[Rhodes22-list] Brad - A little more on CRAs

Tue Sep 30 11:35:51 EDT 2008

Wally,

You have to follow the whole time line of the CRA all the way to the
end game. The CRA worked fine for several years. The 1995 CRA act put
real pressure on lenders to make CRA loans.  The system still worked
OK.  It was when primarily Fannie, but also Freddie, made a market for
CRA loans that the whole sub-prime market took off.  They were the
largest buyers and enabled the lenders to make a quick buck and pass
the risk.  The some bright boys on Wall Street came up with credit
default swaps and the wildfire really started.  Buffet predicted the
outcome in 2002.  Bush and McCain AND Greenspan warned of the
excessive risk Fannie and Freddie were taking.  Real estate prices
started escalating higher than any reasonable factor would have
predicted, the classic bubble.  I thought the market would correct in
a timely fashion and I was wrong. The CRA isn't the only factor in
play, but it was the kindling for this wildfire.  Greed and CDS was
pouring gasoline on the fire.

So back to the roots of the problem, first someone had to pressure
lenders to take greater risks.  The CRA did that.  Second, someone had
to provide a market for higher risk loans - Freddie and Fannie did
that.  Third, something had to spread the risk for Wall Street to get
in on the action.  They thought credit default swaps would do that and
they started to compete with Freddie and Fannie for the action.  Fred
and Fan were responsible for half, Wall Street the rest.

Was CRA the sole cause?  No, it was the match.  Freddie and Fannie was
the firewood and Wall Street was the gasoline. Could we have doused
Fan & Fred?  Sure we could have but they were the darlings of
Congress.  Could we have controlled Wall Street?  Not with the
existing laws in place (that's sure to change).

The average "accident chain" for most aircraft hull losses is about 16
steps long.  Break the chain at any step along the way and you avoid
the smoking hole in the dirt.  Did we break this chain?  No, we missed
every opportunity along the way.

Brad

On Tue, Sep 30, 2008 at 9:23 AM, TN Rhodey <tnrhodey at gmail.com> wrote:
> I read that already and no that doesn't provide what percent of the defaults
> were from CRA bank programs.  If it did maybe I missed it. I was aware that
> Fannie Freddie held a bunch of sub-prime paper so I am not sure why you
> pointed that out.  I will keep looking for my answer. I am not disagreeing
> with you I just never have seen any numbers showing CRA loan performed worse
> than typical sub-prime and were a leading cause of the meltdown. In fact my
> own experience is the exact opposite. This is why I am curious.
>
> It is a fact that sub-prime mortgage companies did not even have to worry
> about CRA. You do understand this right? Your wiki link says the same thing.
> Are you trying to make my point or yours? I used to review CRA numbers for
> a  large bank in our state. My own experience makes me think the blame on
> CRA bank loans is way over blown. Yes they were part of the problem but to
> say they are a leading cause just isn't true and really shows a lack of
> understanding of how sub-prime loans hit the street. None of the dedicated
> sub-prime mortgage lenders had to be concerned with CRA.
>
> I leave my work off this site for good reason but I have actually been a
> part of the process in selling loans direct to Fannie and to Hedge Funds. I
> had a ringside seat to this. This vantage point is why I was crying chicken
> little way back while you were still saying all is well. You stick with your
> sources and I will stick with mine. The track record of your sources and
> opinions on this is a quite suspect in my view. You may want to re-evaluate.
>
>
>  I am going back into hiding.....Wally
>
>
> On Tue, Sep 30, 2008 at 9:06 AM, Brad Haslett <flybrad at gmail.com> wrote:
>
>> Wally,
>>
>> Buried in here is your answer-
>>
>> http://en.wikipedia.org/wiki/Subprime_mortgage_crisis
>>
>> Over half of all subprime mortgages were held by Freddie and Fannie.
>>
>> Everything related to economics is an opinion.  I think we're in deep,
>> deep shit.  But that's just my opinion.
>>
>> Brad
>>
>> On Tue, Sep 30, 2008 at 6:58 AM, TN Rhodey <tnrhodey at gmail.com> wrote:
>> > Brad - You post stuff as fact when it isyour opinion. I stated i didn't
>> know
>> > the quality of the source up front...I admitted I wasn't sure of my claim
>> of
>> > les than 50%. I said i tried to find some different numbers and could not
>> > so I asked you if you had any. Hell Brad I said I wasn't sure so I was
>> > looking to see some actual numbers. The last numbers I saw showed CRA
>> loans
>> > out performed typical sub-prime. This was my own experience as well. Heck
>> i
>> > just asked if you had any numbers to support your claim. I take your
>> dodgy
>> > response as a"no" If you don't have any numbers to support your claim
>> just
>> > say so....
>> > Wally
>> >
>> > On Mon, Sep 29, 2008 at 8:59 PM, Brad Haslett <flybrad at gmail.com> wrote:
>> >
>> >> Wally,
>> >>
>> >> First, a "truth in posting" statement is necessary.  I'm not going to
>> >> waste my time parsing ANY data that has Keith Ellison as the source.
>> >> Anyone who knows me well knows that I have no issues with
>> >> African-Americans or Muslims.  I have huge issues with 'black whatever
>> >> he was converted to the Muslim faith' Keith Ellison.  Call me racist,
>> >> bigoted, ignorant, stupid, fill in the blank here ________________,
>> >> whatever.  Sorry, I'm not even going to look at anything Ellison
>> >> quotes or anything anybody else quotes that is  attributed to Ellison.
>> >>
>> >> The pdf document is from a law firm defending the CRA, hardly an
>> >> objective source.
>> >>
>> >> Since you seem to enjoy repeating the statement that my sources don't
>> >> back up my statements, all I can say is "buy a mirror". You yourself
>> >> said you hadn't watched the videos I posted.
>> >>
>> >> Wally, it doesn't matter if we meet halfway in Nashville, get out the
>> >> rulers, and end this argument once and for all. We're in deep shit
>> >> either way (but I am looking forward to your numbers from a credible
>> >> source and your comments on the videos).
>> >>
>> >> Brad
>> >>
>> >> On Mon, Sep 29, 2008 at 4:29 PM, TN Rhodey <tnrhodey at gmail.com> wrote:
>> >> > Brad - I said CRA sub-prime defaults  represented less than 50% of
>> >> sub-prime
>> >> > defaults. I hadn't checked in a year or so ....your claim blaing CRA
>> made
>> >> me
>> >> > curious . .A quick check shows I was way off.  CRAs actually have
>> >> > performed much better than i remembered. They do not perform as welll
>> as
>> >> > prime but much better than traditional sub-prime and Alt A.  Do some
>> >> google
>> >> > searches on CRA defaults.
>> >> >
>> >> >  see link from Slim's paper below. Check out the embedded PDF in the
>> >> article
>> >> > for breakdown on CRA loans defaults in top 15 US cities. I don't know
>> >> > anything about the paper but the PDF contains data refuting the claim
>> the
>> >> > CRA defaults are the problem. I searched hard but could find no claim
>> >> with
>> >> > numbers supporting  your position that CRA was the problem. In fact
>> >>  people
>> >> > (mostly politicians) making the claim didn't provide numbers and
>> didn't
>> >> seem
>> >> > to know what they are talking about......present company excluded of
>> >> course.
>> >> > :-)
>> >> >
>> >> > Do you have NUMBERS  to support your claim that CRA loans are the
>> >> problem?
>> >> >
>> >> >
>> >>
>> http://minnesotaindependent.com/10179/against-all-reason-bachmann-and-others-blame-1977-fair-lending-law-for-adding-to-economic-crisis
>> >> >
>> >> >  A quick check also confirmed most of the Sub-Prime Mortgage lenders
>> did
>> >> not
>> >> > have to be concerned with CRA. If ones reviews the numbers you can
>> come
>> >> to
>> >> > the conclusion the CRA loans actually have helped keep foreclosures
>> from
>> >> > being worse. If these folks were not in a CRA loan they would be in
>> >> typical
>> >> > sup-prime ARM with adjustable rates, high fees, and pre-payment
>> >> penalties.
>> >> >
>> >> > A while back there was a  Congressional GAO report breaking down
>> >> > foreclosures in every state by type of loan. I will try to find and
>> post.
>> >> > The main problems were Alt A Pay Option ARMs, Alt A Stated, Alt A No
>> DOc,
>> >> > and Sub-prime stated.
>> >> >
>> >> > Wally
>> >> >
>> >> > <
>> >>
>> http://minnesotaindependent.com/10179/against-all-reason-bachmann-and-others-blame-1977-fair-lending-law-for-adding-to-economic-crisis
>> >> >
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