...if someone made you cut $88 million from the federal budget, where would you cut?
The NIH grants to competing researchers.
So...if someone made you cut $88 million from the federal budget
Snickers bars in the Senate vending machines? $88 million is chump change in the national budget of any developed country, why bother?
I don't cut spending, I raise taxes. Spending cuts are off the table, or I walk away from the table.
Now what kinds of tax increases shall we talk about?
(See how Republicans do it?)
It's not enough that Moby succeeds, other things must die fail.
I cut the portion of the budget that funds the budget-cutters!
Is there strong evidence that housing counseling works?
There are so many appealing programs to cut, though. There's the kill-foreigners program, there's the mass-imprisonment-of-the-underclass program, there's the enrich-the-entrenched-economic-interests subsidies...
We only get to choose $88M in cuts?
Farm subsidies. (But bob gets it right in 4. There are plenty of socially destructive behaviors that ought be taxed.)
Uh, withdrawing troops? I almost put that in the OP, but I thought it was too obvious.
Cancel all military bands.
Also, increase the IRS enforcement budget by $40 million. This will increase revenue by substantially more thatn $88 + $40 million, with all of the added revenue coming from criminal tax evaders.
Cancel all military bands.
So you'd pick the only part of the US military that does nothing but bring pleasure and happiness to people, and cancel it? You, sir, are a monster.
Replace the ridiculous law from 1872 that allows private companies to pay no royalties whatsoever on gold, uranium, and other precious metals/minerals extracted from public lands (given dictatorial powers, I'd just nationalize the entire domestic resource extraction industry outright, but such powers don't appear forthcoming).
5: I don't wish them ill, I just hate having to cite other people.
12: My high school music teacher quit being my high school music teacher to join the Air Force band. I still maintain it wasn't my fault.
13: The natural gas extraction tax is a similar set of assholery around these parts.
7: I have the same question. The OP mentions, among others, help provided to elderly people buying homes. Which kind of doesn't make much sense as far as wealth building goes. If you want to build wealth by owning a house, you'd better start before you hit old age. Anyway, I'd wonder if the program would actually tell somebody that they shouldn't buy a house when the circumstances didn't suggest buying a house would be a good deal for them.
Preserving the Oil Depletion Allowance is at the heart one branch of JFK assassination conspiracy theories.
if someone made you cut $88 million from the federal budget
Sell Texas to Mexico, maybe with a BOGO option on Arizona.
I'd cut the office of faith-based whatever-it-is.
And replace it with atheist-based whatever it is! At double the funding, and Sam Harris as czar!
Or maybe I'd just order one less fighter jet.
The [F-35] jets were supposed to cost $50 million per fighter nearly a decade ago. Some of the increase to $113 million can be attributed to inflation and a spike in the price of certain materials.
According to congressional watchdogs at the Government Accountability Office, plans to buy some 2,450 aircraft will cost the military $323 billion -- almost half of what the Pentagon spends each year, including on the wars in Iraq and Afghanistan.
Congress could bring its own toilet paper from home. Or at least switch from the quilted stuff to the same scratchy kind regular government offices have.
I'd stop the whole negative-property-tax thing that you get to benefit from if you own land that used to be agricultural land some time in the 20th century.
16: not just elderly; "poor, elderly, and/or disadvantaged people". And not just buying houses: "to successfully navigate the process of buying a house, OR renegotiating a mortgage to avoid foreclosure". The second of those will have been booming recently.
16
The OP mentions, among others, help provided to elderly people buying homes. Which kind of doesn't make much sense as far as wealth building goes. If you want to build wealth by owning a house, you'd better start before you hit old age.
Well, to nitpick this, 60 is "elderly" compared to the median, but it doesn't sound too unreasonable to buy a house at 60, pay it off while working until 70, and still live in it for 10 years after that. It depends on career, health, cost of the house, etc., but it doesn't sound all that unrealistic.
But like I said, nitpicking. I think a more relevant problem is that you're talking about two different things. No, I hope a housing counselor wouldn't generally advise an elderly person to buy a house as an investment to build wealth. But elderly people still need help buying their retirement homes (maybe) as recent banking scams innovations may have escaped their notice, and like it said right in the OP, renegotiating a mortgage to avoid foreclosure.
Maybe every member of the Senate could bring in a box of tissues at the beginning of the session, so that there are enough to last the whole chamber for a year.
I think "building wealth" is a much less important reason to buy a house than, say, "wanting to own a house".
28: That is all true, but a great deal of "helping people buying homes" seems to be much more effective at helping people who sell homes/mortgages.
The best reason to buy a home is that if you rent and you dig a hole in the yard and find pirate treasure, you don't get to keep the treasure without lying.
That is why coastal areas have usually had higher housing prices.
The Blue Angels and the Thunderbirds could stand to be privatized.
All Military bands. Oil/NG/coal extraction subsidies. Home mortgage interest deduction (over time).
Okay, here's the plan: we come crawling back to the UK. I'm sure they'd take us back, and that Cameron chap seems to be doing a bang-up job over there.
Maybe we could consolidate the Dakotas, and squeeze out some saving there. One less star on the flag would save us 2% on the White Star line-item in the flag-making program related activities budget.
Stop buying me so many Twizzlers, guys! SO HYPER RIGHT NOW. OMG.
39: Great Dakota would just barely (147816 vs 147042 sq.mi.) edge out out Montana as the fourth largest state.
We should also combine Vermont and New Hampshire because I have trouble keeping track of which is which.
Vermont points down, like the letter 'V'. I suppose everybody else has used that trick for years, but it just occured to me.
I sure do like Jewish people. AND TWIZZLERS.
43: New Hampshire wears Vermont like a Flying V.
The best comment I heard about the F-35 was that the most likely situation we would really need a fighter like that is an alien attack.
Thinking of progressive dream budgets is pretty easy. And $88 million is indeed chump change. How much does the average overseas US military base cost to maintain & staff? I bet you could get $88 million back from just closing a couple of really small, insignificant ones.
Obviously, the first thing to do is start cutting from the military. Even with a graduated phase-out over 25 years or so, to preserve jobs and not wind up with 100,000 homeless vets overnight, you could easily save many billions of dollars per year.
Another obvious cut would be to non-Pentagon intelligence agencies. We have way, way too many spies, and they just wind up getting in each others' way most of the time.
You could also cut military aid to other countries significantly, given that we seem to still be arming both sides of future conflicts in several parts of the world. And convert most of the rest of the military aid to humanitarian aid. CCCs and WPAs for everybody!
Cutting border enforcement would be a big savings as well. Not to mention drug enforcement.
Also, of course, everyone should pay in to Social Security & Medicare, with no income limit. And there should be a graduated phase-out of SS benefits with means testing. That wouldn't save a huge amount, but it would be much fairer.
Finally, roll back subsidies to every established industry. Subsidies should serve as start-up capital for new ideas, not a constant prop for inefficient businesses.
Then you could start in on the progressive spending wish list. Cabinet-level Department of Peace, significantly increased foreign aid to developing countries, free university education, free technical education, new CCC/WPA/etc programs, free universal health care, more subsidies for green technology & mass transit, wilderness restoration, reparations for slavery, a free bicycle for every 8 year old -- you could probably do all of that just with the defense department cuts alone.
Plus soak the rich of course.
Finally, roll back subsidies to every established industry.
What? The free market wouldn't stand for such a thing.
And $88 million is indeed chump change. How much does the average overseas US military base cost to maintain & staff? I bet you could get $88 million back from just closing a couple of really small, insignificant ones.
ISTR that it costs $1m a year to keep a single US soldier in Afghanistan. You could just close down a single FOB and you're there.
We've got around 50 installations going in Germany for the Army alone. Not only has WWII been over for a long time, the Cold War has been over for a long time. Crazy.
47
And convert most of the rest of the military aid to humanitarian aid. CCCs and WPAs for everybody!
Agreed, and I think this part doesn't get enough emphasis. Yes, of course I realize money that for public transportation has to come from somewhere, and the military-industrial complex provides lots of benefits in addition to dead foreigners which we'd miss if we stopped funding it, Mr. Hypothetical Non-Disengenuous "Reasonable" Conservative. But it looks to me like to a large degree those two problems could solve each other. My dream budget for the next 10 years probably wouldn't differ from the actual budget by more than 10 percent in total spending, but more than half the Pentagon budget would be diverted to non-Pentagon-related things.
We should also combine Vermont and New Hampshire because I have trouble keeping track of which is which.
VT is the one with the socialist senator and gay marriage, NH is the one run by anti-tax crackpots. Both have lovely fall foliage and maple syrup.
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A student came in, totally clueless, and we have a final on Wednesday. After I went over some material, I told him, "You really need to sit down and practice solving lots of problems."
He said "From where?"
I said "Do the odd problems in the book." (b/c there are answers in the back.)
He said "I sold my book back already."
I gave him a really appalled look and he said he needed the money. I can't figure out if I should marvel at his financial hardship or be totally irritated at the degree that he blew off this exam. Probably both.
I asked him why he didn't sell his other books instead, and he said that CS books get updated every year, so they won't buy them back. Plausible, but SERIOUSLY UN-RESOURCEFUL, KID. But maybe he is actually that strapped for money.
|>
And whether or not he is, he can borrow a friend's, or see if there's one copy in the library.
Financial hardship == purchase a bag of weed.
55 is what I told him. It doesn't even need to be our calculus book. All calculus books are the same, happy or unhappy.
55: I would count not thinking of those options as part of the shit with which he is full.
It doesn't even need to be our calculus book. All calculus books are the same, happy or unhappy.
In that case, a google search for "calculus sample problems with solutions" seems to generate almost limitless possibilities.
Just to be clear, I already know how to find lots of calculus problems.
I'm going to start using the phrase "full with shit".
I certainly wouldn't shut down the *non-DOD* intelligence agencies, quite the opposite.
ISTR quite a few studies after it turned out Iraq was just as bad as we said that suggested that the most effective people in the "community" in terms of forecasting and policy advice were the State Department's Bureau of Intelligence and Research. That's precisely what you want from an intelligence agency, right? There are a couple of others you'd probably keep like the maps-and-satellites people and at least the crypto PhDs from NSA, who are all genuinely useful and for quite a few peaceful purposes too.
CIA, though, and the Bush/Rumsfeld/Hayden/Boykin militarised stuff, and DHS? Obviously The Company's stock must be trading quite a bit higher than it has for a long time at the moment, but then that's the time to get out while you're ahead.
I already know how to find lots of calculus problems
I was more concerned about him than you. You've probably even still got a copy of the book.
63: Realized after posting that my statement was somewhat ambiguous on that point: My preference, if we are going to have spies at all, is that they be civilian spies under civilian control, and that significant DoD spending cuts be realized from closing DoD spy agencies. And also some of the civilians.
It's true, I do. And I'm already pretty prepared for the final.
I mean, the Washington Post last year made it clear we don't even have the capability to identify and reduce redundancies in the intelligence community, much less make changes in policy about how much and what kind of intelligence work we should be doing. Even the GAO is kept out.
66: I bet everybody in the class finishes work on the final before you.
I'm grading the final exam belonging the student who cheated twice, who I already hated - no, seriously hated - and he is faaaaaaaaaaailing, and I'm taking way too much delight in this.
where would you cut?
1.5% of an SSBN(X). I'm pretty sure that 98.5% of a ballistic missile submarine is still adequate for deterrence.
I'm pretty sure that 98.5% of a ballistic missile submarine is still adequate for deterrence.
Got to be careful which 1.5% of the submarine you cut, though. If its part of the hull, the sub might sink. Not much deterrence at the bottom of the ocean.
Probably you could get some good savings if you replace the gold-plated fixtures in the officer's head with brass ones, though. I always said gold-plated toilet seats were a waste of tax-payer dollars, but you know, its hard to fight the whole "nothing to too good for our troops" argument.
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I'm super bored of grading and I'd like to go for a walk. It's 97 freaking degrees out, though.
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72: One more degree, and you'll have a shitty pop song. I understand why you're concerned.
... That said, I think this compromise is a direct result of 2008's inaccurate and racially-coded claim that the housing crisis was caused by irresponsible lending to poor and minority people.
You can argue about "caused" but the financial crisis certainly exposed a lot of irresponsible lending to poor and minority people. And housing lobby propaganda of the sort in this post enabled a lot of it.
75: that's some weird ambivalence. Try putting some effort into it (they say you only get out what you put into some things).
And housing lobby propaganda of the sort in this post enabled a lot of it.
By brainwashing investors into thinking that housing loans made to poor people were good investments? How did this work exactly?
There is a lot of liberal propaganda out there. How much of it gets enacted into reality? If someone is landing a 9-figure payday while mouthing pieties about homeownership, is it really that hard to figure out the wagging mechanism?
CRA loans were only 6% of all subprime residential loans issued 2000-2008, and 0% of failed commercial loans. This is a tiny effect, unambiguously a sideshow.
Criticizing Barney Frank for refusing to get out of the way or to properly oversee Freddie and Fannie makes sense, but is a soft target; the enabler isn't the one who keeps ordering drinks.
It is completely implausible to blame the left for the crisis.
77
By brainwashing investors into thinking that housing loans made to poor people were good investments? How did this work exactly?
See here .
79: Too long. I gave up after
It is also worth remembering that the motive for this bipartisan ownership expansion probably had more to do with the legion of lobbyists working for lenders, brokers, and Wall Street than an effort to walk in MLK's footsteps
Maybe I'll finish later. Looks interesting.
It is completely implausible to blame the left for the crisis.
But, the idea that paying $88 million to help people their homes or buy a home is helping those people is very different. It would be very easy to spend $88 million on that and without helping anybody who wouldn't get prison time in a better world.
78
It is completely implausible to blame the left for the crisis
The left isn't the main component of the housing lobby but some lefties like Barney Frank were useful idiots. All this stuff about buying a house being a path out poverty is just housing industry propaganda and lefties who repeat it are naive.
80
Too long. ...
Short version, there was government pressure under both Clinton and Bush for banks to make more housing loans to poor and minority people. The banks did make more such loans. Many of them went bad. The government pressure was not the sole reason for the bad loans but it surely didn't help.
4, 47: I like the way you guys think.
63: I found out today that DHS is the third-largest Cabinet department, with more than 200K employees. If possible, this made me even more angry than I was in early 2002 when it became clear that our reaction to Sept. 11 was going to include creating a massive new federal bureaucracy.
83: One thing I think a lot of people don't get, when quoting the % of subprime that was CRA eligible &c., is that you don't just boost your numbers by deciding, "you're getting this loan because you're poor/black/etc." Not unless you want a slew of "reverse discrimination" lawsuits. The way it's done is by relaxing credit standards, since unsurprisingly poor people & protected racial minorities tend to be disproportionately low-income poor-credit-history borrowers. But you're still swallowing a *lot* of bathwater to eat that baby.
I don't know if it actually had to be that way or if it's just an artifact of the corporate decision-making process, but large parts of the industry were either (a) motivated to lower credit standards in order to get good poor-and-minority numbers, or (b) were treated preferentially by regulators because their lower credit standards, though perhaps adopted out of greed alone, meant higher rates of lending to poor & minorities.
It would have been better for almost everybody just to do something simple like expand the EITC, but at the time these roundabout methods seemed like they were costless.
Fannie Mae would be an example of (a), Countrywide was a (b).
Did the banks ever complain about having to make these shitty loans, or were they too shy about criticizing their government masters?
We've got around 50 installations going in Germany for the Army alone. Not only has WWII been over for a long time, the Cold War has been over for a long time. Crazy.
Yeah, us too, but if you brought them home it'd probably cost just as much to keep them here as it does to keep them in Germany. It's actually a lot more costly to have a squaddie in Afghanistan than to have him in Germany (or indeed Colchester).
85: Be advised that Shearer tends to lie, a lot, when talking about politics, especially when talking about poor or brown people. He's doing it again now. I know he's lying rather than just being ignorant because he's been called on this before.
I should add that the reason he's lying is that the poor or brown people are the only people whom he can possibly blame the crisis on who aren't also his political friends and allies.
87
Did the banks ever complain about having to make these shitty loans, or were they too shy about criticizing their government masters?
Sure they complained, I am sure you can find all sorts of complaints that these regulations would lead to disaster. But of course there is a bit of the boy crying wolf problem as businesses almost invariably claim that additional government regulation of them will have bad effects.
Actually, CRA included extra regulation and oversight which meant that CRA loans were less likely to default than non-CRA loans, and the buildup of the mortgage crisis was immediately preceded by the Bush administration's decision to weaken CRA oversight. There are many reasons for the financial crisis and CRA is not one of them.
Follow the links from this page for more detail:
http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Relation_to_2008_financial_crisis
Notice how what I've just said is directly opposite to what Shearer said in 83? That's because what Shearer said is a lie.
89
I should add that the reason he's lying is that the poor or brown people are the only people whom he can possibly blame the crisis on who aren't also his political friends and allies.
This is nonsense, I don't have a lot of political friends and allies leaving a wide field of people to blame. Like Bush for example who I think was a terrible President. And I am not blaming poor and minority people for the crisis but the people who thought it was a good idea to make it easier for them to get loans.
Sure they complained, I am sure you can find all sorts of complaints that these regulations would lead to disaster.
I am not so sure, can you provide some examples? When conservative hacks argue that the CRA ruined everything, they generally quote bank executives sounding incredibly enthusiastic about these steps towards social justice. This is taken as evidence of just how powerful political correctness had become, and just how scared executives were of thinking that poor and minority people were bad loan risks.
92: the people who thought it was a good idea for poor and brown people to get loans more easily (filthy bleedingheart liberals we hates them for ever) were not to blame for the financial crisis, James, because CRA wasn't one of the causes of the crisis. When you blame the crisis on CRA, even in part, you are lying.
87: Some complained, others didn't. The ones who were most enthusiastic about the new big thing often got bigger. The ones who weren't, often didn't.
CRA all by its lonesome would *not* have caused the crisis. But it provided a convenient rationale for excessive risk-taking.
If you impose an incomplete measure of success on people who specialize in gaming the system, you will often get a suboptimal outcome.
CRA all by its lonesome would *not* have caused the crisis. But it provided a convenient rationale for excessive risk-taking.
No. This is ignorance.
How would doing a load of really shitty home equity loans and refinancings for people who already owned houses help your CRA numbers? Anyone? Bueller?
96: Could you say a little more about that?
I had thought that expanding access for African-Americans and Hispanics was a major component of Countrywide's propaganda (to name the most prominent example)
Some complained, others didn't.
Evidence, please?
But it provided a convenient rationale for excessive risk-taking.
It seems to be more of a convenient rationale for excessive liberal-blaming. If banks expanded lending well beyond anything the CRA was going for, I don't see how the CRA is to blame.
98: Lending money stupidly to people of all races and creeds was part of their propaganda, but that didn't have anything to do with CRA.
The CRA is kind of useful as a means of flagging people who don't know what they're talking about.
Short version, there was government pressure under both Clinton and Bush for banks to make more housing loans to poor and minority people. The banks did make more such loans. Many of them went bad. The government pressure was not the sole reason for the bad loans but it surely didn't help.
The thing is, many loans to non-poor, non-minority people went bad. In fact, more loans to non-poor, non-minority people went bad than loans to poor, minority people. CRA loans have a lower default rate than non-CRA loans. Alt-A RMBS have higher losses than subprime RMBS. Jumbo loans, which almost by definition are given only to rich people, have an atrocious loss rate. The problem wasn't irresponsible lending to poor and minority people. It was irresponsible lending to everyone. And the richer the borrower was, the more comfortable the lenders felt making irresponsible loans. So when they went bad, the market fallout was actually worse (and that's before we get to the impact on the borrowers).
Yes, policy played a role in the housing boom and bust. As did Fannie and Freddie. But far and away the biggest role was played by private sector actors on all sides who made stupid and incorrect assumptions because they wanted to make money and then leveraged themselves to the hilt. You know, market capitalism.
100: Fair point. Maybe I'm inappropriately mixing up specifically defined programs like CRA with broader propaganda about expanding acccess to credit.
Fannie-Freddie having buying the repacked shit under the supervision of over-paid ex-government managers getting huge bonuses offering a quasi-guarantee where the public takes the losses and the private gets the gains. That's the big issue for the government in this mess.
The thing is, there was a reason why banks were always eager to find ways to boost their CRA numbers. And that reason is that poor minority borrowers are actually quite difficult to make loans to (they're a minority!). A lot of the outright frauds in California and Florida did involve Spanish-speaking minority communities, mainly because it's a lot easier for a crooked broker to forge an application if his straw borrower doesn't understand what's going on. But the mortgage crisis wasn't a small isolated crisis related to a minority of fraudulent loans. It was a big, pervasive, systemic crisis.
99: On reflection I would like to rephrase. Since the government did not in fact require banks to engage in super-risky lending, some banks declined to participate in such lending, others went wild.
I don't actually know if there was a lot of complaining.
104: The private sector wasn't exactly safe from that sort of thing, either.
To an amateur, the problem with MBS appears to have been that the distinction between good and bad loans was intentionally obscured. To the extent debt varies in quality, this increased both volatility and the information discrepancy between originators and purchasers.
108: I am sure that cherry-picking and anti-cherry-picking went on (since MBS generally aren't sold with loan-level data attached, it's easy to keep the best, sell the rest), but we would still have had a crisis even if lenders had been scrupulously honest about packaging a representative sample of their loans into MBS. Like the minority-lending stuff, this is a drop in the bucket compared to the humongous incentives to chase yield and risk.
The problem wasn't irresponsible lending to poor and minority people. It was irresponsible lending to everyone. And the richer the borrower was, the more comfortable the lenders felt making irresponsible loans. So when they went bad, the market fallout was actually worse (and that's before we get to the impact on the borrowers).
Ginger says it better than I did.
I blame the housing crisis, and many other problems, on the existence of California, Florida, and Arizona.
How would doing a load of really shitty home equity loans and refinancings for people who already owned houses help your CRA numbers? Anyone? Bueller?
The idea is that the CRA is a racist institution that discriminated against whites, and therefore leads to people who can afford to pay their mortgage being passed over in favor of people who can't afford to pay their mortgage, as one of those wealth-destroying Maoist levelling maneuvers that the Carter and Reagan administrations prioritized.
97
How would doing a load of really shitty home equity loans and refinancings for people who already owned houses help your CRA numbers? Anyone? Bueller?
I seem to recall reading that when these were stuffed into CDOs and the like, the government allowed the resulting paper to count towards the goals. In this incorrect?
Tangentially, I have just gotten notification that my primary home mortgage has been sold to Freddie (Second time it's been sold in the two months I've had it: original lender -> an ordinary large bank -> Freddie). I've been trying to figure out if I care or if this has an actual effect on my life - so far I haven't come up with anything. The warm glow that I'm in good company with half of the nation's homeowners?
I seem to recall reading that when these were stuffed into CDOs and the like, the government allowed the resulting paper to count towards the goals. In this incorrect?
Are you serious? What would this even mean?
114: You might want to make sure somebody didn't forget to pay your home insurance. That happened when our mortgage was sold.
115: If I buy 100 loans, of which 5 are to underserved groups, that's economically very similar to actually lending to 100 people of which 5 are in underserved groups. The originating lender is basically just an intermediary broker through which my capital goes to those borrowers, and their principal and interest comes back to me.
If those 100 loans are in an MBS, you could still consider the MBS buyer the true lender.
Similarly, if I buy MBS-filled CDOs, that is also economically similar to lending money to the borrowers for those loans. So if I have a 5% underserved-population-loan CDO, then I could get credit for 5% of my "lending."
Did you read the question James was supposedly answering?
118: I don't know the details of how CRA compliance was tracked, but I know that the OFHEO's housing goals for Fannie and Freddie tracked what % of loans went to underserved areas, low-income borrowers, and minorities. I am pretty sure that a HELOC or Refi would have counted toward those numbers, though there may have been separate tracking for purchase mortgages.
Jesus Christ. Yes, that's how I remember the housing bubble as well, it was everyone in the damned country refinancing on their house because banks were trying to hit CRA targets.
As far as I understand it, CRA regulated banks and other retail mortgage lenders. These guys originated assets for securitisations, they didn't buy securitised products. Compliance for them meant "did you make enough loans to previously redlined areas" - what happened to the loans afterwards, whether they sold them on or kept them, wouldn't really matter.
So the question of "when these were stuffed into CDOs and the like, the government allowed the resulting paper to count towards the goals" isn't really relevant. It's about lending policy, not having to have a certain number of loans on your balance sheet.
As to whether Helocs or refis would have counted: as far as I can tell, all kinds of retail credit counted, but of course most of that is housing finance.
I blame the housing crisis, and many other problemsevery other problem, on the existence of California, Florida, and Arizona.
120: Maybe it's silly of me to hope that I can agree with part of a well-known argument without sounding like I'm agreeing with the whole thing.
But I am just making a limited claim here, that expanded access initiatives such as CRA, housing goals, etc., were part of the political cover for massive risk-taking by banks via expansion of credit, and a small part of the reason risk-loving banks were rewarded. I'm not claiming that it's the real reason banks wanted to make risky loans. The real reason was of course to make money. The banks that thought they would lose money on risky loans generally didn't make those loans.
The expanded access programs that work are high-touch organizations such as Self-Help that don't really fit well into the commoditized mega-lender business model. So the big lenders that looked like they were doing a good job expanding access were the ones who had a bigger appetite for risk in general.
In other words, it's not that the desire to expand credit access incentivized individual banks to loosen credit standards. (Though I do think this was the case at Fannie and Freddie, who reached their housing goals in part by buying subprime MBS from originating lenders).
Rather, the desire to reward expansions of credit access to underserved groups selected for banks that were already comparatively risk-loving.
123: OK, I see. In that case you are not malicious, but (I think) still wrong.
For a start, the timing doesn't work. CRA came in in 1977. Why didn't banks use it as cover ten or fifteen years ago?
Second, can you point to examples of banks saying, during the housing bubble, "our mortgage book has grown 120%, but this is OK because it was all CRA loans"? They didn't need an excuse for that sort of growth - it was seen as a good thing per se.
Shouldn't have said "in other words," as that's actually a separate argument.
Nor did CRA really reward banks for lending to underserved groups on equal terms. They just gave the regulators power to compel them to do so.
I think this may be central to your misunderstanding: CRA did not say to banks "you must all have 5% of your mortgage book consisting of people with less than $20k annual income". Nothing that strict.
All it said was "you should lend to people in underserved areas on exactly the same terms as you do to people with similar credit histories, incomes, etc elsewhere - no more redlining districts and forcing people to pay twice the interest rate just because they come from the black part of town. The bank regulators will be checking up on you, and if they find you've been redlining, they'll yank your licence."
But I am just making a limited claim here, that expanded access initiatives such as CRA, housing goals, etc., were part of the political cover for massive risk-taking by banks via expansion of credit, and a small part of the reason risk-loving banks were rewarded
It still doesn't explain why, say, small German Mittelstand banks suddenly took exposure to US subprime portfolios larger than the vast majority of US banks. Or why random, non-bank investors the world over financed that exposure. That was pure yield hunting.
Be berry, berry quiet. I'm hunting rabbit yield.
125: Again I don't think CRA & similar programs were the sole impetus, my opinion on the primary driver of the risk taking is pretty conventional. Some combination of lax regulation in the '90s and '00s, a legitimate house price boom in the '90s, and an international savings glut. I just think that regulators were a little more reluctant to apply the brakes than they otherwise would have been, because of expanded-access and expanded-homeownership programs, and already-profitable lenders like Countrywide and WaMu grew a little faster and more smoothly than they otherwise would have.
A simple google search turns up some related Countrywide propaganda:
http://prn.to/l8XKa2
http://bit.ly/mGYbtB
http://bit.ly/jCscla
I don't know of any public propaganda that explicitly cited CRA, but I suspect that bank regulators and HUD were quite a bit friendlier toward the banks that cooperated with them.
A similar story I could tell is that the Bush administration decided to give some goodies to the financial industry, and justified it on the basis of "expanded homeownership," and that the corruption of things like CRA and related programs was just collateral damage. I don't know how much less they would have been able to do if they hadn't been able to use the pretext of expanded access. I don't have a strong idea how different the counterfactual would be, but I do suspect that people like e.g. Barney Frank might have offered a little more resistance if the story was "we're going to enable lots of risky loans in order to profit" instead of "we're going to extend credit to underserved groups."
128: I agree. There were lots of reasons for the financial crisis, yield hunting was one of the big ones, this is one of the minor contributors.
And really my argument is quite a bit weaker for CRA in particular than for other related programs. Mostly because so much of CRA was discretionary, so I don't think there were published standards. It's hard to know exactly what CRA regulation looked like in practice.
127: But it's not like the bank regulators are going to show up one day and find a big map with red lines drawn around risky neighborhoods, and say, "Aha! Redlining!" Nor did they have the staff to regularly send out agents to impersonate poor/minority borrowers and apply for loans, to see how they're treated. (Although a friend of mine used to get the best interest rate available by telling the loan officer that she did research on predatory lending. Which was true.)
Regulators check aggregate numbers, provided by the banks they regulate. so even though there's no provision in the law requiring 5% minority lending or whatever, how else are regulators supposed to know that the lender is making a reasonable effort?
Also, my understanding is that enforcement isn't just limited to licensing, there are softer options like preferential treatment for approving new branches or mergers & acquisitions.
I just think that regulators were a little more reluctant to apply the brakes than they otherwise would have been, because of expanded-access and expanded-homeownership programs
I'd be very keen to know why you think this, because if you have anything in the way of written evidence it would be of great professional interest to me. It's not something I've heard of before: I don't remember anyone even suggesting that OCC was going easy on the thrifts because it was under pressure to increase home ownership in underserved communities.
134: I don't have any written evidence.
On that particular point all I have is a suspicion. My guess is that the higher ups made it clear what they wanted in their public statements (e.g. "look at what my administration has done to promote homeownership", or lots of positive statements about Countrywide) and by omission made it clear what they didn't care about (prudential regulation to make the system more stable), and those who were responsible for implementing the policy found ways to sacrifice the latter for the former.
But I don't have specific stories to share about differing treatment by the OCC. Sorry to disappoint.
OCC is notoriously subject to regulatory capture, more so than the other federal regulators. If they acquiesced to pressure to ignore lax underwriting, it was because industry wanted them to.
Also, as needs to be pointed out, a huge proportion of subprime lending was done by, and ultimately financed by, unregulated entities.
94
... When you blame the crisis on CRA, even in part, you are lying.
I didn't say anything about the CRA. I said there was pressure by the Clinton and Bush adminstrations to make more loans to poor and minorities. The article I linked in 79 cites HUD regulation of Fannie Mae and Freddie Mac (a product of the 1992 FHEFSSA ). The affordable housing goal concerning the fraction of loans to low and moderate income borrowers started at 42% was increased to 50% in 2000 (under Clinton) and again to 56% in 2004 (under Bush).
And the GSEs - Fannie and Freddie - were not a primary cause of the crisis. GSE investment in subprime RMBS was bad for the GSEs but weren't responsible for the crisis, GSE mortgages were of substantially higher quality than non-GSE loans, and GSE-produced RMBS did not collapse in value and played no role in the losses at other banks.
Again: if you are trying to argue that government pressure to increase lending to poor people and/or brown people was a cause of the financial crisis, you are lying, because it suits your abhorrent political agenda to do so.
Also, if it was the CRA forcing banks to lend in the ghetto, why was the bust biggest and worst in Las Vegas, Phoenix, Central Florida, and exurban southern California? Those are not a map of black America. (And why was it, in general, so exurban?) In fact, with the sole expection of Detroit, there's a surprisingly close correlation between the housing bubble and old white people.
(PS - this stuff is your recent history. What does it say that only the Brits on this blog seem to know it?)
140 emphasises the point that it was a case of subprime loans, not subprime borrowers - a subprime loan could just as easily have been to a well-off family for a second home, or to move to a bigger house that they couldn't quite afford, as to a poor family for a small first home that they couldn't afford.
re: 141
Indeed.
I was being lectured just this past weekend by a friend about my failure to get on the property ladder. He of course did it via hard-work and pulling himself up by his bootstraps, i.e. he lied through his teeth about his earnings, got his employer to collaborate in that lie, then had parents who had property/money he could use. He can just afford it, but only because he's since got married and they now have a second income. It seems endemic.
(PS - this stuff is your recent history. What does it say that only the Brits on this blog seem to know it?)
Yeah, I sent Heebie the guest post on Sunday night, and when I came back on Monday evening to post 84 above, I saw Shearer's comments and couldn't bring myself to respond. I'm very grateful to everyone on this thread (including lw, who I think is American) for pushing back with such solid empirical data. Valuable for all of us, including the lurkers.
139
And the GSEs - Fannie and Freddie - were not a primary cause of the crisis. GSE investment in subprime RMBS was bad for the GSEs but weren't responsible for the crisis, ...
It was bad for the borrowers too don't you think? How is the buying a home as a means of building wealth thing working out for them?
And the GSEs may not have been a primary cause but they contributed prolonging the housing bubble and thereby increasing the ultimate number of foreclosures.
... your abhorrent political agenda ...
Reducing subsidies to housing?
140
Also, if it was the CRA forcing banks to lend in the ghetto, why was the bust biggest and worst in Las Vegas, Phoenix, Central Florida, and exurban southern California? Those are not a map of black America ...
Minority goals included Hispanics.
145: yeah, right, I'm sure that new-build whitebread developments in exurban southern California and suburban Phoenix were exactly the sort of places that were being redlined by racist mortgage lenders until CRA came along.
You know - because you've been told, repeatedly - that CRA did not enforce quotas; it prevented the abhorrent and unjustifiable practice of discrimination against lenders on geographical and racial grounds.
my failure to get on the property ladder
I felt sheepish about this for years, even though I had lots of good reasons. Particularly as in my job I was actually acting for clients all the time who were buying property. Now it turns out I dodged a bullet and avoided being stuck with negative equity. Just as well as I could lose my job at any time.
But no-one would shite on about the property ladder over here now, since for so many people it has turned that they landed on a snake instead. Is your friend still living in 2005?
I for some reason have emir down as being in Ireland. If that's true, no one could have landed on a snake, thanks to Saint Patrick.
I call shenanigans.
Unfortunately the anti-snake protections were swept away in recent years as old-fashioned and no longer appropriate in a modern economy ...
22: At least its money well spent:
"The U.S. Air Force's F-35A Lightning II appears to be unable to fly as far as once predicted, according to a Pentagon document. The aircraft is currently estimated to have a combat mission radius of 584 nautical miles, just short of the required 590 nautical miles, according to a Selected Acquisition Report dated Dec. 31. Program officials had previously estimated that the aircraft, unrefueled, would be able to strike targets 690 nautical miles away. "
But at least our Navy is well equipped
"When the USS San Antonio entered service it was suddenly discovered that the builders had done a very shoddy job. It took the better part of a year to get the ship in shape. The second of the class, the USS New Orleans, was also riddled with defects that required several hundred million dollars to fix. This pattern of shoddy workmanship, incompetent management and outright lies (from the ship builders) continued, and resulted the order being cut to eleven ships. To add insult to injury, the last ship in the class is being named after politician John P. Murtha, who is generally hated by soldiers and marines for the way he politically exploited and defamed the troops who served in Iraq and Afghanistan. This is particularly painful because the LPD 17s carry marines into combat."
John P. Murtha, who is generally hated by soldiers and marines for the way he politically exploited and defamed the troops who served in Iraq and Afghanistan
Wtf?
152: There was a thing -- didn't he say something disapproving of an incident where our military killed a whole bunch of civilians in a particularly egregious way, that then blew up into a Failure To Support Our Troops? I don't recall the details, but something like that.
Murtha was a marine. He did take heat from (i.e. was sued by) at least one marine cleared of wrong doing in Haditha. (I had to look at Wikipedia to recall what he said.) I have no idea how soldiers and marines feel about him in general, but he was still winning in a very conservative (blue dog) district when he died. The man had issues, but he was far better than most at not having them stick to him. Mainly, his job was to bring money to the ass-end of Pennsylvania and he did it well.
106: But the mortgage crisis wasn't a small isolated crisis related to a minority of fraudulent loans. It was a big, pervasive, systemic crisis.
I just want to underscore this. This wasn't a case of a few bad apples. There were bad decisions, incorrect calculations of risk, and outright fraud from the top to the bottom here. The government, the banks, the stock brokerages, the insurers, the mortgage brokers, the assessors, the real estate agents and indeed, many consumers, were all complicit in creating the conditions that led to the bubble and its burst. I do think that the government deserves a significant share of the blame here, but not because it occasionally and in very minor ways tried to level the playing field for minority home buyers. It deserves the blame because it abrogated its responsibility to effectively regulate and police industry for the benefit of individual consumers, communities, and the entire economy. So too the other large institutions involved chose, in a series of discrete and conscious decisions, to collectively ignore the problems they were helping to create. If there's any hero in this story, it's the community organizations and consumer groups who were trying to warn people about predatory lending, fraud and unsound financial practices the whole time, and who, unfortunately were roundly ignored by people in power.
156: Also, the developers were bad too.
154: didn't he say something disapproving of an incident where our military killed a whole bunch of civilians in a particularly egregious way, that then blew up into a Failure To Support Our Troops?
Yeah, the Haditha Massacre in 2005, in which Marines killed 24 civilians.
Pwned by 155 I see. I should not post after drinking wine.
How many Hispanics bought commercial real estate market during the real estate bubble? Amazing.
162: My understanding is that commercial and multifamily real estate loans have performed relatively well. Is that wrong?
161: You shouldn't drink and drive. You shouldn't comment and drive. But drinking and commenting seems fine.
Google commercial real estate bubble, or go to the las Vegas strip and see if you can find any evidence of overbuilding.
My understanding is that commercial and multifamily real estate loans have performed relatively well.
Compared to residential loans, yes. But delinquencies are still around 10% (much higher in certain areas) and all those small bank failures you hear about every Friday? Those are because of CRE loans. Small US banks often have CRE exposures of 50% or more of their balance sheets.