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Yet another reminder

Submitted by Ironman on Thu, 03/05/2009 - 19:05
in

Cause

Chris Dodd, March 13, 2007

``I am a strong advocate of subprime lending,'' Dodd said. ``I don't want that word to become a pejorative as junk bonds did.''

Effect

A stunning 48 percent of the nation’s homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure

Why is this guy chairing the Banking Committee, anyway?

 

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2004 GOP Platform

Submitted by NextRightNando on Thu, 03/05/2009 - 19:35.

From the 2004 GOP Platform:

The most significant barrier to homeownership is the down payment. We support efforts to reduce that barrier, like the American Dream Downpayment Act and Zero Downpayment Mortgages.

 

well, NRN since you are such a mortgage expert

Submitted by Ironman on Thu, 03/05/2009 - 20:15.

I wonder why my institution at the time was issuing FHA mortgages with downpayment assistance mortgages and getting a rather reasonable default rate....because...hmmm. maybe they weren't subprime?

Lack of downpayment was a mild moral hazard compared to the ARM teaser loans many of these people took out to refinance their higher fixed rate FHA loans. But we can;t treat "subprime" as a pejorative term, now can we? 

 

the cause of many defaults appears to be

Submitted by RisingTide on Fri, 03/06/2009 - 11:19.

health care, as the proximate cause I mean. I'm not going to say that where you worked wasn't issuing subprimes, or preferentially shifting those who looked vulnerable to subprime, but many were (I've got the studies to prove it).

Refinancing was a trap. Responsible people understood that.

Dodd, in the graf before, is calling for regulation. it's better than completely removing the financial vehicle -- just understand that it's riskier, but not "shit, more than half of these default" risky.

Clearly, you are the one who considers themselves an expert.

Submitted by NextRightNando on Thu, 03/05/2009 - 20:37.

I'm just somebody interested in reality.

States, aware of the risks of abuses in subprime lenders' practices, wanted to regulate, but the Bush Administration prevented them.

States warned about impending mortgage crisis

Bush administration, financial industry thwarted efforts to curb greed

More than five years ago, in April 2003, the attorneys general of two small states traveled to Washington with a stern warning for the nation's top bank regulator. Sitting in the spacious Office of the Comptroller of the Currency, with its panoramic view of the capital, the AGs from North Carolina and Iowa said lenders were pushing increasingly risky mortgages. Their host, John D. Hawke Jr., expressed skepticism.

Roy Cooper of North Carolina and Tom Miller of Iowa headed a committee of state officials concerned about new forms of "predatory" lending. They urged Hawke to give states more latitude to limit exorbitant interest rates and fine-print fees. "People out there are struggling with oppressive loans," Cooper recalls saying.

Hawke, a veteran banking industry lawyer appointed to head the OCC by President Bill Clinton in 1998, wouldn't budge. He said he would reinforce federal policies that hindered states from reining in lenders. The AGs left the tense hour-long meeting realizing that Washington had become a foe in the nascent fight against reckless real estate finance. The OCC "took 50 sheriffs off the job during the time the mortgage lending industry was becoming the Wild West," Cooper says.

This was but one of many instances of state posses sounding early alarms about the irresponsible lending at the heart of the current financial crisis. Federal officials brushed aside their concerns. The OCC and its sister agency, the Office of Thrift Supervision (OTS), instead sided with lenders. The beneficiaries ranged from now-defunct subprime factories, such as First Franklin Financial, to a savings and loan owned by Lehman Brothers, the collapsed investment bank.

Some states, including North Carolina and Georgia, passed laws aimed at deterring rash loans only to have federal authorities undercut them. In Iowa and other states, mortgage mills arranged to be acquired by nationally regulated banks and in the process fended off more-assertive state supervision. In Ohio the story took a different twist: State lawmakers acting at the behest of lenders squelched an attempt by the Cleveland City Council to slow the subprime frenzy.

A number of factors contributed to the mortgage disaster and credit crunch. Interest rate cuts and unprecedented foreign capital infusions fueled thoughtless lending on Main Street and arrogant gambling on Wall Street. The trading of esoteric derivatives amplified risks it was supposed to mute.

One cause, though, has been largely overlooked: the stifling of prescient state enforcers and legislators who tried to contain the greed and foolishness. They were thwarted in many cases by Washington officials hostile to regulation and a financial industry adept at exploiting this ideology. 

 

The key to the financial crisis is...

Submitted by johnson springs on Thu, 03/05/2009 - 20:38.

The key to the financial crisis is finding away to demonstrate one political party is wholly to blame.

Please continue.

Bush is gone, folks.....

Submitted by Ironman on Thu, 03/05/2009 - 20:55.

So, why shouldn;t Chris Dodd join him?

Senator Christopher J. Dodd, Democrat of Connecticut and the chairman of the banking committee, said he did not know if new legislation was necessary, saying regulators could addresses most excesses under existing laws.  http://query.nytimes.com/gst/fullpage.html?res=9E01EEDE1530F930A15750C0A9619C8B63

Quibbles: Context, history

Submitted by impulsenine on Fri, 03/06/2009 - 04:29.

johnson springs:

In the meantime, I have two quibbles with the post.

First, Chris Dodd is by far the only person to blame, and had been serving as that Chairman for four months when the quote was taken. His predecesor Richard Shelby dropped several years' worth of balls as his committee leader in that position.

Second, here's the full context:

Dodd reaffirmed a plan to introduce a bill that would combat predatory lending. ``There is a difference between a subprime lender and a predator, and I don't want to lose the subprime lender [ ... ] I am a strong advocate of subprime lending,'' Dodd said. ``I don't want that word to become a pejorative as junk bonds did.''

To me, the quote suggests liberal naïveté that comes from believing that non-homeowners are that way because they need a hand (i.e., a subprime mortgage), but it's not as criminal as the suggestion that Chris Dodd actively tried to get lenders to issue irresponsible loans.

Incidentally, that excessive faith in people is at the core of the liberal/conservative divide.

it was bush with the homeownership society.

Submitted by RisingTide on Fri, 03/06/2009 - 11:25.

subprime mortgages were created for a reason. Dodd's quite firmly in the pocket of the lenders, sure.

but it was the republicans who were idealistic enough to thinkt hat everyone needs a bloody house. and that owning a bloody house would make people better citizens.