Fix talk radio.

Doing nothing allows things to straighten themselves out. Doing something may or may not just make things worse.

I think we need to fix this housing meltdown deal while we're at it.

Fortunately, eight years of doing nothing should take care of it.

I.e. who? Who did it?

My urologist said not to use the "Bounce" sheets when drying the underwear shorts.

Any particular reason?

Doing nothing allows things to straighten themselves out. Doing something may or may not just make things worse.

Allergy. Makes itchy balls.

I'll have to remember that.

To use or not to use?

It depends.

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Pure BS. The high apparent profits from the subprime sector drew investors and the real estate and mortgage origination industry. Nobody forced them.


Check and find who encouraged, made possible, all those subprime and easy occupancy, etc. items possible!

The Bush Administration.

Sorry, but neither of you may blame your favorite perps for this one.

Market driven.

ROBERT KUTTNER
The dangers of deregulation

By Robert Kuttner | March 17, 2007

THE BUSH ADMINISTRATION and the US Chamber of Commerce picked an awkward moment for their latest assault on financial and consumer-protection regulation. At the very moment that Treasury Secretary Hank Paulson was meeting with Wall Street bigwigs in a high-profile confab this week to call for weakening of the post-Enron Sarbanes-Oxley Act and other investor and consumer protections, the stock market was tanking.

Why is the market so nervous? Mainly thanks to the latest bitter fruit of financial deregulation : the collapsing $1.3 trillion "subprime" mortgage business, which now accounts for one mortgage in three. Here is a textbook case of why financial institutions need to be regulated, to protect both consumers and the solvency of the larger economy.

In the past decade, as regulators discarded rules, shady mortgage banking companies, financed by the bluest-chip outfits on Wall Street, calculated that they could make a lot of money offering bait-and-switch mortgages to poor credit risks. Default and foreclosure rates would be greater, but higher profits would more than compensate for the risks. So the subprime mortgage industry, enabled by the big banks, invented amazing gimmicks. These included not just variable-rate mortgages, but mortgages that were initially interest only, mortgages with introductory teaser rates, mortgages with no down payment. No income verification required! No credit check! Subprime operators targeted people with horrific credit histories and families desperate for housing who could not afford the debt they were taking on. Last year, 60 percent of subprime loans required no meaningful documentation.

Then came the morning-after: As higher payments kicked in, people couldn't meet them. Defaults skyrocketed, to an estimated 13 percent of all such loans. At least 25 subprime lenders have gone out of business. The big dogs on Wall Street, who had invested in the subprime operators, took a big hit, too.

It's not clear where this will end. Many low-income families will lose their homes. Innocent investors will suffer the spillover effects on the stock market, and general mortgage rates may have to go up to compensate for these losses of reckless speculation.

But wait. Weren't these subprime lenders doing good works by making it easier for low-income borrowers to become homeowners? Sure -- in the same way that the Mafia helps small-business owners desperate for credit. If the goal is to promote low-income homeownership, there are far better ways that don't put financial markets at risk and don't cause people to lose their homes after a few years.

For instance, the FHA has long had a program of insured loans that require only a 3 percent down payment (and have a much lower default rate). Non profit and public programs like Neighborhood Housing Services offer long-term help to moderate-income homebuyers on credit counseling. If we were serious about promoting first-time homeownership, we would offer subsidized, low-rate mortgages, as we did in the Great Society era, before Reagan and the Bushes gutted social spending.

The subprime mortgage industry had no real commitment to the homebuyer, who was merely a handy means of making a quick buck. Ever since the Wall Street wiseguys invented "securitization" of mortgage loans, a mortgage company with little of its own capital at risk has been able to originate loans and sell them off to middlemen who turn them into bonds. Both the mortgage company and the middlemen make their money on the transactions, and some lucky investor ends up with the bonds and the risks.

Supposedly, the wizards of the private secondary mortgage market, such as Fannie Mae, vet the mortgages to make sure reasonable standards are being met. But Fannie has been reeling from her own scandals, and obviously someone was asleep at the switch.

A spectacular casualty was a subprime lender called New Century Financial, which has now suspended loans. Between 2004 and 2006 its three founders, perhaps seeing the coming abyss, realized $40 million in stock-sale profits, and are now under investigation for possible improper trading and rigged accounting.

Congress is also investigating the entire mess, while mortgage industry lobbyists hope to fend off regulation by using the low-income family as poster child for the industry's misdeeds: Regulation would just hurt the poor.

But before the mid-1970s, this kind of meltdown didn't happen, because there were regulations and prudent credit standards; low-income people got government help rather than private-market scams -- and there were hardly any defaults. How many more financial scandals will it take before we get back to that model?

Robert Kuttner is co-editor of The American Prospect and a fellow at Demos. His column appears regularly in the Globe.

http://www.boston.com/news/globe/editorial...f_deregulation/

But, how did this situation develop in the first place?

First, look back to the Supreme Court decision in 1978 that allowed usury credit card interest rates to be exported from North Dakota. Soon, other states joined the bandwagon and, adjusted for inflation, from 1968 to 2000 credit card debt increased by 6,000%. That's right, I needed a comma. One more time; a six thousand per cent increase. Now,20% of all twelve year olds in this country carry a credit card.

Is it the personal responsibility of the consumer to cease and desist using credit cards and going further into debt? Sure. Absolutely. Is there corporate responsibility for banks to scale back on the two billion mail solicitations a year for credit cards to American consumers and ask themselves is it morally right to require credit card agreements to have thirty pages of terms which allow more and more creative ways to trap the customer into deeper debt? Agreements which Harvard Law School professors that teach contract law can't read? I think the answer has to be 'yes' in both cases.

But, what does this have to do with sub-prime mortgage loans? Well, in a word, everything.

Sub-prime loans just like the out of control credit card industry are the direct result of banking de-regulation, and after two decades of this de-regulation, home owners of today are three and one half times more likely to lose their homes to foreclosure than their counterparts a generation ago. With home loan payments that are 40% to 50% of a family's gross monthly income, with more available credit, more complex credit and more expensive credit we suddenly find ourselves in a mess of foreclosures and bankruptcies. And, we are now surprised?

Sub-prime loans are not the problem, they are a symptom of the problem and the problem is that, "Just a generation ago, the average family simply couldn't get into the kind of financial hole that has become so familiar today. The reason was straightforward: A middle-class family couldn't borrow very much money. High-limit, all-purpose credit cards did not exist for those with average means. There were no mortgages available for 125 percent of the home's value and no offers in the daily mail for second and third home equity loans. There were no "payday lenders," no "live checks," no "instant money," and certainly no offers to "consolidate" all that debt by moving it from one credit card to another.", because it would have been against the law to do so, according to Elizabeth Warren of Harvard Law School who recently testified to Congressional hearings.

So, what is, or, maybe the better question: is there a solution? To me there is, and it is two fold.

First, some banking regulation is absolutely necessary. It is no accident that Congress is
investigating credit cards which charge what would have been usury interest rates prior to de-regulation with incomprehensible terms, trick billing cycles and 'traps' to squeeze ever more profit and fees out of the consumer. It seems $29 Billion in revenues were not enough for the banking industry in 2005, so interest and penalty fee revenues were increased using these predatory tactics to attain $79 Billion in revenues. There is no reason to believe that revenues went down since these numbers were reported.

So, when this is combined with predatory fees, interest rates and deceptive practices used by credit cards companies, the consumer is getting steered, squeezed, mislead and their economic viability drained. Two decades of deregulation has taught us that market forces left to themselves, simply are incapable of finding within their structure the morality to do what is right. With more and more regularity, when describing the dire circumstances of debtors, we are discussing and addressing the person next door in suburbia. It is no longer a low income problem.

http://www.articlealley.com/article_157287_19.html

Sorry, but neither of you may blame your favorite perps for this one.

Market driven.

Sorry, but neither of you may blame your favorite perps for this one.

Market driven.

We just have to get rid of that stupid market thing. Get on the five year plans and let gubmint run things like they do Medicare and the DMV.

We gave you righties 5 years and now foreclosures and personal debt is at an all time high. If Medicare and the DMV are messed up it's thanks to the vast expansion of bureacracy created by.... the right.

Leave it to the righties to destroy the "market" by legitimizing usary, greed, and self-defeating, self-destructive, anti-business practices.

You want Markets?

Then don't work to detroy them.

Heck of a job there, righties.

Ok, folks.

This here forum is for stuff to be fixed up good by The Shills in 2009.

Let's not hijack this important thread with arguments.

I'll add "Fix the markets up good in 2009" to the list of poop The Shills will be fixing up good come 2009.

We just have to get rid of that stupid market thing. Get on the five year plans and let gubmint run things like they do Medicare and the DMV.

I've been impressed with the DMV here in California lately. Totally different system, wait is nowhere near as bad. Last 5 years or so, you know, since Ahnold.

I've been impressed with the DMV here in California lately. Totally different system, wait is nowhere near as bad. Last 5 years or so, you know, since Ahnold.

Oh please . . since Ahnold my ass!

Did the change go into effect under Davis?

Which changes are you talking about?
The computerized line (with the 'greeter' so to speak, who does a bit of 'triage' and then gives you the "number" with different letters and numbers, and the P.A. system and all that) started in 2002, while Davis was still governor.