More Causes of the Mortgage Crisis

 The New York Times has been running a series of articles on how the Mortgage crisis that led to the economic crisis developed. I've linked below to the ones I haven't dealt with earlier on the blog.

If I had a New Years Wish I could get granted (since Xmas is already over) I'd like this all in one article with less fluff and personal interest stories and more bullet points.  But you have to hand it to the NY Times. They are trying to get to the bottom of this.  Maybe someday a repetition of the mortgage industry meltdown  may be avoided due to their efforts that, once again seem to exceed the other news sources'.

Ha, who am I kidding.  Faced with a repeat in conditions we will hear Republicans spouting their talking points and watch Democrats accept whatever extreme solution that is offered.

But the gist of the reports are good.

Check these out:

Tax Break May Have Helped Cause Housing Bubble

Now you might think that was the Feed the Wealthy tax break from 2001, but in reality the report is about a tax break proposed by Bill Clinton in1996 which passed through Congress in 1997 that said a homeowner didn't have to pay capital gains tax on a home that increased in value before it was resold.  The report says that the tax break meant that 17%more homes were sold than would have been otherwise.  But it also notes that other factors were more important in producing the crisis:

Excerpt:

...a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall — probably played larger roles.

Saying Yes, WaMu Built Empire on Shaky Loans

The WaMu's best loan creator was using methanphetamines.  That should say a lot.

Chinese Savings Helped Inflate American Bubble

The Chinese had lots of money to lend and we wanted to borrow lots of money.  Hey, it's just like the loan shark down the street, except China doesn't knee cap you, um, we hope.

But lets get to Bingo! in the next report.

White House Philosophy Stoked Mortgage Bonfire

Excerpts:

 For Mr. Bush, it was part of his vision of an “ownership society,” in which Americans would rely less on the government for health care, retirement and shelter. It was also good politics, a way to court black and Hispanic voters.

But for much of Mr. Bush’s tenure, government statistics show, incomes for most families remained relatively stagnant while housing prices skyrocketed. That put homeownership increasingly out of reach for first-time buyers like Mr. West.

So Mr. Bush had to, in his words, “use the mighty muscle of the federal government” to meet his goal. He proposed affordable housing tax incentives. He insisted that Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending.

tags: mortgage crisis  financial crisis  mortgage meltdown  bush administration  politics  tim greitner  henry paulson  fanny and freddy  

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