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#938818 - 04/09/08 06:17 PM ComActivists(likeObama)Helped Create SubPrime Mess
TheManofSteel Offline
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http://www.townhall.com/columnists/Jerry...subprime_crisis

Excerpts:

I wrote to you previously (Meet Barry Obama, 'Fair Housing' Lawyer) about the Community Reinvestment Act, a law which compels banks to make home loans in minority neighborhoods to people who were poor credit risks. Although the CRA is well known in the financial industry, political pundits and reporters often know very little about finance and so have missed this extremely important aspect of the story. Ignorance of economics doesn't help much either. The political class seems blissfully unaware of the concept of unintended consequences which is the idea that laws which are designed to make our lives better often make our lives worse.

On a recent edition of Kudlow and Company, I debated Vermont Senator Bernie Sanders on precisely this point. He seemed not only to disagree with my point that if congress compels banks to make Subprime loans, then they share responsibility for the crisis that results when the borrowers default; he seemed not to understand it. For him once we identify the target group as bankers, nothing else matters - they're bad and he's good, no more reasoning is necessary.

...

That's where guys like Barry Obama came in to the picture. When Barry (who was gradually changing his name to Barack around this time) graduated from Columbia, he took a brief stint as a researcher writing for a corporate consulting firm. According to his memoirs he thought of himself as 'a spy' who was dropped 'behind enemy lines'. Shortly thereafter, he left the enemy territory of corporate America and moved to a job about which he could feel proud - he went to work for the New York branch of the Public Interest Research Group. PIRG is one of those left of center activist groups who, among other things, uses the legitimate concept of 'fair housing' to force banks into making bad loans. PIRG has actively lobbied for a stronger (yes, you guessed it) Community Reinvestment Act.

According to his bio, and accounts from friends, Obama became an expert in real estate law and fair housing while working as a community organizer and public interest lawyer. This is especially the case during his Chicago period. After graduating from law school Barack worked for various community groups which were attempting to get black churches politically involved in left-of-center causes. He was hired because the Developing Communities Project, which was headed by two older Jewish gentlemen, was having trouble making headway in the black community. By then, the name change to Barack was complete and so was the shift to an Afro-centric identity. Barack was a natural. He was able to play upon crowds' sense of racial identity, castigating black audiences for their failure to embrace the right policies, but offering hope to them in the form of his own leadership. He joined a prominent Afro-centric church at this time, headed by Rev. Jeremiah Wright.
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#938848 - 04/09/08 06:40 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess TheManofSteel
B_F Offline
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So they are blaming the subprime mess on CRA?

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#938932 - 04/09/08 07:35 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess B_F
TheManofSteel Offline
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I do not think that is precisely what he meant. Rather, the prevailing sentiment that the government, egged on by certain community activists, pushes banks to make loans to people with very poor credit or who cannot afford mortgage loans, is a significant factor in what eventually became the sub-prime mess.
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#938959 - 04/09/08 07:57 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess TheManofSteel
straw Offline
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Many banks invest in special MBS that are drawn solely from low/mod geocodes. The banks receive CRA credit for these investments.

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#938963 - 04/09/08 08:00 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess straw
TheManofSteel Offline
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If the MBS portfolio goes south, do the banks have something to hedge against it?
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#938977 - 04/09/08 08:12 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess TheManofSteel
straw Offline
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if they have a hedge strategy. Still get CRA credit whether MBS goes south or not.

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#939078 - 04/09/08 09:25 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess straw
Mint Julep Offline
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The subprime mess was created by greed.
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#939085 - 04/09/08 09:31 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess Mint Julep
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So was 70% homeownership, if that's how you're going to define "greed".

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#939143 - 04/09/08 09:57 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess Mint Julep
straw Offline
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Originally Posted By: Mint Julep
The subprime mess was created by greed.


Absolutley. No one in their right mind wants to own a home.

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#939148 - 04/09/08 10:01 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess Mint Julep
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Originally Posted By: Mint Julep
The subprime mess was created by greed.


Exactly.
If it sounds too good to be true, it probably is too good to be true. Maybe it isn't greed, but gullibility?

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#939156 - 04/09/08 10:09 PM Re: ComActivists(likeObama)Helped Create SubPrime Mess Imagine
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No it must be greed because if its gullibility, than the consumer would have some responsibility and that simply cannot be.

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#939231 - 04/10/08 12:49 AM Re: ComActivists(likeObama)Helped Create SubPrime Mess straw
HappyGilmore Offline
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Pulling people out of the ditc...
Quote:
If it sounds too good to be true, it probably is too good to be true


Funny, I say the same thing about Obama...
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#939291 - 04/10/08 12:42 PM Re: ComActivists(likeObama)Helped Create SubPrime straw
TheManofSteel Offline
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Originally Posted By: straw
No it must be greed because if its gullibility, than the consumer would have some responsibility and that simply cannot be.


Without trying to sound in any way well-informed on this topic, as I have followed the various debates on BOL about the sub-prime mess with studious interest but really offered no opinion, I will say this in general:

I would not foolishly take out a mortgage loan that I cannot now, nor would in the event of a major change in the interest rate of an ARM, afford to pay. Thus I agree, caveat emptor, the consumer has the most culpability here. But it is hard not to take a step back and note the trend that the author of the article in the first post points out, that spurred on by the community activist mentality, a paradigm was created that lent to the govt. pushing the banking industry toward unwise lending practices, then the govt. washing its hands of even a glimmer of responsibility, basically blaming the banking community.

When the government gets too involved in the free markets...(should I even bother going there)? ::waits for Ron to emerge
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#939462 - 04/10/08 02:34 PM Re: ComActivists(likeObama)Helped Create SubPrime TheManofSteel
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TWD-that is a fair assessment. Even HUD pushed to remove "barriers" to homeownership. Those barriers were savings and strict credit requirements... GASP! Savings? Who would have thunk!!!

There is no doubt of the abuses that happened with this sub prime mess. However, in the effort to tear down these "barriers", lax underwriting programs were created. It has collapsed on itself, and unfortunately there are innocent victims here....I can also see people taking advantage of the bailouts to get them out of a mess they knowingly put themselves into.
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