To quote myself:



Basic game theory: If your competitor MIGHT lend to people who MAY not have qualified under the old rules, what do you do? The Nash equilibrium is to go ahead and lend to those people before your competitor can.



CRA opened the door.



Once again, 6% of all HIGH priced sub-prime loans were CRA. In what world does that make sense. Even 1% of all HIGH priced loans is too many. There should have been none. If 6% of all high-priced loans were CRA, how many of middle and low were there?

gabe -



From Stan Leibowitz - an actual Economist and economics professor.



http://www.independent.org/pdf/policy_reports/2008-10-03-trainwreck.pdf

The people who were pushing for the changes in the CRA in the nineties were crowing about how the changes would make loans more available to lower-income people.

And there is President Barry again, taking a cheap shot at Bush on 60 minutes saying W approached war incorrectly by taking a “lets kick butt approach.” What approach should we take you ass hole, a “well I hope we win”  approach ?

[quote=Moraen] gabe -



From Stan Leibowitz - an actual Economist and economics professor.



http://www.independent.org/pdf/policy_reports/2008-10-03-trainwreck.pdf[/quote]



Thanks for the link. I need to read it fully but I don’t see much where I disagree. From what I see he doesn’t even mention the CRA and focuses on the use of adjustable mortgages as a main culprit. Fully agree.

gabe - here is some help. Page 7.



Also, you can read his NY Post article:



http://www.nypost.com/seven/09242008/postopinion/opedcolumnists/house_of_cards_130479.htm

[quote=Ron 14] And there is President Barry again, taking a cheap shot at Bush on 60 minutes saying W approached war incorrectly by taking a “lets kick butt approach.” What approach should we take you ass hole, a “well I hope we win” approach ?

OK. But please note that this is not a ‘peer reviewed’ article. It’s just this guys opinion. In the article CRA does not appear as a major cause, at best it may be seen as the first step towards what eventually happened.



The problem when coming up with ‘reasons’ why X happened is that you need some way to weight each of them. If I list 20 reasons but one is 95% responsible for what happened, then maybe the other 19 are not reasons at all. One way to think of this is to ask, if the CRA had never existed, would the crisis have still happened? The available evidence is yes. So long as rates were low enough for a long time, and so long as financial innovation and financial engineering led many investors and bankers to think risk had disappeared, this was bound to happen.



In fact, one could argue there are even deeper reasons. Spain had an even bigger housing bust and they had neither CRAs nor CDOs. There are other countries like the UK, or Ireland that had similar experiences. Or, for an even greater example look at Iceland and the Baltics.



What all these countries had in common with the US was an explosion of availability of cheap credit and a willingness by lenders to provide it to almost anyone without worrying if they could pay back. In all cases the underlying assumption was that home prices would only go up.



Something that happens at the same time in Spain, the UK, Ireland, the Baltics, Iceland, and the US (and I’m probably missing several others) is clearly something that has a common explanation. And it’s not CRA.



And if you look at Latin America, which has many CRA-type laws, you see none of the countries there had any crisis. The reason? Credit was never so cheap or so freely available. THAT is the key explanation, the sheer amount of credit offered in many of these countries.

Gabe, you keep saying you are an analyst.  As in keep the Buy rating on a company until they are down 70% then go to a hold until they are down 90% then slap a sell rating on it?  One of those clowns?  It is because we are salesman and work in the real world we understand how things happen.  For every link you provide saying CRA had nothing to do with anything, we can post a link saying it does.  At the end of the day it comes down to one’s opinion.  Your refusal to admit that the CRA played a part in this simply shows your own bias.

I never said it was peer-reviewed. But you seem to think that non-peer-reviewed articles have credence. His article is at least a step above a blog.



Like I said, I can present as many arguments as I want. I can show empirical evidence and you still will not agree.



The issue has become an ideological one, given that those with a more liberal mindset refuse to believe that CRA caused the crisis, while conservatives refuse to believe that it wasn’t.



But, there are more peer-reviewed articles in favor of CRA being the cause than not. Krugman tried to get his garbage in the Journal of Economics and business and was told to go fly a kite because his numbers were manipulated. Even Berkeley told him to go fly a kite. As for your your buddy Ritholz - he has been published in a few Law journals, but nothing related to the crisis by a peer-reviewed journal.



Sorry, but we will have to agree to disagree.

[quote=gabe]

And if you look at latin America, which has many CRA-type laws, you see none of the countries there had any crisis. The reason? Credit was never so cheap or so freely available. THAT is the key explanation, the sheer amount of credit offered in many of these countries. [/quote]



As the U.S. goes, so goes the world.

Gabe, you keep saying you are an analyst. As in keep the Buy rating on a company until they are down 70% then go to a hold until they are down 90% then slap a sell rating on it? One of those clowns? It is because we are salesman and work in the real world we understand how things happen. For every link you provide saying CRA had nothing to do with anything, we can post a link saying it does. At the end of the day it comes down to one’s opinion. Your refusal to admit that the CRA played a part in this simply shows your own bias.

[quote=Moraen] [quote=gabe]

And if you look at Latin America, which has many CRA-type laws, you see none of the countries there had any crisis. The reason? Credit was never so cheap or so freely available. THAT is the key explanation, the sheer amount of credit offered in many of these countries. [/quote]



As the U.S. goes, so goes the world.[/quote]



Hardly. Latin America’s financial systems turned out to be much stronger than that of the US this time around.

Yes, diversity of markets is great.



What are the CRA-related laws in those countries?

CRA allowed the money to be lent.

[quote=Primo] Gabe, you keep saying you are an analyst.  As in keep the Buy rating on a company until they are down 70% then go to a hold until they are down 90% then slap a sell rating on it?  One of those clowns?  It is because we are salesman and work in the real world we understand how things happen.  For every link you provide saying CRA had nothing to do with anything, we can post a link saying it does.  At the end of the day it comes down to one’s opinion.  Your refusal to admit that the CRA played a part in this simply shows your own bias. [/quote]

To say ‘it played a part’ is very, very different than to say ‘it was the cause’. I have not said it was THE cause, I have repeated over and over it is part of the problem.  You have said it had “nothing” to do with it.  That is patently false.  We can argue to what degree all day, that the CRA was a factor is not in dispute.

Yes, there was clearly a process by which lending standards weakened over the years. Very true. But CRA was, at best, a small part of that.

But what happened in the US was a huge crisis, and simply talking about weakened standards does not explain it. What DOES explain it is the drop in housing prices.  Without derivatives, it would not be a crisis of such magnatude.  Cheap money led to the real estate bubble, here and abroad.  The derivitaves and leverage used threatened the system.  The US is primarily responsible for the derivatives, made possible by  Gramm-Leach-Billey which was passed only after the Democrats negotiated a strengthening of the CRA (I’ll agree to your bad idea if you agree to my bad idea.) And this happened in several countries in the world at the same time, and most had nothing like CRA.  Only if you look at the first layer, however if you peel the onion, you would realize the a law passed here can have effects worldwide, even in places the law does not apply.
The fact that you can post a lot of links doesn’t mean they make sense. (Same for me). What you need is an analytically consistent rationale.

As an analyst, I’m always confronted with situation that have no clear ‘answer’ or ‘explanation’. And I have to try to keep my political preferences at bay. You can’t look at what happened in the world in the last two years, a crisis that replicated very similarly in severa pretty different countries, and try to explain it by one law from one country from 30 years ago. Even if that law started a process it’s clear that something that affects Spain and the US and Latvia all at the same time and in the same way is something bigger than the CRA.

And finally, let’s not forget how this started. My point was that the empirical evidence is pretty strong that the economy and the markets tend to do better under Dem administrations. Not sure why. But anyone interested in seeing the stock market rise should not automatically support Republicans.

An interesting post, somewhat related:



http://blogs.reuters.com/felix-salmon/2009/12/13/how-smaller-banks-would-have-helped-shrink-the-cdo-market/





Notice how even in the US market what fueled the bubble was money from abroad. European banks buying US CDOs (and ultimately US mortgages), and they probably never even heard of the CRA.   

it wont matter soon. This from the European Union Times



http://www.eutimes.net/2009/11/obama-orders-1-million-us-troops-to-prepare-for-civil-war/

follow article from the eutimes



U.S. Forces Plan Direct Action Against American Citizens

Posted by Europe on Dec 11, 2009 | 64 Comments





“There is an event coming in the very near-term future that is going to effect the USA to its very soul,” former Kansas State Trooper Greg Everson of The Heartland USA and former host of Republic Broadcasting “Voices from the Heartland” told host Steve Quayle in a special two hour “Survive 2 Thrive” broadcast Thursday.



“What is being planned and what is coming together is a perfect storm brewing right over our heads.” Everson cited verifiable information confirmed by an active duty US Air Force Colonel, three chiefs of Police, a local Sheriff, State Troopers in 3 neighboring Midwest states and a Federal agent he has known for twenty years.







“There is being made an effort to bring together the Armed Forces of this Nation in preparation for responding to and acting against the interests of our Citizens,” Everson said. Such efforts include actions that will be so deep and penetrating that the United States will never be the same. Everson explained that the deteriorating economy combined with Federal Reserve theft of trillions unaccounted for has had a devastating effect on Americans who had have enough and the US Military expects will respond by defending what little they have left.



“The American people have reached the point of total saturation due to the failure of Government to protect its borders, corruption and theft.” Everson expects that such a response has been projected by US Government computer models and believes NORTHCOM, DHS and state and local authorities will begin implementation of Operation Garden Plot and Martial Law within 45-60 days. “Civil war is precisely what this administration wants to happen,” said Everson. “And before Americans can organize themselves they will be destroyed by their own military.”



The first signs of pacification by our own forces will not only be convoys rolling through city streets and small towns throughout the Country, but direct military action against pre-targeted areas. Data acquired in the past year by “Census workers” has been used to program military targeting computers which our own armed forces will use in the unthinkable task of fighting its own citizenry.



“It is a formula for unmitigated disaster regardless of Copenhagen, Health Care reform or anything coming from Capitol Hill,” Everson said. Steve Quayle noted his own sources who say as many as 50 million Americans are likely to be killed with gun owners, veterans and the more visible dissenters the most likely targets of deadly force. More “liberal” areas that pose minimal resistance would likely be pacified using lesser means.



One of Everson’s’ sources was quoted as having said “We have plans that if it gets bad enough we will simply commence yard farming,” (a military reference for targeted air strikes) on neighborhoods and communities in cities and states where heavy resistance is expected. A tactic designed to destroy both the enemy and the area(s) under and around the enemy. Everson suggests such horrifying events could possibly coincide with an invasion by the Chinese from the west and Mexico from the south. In any case, military, law enforcement and civilian casualties could be enormous.



During the two hour broadcast Quayle received an e-mail message from an undisclosed US Military source that a last minute, unscheduled meeting of Saturday December 5 has been called for all unit commanders in the region to present readiness status reports. States in the Region include Ohio, Michigan, Indiana, Kentucky, Illinois and Tennessee.

[quote=tdude] it wont matter soon. This from the European Union Times



http://www.eutimes.net/2009/11/obama-orders-1-million-us-troops-to-prepare-for-civil-war/[/quote]



i love smell of loonies in the morning.