So banks are to consider welfare payments when figuring a loan?

That seems simple enough "You're on welfare = I figure you cant afford a new home"

Prager once mentioned a principle in Judaism: If you're not seriously interested in buying something, it's immoral to ask the seller what the price is.

(It's probably worded with much more grace in the original text.)

I love that because it has so many subtle implications for how economies work, and for how buyers and sellers each have responsibilities.

And in the 15 or so years since I've heard it, it's saved a thousand heartbreaks in guitar shops.

Everyone is supposed to believe that the current financial crisis was caused by excessive free markets and deregulation and corporate greed, when it was clearly caused by the obviously stupid policy of forcing banks to lend money to people that no sane lender would lend to.

Some of the people making these claims must surely know they are talking humbug, but are happy to do so anyway.

Gee, the way the banks used to do business sounds so ... patriarchal. Oppressive, even! Thank God for political correctness, the "something for nothing" fix for what ails you. I am so grateful that Feminism has led the way to the progress we have made in the financial health of this nation -- clearly that "old white guy" way of thinking HAD to go.

What else of that bad ol' Patriarchy can we destroy so that people can be made more "equal"? I have little doubt that we are going to find out ....

True, Amy, not everything is about feminism, and I don't always make that connection, as you know. But I see a definite connection here. The banking crisis is largely caused by PC bullshit. Feminism is one of society's primary enablers of PC bullshit -- the Nanny State, the Welfare State, etc.

When I see the wolf, I raise the alarm. It is my duty -- given the number of "see no evil, hear no evil, speak no evil" monkeys on watch these days. Try to convince me that I actually saw a sheep, or nothing at all, and I'll be willing to evaluate my position.

I respond much better to substantive argument and analysis than shaming tactics, even where they are well-intended, as here. I know that takes valuable time, however.

Eliminating the pernicious, perverse effects of feminism from society must be an ACTIVE, not a passive, process. Consciousness must be raised, right? I'll be done when I'm dead.

To be fair, there was a kind of institutional racism in the banking industry during the post-WW2 period when home ownership rates soared. If you lived in a black neighborhood, you couldn't get a mortgage backed by Fannie Mae. (See Niall Ferguson's PBS doc, "The Ascent of Money.")

Appropriately, government action that created a problem had to be solved by more government action, which created another problem, which had to be solved by more government action. I think we all see where this is going. Every crisis is an opportunity to expand the size of government, instead of abolishing the government institution that caused the problem is the first place.

> Eliminating the pernicious, perverse
> effects of feminism from society
> must be an ACTIVE, not a passive,
> process.

Could you eliminate the pernicious, perverse effects of some other liberating historical force first? That way we'll know you're sincere, and not just a bitter clown who got his heart broken by a ninny woman or something. Abraham Maslow said "When the only tool you have is a hammer, you tend to see every problem as a nail." It's easier to blame this economic crisis on the eradication of smallpox than on feminism.

Jay R, you're getting hysterical.

Believe me, radical feminists have had at least as pervasive influence on Canadian society as on American, but our banks up here are in vastly better shape than yours down there. There is no banking crisis up here. There are no zombie banks. No "stress tests". No talk about nationalizing the financial industry. Why? Because there was no Community Reinvestment Act in Canada, and no Fannie Mae or Freddie Mac, either. There are other reasons, but those are the essential ones. Feminazis had nothing to do with it.

I think it is simplistic to simply blame the government forcing banks to make subprime loans. The key players in this mess are the insurance companies (hello AIG) that assessed the risk of the repacked bundled loans and provided insurance to the people who bought them. The danger of systemic collapse existed because the repacked loans were sold with insurance against default that essentially propogated the risk throughout the entire financial system. Investers bought the loans because they could get insurance against default. But if too many loans defaulted, the insurance companies would go bankrupt, the investers would then not buy new loans, and then banks would no longer be able to sell loans. Once banks got stuck with the loans, the system locked up. Bad behavior was encouraged because everyone could pretend there was no risk. They knew what they were doing and pretended everything was OK anyway. Because until it collapsed, everyone made money. Shame on them all.

Speculators, Politicians and Financial Disasters

11/10/08 - WSJ.com from Commentary by John Steele Gordon

How Washington created a financial panic in 1836 and 2008.

In 1934 the government created "red lining" as a quick, bureaucratic way to assess risk. Always look to the government for intelligent, nuanced decisions.

--- Quote ---

But historically there was also a class, made up mostly of American blacks, for whom home ownership was out of reach. Although simple racial prejudice had long been a factor here, it was, ironically, the New Deal that institutionalized discrimination against blacks seeking mortgages. In 1935 the Federal Housing Administration, established in 1934 to insure home mortgages, asked the Home Owner's Loan Corp.—another New Deal agency, this one created to help prevent foreclosures—to draw up maps of residential areas according to the risk of lending in them. Affluent suburbs were outlined in blue, less desirable areas in yellow, and the least desirable in red.

The FHA used the maps to decide whether or not to insure a mortgage, which in turn caused banks to avoid the redlined neighborhoods. These tended to be in the inner city and to comprise largely black populations. As most blacks at this time were unable to buy in white neighborhoods, the effect of redlining was largely to exclude even affluent blacks from the mortgage market.

--- /Quote ---

The talk about irresponsible mortgage lenders misses the target. These were bank and independent mortgage originators. These loans were immediately sold to Fannie Mae, Freddie Mac, and other large institutions who depended on a handshake government guarantee on their investments. The mortgage originators produced what the government wanted to buy. The government handed out favors to those who would in turn vote for the politicians giving the handouts.

The government was buying, so independent companies produced what the government wanted to buy. It is that simple.

The government, specifically the House and Senate financial subcommittees, directed massive resources into ordinary and subprime lending by implicitly guaranteeing the actions of Fannie Mae and Freddie Mac. The government discovered an amazing and deadly fact, that they could direct almost any amount of money where they wanted in the housing market without nasty arguments about publicly appropriating the money in the budget.

Fannie and Freddie could borrow any amount of money off-budget, out of public view. Institutions would lend them the money because they expected the US Government to make good in any default. They were correct, the government is making good through the bailouts.

One way or another, the US is paying off $1.5 - $2.0 trillion in losses. That is where the AIG payments and the bank bailouts are going, in my opinion, so that they are not directly related to Fannie and Freddie in the public mind.

See We Guarantee It: Don't Stop for the whole story.

The House Financial Services Committee had many opportunities to stop Fannie and Freddie from expanding its support for subprime lending. It is false that they did not know what was happening. This was not a lack of regulation, because that entire committee was a regulator, and they encouraged and even required Fannie and Freddie to relax their standards for buying subprime loans.

The original small market for Alt-A (riskier) loans increased hugely because FanFred became a buyer. The subprime mortgage (riskiest) loan was created by Government mandates on banks through the the CRA housing bill, and the volume of subprime loans expanded mostly because FanFred became a buyer, as dictated by Congress. FanFred did not buy all of the risky loans, but it supported the market for such loans and made them acceptable over time to other institutions. So, mortgage losses have not been limited to FanFred.

FanFred set the standards for the mortgage market. Mortgage lenders made risky loans to people with poor credit ratings, according to the standards for the loans FanFred would buy. FanFred's decreasing credit standards of course produced decreasing credit standards by retail mortgage lenders. FanFred knowingly took on all of the risk when they bought these loans.

So to a fair degree, the current economic crisis has been caused by the incessant demands of millions of blacks who felt entitled to be given homes by the rich, without having to work for them, and people giving in to those demands, presumably being caught up in the new feel-good PC cult.

"So to a fair degree, the current economic crisis has been caused by the incessant demands of millions of blacks who felt entitled to be given homes by the rich, without having to work for them, and people giving in to those demands, presumably being caught up in the new feel-good PC cult." --Mouse

"To be fair, there was a kind of institutional racism in the banking industry during the post-WW2 period when home ownership rates soared. If you lived in a black neighborhood, you couldn't get a mortgage backed by Fannie Mae." --Tyler

It's just interesting to see them both, side by side.

Andrew Ferguson has the truth of it (and Tyler, too) that it was the government that instituted the redlining in the first place. There never should have been a Freddie Mac or a Fannie Mae.

"Andrew Ferguson has the truth of it (and Tyler, too) that it was the government that instituted the redlining in the first place. There never should have been a Freddie Mac or a Fannie Mae."

Tyler makes a very good point with his "Every crisis is an opportunity to expand the size of government" comment ... this continues to this day, with Obama, and the G20 etc. ... 'government to the rescue' to 'make sure this never happens again' - oh, it just involves giving ever more power and money over to ever more government bureaucrats, and ever more onerous regulations.

But still, something within me is screaming --- when you purposely take out a loan, it does *not* take a genius to be able to figure out whether or not you will reasonably be able to continue to make those monthly repayments. No matter how complex one can pretend it is, it is not, a 10-year old can figure it out. And yet so many people 'signed on the dotted line' anyway -- nearly all of them *must* have known they couldn't pay - and collectively, in large enough numbers, those people helped this huge problem.

Maybe they blindly hoped the rich people would somehow end up paying for their houses, perhaps feeling entitled to them. And hey, if so, they turned out to be right.

"those people helped this huge problem." -> correction, "helped created".

The regions that have been hit hardest by foreclosures are not inner-city urban areas. To my understanding most are in CA, and the south west. It's my impression that the standards that were innovated to serve marginal borrowers were also applied to more affluent ones, but employed to enable them to purchase homes well beyond their means.

Per a recent issue of the Economist, as of mid-2008, subprime mortgages were 1% of the total in Canada, 2.5% in Australia, and 14% in the US.

The cause and effect are pretty clear, but Mike got to the core of the matter: the road to hell is paved with good intentions.