On Fri, 20 Feb 2009 12:01:15 -0800 (PST), "
wrote:
snip
Greenspan may have been skeptical of Congress passing any
legislation to suppress asset bubbles. The housing bubble was at
least in part due to Congress trying to increase the numbers of
poor that owned houses.
snip
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On Feb 19, 10:11 pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:

I am assuming you are referring to the Community Reinvestment
Act.

Actually no. Although that is one of the things congress did that
encouraged high risk loans.

Dan
------------
What then? Be specific.

I see no reason that increasing the number of homes owned by
lower income families should have resulted in the housing bubble.

This appears to be another case where the road to hell was paved
with good intentions, exacerbated and amplified by the sharpies
that gamed the system and abused their customers.

If anything the only likely result of a significant shift from
rental to owned residences would be a depression in the low cost
rental markets because of a lack of tenants.

A survey of the homes that were actually constructed during the
bubble indicate a proliferation of unnecessary and ostentatious
features such as granite counter tops and home theaters that are
incompatible with low cost "starter" homes suitable for entry
buyers. In many cases the house prices were further padded with
the major appliances, drapes, rugs, etc. being included in the
sales price. The problem being that top dollar was paid for the
appliances, etc, then this price is more than doubled because of
interest over the live of the 30 year loan, and the home owner is
still paying for these items long after these have been worn out
and replaced.

In spite of the impression we are being force-fed by the media of
the bubble being caused by the low-income first-time home buyer,
many if not most of the problems are entirely due to the
speculators that bought several houses, with the intent to "flip"
for a quick profit, pyramiding their profits from earlier
"flips," and who got caught when the bubble burst.

To be sure many of the recent low income buyers are now losing
their new homes to foreclosure but this is more due to the loss
of their jobs caused by the general economic contraction, the
sale of unsuitable homes and/or the writing of unsuitable
mortgages, by a combination of unethical real estate agents and
mortgage brokers than any vague Congressional mandate.

One of the primary factors in creating and inflating the housing
bubble was the collusion of the banks and bond rating companies
to conjure up residential mortgaged backed collateralized debt
obligations with AAA ratings out of sub-prime and alt-a paper,
most of which was generated by the speculators, and not the low
income first time buyers, which were then sold to the insurance
companies, pension funds, foreign investors, etc. to keep the
money coming in [and the grift going].

An equally important factor was the active participation of the
GSEs [Freddie and Fannie] in this scam by their in discriminant
purchase of the rotten paper generated to keep the money coming.
While the excuse is that they were "just following orders," these
were independent public corporations, and in hindsight, it can be
seen the actual motivation was to keep the transaction volume up
and those big bonuses coming for the executives. At no time did
Congress give instructions to these executives to "loot the
company, wreck the economy, and make yourself rich."

FWIW -- the next tidal wave set to wash over the real estate
market appears to be the so called 'Jumbo" loans that are too big
for governmental backing [417k$US or 625k$US in select areas],
and nothing to do with the entry-level buyer.
http://www.bloomberg.com/apps/news?p...Nqs&refer=home

http://www.bloomberg.com/apps/news?p...d=aRH2S0KvOEF8


Yes, identifiable people are responsible/accountable for the
allowing the housing bubble to grow to a disastrous size before
it popped, and helping to inflate it, but the low income
individual buying a house for his family to live in isn't on that
list. Congress is more accountable, but only because they kept
believing the administrators and bankers when they said "not to
worry, things are fine," when asked about possible problems.

== Until the foundational problems are identified [and fixed]
and the accountable people named [jailed, and their assets
confiscated], bubbles will keep occurring as there is simply too
much [easy/quick] money to be made.==

KEEP YOUR EYE ON THE BALL, AND YOUR HAND ON YOUR WALLET.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).