[thechat] Hiding from Elections Now

Matt Warden mwarden at gmail.com
Mon Oct 27 08:55:31 CDT 2008


On Mon, Oct 27, 2008 at 3:32 AM, Martin Burns <martin at easyweb.co.uk> wrote:
>> No one remembers the
>> government intervention in the markets over the last couple decades,
>> including increasing regulations encouraging and/or forcing risky
>> subprime lending (that otherwise would not have happened) in the
>> spirit of encouraging American home ownership.
>
>
> Um no, that was regulation preventing banks from blacklisting entire
> areas, rather than scoring on individual circumstances (which is what
> is *supposed* to happen).

The US government has been obsessed with the idea of encouraging
American home ownership. They have manipulated the market to encourage
lending to individuals to this end. You are correct that PART of the
CRA was that banks could not "discriminate" by lending too
infrequently to people from certain geographic areas -- specifically,
low and middle income areas. Interestingly, most people from low and
middle income areas have low and middle income. There are effectively
quotas to meet to avoid punishment and maintain the appearance of
fairness. Just as with the unintended consequence of affirmative
action where less qualified individuals are often taken over more
qualified individuals simply due to their minority status, the fact
that individuals are from low and middle income areas influenced the
loan evaluation process such that individuals who would not normally
qualify for the loan did get the loan. The government further
compounded the problem by way of their GSEs, which investors saw as an
extension of government and therefore guaranteed by government. All
this led to banks and investors discounting risk.

There are additional problems around the securitization of these
loans, but government certainly did encourage lending with risk beyond
what the market would have otherwise accepted and subsequent
politicians refused to touch the legislation with a 40 ft pole for
fear of being branded "against American home ownership."

>> No one remembers that
>> they all supported the Iraq War when it was ramping up and those
>> against it were hippie anti-American idiots.
>
>
> Don't know if you noticed, but Sn Clinton lost. It was in the news and
> stuff... ;-)

Actually I was not talking about any of the candidates. I was talking
about how if you discuss the war with your fellow citizens, it's as if
they were always against it. They seem not to be conscious of the fact
that they were part of massive public support for the invasion just a
few years ago. I think that's dangerous. Like every other senator and
representative who voted for the invasion, Senator Clinton was
definitely aware of the current polling with regard to the issue.


-- 
Matt Warden
Cincinnati, OH, USA
http://mattwarden.com


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