Fed didn’t bark at subprime loan abuses (great timeline)

[underpants]

Source: MSNBC

Regulator didn’t police lenders’ compliance with laws protecting borrowers

The visits had a ritual quality. Three times a year, a coalition of Chicago community groups met with the Federal Reserve and other banking regulators to warn about the growing prevalence of abusive mortgage lending.

They began to present research in 1999 showing that large banking companies including Wells Fargo and Citigroup had created subprime businesses wholly focused on making loans at high interest rates, largely in the black and Hispanic neighborhoods to the south and west of downtown Chicago.

The groups pleaded for regulators to act.

But during the years of the housing boom, the pleas failed to move the Fed, the sole federal regulator with authority over the businesses. Under a policy quietly formalized in 1998, the Fed refused to police lenders' compliance with federal laws protecting borrowers, despite repeated urging by consumer advocates across the country and even by other government agencies.

Between 2004 and 2007, bank affiliates made more than 1.1 million subprime loans, around 13 percent of the national total, federal data show. Thousands ended in foreclosure, helping to spark the crisis and leaving borrowers and investors to deal with the consequences.

Read more: http://www.msnbc.msn.com/id/33041360/ns/business-washington_post

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This WaPo article is more detailed and includes how the arms-length financial operations sprung from banks when they saw how profitable their were but with lower liability.


As Subprime Lending Crisis Unfolded, Watchdog Fed Didn't Bother Barking
http://www.washingtonpost.com/wp-dyn/content/article/2009/09/26/AR2009092602706.html

The Fed's performance was undercut by several factors, according to documents and more than two dozen interviews with current and former Fed governors and employees, government officials, industry executives and consumer advocates. It was crippled by the doubts of senior officials about the value of regulation, by a tendency to discount anecdotal evidence of problems and by its affinity for the financial industry.

"I stood up at a Fed meeting in 2005 and said, 'How may anecdotes makes it real?' " said Margot Saunders of the National Consumer Law Center's Washington office. "How many tens or thousands of anecdotes will it take to convince you that this is a trend?' "

[Roland99]

1. But, but, but. The conservatives all say it was Clinton, Frank, and Dodd!

Well, we all know how much conservatives love to project and just flat-out LIE!

[underpants]

5. Well Clinton was involved but so were Graham, Greenspan, and the entire culture

[Overseas]

2. Also interesting-- the substitution of the word "subprime" for the previous "predatory lending"

http://seattle.bizjournals.com/seattle/blog/2009/09/when_is_subprime_lending_predatory.html

The article reports that news organizations overwhelmingly used the term subprime to refer to the cause of mortgage crisis. In part this is because news organizations weren’t sure if the definition of “predatory lending” was clear. It was, but that didn’t stop high officials from saying it wasn’t.

Longobardi cites a 2000 report by former Sen. Phil Gramm, who headed the Senate banking, housing and urban affairs committee at the time, as saying: “It’s difficult to understand how Congress can formulate proposals to combat predatory lending when there is no clear understanding of what it is….In the absence of a definition, not only might we miss the target, but we may hit the wrong target.”

This statement was made at a time when the Department of Housing and Urban Development and the Treasury Department had released an extensive report on the predatory lending problem. No problem of definition there.

News organizations felt more comfortable with the industry-friendly term “subprime” because it didn’t imply a moral judgment, the author says. They used the word “suprime” 75,000 times in 2007, compared with about 1,000 for “predatory lending,” Longobardi reports, based on a Factiva search.

[underpants]

4. Thanks for the details of how this entire issue has been marketed for mass consumption

great article.

"Subprime" DOES imply a moral judgment--on the buyer.

The whole thing is the result of the Milton Friedman economic theory that every signed on to because there was more money in it for the top-the "Masters of the Universe" which because a self serving vicious circle where top money just HAD to be paid to all the "talent" because, HEY, they have to worth that much money because they all went to all the right schools (and they praise "The Man" at the top)

these consumer groups and *ahem* community organizers don't make squat for money so what could THEY possibly know???

Notice that in neither of these articles do we get the names of the organizations who were trying to alert the "talent" at the top to what was going on. I looked for related articles that might tell us but alas no- we can't have that much information (because I think we all know which organization's name might just pop up)

[Overseas]

6. Interesting point-- subprime blames the buyer. predatory- the seller.

I see a lot of right wing talk aimed at shifting the blame from predatory practices of all kinds from the corporations to the individuals who fall for the sophisticated marketing supported by millions in research disseminated with millions for PR and advertising.

[underpants]

10. There were no "victims"

until the Madoff scandal broke and we found out that Mort Zuckerman, the CEO of GMAC financing :eyes:, and the President of the Mass school of law had been "ripped off" THEN we had us some VICTIMS


many of these victims (including Spielberg and Kevin Bacon and his wife) weren't VICTIMS of bad contracts because there weren't any contracts just excel spreadsheets that Madoff sent them quarterly. THEY DIDN'T EVEN HAVE CONTRACTS!!! :eyes:

[Red1]

3. Pikes

topped with the heads of the regulators and banking ceos recieving tarps, surrounding the banks and fed buildings

[Frustratedlady]

7. Wasn't ACORN one of the Chicago groups that was warning the Feds?

If so, is that why the Repugs are targeting ACORN? Can't just be because they were bringing in more voters for the Dems. The Repugs can BUY or manipulate machines to get them!

[underpants]

9. It doesn't say (rather conspicuously)

As I posted above neither versions of this article (same writer from two sources) lists what community or consumer groups were raising the red flags

Yes that seems to be a major part of why ACORN has been attacked since former Sen. Dominici tried to get Yglesias to charge them right before the election

What does ACORN do?
the fight predatory lending
they petition utilities and local governments AND raise money to lower or pay for heating bills
AND
they now register votes

The first two- Hmmm who do you think most of the contributions from those industries go to
the third one is self explanatory in the fact that Republicans don't like it and have openly tried to fight the trend of more people voting (from RocktheVote to census-fighting to outright voter suppression see link below)

http://en.wikipedia.org/wiki/Voter_suppression

[defendandprotect]

12. Think they were calling them "Liar Loans" . . .no wonder Repugs are trying to shut them down!

[slipslidingaway]

8. Thanks knr nt

[defendandprotect]

11. k i c k