The banks forced Congress to repeal Glass-Steagall so they could give subprime loans to Americans w/ low credit scores. They securitized the mortgages and used them as leverage on speculative investments There are no "racial IQ differences", this is an affront to human potential
The housing crash resulted from refusing to talk about racial IQ differences. Disparities in racial rates of home ownership were ascribed to racism, and banks were forced to make loans to unqualified minorities. This destroyed the lives of millions of blacks/hisp. We must talk
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I agree with you partly except lenders gave subprime mortgage loans to people with high credit scores as well. Lenders also disproportionately steered borrowers of color - with higher credit scores - into subprime mortgages.https://www.wsj.com/articles/SB119662974358911035 …
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I agree, but I only had 240 characters. Someone would inevitably say that subprime refers to the borrowers ability to pay. But this would ignore practices that make them borrow more than they can afford, and things like PMI and extra large down payments; as the article mentions.
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I worked in the financial sector during the subprime mortgage crisis and I can say few things for certain about this incredibly complex, multi-caused, massive worldwide scandal. One thing I can say for certain, is that you are absolutely, 100% wrong.
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Adam, you are asking the world to trust your 'professional' judgement that someone else is wrong 100%, while your profession almost ruined itself and the world 10 years ago. Where is your reasoning to reach the 100% conclusion? The world wants to see...
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The crisis had multiple causes, most of which were far more important than dumb loans taken on by ppl who should have known they couldn’t repay them. Want evidence? Read “The Big Short.” Don’t like reading? Watch the movie.
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I watched the film, but it does not prove Stefan is 100% wrong. It was not made for that purpose at all.
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The movie doesn’t mention “racial IQ” for the simple reason that “racial IQ” has 0 to do with the subprime mortgage crisis.
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While subprime adjustable-rate mortgage loans were indeed made to unqualified minority applicants, it was the willingness of lenders to repackage them into exotic securities such as collateralized debt obligations (CDO's) that really created the momentum.
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Eh. That made it worse but if people pay the loan there is no crash. See Thomas sowell
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True. But the banks hid that volatility with a veneer of more attractive investment vehicles. Their hands aren't clean.
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Securitizing debt is just a way of pooling risk. You might as well claim insurance is a scam or something. Banks had to do that to deal with the overly risky loans they were forced into making.
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Wait, how were they forced?
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Economic incentives. If they had all of these objectively terrible loans, it would ruin their businesses when they defaulted. They had to offload the debt.
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Incentives do not equal “forced”. Also he used “force” in relation to the initial bad loans , not the risk pooling.
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The issue of force is difficult to state, as we'd have to look at the original legislation which was (theoretically) designed to help the historically underserved to realize the American dream. At the very least, we can say there was pressure and incentive to create these loans.
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It was a subset of the bigger problem, which was Collateralized Debt Obligations. The bad mortgages were packaged up into shit sandwiches with the good ones, tied in a bow and sold as low risk investments, which they were not.
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NINJA (No Income No Assets) loans were peddled to all manner of riffraff, including white trash, and then peddled to banks who knew better. These were the secret ingredient that made the CDOs so toxic.
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Watches the Big Short once...
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That and after the crash I pissed away a lot of time trying to unwind ownership of properties in Florida, paper on which was often held in multiple CDOs. Good fucking luck with that.
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