[Running_Man]

Quote:

Originally Posted by brewer12345 I suppose I might as well be throwing meringues into a black hole trying to talk about facts on this subject, but one more try: The federal regulators were doing what they were supposed to be doing: they were regulating and restraining the banks in their lending. If you look at the last two years worth of "proposed guidance open for comment" (i.e. this is what we will force you to do shortly, so stop doing it now) that the bank regulators issued, you will see: restrictions on subprime lending, restrictions on construction lending, resquirements to qualify borrowers for loans based on verifiable income, etc. The real problem is that a lot of lending was done outside the banking system. So while actual FDIC-backed banks were kept from doing the really stupid loans (mostly), non-bank lenders could do whatever the ultimate buyers of the paper would put up with. In an era of loose credit, dumb things were done but the federal regulators (mostly) kept it out of the banking system. The problem now is that the non-bank lenders (who were regulated by the states if at all) have pissed in the punch bowl. Want a cup? But it isn't the bank regulators' fault.

This is absolutely a total falsehood. There may have been some toothless guidelines issued but there was no enforcement and the banks did not stay out of the business. Of the top 10 originators of subprime loans you have Citigroup, Merrill Lynch, Countrywide, Wells Fargo and Washington Mutual. They then took these loans and had Wall Street package them all over the world in tranches. If you read the story you will see Wells Fargo originated 23 billion in the 3rd quarter of 2006 in subprime loans to lead the country. I don't see restraint there!?

You had Greenspan and Bernake state they never realized the troubles until it was too late. Bernake thought all was well and waited until April of this year to ask for some more oversight. Greenspan never saw any problem.

At the same time Goldman makes a fortune shorting the very loans they packaged. To claim this all happened outside the main banking area is totally misleading and a false claim you have been making from the beggining of the subprime mess. Yes there were a great many mortgage companies making loans but it was the big players who gave the impression to all that it was a profitable and good way to finance housing.

To look at a chart of the amount of subprime lending up to 2006 and I do not see a definition of restraint. I believe 20 percent of all loans were subprime in 2006.


Top 10 subprime originators slanted toward West Coast - MarketWatch

Bernanke Believes Housing Mess Contained - Forbes.com

Greenspan defends subprime market - CNN.com