Housing Crisis Explained

[H8tank]

Via this video link, watch the first few minutes at least to get an idea.

[wiegie]

see this:

 

http://forums.thehuddle.com/index.php?s=&a...t&p=2617097

[H8tank]

see this:

 

http://forums.thehuddle.com/index.php?s=&a...t&p=2617097

 

Wedgie, forgive me for not swallowing that.

 

Here is the most conservative paper in the world: http://query.nytimes.com/gst/fullpage.html...mp;pagewanted=1

 

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

[godtomsatan]

Via this video link, watch the first few minutes at least to get an idea.

 

Can you find a catchy video with words across the screen that outlines the role the decision by financial institutions to buy, sell, and trade these bundled mortgage packages in this mess? Perhaps with another soundtrack featuring Dire Straits' "Industrial Disease"?

[Azazello1313]

see this:

 

http://forums.thehuddle.com/index.php?s=&a...t&p=2617097

the CRA and its expansion in the 90s is only part of that story. there was also the willingless (legally mandated or not) of the GSEs (fannie and freddie) to buy up all the subprime mortgages, and the banks willingness to keep going along because, hey, they're backed by the government. when they got into trouble because of shoddy accounting, they got out of it by promising congress they would buy MORE subprime mortgages. then there are the warnings this decade from greenspan et al, and the attempts at instituting some oversight of the GSEs that were blocked by party line votes. it seems all of these actions by government helped make the current situation possible.

 

hell, even bill clinton agrees:

CHRIS CUOMO, ABC NEWS: A little surprising for you to hear the Democrats saying, "This came out of nowhere, this is all about the Republicans. We had nothing to do with this." Nancy Pelosi saying it. She signed the '99 Gramm Bill. She knew what was going on with the SEC. They're all sophisticated people. Is that playing politics in this situation?

 

BILL CLINTON: Well, maybe everybody does that a little bit. I think the responsibility the Democrats have may rest more in resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac.

[Jimmy Neutron]

BILL CLINTON: Well, maybe everybody does that a little bit. I think the responsibility the Democrats have may rest more in resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac.

 

Bill's been almost likable in recent weeks.

[moneymakers]

What happened?

 

You've been following the economic news and know that the Dow Jones Industrial Average fell another 161 points Tuesday. The Treasury is negotiating with Congress on a $700 billion response to the crisis. Many economists are calling this the most turbulent time since the Great Depression. Everyone wants to know: what went wrong with our economy? What is going to happen next? What does it mean to you and your family today?

 

First, what happened? Here's one explanation, expressed as succinctly as possible. The Great Depression was caused largely by banks which invested money placed on deposit, much of it in unwise speculation. When their investments failed, they didn't have the money people had deposited with them. A run on the banks ensued, and the financial system collapsed. As a result, regulations were put in place which prevented banks from acting as investment companies and investment companies from acting as banks.

 

A decade ago, through a series of legislative decisions, many of these regulations were changed or eliminated. As a result, large banks began participating more fully in investment strategies. Much of their attention was focused on real estate. At a time when housing values were annually escalating far beyond other investments, this decision paid off handsomely.

 

Banks began offering extremely low initial interest rates to get new buyers into the market. Many of these rates were "adjustable rate," meaning that they would increase over time. Most of these loans were called "subprime," describing borrowers who were considered to be higher risks and thus were required to pay higher or more quickly escalating interest rates. But the value of their houses would theoretically increase even more quickly, so that these buyers could soon refinance their homes without paying such high interest rates.

 

Then housing values began to decline, especially in areas where they had been overvalued and had increased beyond reason. Some allege that some banks pressured appraisers to assign unrealistically high values to properties. The price of oil began to escalate as the global market increased its demand, causing the overall cost of living to increase and making it harder for borrowers to pay their mortgages.

 

Soon many "subprime" borrowers began to default on their loans, leaving banks with properties worth far less than what was borrowed. Foreclosures further depressed the housing market, creating even more homes which were worth less than what was owed. As "adjustable rate" borrowers were unable to sell their homes, they were forced to pay escalating interest rates. When they could not, they were forced into foreclosure, flooding the market with even more devalued properties.

 

The result was that many banks and investment firms which had invested heavily in real estate ended up owning property they could not sell for what they had lent. Their losses mounted, raising the possibility that they would not have money to repay those who had made deposits with them. Freddie Mac (the Federal Home Mortgage Corporation) and Fannie Mae (the Federal National Mortgage Association), government entities created to provide banks with money for making home loans, ran short of cash necessary to keep these banks afloat and were recently taken over by the Federal Reserve.

 

After the failure or consolidation of several high-profile banks and investment companies, the federal government has determined that a very significant step must be taken. The U. S. Treasury Department has proposed the creation of a $700 billion strategy to assume the high-risk investments which are threatening to bankrupt even more lenders. On the assumption that these properties and investments eventually rebound in value, the Treasury may eventually see much of its investment returned. In the meantime, financial institutions will be able to shed the investments which threaten their future.

 

Will this "buyout" work? At what ultimate cost to the taxpayer? Will taxes have to be raised? Will inflation be spurred? No one yet knows. But most economists seems to feel that this decision was the best of a number of bad options, and that the Treasury may be able to support our economy until housing values eventually rebound. New regulations will hopefully make it much harder in the future for banks to become involved in unsafe investments, or for homebuyers to purchase such risky loans. But for now we must weather this economic storm.

 

What does the Bible say?

 

God's word speaks to our economic crisis in a number of ways. First, Scripture warns us about the perils of greed and unjust gain:

 

• "A greedy man brings trouble to his family, but he who hates bribes will live" (Proverbs 15:27).

• "Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income" (Ecclesiastes 5:10).

• "Like a partridge that hatches eggs it did not lay is the man who gains riches by unjust means. When his life is half gone, they will desert him, and in the end he will prove to be a fool" (Jeremiah 17:11).

• "The love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs" (1 Timothy 6:10).

 

One of the most important principles of true success is to live in such a way that God can bless you. If we are covetous, greedy, or unethical, we cannot be blessed by your holy Lord. We will never have the joy and contentment which Jesus alone can give. No matter how much we have, it will never be enough.

 

As the story goes, someone asked one of the Rockefellers how much money was enough. He smiled and replied, "Just a little more."

 

Second, God's word reminds us that all human institutions and wisdom are fallen and fallible:

 

• "Do you see a man wise in his own eyes? There is more hope for a fool than for him" (Proverbs 26:12).

• "The wisdom of this world is foolishness in God's sight. As it is written: 'He catches the wise in their craftiness' ; and again, 'The Lord knows that the thoughts of the wise are futile'" (1 Corinthians 3:19-20).

 

None of us can predict the future. No one can see perfectly the future consequences of present decisions. In retrospect we can see the damage caused by economic deregulation and speculative investment, but such decisions were made at the time by leading experts in their fields. When we put our trust in humans, we will eventually and inevitably be disappointed.

 

Third, Scripture counsels us to seek wisdom and guidance first from God:

 

• "The fear of the Lord—that is wisdom, and to shun evil is understanding" (Job 28:28).

• "The fear of the LORD is the beginning of wisdom; all who follow his precepts have good understanding" (Psalm 111:10).

• "If any of you lacks wisdom, he should ask God, who gives generously to all without finding fault, and it will be given to him" (James 1:5).

 

Whether your problem today is economic, relational, vocational, or spiritual, you can bring it to your Father. His wisdom is sufficient for your need, his truth for your problem, his grace for your guilt or grief. His will never leads where his grace cannot sustain.

 

Finally, God's word calls us to trust in him for our security:

 

• "The LORD longs to be gracious to you; he rises to show you compassion. For the LORD is a God of justice. Blessed are all who wait for him!" (Isaiah 30:18).

• "Keep your lives free from the love of money and be content with what you have, because God has said, 'Never will I leave you; never will I forsake you'" (Hebrews 13:5).

• "Surely I am with you always, to the very end of the age" (Matthew 28:20).

• "Do not be anxious about anything, but in everything, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus" (Philippians 4:6-7).

• "Do not worry, saying, 'What shall we eat?' or 'What shall we drink?' or 'What shall we wear?' For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own" (Matthew 6:31-34).

 

What about the future worries you today? The stock market or price of oil or global economy? Your health or that of someone you love? Your marriage or family? Your vocational future? Unresolved guilt over the past? Where should you turn for security and comfort today?

 

I was talking recently with a trusted friend and economic advisor. His advice on the economy: turn over a dollar bill and read what it says. Not "In America We Trust" or "In the Treasury Department We Trust," but "In God We Trust." Whether the current economic crisis affects you greatly or not at all, that's good advice.

 

What life issues are spurring you to trust your Father today?

[Azazello1313]

[wiegie]

the CRA and its expansion in the 90s is only part of that story. there was also the willingless (legally mandated or not) of the GSEs (fannie and freddie) to buy up all the subprime mortgages, and the banks willingness to keep going along because, hey, they're backed by the government. when they got into trouble because of shoddy accounting, they got out of it by promising congress they would buy MORE subprime mortgages. then there are the warnings this decade from greenspan et al, and the attempts at instituting some oversight of the GSEs that were blocked by party line votes. it seems all of these actions by government helped make the current situation possible.

 

hell, even bill clinton agrees:

if Freddie and Fannie actually had bought up all of the subprime mortgages, this crisis wouldn't have happened.

[H8tank]

You Tube and Warner Music Group today pulled a highly popular video that very succinctly and clearly spelled out the roots of the current economic crisis.

 

The 9:59 video entitled "Burning Down the House: What Caused Our Economic Crisis" played four different songs under a fast moving video sequence that very clearly tied Democrats like Chris Dodd, Franklin Raines, Jim Johnson and Barack Obama to policies and corruption related to Fannie Mae and Freddie Mac. It cleverly showed how the "affordable mortgage" programs sent an economic virus through the entire economy and showed Republican efforts to intervene and regulate being blocked.

 

For Obama and all congressional Democrats, it was a devastating video.

 

The video had almost a perfect viewer rating and had been viewed some 1.2 million times according to the You Tube counters. Sometime around 3:45 EDT the video disappeared with the banner saying "This Video is no longer available due to a copywrite claim by Warner Music Group."

 

Daniel J. Bianco writes in, poiting out that head of the Warner Music Group's political contributions this year are going exclusively to Democrats.

[WaterMan]

Slideshow videos ARE devasting.