CAPITALISM On Oct 6, 2:57 pm, "M.A. Johnson" <[EMAIL PROTECTED]> wrote: > Anatomy of a Train WreckCauses of the Mortgage MeltdownStan J. Liebowitz > October 3, 2008Executive SummaryWhy did the mortgage market melt down so > badly? Why were there so many defaults when the economy was not particularly > weak? Why were the securities based upon these mortgages not considered > anywhere as risky as they actually turned out to be? This report concludes > that, in an attempt to increase home ownership, particularly by minorities > and the less affluent, virtually every branch of the government undertook an > attack on underwriting standards starting in the early 1990s. Regulators, > academic specialists, GSEs, and housing activists universally praised the > decline in mortgage-underwriting standards as an “innovation” in mortgage > lending. This weakening of underwriting standards succeeded in increasing > home ownership and also the price of housing, helping to lead to a housing > price bubble. The price bubble, along with relaxed lending standards, allowed > speculators to purchase homes without putting their own money at risk. The > recent rise in foreclosures is not related empirically to the distinction > between subprime and prime loans since both sustained the same percentage > increase of foreclosures and at the same time. Nor is it consistent with the > “nasty subprime lender” hypothesis currently considered to be the cause of > the mortgage meltdown. Instead, the important factor is the distinction > between adjustable-rate and fixed-rate mortgages. This evidence is consistent > with speculators turning and running when housing prices stopped > rising.http://www.independent.org/pdf/policy_reports/2008-10-03-trainwreck.pdf --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum
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