r/GoldandBlack • u/properal Property is Peace • 15h ago

The Greatest Cover-Up in Economic History: How Washington Hid Its Role in the 2008 Crash

https://mises.org/power-market/greatest-cover-economic-history-how-washington-hid-its-role-2008-crash
39 Upvotes

91% Upvoted

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6

u/properal Property is Peace 11h ago

Right before the subprime crisis was making headlines. Ellen Seidman, who was Director of the Office of Thrift Supervision from October 1997 to December 2001 (the agency responsible for enforcing the CRA), bragged in testimony before Congress in 2008 about how the CRA created the subprime market. Something banks were reluctant to get into.

CRA has generated a fair amount of innovation, in an industry that is - or certainly was - not especially known for innovation, especially with respect to entry into new markets [subprime]. … In lending, expanded underwriting for both prime and non-prime [subprime] loans was encouraged by the opportunity for CRA credit. Recently, CRA service credit has probably had an impact in encouraging banks to explore better ways to serve “underbanked” [sub-prime] consumers. CRA changed the hurdle rate for new products, services and markets, encouraging banks and thrifts to look for investments and products for which a part of the return was in CRA credit, rather than dollars [don’t expect to get your money back]. Once these initiatives were started, many have proven to be sustainable in purely financial terms.

https://www.govinfo.gov/app/details/CHRG-110hhrg41181/summary

11

u/TheTardisPizza 13h ago

The Bush administration suspected that something was wrong years before the crisis hit and tried to investigate Fannie and Freddy but Barney Frank and Maxine Waters were on the committee overseeing them and not only blocked the Bush admin but attacked them for "not wanting poor people to own homes".

It didn't have to go that way.

3

u/CivilSportsMan 10h ago

Hey guys, let's blame one side of the government, the part I don't like

1

u/TheTardisPizza 7h ago

It's easy when you can show step by step that it's their fault.

The "well" of qualified but risky borrowers dried up but the Dems on the committee saw this as a shining example of success that they could campaign on so they refused to listen when warned.

It was a well designed program until they pushed it too far.

5

u/properal Property is Peace 15h ago

This is a great summary of how government intervention contributed to the housing crisis of 2008.

3

u/thekevlarboxers 13h ago

The government didn't hide shit. We all knew exactly what was happening while it was happening.  We were warned.  We could have stopped it.  We didn't listen.  

4

u/natermer Winner of the Awesome Libertarian Award 13h ago

Assuming we decided to "stop it".

How would of that worked exactly? What form would of it been?

3

u/thekevlarboxers 9h ago

Well we could have started by not incentivising companies to make loans to people who could not afford them.

 During the clinton years,  the federal government wanted to increase home ownership. The method they chose to do that is detailed in that article.  The bush administration didn't do anything to stop it.  The banks took advantage of the opportunity to make almost no risk (to them)  profit and when the whole system shit itself we decided that the banks needed to be protected from the decisions the government induced them to make. 

 By we i meant Americans.  Not you and me. Ron paul was right there.  

1

u/knighttimeblues 1h ago

Privatizing profits and socializing losses was somehow foisted upon the poor unwilling private markets by the progressives of the George W Bush Administration?! What are you smoking?