Comments on: A Simplified Story of Our Economic Crisis

By: Lori - ESPACIOS Organizing & Declutter

Lori - ESPACIOS Organizing & Declutter — Fri, 19 Jun 2009 16:33:18 +0000

All very sensible comments. We need to be educated on the process as a whole to be able to give educated opinions on the subject of what creates a crisis and hopefully learn that Greed & Fear are not good advisers. The best advise is that which is valid in the good and bad times alike.

By: Recession Proofing Yourself | Financial Highway

Recession Proofing Yourself | Financial Highway — Tue, 12 May 2009 09:02:12 +0000

[...] A simplified story of the economic crisis Share Please: Related PostsQuantitative Easing-What is Quantitative Easing And How Does It Help The EconomyWhat is Recession- Recession A Good ThingRetirement Planing-Canadians more confident than AmericansIf you enjoyed this post, make sure you subscribe to my RSS feed! in Debt Elimination, Economics, Financial Planning, Investments Tags: economy, recession If you enjoyed this article and would like to be notified when new articles are posted, you can have them delivered right to your blog reader or free of charge to your email [...]

By: PF Blog Spotlight: Weakonomics | The Amateur Financier

PF Blog Spotlight: Weakonomics | The Amateur Financier — Sun, 05 Apr 2009 13:20:33 +0000

[...] A Simplified Story of Our Economic Crisis – A guest post by the Weakonomist on SimpleMom.net, detailing how we found ourselves in our economic conundrum. A simple, succinct explanation, certainly clearer than many of the official renditions I’ve read. A good read, especially if you keep asking yourself, ‘What Happened?’, without gettingmany clear answers, here would be a good place to look. [...]

By: Good stuff I read this week… « Too Full Of Hands

Good stuff I read this week… « Too Full Of Hands — Sat, 04 Apr 2009 07:03:31 +0000

[...] Economic Explanation from The Weakonomist [...]

By: Scott

Scott — Thu, 02 Apr 2009 15:21:41 +0000

You miss 2 key elements that most in government (both sides of the aisle) refuse to acknowledge (because the vast majority of politicians took advantage of the system and took huge donations from the GSE\’s and banks who profited, all the while pushing the notion that they helped promote \”affordable housing\” and increased minority home ownership): 1) In 1992, Congress also passed the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, which amongst it\’s other provisions, REQUIRED the government GSE\’s to devote a measurably higher percentage of their lending for purchasing and securitizing loans to \”affordable housing\”; and 2) Beginning in 1993 and extending through most of his presidency, President Clinton pushed strongly (and achieved) greater regulatory enforcement of the original CRA. He successfully got the Treasury to write stricter regulations regarding the notion of affordable housing mandates in order to further a political agenda to \”deal with the problems of the inner city and distressed rural communities.\” It was a brilliant and shrewd political move that helped him to be viewed as an advocate for those in need, and enshrined him as the \”first black President,\” (this, of course, before President Obama was a twinkle in the press\’ eye). Then, the Justice Department led by Janet Reno, at the behest of President Clinton, began pushing literal enforcement of these tougher regulations under threat of penalty against lenders. To ignore this as a HUGE element to the problem is HIGHLY irresponsible, and is one reason we are nowhere near fixing the underlying issues that created are current circumstances. In the Weakonomist\’s story here (in the early 2000\’s), it is floated that some bankers/lenders got together and developed the idea to give subprime loans. That is simply not the case. They were threatened to give subprime loans (which weren\’t called that yet) by the government, or face regulatory penalties on a daily basis. This is not to fully excuse the lenders/brokers/etc. who made money on all this. When they began acquiescing (as if they had a choice) to the new Justice Department threats, they shrewdly realized that they could sell most of their soon to be called \”subprime loans\” to Fannie and Freddie as a result of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (referred to above). So whereas most lenders were willfully staying out of the subprime market, not desiring any of the exposure to risk that comes with lending to low income borrowers, the government absolutely forced them all into the market by the mid-1990\’s. Once forced in, they found the loophole that had been created by the 1992 Act allowing them to package up the securities by writing them under GSE guidelines. That way, they were complying with new federal regulations, able to avoid justice department scrutiny, and oh, by the way, actually make more money by offering such loans and immediately passing them off to GSE\’s. ONLY THEN, did the banks take it to the next level described in this post. Once it was evident how much extra money could be made by seeemingly making risky loans without much risk to their own balance sheets (since they could package the loans and sell them as securities to someone else), banks started getting more and more irresponsible in their lending standards. They took it to the next level by skipping the GSE\’s alot of the time. Essentially, what happened was they said, \”hey this thing we were forced to do by the government has actually worked out pretty well for us financially, why not skip the whole government involvement with a portion of our business and just offer these loans as investments to private investors? After all, we can take the same concept we\’ve used to avoid the exposure to our own books and apply it to private investors, and we\’ll all make tons of money.\” So yes, they are part of the problem, and need to be held accountable. BUT, the government created the environment in the first place. And NONE of this ever would have existed had they not stepped in and forced lending to people banks otherwise would not have been interested in lending to because of the risk associated with having to hold those assets on their books. To ignore the increased regulation and enforcement of the CRA in the Clinton years, and the new securitization options available after the 1992 Act with Freddie and Fannie, is either a continued \”head in the sand\” attempt to ignore the first domino that HAD to be put into place for this entire failure to have occurred, OR it is just another political attempt to mislead and lie to avoid responsibility for the bad decisions that helped create this mess! Government involvement an excuse?? Give me a break. It is THE ONLY factor (and there are many factors, and many people, including the lenders who share in the blame) that if removed, probably would have avoided the entire crisis we find ourselves in. The banks followed the lead of the government, the regulators, and the GSE\’s… not the other way around.

By: Tsh

Tsh — Tue, 31 Mar 2009 20:46:42 +0000

Hmm… Never heard of this before. Could you send a possible link this way? Thanks in advance.

By: Jessica

Jessica — Tue, 31 Mar 2009 19:47:31 +0000

I love your blog but I have to point out that this is a total ripoff of This American Life’s fabulous “Giant Pool of Money” show that was done by Alex Blumberg and Adam Davidson. I realize this is a guest blogger, but plagiarism is plagiarism, even if the orignal was published on the radio.

By: Horlic

Horlic — Tue, 31 Mar 2009 07:59:04 +0000

Great post. It is simple and easy to understand the point. Thank for sharing this great article. Horlic´s last blog post...Free Online Consultant’s Advice for Home Loans, Property Legal Aid, Interior Design Ideas and Home Insurance

By: Baker @ ManVsDebt

Baker @ ManVsDebt — Mon, 30 Mar 2009 14:34:14 +0000

Great post! Very well-design with great content. Provides an easy-to-relate-to overview of the meltdown as a whole! Baker @ ManVsDebt´s last blog post...49 Reasons You Make Less Hourly Than You Think

By: A Simplified Story of Our Recession | Weakonomi¢s

A Simplified Story of Our Recession | Weakonomi¢s — Mon, 30 Mar 2009 14:13:10 +0000

[...] to keep things simple. She has allowed me to make my own simplified version of this recession. Head on over there and give it a read. Share and [...]