So we both agree that "too big to fail" should not exist.

BUT, "give banks the freedom to manage their funds"

IS EXACTLY WHAT FUCKING LED TO THIS MESS IN THE FIRST PLACE

"Get out of the way" has been the rethuglican mantra for the past 30 years and it has allowed corporate America to buy off lawmakers to look the other way and whatever over sight is set up is stacked with former lobbyists.

I really am tired of your bullshit trying to claim that more of the same will solve problems.

Rethuglicans are like the teen whose parents come back from a weekend vacation and find the house trashed, then the teen kisses their ass and promises not to do it again, but the very next month they do the same shit.

More jobs ISN'T ENOUGH, creating mostly crappy paying jobs only makes the shareholders and CEOs rich, it doesnt do shit for the most people who have to live off of what they get paid WITH the cost of living and pay gap exploding.

AGAIN, our future is to look like China and India and that IS NOT, nor will ever be my idea of competition.

I am sick of your bullshit. And I am damned glad more and more people are standing up to corporate bullies.

Well it is not just that. It is bad enough that banks lent money to people who didn't qualify. What the top are not doing is long term is creating a higher paid society that COULD become a good risk, instead of keeping wages down.

Our economy is "whatever the market can get away with" instead of building a stable society. It never occurs to the top that IF IF IF IF IF IF IF IF those in the middle and the bottom have stability and a future, then they COULD put more people in houses and not create the bubble they did for their own selfish benefit.

AGAIN this is a result of the black and white thinking that life is only about choices and never about what someone else can do to you beyond your own choices. Actions affect others no matter what some might think.

It may be legal to do some things, but legal doesn't constitute moral or even long term benefit for society.

The top likes to blame the victim not understanding that they are the ones who raped the victim in the first place.

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Brian, if the banks had been left alone, the current crap never would have happened. Banks pretty much are not in the business of extending bad loans. They are in it for the money and that tends to mean deciding who can have it based on parameters and math.

What went wrong this time was that a crap load of federal loan guarantees were put out there, specifically targeted at getting them to extend themselves past the point where they had any business being.

The intent may have been, well, I will not call it noble but good hearted. However, it was so badly thought out that it created the industry of people not working because it was easier to flip houses for profit.

Now things suck far worse than ever and a trillion dollars of fake money were made to fix it. People who were keeping an old car on the road because that is the cheap way to run all had to buy cars that the insurance on is fairly expensive. Banks which are too big to fail (and where did that idea come from?) managed to make a profit on moving money that never existed.

 Brian, did you miss the part where I pointed to very specific laws and government agencies involved? Your ignorance is so overwhelming I don't even know what to say except you really should do some research on your own and not rely on political sound bytes. I know you aren't going to believe anything I say and that is fine, you shouldn't, but I can and have pointed you to direct sources where you can do your own research.

Saying the banks were unregulated is simply false. You might argue they were poor regulations and that maybe someone could create better ones. I believe that is unlikely to happen and am aware of no one in congress who has proposed good regulations. Could you point me to a specific regulation that is positive?

You continually fall back to blaming the republicans, and I agree the republicans failed miserably, but it wasn't because they shrunk government- they didn't. They talked like they would, but when in power they increased the size and power of federal government just in different areas which is why I left the republican party. Do you deny that Bama and the democrats have been engaging in corporate asskissing and circle jerks? It isn't a republican vs democrat problem. It is an American freedom vs power hungry politicians problem.   

You seem to have some interest in the subject since you are an active participant whenever it comes up. I would strongly encourage you to do some research on exactly what all these banking regulations are and the effect they had on the market. Read the CRA, it is government law and is available on the internet, research Fannie Mae and Freddie Mac- the government DID put massive pressure on banks to make subprime loans with the CRA. And Fannie & Freddie were used to purchase questionable loans from banks, thereby providing them a safety net. It is as fucking factual as the sun rising in the east every morning.

The STATED goal of these programs was to provide poor people loans to purchase houses and it worked. A bunch of poor people bought houses and a bunch of middle class people bought houses they couldn't afford. When bankers saw that these loans could be profitable and had the safety net of government they realized they could make a killing and banks/mortgage brokers that specialized in only subprime loans sprung up everywhere. So yeah, the "greed" in the market was a factor, but it was only possible because of the CRA being a catalyst to force the initial loans and Fannie/Freddie being the safety net to cover their losses that most bankers knew would come eventually.

Remove the catalyst and remove the safety net, most bankers wouldn't risk their money and those that did would have had a much harder time selling the securities because the ONLY reason they had a AAA rating was because of the implicit government guarantee. Which means they would have needed to sell lower rated securities at a higher interest rate thereby making subprime lending less profitable. Less profitable means fewer bankers would have taken the risk because they are greedy- they take risks based on how potentially profitable they are.

The definition of an economic bubble is when demand is temporarily inflated causing over production of the good. Demand was temporarily inflated because a bunch of people who couldn't get loans in the past suddenly qualified therefore substantially increasing demand and stimulating the values. When that demand disappeared because people couldn't or wouldn't pay for the loans, the market collapsed. Also note that the poor are not the only subprime failures. Many were people with money "flipping" houses for profit because the rapidly rising real estate values made it profitable adding even more artificial demand. Perhaps an unintended consequence of the governments regulations but a predictable one. 

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Well, Beyond, I never made the kind of cash to count as a quality source for the CC companies. Even so, I had a maxed out card, stopped using it and went on autopay. The same month that it finally went to zero, they gave me an extra thousand dollars to work with. That is so responsible on their part that I have not used it for a long time.

@Brian, I see you as somewhat right but only to a point. The tea party has been the first group to speak up but now we have the hippies on wall street. Local rumor is that pissed of ex-veterans are looking to get in on the deal. Heavily armed and combat trained people going up against the NYPD? This could get interesting.

Back to Beyond: Consider not leaving home unarmed. I don't know your location at all but we have a many city deal going on that could get ugly. I am not willing to wear any of the swords in public just yet but I trivially can.

If ugly happens, you would do best to have my back and I will have yours.

Look in the mirror. So far I have pointed to specific laws and specific government agencies that were set up and detailed a specific explanation on how it led to the housing bubble. What have you supplied? RICH PEOPLE ARE GREEDY!!!! Who is using buzz words? All you use is buzz words. Arguing with you is kind of like yelling at a campaign commercial.

You have asserted that the banking industry was unregulated- that is demonstrably false. You have said the government didn't pressure banks to make risky loans- again demonstrably false read the law. 

Show me where I am wrong. Link me to a single regulation written or proposed you consider positive. There have been thousands of regulations written in the last few years. Go find one that you think is great an link me to it. You keep saying we need to regulate- ok, what should the regulations say?

Is your debit card getting a new fee? You probably are screaming at the "greedy" bankers about it while being completely ignorant of the provisions in the Dodd-Frank bill that have made it necessary. My point is that government regulations have consequences. The market is not operate out of morality or ideology and never will, it is profit motivated. If a regulation makes an action more profitable you will see more of it in the market. If it makes it less profitable, you will see less of it, if a regulation bans/lowers a revenue stream companies will seek out replacement revenue streams.

The CRA made banks take on riskier loans, Fannie made it possible for those risky loans to not only be profitable, but to be more profitable than regular loans. So the market did what markets do when an extremely profitable and low risk opportunity comes around- it flooded the market. Voila, you have a massive bubble that fed itself until it burst. Without the government creating those conditions, sub-prime loans would have remained high risk-low profit so banks, being greedy, would have limited their exposure to them.

What is wrong with my line of thinking? How could sub-prime loans be profitable without Fannie and Freddie? Suppose there were absolutely no banking regulations other than bans on theft and fraud (basically the infractions that can cost you serious jail time) and you had an idea to make profits on sub-prime mortgages but didn't have the cash. Sell me on the idea. If I provided the financial backing, how are we going to make a profit? 

Here's Beyond's simplistic utopia mantra, "Free market good",

Depends. It can be a good thing, but it can also be abusive, which Beyond is in total denial of.

Pools are fun to swim in, but can be unsafe if designed wrong, and if they don't have a lifeguard. In fact, most pool companies are no longer allowed to sell the small kidney bean shaped pools with diving boards. And many companies still sold them after the medical community told them it was a bad idea to dive into them. I've hit my head on the incline from the deep end myself because the length of the deep end was too short and not deep enough.

It is also why it took car companies almost two decades to put seatbelts into cars, and most of these improvements were not self done, but a result of regulation made by government. But those regulations in BOTH cases have saved lives.

And again, Beyond's doesn't understand that political ideology in practice are never as simplistic as how they are sold. He wants government out of the way, but the private sector almost always has to be forced to do the right thing. He could have less government, quite simply and quickly IF they would self regulate AND CARE, which far too much of big business is not doing.

This is not the fault of just republicans or democrats, this is the fault of 30 years of republican policy that BOTH parties let linger and grow. The pay gap is far too lopsided and the cost of living is through the roof and the jobs are disappearing. Good paying jobs anyway.

He thinks too simplistically which is the SAME mistake Marx made. NOTHING is ever as simple as a cliche and nothing is ever black and white. And nothing is either all bad, or all good.

My last boss was a good boss, he rewarded me TWICE with a raise that I did not even ask for. And he also knew even during the down season, that there was a minimum of hours I needed, and he never broke that trust.

My current boss merely seems out for money and uses the down season as an excuse even after he made record profits he cut my hours way below my needs EVEN AFTER HE SAID "NOTHING IS GOING TO CHANGE", at the first meeting after he bought the place. He renigged on that.

. Sure, legally he can do that. But this isn't just about me. This is about far too many people not having enough of what my last boss had, compassion and caring. No, they were not legally obligated to care, but because they did, we all were better off. They didn't have to pay unemployment and I didn't have to starve.

WHAT I DO KNOW is what I have seen over the past 30 years. And more of the same wont work.

The other thing he doesn't get is that he uses the same tactic I have seen from theists.

He claims I don't know everything about economics, now, while true, I have not studied economics, I AM FEELING THE AFFECT OF IT. I cant fly a jet either, but if I am on TWA and the plane suddenly flips over, I know damned well that isn't right and something bad will happen.

It is the same stupid logic that Cap uses when he says, "You're not a scientist", No, I am not, but I do know what scientific method is.

Just like I don't know how to build a car engine doesn't mean that a rust bucket will run simply because the sleezy used car salesman says it will.  And just because I don't know how to build a car engine doesn't mean I cant drive a car.

What I do know is that the same policies have been passed down for the past 30 years and things have gotten worse, not better. I think 30 years has been long enough for the republican tactics. And this mentality was in place that caused the great depression. That was caused by the same extraction market we are seeing today.

The problem is the banks were in a catch-22. They were told they had to make loans in poor communities. The reason banks didn't loan in these communities was because they were poor and when a house foreclosed, the banks were unlikely to be able to get their investment back by selling the house. Poor communities tend to have higher crime, more drug problems etc. that lead to vacant houses being trashed. So banks simply refused to loan to purchase houses in certain areas regardless of your credit because they determined it was too big of a risk. Since black poverty is substantially higher than white poverty in our country, it makes sense that many of the communities that were redlined had high populations of blacks. I think it is absurd to argue that the banks were racist, they had sound financial reasons for not making those loans. 

Now the government comes along and says you can't do that. You must loan to these communities. Banks start making loans but find, surprise surprise, that most people living in poor communities, are poor. They don't qualify for conventional loans. The only way to make the loans the government insisted they make was some pretty shady lending practices. (ARMs, second mortgages, relaxed financial reviews etc) Which also relied on the ignorance of the borrowers. They had a choice, make some shady loans or face government regulators crawling up your ass. In an industry as regulated as finance, government regulators can make your life hell even without slapping an outward penalty on you. Having someone come into your office and demand to look over every transaction your bank has done and explain them takes massive man hours (and therefore money) to make that bureaucrat happy. If you have ever been audited, you know what I mean. 

Now if you leave that on its own the likely result is that banks make just enough loans to keep the government off their back and just write the loans as a loss on the balance sheet. Initially, sub-prime loans were only repurchased by Freddie Mac and it would only take some of them. So in the mid-90's there wasn't a lot of incentive for banks to make these risky loans and they didn't. 

By the late 90's Fannie Mae started accepting sub-prime loans and dramatically lowered its standards. The initial banks that fell under the CRA saw an opportunity to get value out of mortgages they thought were worthless. They bundled them into mortgage backed securities which got a AAA rating because of the implicit government guarantee. Now the banks were making really large profits on these loans, the rapidly rising housing costs helped. Mortgage brokers and bankers realized Fannie and Freddie could be used to make sub-prime mortgages very profitable and the scum started coming out of the woodwork like flys to shit. The sub-prime market was born and throughout the early to mid 2000's was extremely profitable. 

Your right that at the time of the crash many of the mortgages were not CRA covered, but the ONLY reason the sub-prime market came into existence with the force it did was because those initial CRA mortgages were extremely profitable. Without the CRA, Fannie and Freddie never guarantee sub-prime mortgages and without Fannie and Freddie those mortgages are never profitable, the companies that make them lose money and you have no sub-prime meltdown and no bailout. I believe it is most accurate to describe the CRA as the primer, it didn't cause the explosion but it started the flame that eventually led to it.

And Brian is right, the regulators looked the other way, but it is because the government was pushing for giving loans to everyone. Fannie continually lowered the standards on the mortgages it would accept. I'm sure many bankers did in fact lobby for this to happen, but I don't see why it is relevant who supported it for what reasons. The bottom line is the government has no business guaranteeing loans with our tax money regardless of whether the bankers want it for higher profits or some liberal wants it to make lending "fair" or any other reason. I don't care who is at fault or who voted for it or who lobbied for it and whether their intentions were good or bad. It is not a role the government should have any involvement in at all. It should not guarantee loans or tell banks who they must loan money to or who they can't loan money to. And it sure as hell pisses me off that my tax money was freely spread around to all the people who gamed the system that shouldn't have existed in the first place.   

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Brian, economic problems do not begin at your memory horizon (which appears to be during the Reagan administration). Let's go for centuries ago on this one.

The Massachusetts bay company was a huge business deal. That is why it was called a company. It was individual investors and not originally a government deal. Eventually, the business climate shifted and the government got involved.

By 1770, we were bleeding the economy dry. So the government started a tax on windows. We bricked them up. Then they forbade steel making. We invented the wooden shovel.

They sent mercenaries to Caluctta to steal a ship load of tea. The general plan was to sell it to us at half price but we got wind of the deal. Boston harbor became the biggest cup of tea ever.

It took two wars and burning Toronto to the ground to sort that one out. Today, their nuclear tipped missile are on loan from us.

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All of the freedoms you espouse (as do I) arise from economic problems. The basis of every modern government arise from the fact that Americans are total fuckers. TYPE IN CAPLOCK ALL YOU WANT (although it is annoying) but you are not really going anywhere by saying that the problem began with whatever the fuck you hate.

The banks created the poor communities by discouraging investment in them. I don't see you disputing this. I just see you blaming the bad ol' government for attempting to rectify the problem. 

I thought you said that they were in the business of making money. Informing people about not getting a loan that they would be unable to pay seems like it would be more profitable than what they did. Then again, they are in the business of making money -  even if they have to create poverty to do it. There is no land that "can't" be sold to a developer where the bank and the developer can't make money off it. Ever heard of re-gentrification?

I didn't say you accused poor folks of anything. I did see you absolving the banks from blame because the mean ol' government "made them do it" which stands against your idea that banks don't do anything if they can't profit from it. Sounds more like you're mad that you didn't get in on the game.

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Jc, everyone is gaming the system. It is called doing whatever pays the rent.

Sometimes the federal rules work and sometimes not. OSHA seems to have worked out fairly well. Freddy a bit less but at least they have the idea of aceptable losses. Fannie, less so than Freddie and they were forced by a CRA update to abandon the idea of acceptble losses.

Acceptable losses are firmly rooted in the territory of “whoops! The whole system fucked up”. It was rare but it did happen. For the most part, when it happened, it was a matter of figuring out how to deal with it.

Banks used to give people who lost their job a lot of forgivness. It has always been a fairly expensive thing but the alternative was to rip someone's house out from under them. Today, granting that much leeway could lead to a bank failing. Because they are all stuck holding so damned many crap loans.

They didn't create poor communities, the communities would be poor regardless of whether or not the banks existed. The banks simply didn't give out charity loans to them and I don't see why the banks should. It is not their obligation to improve communities, it is their obligation to lend money in a manner that creates a profit for their investors while protecting/growing the funds of their depositors.  

They are in the business of making money, and lending is how they make money. When the government passes a law telling them they can't redline the banks determined it was cheaper to simply issue loans and write them off as losses than to put significant resources into attempting to rebuild whole communities. And it is utterly false that banks can always turn a profit on land. When the market was over-inflated in the 2000's that was true, but before that and currently banks often get burned and take large losses on foreclosed property. There simply is not that much demand from developers. There were keynesian economists that were saying real estate could rise perpetually, obviously they were wrong. Even now there are a lot of areas where banks own a lot of houses they can't sell because no one wants them. 

Banks aren't blameless, but they were doing what they do. They are in business to profit, that is what they are supposed to do. Government created an environment where the sub-prime market was artificially stimulated. If the government uses its power to make a market more profitable you shouldn't be surprised when businesses jump into it. 

And I'm not mad, I profited from the whole ordeal quite well. The massive movement of the housing market has required mass reappraisal of houses which means more money in my pocket. I just have strong beliefs of what governments role in the economy is and it is quite irritating when politicians pass regulations that have predictable consequences then they pretend to be all outraged when what they made possible happens. Then they use the failure of their previous regulations to propose more regulations that will make things worse. The bottom line is that what happened was made possible and encouraged by government regulation. No regulation and any housing bubble would have been much smaller and far less damaging. There is simply no way the sub-prime market could have been profitable without the government being involved. 

If you really want to fix poverty in the ghettos, they don't need money thrown at them. They need serious cultural reform. The problem is that kids are raised in a culture where money is made by trafficking drugs and violence. Our school systems are generally geared towards preparing kids to do what they are told. You go to school, go apply for a job and do what your told to make money. Our entire culture seems to accept that the primary way to make money is to work for someone else. Working for someone else is an inefficient way to make money, but increasingly "thats the way it is". Why?

People sit around waiting for someone else to create a job for them. What makes them think someone else is going to create a job when they aren't willing to do it themselves? Established businesses are going to prioritize locations that will create a good ROI for them. Ghettos simply are not a profitable place compared to a middle class suburb. What is needed is for kids living in the ghettos to learn how to create legitimate businesses that turn a profit for them while bringing goods and services to poor areas. People generally aren't going to come from the outside to do so, only people living in the community are going to care enough to tolerate the business difficulties that come with being in a ghetto. 

If you want to fix the ghetto's you have to deal with the violence problem so legitimate businesses can operate, teach people how to create jobs for themselves rather than rely on others and remove the government barriers that make it expensive and difficult to start a business in a city. (zoning laws, expensive permits, etc.) The most difficult part is the violence which runs into a chicken or egg problem because poverty encourages violence and violence creates poverty. When you get into some areas of big cities the gangs have more power than the police and you simply can't start a business without their permission. I think legalizing drugs would significantly help undercut the funding of gangs and aid police in establishing law and order. 

1a. You can spend your money wherever you want. In fact, investing in rebuilding an economically depressed area is a noble endeavor I would cheer and if asked and I thought the plan would have a reasonable chance of being effective could be persuaded to invest myself. I am simply against using the force of government to force other people to donate their money. 

1b. Dealing with violence is a legitimate government expense. In fact, it is one of the very few proper roles of government and one in which they are failing miserably in some areas. I find it extremely disturbing that here in Ohio they are privatizing some prisons. The government's primary responsibility is to prevent us from using physical force against one another.

1c. I actually was fortunate in learning that at a young age. I just typed a rather extensive blog post on the subject. I learned mostly from my father and no, it wasn't free. He invested in my business ventures and expected a ROI like any 3rd party investor would. Obviously I had a little benefit in that he didn't require a credit check, he knew where I lived. Shortly after the military I learned a few lessons the hard way losing literally every dollar to my name in a bad investment. Perhaps someday I will type a blog story about the mistakes I made there. 

2. I think the case that the regulations led to the problem is pretty clear but I really have nothing to add to what I said previously.

3. In what way did the banks create the poverty? They simply assessed the situation as it existed. 

4. It is a nationwide issue now. The real estate market is trashed. There are some places that are still developing, but right now they are the exception. Many planned developments have been put on hold and few developers are interested in purchasing more land, especially in poor areas. Right now, demand for houses is extremely low compared to supply. When that turns back around developers will start to develop. Until then, most plans have been put on hold and even large developers like MI or Dominion are selling houses at much lower prices and accepting lower profits. Here in Ohio, one of the counties I have a contract with has experienced a decent rate of development. All the others have not and several large planned developments have been postponed indefinitely. I can get you numbers if you really want. I don't have time right now though. Maybe later if you insist.