Subprime Suspects

I love this article! It's so true.... this mess was not the result of just subprime lending, but very poor investment decisions and unethical lending standards and processes enacted by the big rich boys in Wall Street. We can't really expect the Right Wing morons to understand any of this, they typically just have a big bully mouth vs. an education worthy enough to understand the complexities of the real estate market. Thanks for pointing out that this is not the average Joe's fault, but they selfish greedy economic destroyers like Richard Fuld.

The CRA was supposed to help the disadvantaged acquire housing and that was good, but then it was taken to extreme when it wound up in the hands of inherently dishonest people who exploited and used the system in place to enhance their own profitability. Of course the poor are not to blame for this mess....as always they become the victims. Stupidity, greed and market manipulation caused this problem...pure and simple, and now we will all pay the price. Frankly, I am just waiting for the appropriate time to pull all of my money from the large Wall Street firm where it is currently invested. Why? Because I can! I don't want to be a part of any firm that participated in this current mess!

Why is this article a "web exclusive"? This is an important piece, and deserves inclusion in the print edition of Newsweek!

So if what you say is true, why not lend to the poor at the same rate of interest as to the creditworthy and not have "subprime" loans at all. No subprimes and no ARMs. There goes your theory and rant right out the window.

ACORN DID block legislation that would have put tighter regulation and oversight in place at Freddie and Frannie back in 2004. I by no means believe everthing I read or hear...take it all with a grain of salt and then go out and research it yourself. So I read this article at http://www.americanthinker.com/2008/09/barack_obama_and_the_strategy.html and while a lot of it was anti Obama speak, the facts about the CRA and ACORNS involvement were true. I did the research myself.
You can't pin the ENTIRE mess on the CRA, but a good portion of it. Since Freddie and Frannie hold MORE than 50% of the entire mortgage base of the United States. They are the biggest players and they are the ones where most of these CRA subprime mortgages sit. Part of the article reads: "Flexible lending programs expanded even though they had higher default rates than loans with traditional standards. On the Web, you can still find CRA loans available via ACORN with "100 percent financing . . . no credit scores . . . undocumented income . . . even if you don't report it on your tax returns." Credit counseling is required, of course.
Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed "the most flexible underwriting criteria permitted." That lender's $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.
The lender they were speaking of was Countrywide, which specialized in subprime lending and had a working relationship with ACORN." Not to mention: "Most significantly, Penny Pritzker, the current Finance Chairperson of Obama's presidential campaign helped develop the complicated investment bundling of subprime securities at the heart of the meltdown. She did so in her position as shareholder and board chair of Superior Bank. The Bank failed in 2001, one of the largest in recent history, wiping out $50 million in uninsured life savings of approximately 1,400 customers. She was named in a RICO class action law suit but doesn't seem to have come out of it too badly."
So if you think that these unregulated subprime loans to people who shouldn't have had them is NOT part of the problem, your vision is skewed. There is no ONE reason, but several that are ALL vastly important and should be subject to change. Perhaps if Democrats with the help of ACORN lobbyists had not blocked the oversight needed back in 2004, the mess would not be so bad for Freddie and Frannie. Perhaps if the regulations that watched these huge financial institutions (AIG, WaMu, etc..) were not allowed to swept away, the CEOs wouldn't have had all the power. So Democrat regulation on the one hand, Republican de-regulation on the other. They both helped bring this financial crisis into being.
Go read the article, but as with all media, with a grain of salt. Then look up things yourself.

The term "trickle down" comes to mind. It was intended to refer to a trickle of something that would sprinkle "prosperity" down on those who were not included in the benefits lavished on the opulent who were the beneficiaries of years of republican economic "values" which were actually giveaways to the rich. It turns out that the prosperity didn't trickle down as wages stagnated and portfolios on high fattened.
But, do not despair. When the greed bubble burst and our government had to socialize nearly a trillion dollars of credit to save us all, the blame "trickled down" onto the heads of those who were cajoled into mortgages that they couldn't afford nor understand in the mountain of papers signed at closing.
But, now we vote and we will shortly see that what "trickles down", can also "trickle up".

zen16 alot of the bad risky loans were made under Fannie Mae and Freddie MAc guidelines. Risky or not if they met Fannie and Freddie rules they were considered good.

Wow I need new reading glasses pardon the typo's

I agree that blaming on minorities on the housing crisis is wrong. However, I blame on most Americans on wanting something for nothing mentality whether it is on cars, houses, health insurance, war on Iraq. We will pay for it later in some way.

NotLivinLarge who ever said this problem was caused by people paying their bills? This is insane, I haven't seen or heard a single person say "This problem is caused by those people paying their bills, if more people did NOT pay their bills we'd be much better off." There is nothing wrong with living on credit, the vast majority of the world lives on credit to at least a certain extent.

This is not entirely true but a combination of both, poor minority homeowners happily accepted mortgages they knew would be difficult to play back, The lenders had also contributed by adopting a NINJA policy towards borrowers, No Income No JOb Approved. As for borrowers , what idiot takes out a large motrgage at a variable rate? The poor minority homeowners who bit off way more than they knew they could chew share a measure of blame in this too.

Yeah, leave it to the greedy narcissistic crowd to blame it on the poor rather than accept responsibility. The truth is that the rich have always profited from and have exploited the poor...until of course major recession or depression happens. The banks in question gave everybody and his brother a mortgage that they knew they could not afford. They knew in advance that they would be able to pawn off and sell these mortgages. The banks also jam credit cards and balance transfer checks down our throats. I receive them every day...or used to until this crises hit. Credit and credit cards are an empty house of cards and everyone knows it. Credit cards should be outlawed. It's a filthy business run by shysters. People need to learn to live the old fashion way...if you can't afford it...don't buy it. Everything else is an empty illusion created by the rich filthy bankers.

Typical Spin. Comparing international micro-lending to domestic sub-prime lending is not apples-to-apples. As a member of Prosper.com, I understand microlending. Giving money to a poor Indian farmer to buy a cow, upon which his livelihood thrives, is not akin to lending to an American who has been force fed the idea that homeownership is an American "right," and who lives in a culture of "more is more," as espoused by any rapper on MTV or celebrity wearing $30,000 dresses at the Oscars. Certainly there is blame on both sides, but mysteriously quiet and forgotten are the ratings agencies who, knowing that incomes and ability to repay these egregious loans were undocumented (and in many cases non-existent), slapped AAA ratings on these securities simply because they, like the Wall Street companies, earned revenues that were transactionally, and hence volume-based.

Let's start taking responsibility for our own actions vs. blaming everyone but ourselves. If you as a homeowner bought something that you couldn't afford you and only you are responsible. I'm tired of hearing the "old poor little me". I'm still renting because I can't afford the inflated prices for homes out in Chicago. But with all this bailout, sounds like I should have acted irresponsibly like all these other home owners that bit more than they can chew because as always the government is going to help me get out of my own stupidity. I don't feel sorry for all the people in foreclosure. They brought this upon themselves. And shame on the mortgage brokers and banks for agreeing to let this happen and making it possible for these people to do this to themselves.

notlivinlarge who is blaming people in your situation, you and many others have had similar problems. My job and my wife aren't secure just as I am sure many people's aren't. The problem still comes down to people like this author putting a racial spin on an issue and others too eager to blame one political party over the other. The problem is the rules were made laxed to help low income families ( a noble action ) without any oversight to keep things in check. Our leaders in both parties have done nothing to solve it or to even address it till it was out of control. There were people who bought over their heads, there were people talked into risky loans and there were people who just hit hard times that are at the root of the problem. IF our illustrious government led by the brilliant Nancy Pelosi and Harry Reid had done something 2 years ago when they took control and addressed it then instead of letting leaders like Barney Frank watch over it and tell the world everything is good. If our President hadn't destroyed his credibility by getting us bogged down in a war we should have thought through better then we did he may have been able to do something. But the problem is Bush waited till it was too late and Pelosi and Reid refused to acknowledge the problem existed when it could have been contained. This isn't a sudded revelation this has been brewing for years. Since late 2006 alone 289 lenders have either closed or curtailed or stopped lending ( http://ml-implode.com/ ) and yet not a single sole in our government felt there was a problem till late last year and then still did nothing to contain it.

This article is entirely unfair.
One example is given of unregulated banks doling out subprime loans.
Another example is given out of banks giving out non-subprime loans to the rich (notice the article never explains WHY that bank went under.)

The truth is that the overwhelmingly majority of bad loans came from regulated banks giving out loans to people who couldn't afford them. Two examples does not constitute a conspiracy of faulty blame. Also, there's unseen pressure involved. Simply because you can't find a rule in the CRA that says 'screw your bank over to benefit the poor' doesn't mean the pressure wasn't there.

Throwing all that aside. The writer is simply wrong about the rightwing. They never said the poor was at fault. Matter of fact they place more blame on the banks manipulating the poor. Besides the dollar amount of the examples they give target people buying a 300k house when they can only afford a 100k house. If that's poor, then well... I'm at the bottom of the barrel.

This article is bunk.

This situation was caused by any and all who made a bad financial decision, and it seems bad financial decisions are being taught all the time.

Buying up property that is depriciating because you make a profit on the government aid... is stupid. Buying up property you can't afford because it is appreciating and you hope you can sell it to a growing number of foreclosures is poor foresight and stupid.

If this author thinks they can throw two examples and claim the poor had no blame in this, they need to do a little more research into the IQ level of the general population, the bell curve centers on 100....

I personally don't care if the heart of the problem is lbad oans to poor minorities or, to quote the author, "rich white guys". There are plenty of targets to share the blame. Just don't ask me, the American taxpayer, to help bailout people who took out more mortgage than they could afford. No one is helping me to offset the losses I incurred when I made some stupid financial investments during the dotcom boom and bust, nor do I expect any help for my idiocy. For those facing foreclosure now on subprime loans, I'm sorry for your pain but now it's time for you to find a place to live that meets your income.

Racism created this crisis. That loans to all minorities are being labled "subprime" is absurd. Subprime means many things - limited income, high/adjustable interest, little money down, no-doc, etc. These loans were made to folks of all skin colors across the lower and middle classes. Equally absurd is the fact that once these mortgages were being collateralized, traded, and leveraged by rich white guys they were connsidered "safe"! Skin color, prestige, and old-boys networks were used to substitute for judgement. "Ooops! We just didn't realize that our old friends at Lehman were holding mortgages from black people!" Get over it - risky loans are risky the whole way up, all the way to the federal government buying them.

This is systemic racism, it runs deep, and it makes us all do irrational things. Let's keep holding EVERYONE accountable and SPEAK THE TRUTH about this. God bless us because we've got a lot of work to do.

- angry poor white woman