't get me wrong - they had to have complicit greedy banks to get the deed done. Kind of like the government paying the mobsters...

And hence my response when folks say that questioning this policy makes you racist. The policies that Bloomberg was questioning were racist (as an unintended consequence).

um, just trying to nail down the argument here.

Bloomerg said that redlining was when banks refused to make loans to poor people, and that when government said that was bad, it led to the financial crisis.

1) That's not what redlining is - redlining is specifically treating people differently based on race and race alone. Trying to justify redlining by calling it a defensible business decision to not lend to the poor, and the secondary racial impact is an unintended consequence is just flat out wrong.

2) The government said that you can't redline pretty explicitly with the 14th amendment and the civil rights act. However, the gov't has never, and still never dictates who private lenders can or cannot lend to, or set regulations on how private loans are made. Gov't loans like FHA and Ginny Mae can set their own standards, but BoA/Chase is going to do whatever they want.

to answer your question, and to respond to your invocation of Freddie Mac, and how HUD said "they should do more..." that came after the banks started making subprime loans. Freddie's mortgages followed the corporate greed, not lead it. HUD saw that the mortgage backed securities from private lenders were taking up an increased market share of the outstanding mbs's, and because the private lenders' derivatives weren't guaranteed like Freddie's were, was worried that a mass default would be catastrophic, and wanted Freddie to (yes) make more subprime loans so they could cushion the blow if/when the bubble burst.

but none of this really addresses how wrong Bloomberg was in his initial statement that tied redlining, and the government's enforcement to prevent redlining led to the financial crisis. it's not even a matter of inarticulation. it's a falsehood predicated on untrue stereotypes of the poor, and frankly rings trumpian in how wrong it is, and how it plays off people's biases.

and i really hate it when people say the blame for the crisis is 50/50, and that the people taking the loans need to be accountable as well, when Trump is probably the single biggest beneficiary of low interest lending in the history of mankind. the only instance where he talks about economics with any degree of certainty is about the fed rate, and how he wants low interest rates (read: free money) because that's all he understands, as a scuzzy real estate developer. where's the disdain for him when he takes out loans that he's not accountable for? why isn't he demonized? why isn't he, with his literal billions in unrealized debt, disqualified from future loans?

So, I think it was actually more than 50/50 on the government. They intentionally pushed policies that helped create the situation and many of those policies haven't been rolled back (hence why we are moving back into the same real estate bubble scenario.

Yes, the banks had a subprime vehicle - but when did it's usage really take off?

The banks and their shareholders got punished as they should have. I didn't think there should have been any bailout - let them go chapter and get taken over... but that is another thought.

The government should be in the business of regulation - not pushing specific products. Increasing home ownership was a noble cause - how they did it hurt those whom they most wanted to help.

[dckingsfan]

I don’t disagree with him about the cause of the mortgage crisis, but you need to put the blame on the banks. Redlining is racist and unconstitutional full stop. So defending the practice is not going to get support from black people. If you read up on the history of it set black people back decades and some communities still haven’t recovered.

https://www.washingtonpost.com/news/wonk/wp/2018/03/28/redlining-was-banned-50-years-ago-its-still-hurting-minorities-today/

Redlining should be banned. No question.

But that isn't how the government policies worked to fix it... they lowered the qualifications to get a loan. That raised prices in those same areas and burdened those same people with loans they couldn't afford.

Bloomberg was right, the policies put in place to solve the problem created a much, much worse problem.

Could he have been more articulate? Absolutely.

1) Redlining is bad and should be banned
2) Under secured Mortgages are bad
2a) Don't have federal programs that promote 2

Bloomberg is a very smart and articulate person. I have no doubt that if he wanted to say it a different way then he would have. Instead of blaming the banks for predatory lending practices, risky behavior and lack of regulations he showed his contempt for the poor essentially treating the victims of the financial crises as part of the problem. That should speak volumes to how the type of policies he’ll put in place. Other than gun control and climate change, he’s not really in line with the policies the Democratic base want to see. The only reason he’s so popular in places like SC is that he’s been spending a ton of money on ads where as the rest of the Democratic field has been focused on Iowa and New Hampshire. He’s built is momentum off name recognition and his record has not been put under a national spotlight. I don’t see how his comments about race and his alleged sexist behavior will win him a large amount of support with the Democratic base.

Okay, I can understand your point of view. You may be right... but given his actions specifically on affordable housing when he was Mayor - I have a different opinion. He was in Houston - I should have asked him

The reason he is popular in SC and other moderate strongholds is that he is for charter schools and he is fiscally responsible. He just got the endorsement of the Houston Black caucus and Mayor of Houston.

BTW, his climate change plan isn't bad - it is actually much better than the GND (but I guess that is a pretty low bar).

One other note: I am not voting for any D in the primary. I am waiting and then will work for whichever candidate comes out the other side. But, I think we need a big tent - everything from the progressives through the moderates to come out and vote.

And this elections is going to be about Trump - and the reason we want Bloomberg in the mix (regardless of if he is the candidate or not) is that he has been able to make Trump look pretty bad thus far.

[pancakes3]

So, I think it was actually more than 50/50 on the government. They intentionally pushed policies that helped create the situation and many of those policies haven't been rolled back (hence why we are moving back into the same real estate bubble scenario.

Yes, the banks had a subprime vehicle - but when did it's usage really take off?

The banks and their shareholders got punished as they should have. I didn't think there should have been any bailout - let them go chapter and get taken over... but that is another thought.

The government should be in the business of regulation - not pushing specific products. Increasing home ownership was a noble cause - how they did it hurt those whom they most wanted to help.

and i'm saying that the pushed "policies" came in the form of DEregulation, not regulation. the government didn't go around to banks forcing them to make loans that they didn't want to make, but rather removed protections that prevented banks from being incentivized to make bad loans. that's when its usage took off.

repealing glass steagal (GS) allowed saving banks to act like investment banks. pre-GS, investment banks had to find investors (hedge funds, etc.) to purchase derivatives. post-GS, saving banks could raise money themselves, and post CFMA, they were able to issue mortgage backed securities (MBS) for loans that they made, and then trade in them. well shoot, that's essentially giving banks free money. how much you want? they'll just issue that much in loans. and they can make above-market returns in trading in derivatives? free. money.

and these were largely bush-era regulations, motivated by "free market" lobbying by the banks to "improve liquidity" or some other bs. it wasn't a "noble goal" act to give americans an easier path to home ownership. it had nothing to do with redlining, helping the poor, helping minorities, etc.

so to circle this back to bloomberg, when he said that "Congress got involved" and said "these people should be able to get credit" and that "banks started making more and more loans where the credit of the person buying the house wasn't as good as you would like" to me is just a bold faced, and vicious lie. like, sure, people who can't afford loans shouldn't get access to credit, but the housing crisis wasn't caused by starry eyed libs who have no idea how macroeconomics work decided to advance a socialist policy that ordered banks to make loans they shouldn't, to counter redlining.

the banks lobbied for "policies" that allowed them to print money by waiving ninja loans at consumers, and consumers took the bait. both are at fault, but the majority of the blame falls on the legislators that deregulated, and the banks bc they knew exactly what they were doing, and enacted systemic change to achieve those goals. the consumers were just following through on base human instincts, relying on the hope that sophisticated banks and the government, both institutions that are smarter than the average borrower, knew what they were doing. it's analogous to say "well, that kid should have known that candy from strangers is a bad idea." sure, kids should know, but to assign the blame 50/50 is wrong, and it's especially wrong to say that the government did so for the noble cause of helping children gain access to candy and a couple bad actors turned that opportunity to snatch kids up, and the kids are also equally at fault for taking them up on it. not a perfect analogy bc it's a shade patronizing to ppl with bad credit, but you get the gist.

and to reiterate, i'm not trying to relitigate the housing crisis. i'm just taking special offense to Bloomberg's words.

and fwiw, consumer protection measures such as the ones contemplated in this discussion is actually a huge part of Warren's platform but nobody cares about it bc it's boring and inaccessible. in fact, Warren's said pretty explicitly that her interest in health care reform isn't based on the idea that health care is a human right (bernie) but rather that medical costs is the leading cause of middle class bankruptcies and that the entire structure, financially speaking, is unworkable and needs to be reformed. which to me, strikes me as a very centrist opinion, but centrists just see "universal health care" and balk at the idea, facially.

[pancakes3]

just a reminder that systemic, legally enforceable racism was not that long ago.

https://www.cnn.com/2020/02/15/us/racist-deeds-covenants/index.html

[Zonkerbl]

People should not be allowed to take out loans they can't afford (poor or otherwise). Banks should not make loans to people they know can't pay them off, knowing that the government will bail them out when things go south.

What you should *not* do is draw a red line around poor zip codes and refuse to make loans to *anyone* who lives there.

Cheaper, but racist.

And that's all I have to say about that.

[dckingsfan]

and i'm saying that the pushed "policies" came in the form of DEregulation, not regulation. the government didn't go around to banks forcing them to make loans that they didn't want to make, but rather removed protections that prevented banks from being incentivized to make bad loans. that's when its usage took off.

repealing glass steagal (GS) allowed saving banks to act like investment banks. pre-GS, investment banks had to find investors (hedge funds, etc.) to purchase derivatives. post-GS, saving banks could raise money themselves, and post CFMA, they were able to issue mortgage backed securities (MBS) for loans that they made, and then trade in them. well shoot, that's essentially giving banks free money. how much you want? they'll just issue that much in loans. and they can make above-market returns in trading in derivatives? free. money.

and these were largely bush-era regulations, motivated by "free market" lobbying by the banks to "improve liquidity" or some other bs. it wasn't a "noble goal" act to give americans an easier path to home ownership. it had nothing to do with redlining, helping the poor, helping minorities, etc.

Well, if we are going to disagree on this one - the rest becomes moot.

Let's first get our nomenclature in alignment. To me pushing a policy in this case includes all of weaponizing Freddie/Fannie to bundle subprime mortgages, deregulation of the lending industry (failure to regulate) and the CRA and Government Affordable Housing Policies.

BTW, Gramm-Leach-Bliley Act (repealing part of Glass–Steagall Act) was passed under Clinton. And the reason that they let it go through - they thought it would help home ownership.

If the government doesn't do this - we never have an issue. That is why I feel it is more than 50% of the problem. Or as you say, "free money guys, just want to make sure you lend to those that can't afford it...". The actual quote from HUD to Freddy and Fannie was, you are lagging behind and should "do more"?

If you don't think the government was complicit, then I totally understand where you are coming from on Bloomberg.

[dckingsfan]

BTW, did we just have a long drawn out argument without calling each other names? Where is da1 when you need him

[Fairview4Life]

https://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html


https://www.washingtonpost.com/news/wonk/wp/2013/02/13/no-marco-rubio-government-did-not-cause-the-housing-crisis/

[Wizardspride]

Read on Twitter

?s=19

[dckingsfan]

https://www.washingtonpost.com/news/wonk/wp/2013/02/13/no-marco-rubio-government-did-not-cause-the-housing-crisis/

Interesting opinion piece. I agree with his premise that banks have made themselves out to be the victim which they certainly were not. And that is very dangerous moving forward.

But...

Bloomberg was partially correct: Congress did radically deregulate the financial sector, doing away with many of the protections that had worked for decades. Congress allowed Wall Street to self-regulate, and the Fed the turned a blind eye to bank abuses.

What the piece misses is that government became the lending institution through Freddie and Fannie - so, they were an active participant (although Freddy and Fannie weren't a root cause, at the behest of the government they offered mandated issuance of subprime loans). To ignore this in the piece... well.

Should have been: What caused the financial crisis? The Big Lie goes viral - that banks and the government were victims.

[Fairview4Life]

The government did lend through Fannie and Freddie but a lot less than private banks and took in less risk than banks. One of the points was that at the time some on the right were criticizing those agencies for not doing enough risk taking. Deregulation and low interest rates was the governments main involvement in the crisis.