Comments on: Let’s keep making the same mistakes http://cafehayek.com/2009/09/lets-keep-making-the-same-mistakes.html where orders emerge Mon, 16 Jan 2012 02:06:33 +0000 hourly 1 http://wordpress.org/?v= By: briana http://cafehayek.com/2009/09/lets-keep-making-the-same-mistakes.html/comment-page-1#comment-184411 briana Mon, 05 Oct 2009 13:44:00 +0000 http://cafehayek.com/?p=6640#comment-184411 hay my name is briana hay my name is briana

]]> By: Anonymous http://cafehayek.com/2009/09/lets-keep-making-the-same-mistakes.html/comment-page-1#comment-183754 Anonymous Thu, 01 Oct 2009 18:00:00 +0000 http://cafehayek.com/?p=6640#comment-183754 Muirgeo claimed:<I>No way bud. That BS and you know it. Mos tof the worst subprime loans happened outside of govenrment mandates. </I>I don’t expect you to understand this, but I’ll try one more time on a very basic level.What you fail to grasp is the way government intervention works. No, the government didn't call up Countrywide Financial and demand that they begin issuing subprime loans -- just as the government doesn't call up employers and tell them to hire “X” number of minority workers next week. Instead, the government passes laws making "discrimination" in lending a crime -- just as they made "discrimination" in hiring a crime. The Fair Housing Act, the Community Reinvestment Act -- all of that long list of legislation I mentioned in my first post -- all of it established and reinforced the illegality of discrimination in lending.And in both cases -- as is generally the practice with government regulation -- the normal burden of proof is reversed; if you are accused of discrimination in lending by, say, your local ACORN outfit, or if you are accused of discrimination in hiring by your local Al Sharpton-type, <B>you are presumed guilty and must prove your innocence.</B>Let me make sure you understand this point: <B>At any point in time, if you are a lender or an employer, you must be able to prove that you have NOT discriminated in the granting of loans or the hiring of people.</B>Putting aside, for a moment, the blatant injustice of denying to an employer or lender the very rights granted to accused criminals -- the bottom line is this: <B>to the government, the only thing that counts as proof that you have not discriminated is the racial makeup of your workforce or your loan portfolio.</B>Think carefully about what this means. It means if you have a low percentage of minorities in your workforce, it doesn’t matter a whit to the government if this is due to the fact that no minorities applied for work at your firm -- just as it doesn‘t matter a whit to the government if those minorities that applied had terrible work records. The lack of a “sufficient” number of minority employees is considered proof that you are guilty of discrimination. Likewise for lenders. It doesn’t matter if few minorities come forward asking for loans from a given mortgage lender -- just as it doesn’t matter if the minorities that do come forward are uncreditworthy. The government doesn’t care a whit about that. <B>If a lender doesn’t have a “sufficient” number of loans to minorities on his books, he’s considered guilty of discrimination -- even if it is due to factors completely out of his control.</B>What’s more, the lender must <B>prove</B> this “nondiscrimination” even if there is NO accusation from anyone against the firm. The mechanism for this is the periodic audits that are done under the Community Reinvestment Act. Bank examiners come into your bank and look at all their records. They demand to see the proof that you’ve not discriminated. You have to have those minority loans on the books.In addition, you have ACORN running a shakedown by threatening various banks and mortgage institutions to go public with an accusation of discrimination -- and accusation sure to bring on more banking regulators.So eliminating actual racial discrimination in lending is not necessarily sufficient to keep a lender out of trouble. <B>If there aren’t a sufficient number of qualified minorities seeking loans at a given institution, the institition has to find some way to get them to apply and to get them approved, so the minority loans get on the books -- even if all indicators are that the loan is risky .</B>This is how government “mandated” the issuance of sub-prime loans. <B>It put lenders in a position wherein there was no choice but to accept ever-less-creditworthy minorities and to make every-more-risky loans. There was no other way to prove to government that they were not discriminating.</B>That is the “stick” that government wielded. It also used a number of “carrots”. One “carrot” was in the form of the GSEs that were encouraged to create a secondary market for these loans, so that institutions would not have to carry too many of these risky loans simultaneously. The other HUGE “carrot” was the Federal Reserve, who drove interest rates to historic lows, thereby enabling lenders to put extremely attractive initial rates on these riskier loans. In addition, the Federal Reserve -- as lender of “last resort” -- represents an implicit promise that government will be there to bail you out if you get into trouble.Now I have not dealt with the element of time in this comment. The government’s “stick” was not applied all at once, but rather, the pressure to comply with the nondiscrimination requirement was ratcheted up over time. Likewise with the “carrots”. The net effect was to artificially inflate the demand for residential mortgages and residences. Millions of renters were induced to become owners. Home prices soared. The bubble was created. But reality would soon intervene.That’s the end of my effort to educate you, muirgeo. If you cannot grasp how government engineered the creation of the subprime mortgages and the entire housing bubble, there is no use discussing what happened at AIG, Bear Stearns and all the rest. Muirgeo claimed:No way bud. That BS and you know it. Mos tof the worst subprime loans happened outside of govenrment mandates. I don’t expect you to understand this, but I’ll try one more time on a very basic level.What you fail to grasp is the way government intervention works. No, the government didn’t call up Countrywide Financial and demand that they begin issuing subprime loans — just as the government doesn’t call up employers and tell them to hire “X” number of minority workers next week. Instead, the government passes laws making “discrimination” in lending a crime — just as they made “discrimination” in hiring a crime. The Fair Housing Act, the Community Reinvestment Act — all of that long list of legislation I mentioned in my first post — all of it established and reinforced the illegality of discrimination in lending.And in both cases — as is generally the practice with government regulation — the normal burden of proof is reversed; if you are accused of discrimination in lending by, say, your local ACORN outfit, or if you are accused of discrimination in hiring by your local Al Sharpton-type, you are presumed guilty and must prove your innocence.Let me make sure you understand this point: At any point in time, if you are a lender or an employer, you must be able to prove that you have NOT discriminated in the granting of loans or the hiring of people.Putting aside, for a moment, the blatant injustice of denying to an employer or lender the very rights granted to accused criminals — the bottom line is this: to the government, the only thing that counts as proof that you have not discriminated is the racial makeup of your workforce or your loan portfolio.Think carefully about what this means. It means if you have a low percentage of minorities in your workforce, it doesn’t matter a whit to the government if this is due to the fact that no minorities applied for work at your firm — just as it doesn‘t matter a whit to the government if those minorities that applied had terrible work records. The lack of a “sufficient” number of minority employees is considered proof that you are guilty of discrimination. Likewise for lenders. It doesn’t matter if few minorities come forward asking for loans from a given mortgage lender — just as it doesn’t matter if the minorities that do come forward are uncreditworthy. The government doesn’t care a whit about that. If a lender doesn’t have a “sufficient” number of loans to minorities on his books, he’s considered guilty of discrimination — even if it is due to factors completely out of his control.What’s more, the lender must prove this “nondiscrimination” even if there is NO accusation from anyone against the firm. The mechanism for this is the periodic audits that are done under the Community Reinvestment Act. Bank examiners come into your bank and look at all their records. They demand to see the proof that you’ve not discriminated. You have to have those minority loans on the books.In addition, you have ACORN running a shakedown by threatening various banks and mortgage institutions to go public with an accusation of discrimination — and accusation sure to bring on more banking regulators.So eliminating actual racial discrimination in lending is not necessarily sufficient to keep a lender out of trouble. If there aren’t a sufficient number of qualified minorities seeking loans at a given institution, the institition has to find some way to get them to apply and to get them approved, so the minority loans get on the books — even if all indicators are that the loan is risky .This is how government “mandated” the issuance of sub-prime loans. It put lenders in a position wherein there was no choice but to accept ever-less-creditworthy minorities and to make every-more-risky loans. There was no other way to prove to government that they were not discriminating.That is the “stick” that government wielded. It also used a number of “carrots”. One “carrot” was in the form of the GSEs that were encouraged to create a secondary market for these loans, so that institutions would not have to carry too many of these risky loans simultaneously. The other HUGE “carrot” was the Federal Reserve, who drove interest rates to historic lows, thereby enabling lenders to put extremely attractive initial rates on these riskier loans. In addition, the Federal Reserve — as lender of “last resort” — represents an implicit promise that government will be there to bail you out if you get into trouble.Now I have not dealt with the element of time in this comment. The government’s “stick” was not applied all at once, but rather, the pressure to comply with the nondiscrimination requirement was ratcheted up over time. Likewise with the “carrots”. The net effect was to artificially inflate the demand for residential mortgages and residences. Millions of renters were induced to become owners. Home prices soared. The bubble was created. But reality would soon intervene.That’s the end of my effort to educate you, muirgeo. If you cannot grasp how government engineered the creation of the subprime mortgages and the entire housing bubble, there is no use discussing what happened at AIG, Bear Stearns and all the rest.

]]> By: Anonymous http://cafehayek.com/2009/09/lets-keep-making-the-same-mistakes.html/comment-page-1#comment-183628 Anonymous Thu, 01 Oct 2009 10:13:00 +0000 http://cafehayek.com/?p=6640#comment-183628 Welcome, there is always room for another Chihuahua up on the porch where muirduck, Gil, DK, various other little pets, and now you, can run back and forth yapping at big dogs. I'll be content to see your contributions and see if you can actually get down off the porch and run in the street. Dazzle me Junior. Welcome, there is always room for another Chihuahua up on the porch where muirduck, Gil, DK, various other little pets, and now you, can run back and forth yapping at big dogs.

I’ll be content to see your contributions and see if you can actually get down off the porch and run in the street.

Dazzle me Junior.

]]> By: Anonymous http://cafehayek.com/2009/09/lets-keep-making-the-same-mistakes.html/comment-page-1#comment-183625 Anonymous Thu, 01 Oct 2009 06:26:00 +0000 http://cafehayek.com/?p=6640#comment-183625 Go here and watch this presentation for more information: http://www.aynrand.org/site/PageServer?pagename... Looked at all the slides and listened for 10 minutes. No where does he explain how crap loans now could be repackaged as CDS's where they couldn't 15 years ago. He NO WHERE answers the question/ addresses the issue that this could NOT have happened had Glass-Steagall been in effect and the Gramm-Leach-Bliley Act not been passed. He failed miserably but explained things away predictably and just as his audience needed to hear. He's a charlatan pushing blind faith for the true believers. New question. So why aren't lenders being forced to still make crappy loans? Did the government mandate that "made" Bear Stearns and Countrywide offer bad subprime loans end? Go here and watch this presentation for more information: http://www.aynrand.org/site/PageServer?pagename...

Looked at all the slides and listened for 10 minutes. No where does he explain how crap loans now could be repackaged as CDS’s where they couldn’t 15 years ago.

He NO WHERE answers the question/ addresses the issue that this could NOT have happened had Glass-Steagall been in effect and the Gramm-Leach-Bliley Act not been passed.

He failed miserably but explained things away predictably and just as his audience needed to hear. He’s a charlatan pushing blind faith for the true believers.

New question. So why aren’t lenders being forced to still make crappy loans? Did the government mandate that “made” Bear Stearns and Countrywide offer bad subprime loans end?

]]> By: iamse7en http://cafehayek.com/2009/09/lets-keep-making-the-same-mistakes.html/comment-page-1#comment-183620 iamse7en Thu, 01 Oct 2009 04:20:00 +0000 http://cafehayek.com/?p=6640#comment-183620 Thank you so much for that presentation by John Allison. It is excellent. I've been reading a ton about this whole crisis, reading Ron Paul's book now, and will read Meltdown by Woods next, but really appreciate the great link. Half way through the lecture now, and it's very well done! Thank you so much for that presentation by John Allison. It is excellent. I’ve been reading a ton about this whole crisis, reading Ron Paul’s book now, and will read Meltdown by Woods next, but really appreciate the great link. Half way through the lecture now, and it’s very well done!

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