Capital New York

mauibucky commented on Bloomberg: 'Plain and simple,' Congress caused the mortgage crisis, not the banks

So if , as many here have posted, the Dems and Barney Frank are the guilty ones for pushing minority lending , then the mortgages that failed should all be minority loans. Since that is certainly not the case, can someone explain how the other mortgages failed?

Posted on November 2nd, 2011 4:26pm

mauibucky commented on Bloomberg: 'Plain and simple,' Congress caused the mortgage crisis, not the banks

Bloomberg is playing to the uninformed Republican base who love to vilify the lower classes. Weak loans have been around forever. They are risky and to cover the risk, the mortgagae will cost more, either in discount points when it is sold to an investor or in higher interest rates. The problem here is , the investors that purchased the loans were not aware of the level of risk because shady brokers packaged the risky loans in with the solid ones and called them all AAA quality. Then to make matters worse, they created a phony quasi-insurance policy between the two parties buyng and selling the mortgagaes, called a credit default swap.That's where Joe Blow sells junk bundles of mortgages to Mortimer Sucker and tells him they are all AAA, but just in case they aren't, Joe Blow gurantees any losses by issuing a credit default swap. Problem there is there were no reserves to back up the little quasi-insurance policy. They didn't need reserves because deregulation under Republicans eliminated the need for reserves, as odd as that may sound. Thank you Phil Gramm for that little gem.

Posted on November 2nd, 2011 2:29pm