(Mar 11, 2018 02:58 PM)confused2 Wrote: [ -> ]Due to the governmental pressure to make under-qualified loans, that was the only viable way to try to secure the investment value of such loans. GSEs had an implicit guarantee against security value loss:Syne Wrote:That's pretty much how it went down in the US housing bubble. Except the lower qualifications for loan approvals was actually mandated by government regulation. Banks here weren't doing that until the government pressured them. And since the government was to blame, the US taxpayer bailed them out too.
From https://en.wikipedia.org/wiki/Fannie_Mae..._late_2007:-
"Then in 2003–2004, the subprime mortgage crisis began.[35] The market shifted away from regulated GSEs and radically toward Mortgage Backed Securities (MBS) issued by unregulated private-label securitization conduits, typically operated by investment banks."
Clearly there are two sides to every story and we may well (as intended) never know the truth.
Fannie, however, became a private corporation, chartered by Congress and with a direct line of credit to the US Treasury. It was its nature as a Government Sponsored Enterprise (GSE) that provided the 'implied guarantee' for their borrowing.
- https://en.wikipedia.org/wiki/Fannie_Mae...nt_support
The free market did the only thing it's designed to do...compete. The government creating an uneven playing field warped the usual incentives.
(Mar 11, 2018 04:40 PM)Secular Sanity Wrote: [ -> ]Economics is not complicated, once you actually understand it. You're still playing the "I sound smart because I reference someone else" game. If you've actually learned anything, you should be capable of synthesizing arguments yourself. If not, you're just pretending.(Mar 11, 2018 02:57 AM)Syne Wrote: [ -> ]Again, not watching dozens of videos, especially if you don't have the wherewithal to make your own arguments.
There’s no shortcuts to understanding complicated situations, sweetie. If you want to pop off and sound like a big shot, watch the videos and read the links.
Quote:Wrong.Commodity Future Modernization Act of 2000 (wikipedia.org)
"Martin Lowy argued that America’s housing bubble couldn’t have inflated to dangerous proportions without massive inflows from Europe.
The crisis was built in just three years: 2004 through 2006. If no new financing sources had been added to the housing market after 2003, nothing extraordinary would have happened even if house prices had declined.
What made those three years extraordinary was the influx of foreign money into securitized mortgage-based products. That inflow enabled mortgage money to be advanced to people who couldn’t repay it.
Foreign money knows little about the domestic market and therefore relies on local banks, governments, or rating agencies. Investment banks seized on that weakness of the foreign money to use weaknesses in the system to promote badly underwritten mortgage products and pass them off as money-good."
Here's the real story, in brief: In 1995, using the powers of the presidency, Bill Clinton turned the 1977 Community Reinvestment Act into an aggressive program that basically forced banks to lend money to "underserved" communities. That meant those with low incomes who couldn't necessarily repay a loan.
Meanwhile, his Department of Housing and Urban Development got involved in a big way.
Jack Cashill, writing for the American Thinker, notes: "HUD, which Congress had made the regulator of Fannie Mae and Freddie Mac in 1992, began to pressure these agencies to set numerical goals for affordable housing, even if that meant buying subprime mortgages. The media cheered the agencies on."
Under HUD Secretary Andrew Cuomo, the agency became particularly aggressive, in 2000 making a goal of over $1 trillion in new loans to low-income minority households. Fannie Mae and Freddie Mac were told to make at least half of their loans to low- and moderate-income borrowers, mainly minorities.
Banks suddenly found that regulators had the power to refuse their branch expansions or reject a merger if they weren't making enough loans to otherwise unqualified minority borrowers. So they played along. They made the loans, and Freddie and Fannie bought the loans right back. It was like a game of musical chairs, and the Fed kept the game going in the early 2000s by cutting interest rates.
- https://www.investors.com/politics/edito...al-crisis/
Quote:The Real Cause of Americas Housing Bubble was Foreign Money
But shortly after, Chinese investors started pouring in and the prices continued to rise.
There was this little program that was created in 1990. We offered up citizenship through this EB-5 Immigrant Investor Program, providing a method for eligible Immigrant Investors to become lawful permanent residents, but there was some shady shit here, as well. There were a few loopholes in it and the amount of jobs that it was supposed to create never actually took place.
Chinese customers quickly became the silver lining in, not only America’s real estate market, but also, Canada’s, Australia’s, etc. As the prices climb along with rent and property taxes, California residents are being forced out.
China’s Millionaire Migration
Chinese pouring over $110 billion into US real estate
There's a lot more to the story but so little time. Maybe next time, when Syne catches up.
Nope. That doesn't fly either. Foreign investment didn't cause the housing prices to significantly rise. $110 billion doesn't even put a scratch in accounting for the $9 trillion lost in the housing market.