Why The Mortgage Crisis Happened
By Barry Ritholtz - October 31st, 2008, 8:30AM
There is a classic IBD editorial “explaining” why the Housing crisis is all Bill Clinton’s fault. And on CNBC this morn, John Sununu has been repeating the silly talking points.
I did not want to clog the main page with this, so I posted it in video — along with 3 YouTube speeches of President George W. Bush, explaining . . . well, go watch the vids here.
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October 31st, 2008 at 9:03 am
Can you redo videos in photoshop?? Millions of right wing sheeple can’t possibly be worng can they?
October 31st, 2008 at 9:50 am
“If the lunch truly is free, the demand for free lunches will be large.”
Paul McCulley, PIMCO
Hell hath no fury like a homeowner scorned.
“Why am I being punished for having bought a house I could afford? I am beginning to think I would have rocks in my head if I keep paying my mortgage.”
Todd Lawrence, homeowner, outside Norwich, Conn.
“I guess they are forcing me to deliberately stop paying to look worse than I am. Crazy, don’t you think?”
Anonymous Countrywide borrower, Los Angeles
(Quotes via Calculated Risk.)
October 31st, 2008 at 9:58 am
karen:
Did they say what town Todd Lawrence is from exactly? I used to live in CT and Norwich, while not super expensive, does have a mix or higher end and lower end areas around it.
October 31st, 2008 at 10:10 am
I think the mortgage crisis is the proverbial symptom rather than the problem. A lot of ink was spilled on the move from manufacturing to the service industry as the the new economy starting in the 80′s. Reality was that financial engineering and consultation on efficient balance sheets, corporate portfolios etc., reduced gov’t (i.e. reduced enforcement budgets and self regulation) with the Bank of Denver ruling in the early 90′s provided the map for off balance sheet and financial manipulations that have become the norm. The lack of credibility of corporate accounting is the not so little dirty secret anymore. The question isn’t who enabled the mortgage crisis, but rather what the next step is in the ‘new’ service economy that produces little and consumes much.
October 31st, 2008 at 1:01 pm
You’re wearing some awfulyl thick ideological blinders if you believe that those brief comments somehow nullify the points listed in the editorial. Why not deal with the editorial, point by point without the ad hominems and verbal jiu jitsu?
October 31st, 2008 at 1:24 pm
two issues have not been addressed in this blame game debate over housing:
1) how did changes in tax policies over the past 10 years affect incentives for developers, buyers and lenders?
2) how did the evisceration of the limited social safety net in the 1990s affect fiscal and monetary policies during downturns (e.g., 1998 and 2000-2003) that spurred the housing bubble? The fear of even modest recession (and 2001-2 was surely modest) led to herculean “bail out” efforts.
as a developer I can argue from experience that tax policy had everything to do with my business strategy and performance. In short hand, the strategy was “take the money and run.”
October 31st, 2008 at 2:15 pm
By coincidence, I stumbled across John Sununu (the elder) on Squawk Box this morning, claiming that IBD had the only polling data he gave much credence for the election next Tuesday. His assertion coheres with the essay’s silence on the parts played by the likes of “Country Wide” and “Indy-Mac” – the habits of a selective attention to reality.
Loan Shark above makes the reasonable request that factual points be challenged on merits and not rhetoric. A couple jump out on a first reading: CRA only applied to commerical banks and thrifts and NOT to other mortgage originators; the GSE’s WERE NOT backed by the Fed Gov (though people believed what they wanted).
But truth be told, most all of us are now dependent upon the reports and recollections of people directly acquainted with the deeds of the time, and we’re catching up reading other essays as well, e.g., the brief article on the role which compensation practices played in generating bad loans. Given that fact, people are going to reasonable identify whose interest is served by which ordering and emphasis on who did what when.
The essay concludes with the polemical charge that we got here through a failed socialist experiment. It is not unfair to suspect that the essayist is more interested in serving the interests of a rentier class than in solving a real problem – affordable housing. It may well be true that Fannie/Freddie were doomed once they were required to serve two masters – profit and home. Their doom is no refutation of the merits of the goal and the values pursued: People who have stakes in their residence make for better neighbors and communities.
Stakeholding, we are told, is the motive that makes private enterprise virtuous and successful. Why should holding a stake in one’s dwelling be different?
October 31st, 2008 at 2:27 pm
Why? Pure unadulterated greed coupled with no semblance of responsibility.