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bad loans

The Dodd-Frank Wall Street reform legislation managed to pass with one piece that forces banks to be somewhat responsible for their lending, a provision that requires lenders to retain five percent of the residential loans that they make. That's supposed to make banks less anxious to secure risky loans, bundling up that risk, and selling it off as securities. You know, the practice that created the whole massive casino that wrecked the global economy.

Unsurprisingly, that requirement has proven too onerous for the banks to be able to live with. So, of course, they've got their Republican lap dogs primed to try to repeal it.

Rep. Scott Garrett (R-N.J.) is looking to entice the private sector back into a housing market now dominated by Fannie Mae and Freddie Mac with a new bill he introduced Thursday.

The legislation is aimed at making it easier for private investors to begin buying and selling mortgages bunched into securities, a bid to free the market from the "duopoly" enjoyed by the two government-sponsored enterprises.[...]

[H]is bill would eliminate a provision of the Dodd-Frank financial reform law that requires financial firms to retain "skin in the game" by holding some of the risk from mortgages they packaged into bonds.

Garrett said he hopes to move his bill through his subcommittee in short order, as the full committee begins to consider other GOP housing bills as they advance to the House floor.

Just to put a big cherry on top of it all for the banks, the bill would also "prohibit the practice of mortgage 'cram downs,'" or principal reduction on mortgages. It's not like federal regulators are really seriously considering forcing this haircut on the banks—an option that would probably be fairest to customers, since it would mean their mortgages reflect the real value of their home—but Garrett wants to make sure that it can never happen.

Why does Rep. Scott Garrett want to do this? To "try to create a more level playing field for the private market to be able to stand up again." Right, cuz the banks are operating on such a fucking unlevel playing field and don't want to lend out the massive cash deposits that they've been whining about unless they can do it without any rules.

Originally posted to Joan McCarter on Fri Oct 28, 2011 at 02:55 PM PDT.

Also republished by Daily Kos.

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Comment Preferences

  •  Tip Jar (30+ / 0-)

    "There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning." —Warren Buffett

    by Joan McCarter on Fri Oct 28, 2011 at 02:55:41 PM PDT

  •  Not to hijack this but for anyone who wants (4+ / 0-)

    a great explanation of one part of the mortgage crisis, the "paperless mortgages" that made it easy for banks to 'slice and dice' and bundle up loans in this sort of crazy speculation please read this diary by jamess. You won't be sorry, though you might be mad.

    GOP 2012 -- Austerity is just around the corner!

    by ontheleftcoast on Fri Oct 28, 2011 at 03:03:52 PM PDT

  •  The astounding thing in this is (8+ / 0-)

    that language about "level playing fields."  Because that used to be a pretty effective piece of Republican sleight-of-hand back in the day.  But I think it's pretty apparent to most right now that the banks are peddling something more odiferous than shineola.

    •  If people want to go back in time (0+ / 0-)

      to see where this mess started, it was an attempt by banksters and others to open up the market for mortgages so they could be resold. I posted about this some time ago, several years,  and the problem then was that banks were freed up from certain regulations by the Gramm bill, and got into the business of investment instrument creation, derivatives, which were becoming a hot matter in the markets, given their 'guaranteed' returns,  with Countrywide as one of its leading lights, and took a lot of the business of packaging and reselling mortgages which did not conform to Fannie and Freddie requirements, and threatened to take the entire market.   This made F and F loosen their requirements and begin to buy the skunkyand nonconforming mortgages that Countrywide and others produced, in order to stay in the game at all. And the difference which was produced, of course, was that the independently confected derivatives did nto have F and F guarantees on them, but the F and F ones did. So F and F were forced by the private marketers to buy them, too.

      IMO, there has always been a level playing field for conforming mortgages, but the question this sort of thing raises is not whether the playing field shall be level.  That all mortgages of the same quality get the same treatment.  The alternative being posed here  is that  all getting the AAA treatment regardless of quality, and with the guarantees that AAAs get.  

      A second question is ultimately who shall take the risk  of that, the banksters who seem to have ducked it in round one, or the gummint again through the F and F guarantees of stuff they would never have taken before the rules were changed, or the need to do an additional bailout of banks who can't in fact stand up to the risk and responsibility for the junk mortgages they created, and will look for another bailout next time they crash after this Dodd Frank protection is again eliminated. As it is, the lawsuits are already being generated for banks to have to bear the risk they created in those mortgage derivatives based on bad loans which in fact went bad, but whose defects they packaged in such a way that the investors who bought them could not see the defects the banks knew about, starting with MERS, and who are now suing for various versions of securities fraud, round one not being done yet.

      If banks want to be in the 'free market' and 'the private sector' their remedy is simply to hold their breaths and do that, rather than allow the market to be corrupted so that there are no limits on the junk they produce when not restrained and want to produce again, and for the banks to do that without a governmental guarantee and the pols to keep their hands off when the banks come for relief from their own conduct. They can do that now. They would simply have to arrange a better way to deal with the risk they create by doing what they want without regulation, so that they and not either their depositors or their investors or the government bear it for them without remedy against them.

  •  When the 99% has rules they're called "laws" (8+ / 0-)

    People aren't clamouring to have the laws against bank robbery repealed.

    When the 1% has rules to follow, they're called "regulations" which makes them sound less serious and makes it easier for the 1% to treat them as negotiable, to clamour for their repeal.

    We should be referring to banking regulations as "laws" and bankers as advocated for lawlessness.  And, banksters who break laws should be prosecuted and perp walked to prison.

    Men never do evil so completely and cheerfully as when they do it from a religious conviction. -- Blaise Pascal

    by RJDixon74135 on Fri Oct 28, 2011 at 03:16:22 PM PDT

    •  Unfortunately, what governs bank (0+ / 0-)

      behavior may actually be regulations because some agency has been put in charge of enforcing a law passed by Congress. I'm not an attorney, though, and bow to anyone more knowledgeable in this area.

      "The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

      by Lily O Lady on Sat Oct 29, 2011 at 02:14:26 PM PDT

      [ Parent ]

      •  Regulation vs. legislation (1+ / 0-)
        Recommended by:
        Justanothernyer

        Congress passes laws that do not have - in a great many cases, in almost every case, in fact - sufficient details and are not self-executing. The administration of these laws is intentionally left to departments within the Executive branch and to administrative agencies (the latter being referred to as "the headless fourth branch". In truth, Congress often finesses the details to agencies when it, itself, cannot agree on them.

        Yes, administrative regulations generally are more flexible, adjustable and litigable than the bald acts of Congress. Agencies and departments typically have the powers of legislation (in the regulations they issue), the executive (enforce their regulations) and the judicial (resolve disputes, challenge actions in court).

        There is nothing invidious about this. It is SOP and has been for decades. For example, the IRS interprets and applies the tax laws, labor and health agencies apply laws within their purviews, the broad proscriptions of our anti-trust laws are left for the FTC and the Department of Justice (and private litigation, as well). Some industries are - or have been - more pervasively regulated - the FCC and telephone companies. And so forth.

        Businesses have labored under regulations of many kinds for decades. They lobby for favorable interpretations and applications and challenge them in court.

        And there is nothing new to business's antipathy about them.

        Obama and strong Democratic majorities in 2012!

        by TRPChicago on Sat Oct 29, 2011 at 02:55:26 PM PDT

        [ Parent ]

        •  I don't think regulations are bad and came (1+ / 0-)
          Recommended by:
          TRPChicago

          to understand that they were promulgated by agencies created by acts of Congress when I worked at the SEC as a GS-5. Regulations are therefore mandated by law. You explained all this beautifly, but it means that RJDixon's idea of changing the language won't work in this case.

          The fact is that neither regulations or laws are bad as long as they are used to maintain society. Right now Republicans are enacting intentionally punative laws with regards to abortion which really do society harm. They are apparently trying to make people hate laws while simultaneously intimidating women.

          Laws and regulations are the basis of society as long as they are just. The Republicans seems to be running society off the rails.

          "The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

          by Lily O Lady on Sat Oct 29, 2011 at 03:47:49 PM PDT

          [ Parent ]

    •  The purpose of "regulations" is (0+ / 0-)

      to make things regular -- i.e. no surprises.  We like to think that our government agencies have been recently co-opted by the private corporations. But, in fact, there's been no "capture." Government agencies were always set up to serve the industrial, commercial, and manufacturing sectors. Think of patents, territorial monopolies, rail monopolies, dedicated air routes, etc. When Republicans talk about government picking winners and losers, they know what they want.  They want preferential treatment for their friends and never mind environmental and social restrictions.

      And don't dare mention animal rights!  After all, if animals have rights, can humans be far behind?

      People to Wall Street: "LET OUR MONEY GO"

      by hannah on Sat Oct 29, 2011 at 02:21:07 PM PDT

      [ Parent ]

      •  Regulators (1+ / 0-)
        Recommended by:
        hannah

        on Wall Street are like the "regulators" of the cattle wars of the Old West -- hired guns wearing cheap tin stars for the moment, riding in to wipe out anyone or anything who stands in your way so that you can practice unfettered capitalism like God intended for this here country.

        /snark

        The con takes decades to play out: every regulator who fails to do his or her job may be found working at a Wall Street firm in five or ten years, followed by working for the government (not)regulating Wall Street for a few years, followed by another cushy Wall Street job. Revolving door, round and round.

        They're in the family, for life.

        Es una cosa nuestra.  Capice?

        •  It's no longer unfettered capitalism. Half of what (0+ / 0-)

          they want is to eliminate the downsides of unfettered capitalism as to them, so that they can have huge profits but be freed of the risk of huge losses. They want the government to bear those, and through them the taxpayers who give up whatever they get from government so that the banks can be free ofthe consequences of their own choices which were wrapped in the notion of unfettered capitalism when made, but are not to be governed by the other side of that blade, so that the negative consequences are not subject to what happens to losers in unfettered capitalism and  fall only on others.

  •  I Always Refer Folks To The Book (5+ / 0-)

    The Big Short: Inside the Doomsday Machine. I know a lot of folks here have read it, but I still keep suggesting it.

    There are so many take aways from it I don't know where to start. But one thing that I didn't really know until I read the book is all these bankers hired these folks from NASA. Literally rocket scientists.

    They put together all these complex equations to try and "game" the market. The problem being that like about ten people in the entire world could understand them, yet these banks bet trillions on them.

    Clearly, the equations were not right. So I am pretty fearful anytime I read somebody wants to bundle up loans, CDS, you name it.

    When opportunity calls pick up the phone and give it directions to your house.

    by webranding on Fri Oct 28, 2011 at 03:17:34 PM PDT

  •  Ok, maybe I'm just stupid... (7+ / 0-)

    But didn't we just almost lose everything letting the damn banks run amok ?

    “And in the end, it's not the years in your life that count. It's the life in your years.” ~ Abraham Lincoln

    by JMoore on Fri Oct 28, 2011 at 03:25:24 PM PDT

    •  No You Are Logically (3+ / 0-)

      The definition of insanity is doing the same thing over and over again and expecting a different result. I am watching MSNBC right now and Richard Steele is trying to tell us that tax cuts will create jobs. When it is mentioned to him that it didn't work under Bush and it didn't work when Obama extended them he then, and I am not making this up, he tells Al that he lives in la la land.

      When opportunity calls pick up the phone and give it directions to your house.

      by webranding on Fri Oct 28, 2011 at 03:33:14 PM PDT

      [ Parent ]

      •  This is one reason why I thought I was stupid... (3+ / 0-)
        Recommended by:
        hannah, joe from Lowell, foresterbob

        because I not only don't understand these people...I don't understand why any media ( other than FOX) gives them a forum to openly lie...

        Thanks for letting me know I might still have a few working brain cells left :)

        “And in the end, it's not the years in your life that count. It's the life in your years.” ~ Abraham Lincoln

        by JMoore on Fri Oct 28, 2011 at 03:39:22 PM PDT

        [ Parent ]

  •  Scott Garrett (0+ / 0-)

    New Jersey's answer to Chele in the way-out-there whacko department.

  •  How much longer before they (2+ / 0-)
    Recommended by:
    foresterbob, Matt Z

    demand we sell our organs to satisfy their greed?

    "The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

    by Lily O Lady on Sat Oct 29, 2011 at 02:09:33 PM PDT

    •  Right! How can someone claim to (3+ / 0-)
      Recommended by:
      foresterbob, wsexson, Matt Z

      be "poor" when they still own their own kidneys?   Jeesh.  That's more "entitled" than owning a refrigerator.  When will these slackers sell all their worldly goods, sell their kidneys and quit whining?

      (I hope you all know this is snark)

      I was wise enough to never grow up while fooling most people into believing I had. - Margaret Mead

      by fayea on Sat Oct 29, 2011 at 02:22:44 PM PDT

      [ Parent ]

  •  If the loans are as bad as the junk (1+ / 0-)
    Recommended by:
    foresterbob

    they sold in the run up to the 2008 collapse 5% seems pretty light. I suspect that more than that were garbage for which they collected someone's good money.

    We have only just begun and none too soon.

    by global citizen on Sat Oct 29, 2011 at 02:09:36 PM PDT

  •  It's worthwhile to remember that (1+ / 0-)
    Recommended by:
    jds1978

    few in Washington, essentially no Republicans and few Democrats, including the president, have any interest in fighting the banks.  And the facts bear this out.

    No nation can be great if it allows its elites to loot with impunity and prosecutes its whistleblowers. Geithner is destroying the things that made America great. -- Bill Black, white-collar criminologist & a former senior financial regulator

    by jboxman on Sat Oct 29, 2011 at 02:10:47 PM PDT

  •  How our commercial class got to be so (2+ / 0-)
    Recommended by:
    fayea, foresterbob

    risk averse is a puzzlement. Everything has to be either guaranteed, or subsidized or insured or collateralized or "bundled."  Ok, that last is not in the same category, but it also has a whiff of "security."

    Somebody get those bankers a security blanket.

    Goodness!  Could it be that all that anger at social security is just plain old jealousy?

    People to Wall Street: "LET OUR MONEY GO"

    by hannah on Sat Oct 29, 2011 at 02:12:22 PM PDT

    •  Privatize the gains, socialize the losses. (1+ / 0-)
      Recommended by:
      hannah
    •  Capitalism abhors competition . . . (0+ / 0-)

      It is virtually inevitable in a free market that competitors will collude, will fix prices, will merge, will come up with any and all ways they can to monopolize their market.

      Like Steve Jobs vowing on his deathbed to commit all $40 billion of Apple's cash reserves to destroying Android.

      With competition comes hard work, guts, risk, and thin profits.

      With monopoly comes easy money, no risk, fat profits. After a while, the capitalist feels the world owes them their fat profits, like Bank of America claiming they have a right to their profits. Take away their usurious credit card rates, and they start charging people to use their debit cards, or to have an account.

      Insanity, not capitalism.

  •  Sic OWS on this situation (3+ / 0-)
    Recommended by:
    RMadisonWI, fayea, Matt Z

    Breaking News has it that Bank of America is rethinking fees that recently made it in the news.  Anyone that thinks the efforts by the OWS rallies didn't have play a huge part in this?  

    In my view, OWS should begin taking on specific issues "while they're hot", so to speak.  This particular one should top the list because as is being said in this thread, this kind of thing is part and partial to what put our country in the economic situation it's in now and has hurt just soooooo many good, honest, hard working people in America.  

    Sic 'em, OWS !!!

    - If you don't like gay marriage, blame straight people. They're the ones who keep having gay babies.

    by r2did2 on Sat Oct 29, 2011 at 02:16:18 PM PDT

  •  Ya Know! (4+ / 0-)

    I love it when Republicans go the "Full Monty" for the Banksters!

    "Some men see things as they are and ask, 'Why?' I dream of things that never were and ask, 'Why not?"

    by Doctor Who on Sat Oct 29, 2011 at 02:19:47 PM PDT

    •  Yes (0+ / 0-)

      If only the degenerate Wall Street gamblers had more leeway to fuck up the entire economy again......not!

      "He's the one, who likes all our pretty songs. And he likes to sing along. And he likes to shoot his gun. But he knows not what it means" - Kurt Cobain

      by Jeff Y on Sat Oct 29, 2011 at 02:25:08 PM PDT

      [ Parent ]

  •  Say what? (3+ / 0-)
    Recommended by:
    joe from Lowell, foresterbob, Matt Z

    These guys must have the memory of a fruit fly.

  •  This is insane. (3+ / 0-)
    Recommended by:
    fayea, foresterbob, Matt Z

    This, ladies and gentlemen, is what a Wall Street tool looks like.

    Art is the handmaid of human good.

    by joe from Lowell on Sat Oct 29, 2011 at 02:25:16 PM PDT

  •  Repubs are making it SO easy for Dems (0+ / 0-)

    to retake the house, increase their seats in the senate, and keep the presidency--if only they have the smarts and guts to do the blindingly obvious.

    Or, as Toby Ziegler put it to Jeb Bartlet in The West Wing:

    TOBY
    You're a good father, you don't have to act like it. You're the President, you don't have to act like it. You're a good man, you don't have to act like it. You're not just folks, you're not plain-spoken...

    Do not do not do not act like it!

    BARTLET
    I don't want to be killed.

    TOBY
    Then make this election about smart, and not... Make it about engaged, and not. Qualified, and not. Make it about a heavyweight. You're a heavyweight. And you've been holding me up for too many rounds.

    Also, make it about right, and not, moral, and not, sustainable, and not.

    "Liberty without virtue would be no blessing to us" - Benjamin Rush, 1777

    by kovie on Sat Oct 29, 2011 at 02:26:38 PM PDT

  •  Joan & DK flip more than Mitt Romney (0+ / 0-)

    If I looked to DK for information to make informed decisions about politics, I would be completely schizophrenic.

    Dodd-Frank was a bill championed by Obama and Chris Dodd and yet all that I read from DK before it passed over & over again was that Obama and Dodd were nothing more than Republican corportists in the pockets of banksters.

    Now you're telling me that you were wrong and it is REPUBLICANS that are corporatist banksters.

    Which is it? Do you even have a clue here @ DK?

    •  You are confused (0+ / 0-)

      For some reason, you think that the bill and the world is black and white.Nothing could be further from the truth. The dog – Frank Hill when it was initially written had lots of progressive ideas in it. This was finally watered down so that it had not much of anything in it. Sure, Pres. Obama championed the bill but, to be honest, it did not come close to going as for as we needed in order to control the abuses of the financial sector.

      Both sides about to the Almighty financial sector. Both Democrats and Republicans heed the advice and counsel of Goldman Sachs, J.P. Morgan and Wall Street. Who's worse? Republicans. But it is only a matter of degree. This is not a black or white subject.

      Be involved! http://www.whereistheoutrage.net

      by ecthompson on Sat Oct 29, 2011 at 03:34:05 PM PDT

      [ Parent ]

  •  NJ has some of the poorest places (0+ / 0-)

    in the whole country. How could they possibly vote republican?

    http://punkitechs.blogspot.com/ (Punk, Technology, politics-my blog)

    by greenpunx on Sat Oct 29, 2011 at 02:29:15 PM PDT

    •  Actually, our jerk gov aside, we're pretty blue (0+ / 0-)

      and not that poor. NJ went solidly for Obama in 08 & has gone for the Democrat in every presidential election since 1992 IIRC. We have this strange habit of having a governor in the opposing party of the POTUS (we have Christie now under Obama & had Whitman under Clinton; conversely we had McGreevey & Corzine under Bush).

      And as far as income goes, we're actually one of the wealthier states in the nation (and one of the tops in education). I think we're just behind NY and CT in terms of income & have some of the highest housing costs in the country (I have a Master's Degree & work three jobs and STILL can't afford a house in this state; it's that bad).

      That's not to say we don't have some poor areas such as parts of our cities (Newark, Jersey City, Camden, etc) and, believe it or not, the southern parts of the state by the beach.

      A village can not reorganize village life to suit the village idiot.

      by METAL TREK on Sat Oct 29, 2011 at 03:12:07 PM PDT

      [ Parent ]

  •  Because the first time, it worked so damn well (0+ / 0-)

    Everybody got richer.

    Well, everybody that matters to these shitstains.

    Alcohol. The cause of and solution to all of life's problems!

    by sizzzzlerz on Sat Oct 29, 2011 at 02:42:50 PM PDT

  •  kleptocracy "R" US (3+ / 0-)
    Recommended by:
    foresterbob, r2did2, Matt Z
    Kleptocracy, alternatively cleptocracy or kleptarchy, (from Ancient Greek: κλέπτης (thief) and κράτος (rule), "rule by thieves") is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population, often without pretense of honest service. This type of government corruption is often achieved by the embezzlement of state funds.

    I am off my metas! Präsidentenelf-maßschach; Warning-Some Snark Above"Nous sommes un groupuscule" (-9.50; -7.03)

    by annieli on Sat Oct 29, 2011 at 02:54:24 PM PDT

  •  Less accountability. Yeah, that's a *great* idea. (1+ / 0-)
    Recommended by:
    Matt Z

    I mean, what could possibly go wrong?

    Why, just the other day I was thinking that one thing that would most certainly negate the effects of the current housing crisis is to replace it with a different and much bigger one.

    Surely this guy is actually a Comedy Central producer, right?

    Right?

    no?

    There are plenty of Republicans to vote against, but I'd rather have Democrats to vote for.

    by here4tehbeer on Sat Oct 29, 2011 at 03:12:46 PM PDT

  •  simple math (0+ / 0-)

    For the last 30 years, the rich look at us as nothing more than small piles of money. Their job, their life's work, is to come up with new ways to suck money out of our pockets. They began to come up with new and creative ways to separate us from our money. Whether it was clever credit cards with hidden fees and surprise increases in interest rates to introductory/teaser adjustable mortgage rates which start off affordable only to be completely unaffordable within only a couple of years.

    Our income, our net worth, has been stagnant or actually decreasing over the last 30 years. While, at the same time, banks and other financial institutions have been raking in record profits over the last 30 years. There's a correlation here.

    Our only protection against the predatory lending practices of banks and other mortgage institutions is through strict regulation. That's it. We must control Congress. By controlling Congress we can get this crazy system  back in line. We must have a system that works for us, working Americans, again.

    Be involved! http://www.whereistheoutrage.net

    by ecthompson on Sat Oct 29, 2011 at 03:28:25 PM PDT

  •  Of course mortgages on 2nd homes... (0+ / 0-)

    ...will continue to be allowed to be "crammed down" in bankruptcy court.

    'Cause they want to rub our noses in it.

    Occupy Wall Street AND K Street!!!!

    by Egalitare on Sat Oct 29, 2011 at 04:34:39 PM PDT

  •  Skin in the game? (1+ / 0-)
    Recommended by:
    Matt Z

    Let me get this straight.

    People who are poor, disabled, retired or otherwise don't make enough money to owe federal income tax are parasites who "need to pay something so they have skin in the game."

    Banks, with their trillions in assets, after having caused a global financial crisis without any repercussions can't POSSIBLY be inconvenienced to have "skin in the game" themselves.

    Ummm... logic much??

  •  Why Rep. Scott Garrett wants to do this... (1+ / 0-)
    Recommended by:
    Matt Z

    That's an easy one.  Scott Garrett's district (and mine) is heavily inhabited by Wall Street types.   It is located in the north eastern corner of New Jersey, right under and next to New York.   Garrett is playing to his own constituency here.

    Bear in mind, the last time we had an election the local Democrats were able to come up with a legally blind rabbi non-politician, versus career politician Scott, so you see the situation were in here is pretty dismal.

  •  It's not enough for Dems (0+ / 0-)

    to defend the accomplishments of the past. Those policies are, despite their importance, not good enough. In terms of politics and policy, they (and we) need to push for more. If nothing else, having additional proposals draws a stronger contrast in an area where Republican ideas are supremely unpopular.

    One of the best things we could do is to push for state banks.  Creating alternative sources of power within the banking industry (and ensuring less concentration, which state banks can do), can weaken the hold of the big banks.

    Politics is the art of the possible, but that means you have to think about changing what is possible, not that you have to accept it in perpetuity.

    by David Kaib on Sat Oct 29, 2011 at 08:10:19 PM PDT

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