Steve Sailer finds a 2004 press release from HUD. It reads in part:
BUSH ADMINISTRATION ANNOUNCES NEW HUD "ZERO DOWN PAYMENT" MORTGAGE: Initiative Aimed at Removing Major Barrier to HomeownershipLAS VEGAS - As part of President Bush's ongoing effort to help American families achieve the dream of homeownership, Federal Housing Commissioner John C. Weicher today announced that HUD is proposing to offer a "zero down payment" mortgage, the most significant initiative by the Federal Housing Administration in over a decade. This action would help remove the greatest barrier facing first-time homebuyers - the lack of funds for a down payment on a mortgage.
Speaking at the National Association of Home Builders' annual convention, Commissioner Weicher indicated that the proposal, part of HUD's Fiscal Year 2005 budget request, would eliminate the statutory requirement of a minimum three percent down payment for FHA-insured single-family mortgages for first-time homebuyers.
"Offering FHA mortgages with no down payment will unlock the door to homeownership for hundreds of thousands of American families, particularly minorities," said HUD's Acting Secretary Alphonso Jackson. "President Bush has pledged to create 5.5 million new minority homeowners this decade, and this historic initiative will help meet this goal."
Read the whole thing. As Steve puts it:
This is the kind of thing that sends a message to private industry that not only will the government not crack down on zero down mortgages, it looks favorably upon them.
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It's so nice to have a resident racist, um I mean "race realist" like meh hanging around now that MDavid is gone. Always adds so much to the conversation.
And although DavidTC and I probably couldn't usually agree on the weather, he is 110% right in his post above.
David TC - not entirely sure what you mean by "imaginary money". If you're referring to CDS, well, I'm not sure how much they contributed to this crisis. Certainly they brought down AIG, but as I understand it, they were the exception rather than the rule (*); e.g., note that - to the surprise of many (myself included) - CDS on Lehman & Frannie were settled largely without incident. I suspect CDS might be an issue in the future, but AFAIK, most of the trouble to date has come from other sources.
If you're referring to private-label MBS, CDOs, & other structured securities...I tend to agree that these did much to complicate this crisis. They did distribute risk away from originators...and onto God knows who else (appears to be mainly I-banks & various foreign banks). This redistribution of risk, plus the opaque nature of these securities, has led to the loss of market confidence in bank balance sheets, and hence to the ongoing credit crunch.
That being said, crap loans (**) were still an issue. Even in an alternate history without securitization & CDS, but still featuring the housing bubble & enormous volume of crap loans (subprime, Alt-A, stated income, etc) of OTL, we'd still be facing a financial crisis. Only difference is, the casualties would be mainly commercial banks insured by FDIC. Think the S&L debacle, writ large.
(*) portfolio.com/views/blogs/market-movers/2008/10/19/why-the-cds-market-didnt-fail
(**) The loans were crap not necessarily because of _who_ got them. While many borrowers of subprime, Alt-A, stated income, low/no-doc loans may indeed have been non-creditworthy - in the sense of lacking adequate income, assets, and/or financial discipline to make them good credit risks - others were probably quite capable of handling a loan with a lower rate and/or smaller balance than they ended up with. And even a mortgage to someone with good capacity & creditworthiness can still end up dodgy if made against inflated collateral.
"It's so nice to have a resident racist, um I mean "race realist" like meh hanging around now that MDavid is gone."
What does race realism get wrong? That different races have different average IQ's?
MDavid is pro-natalist. He values anyone who breeds, regardless of IQ.
I'm still trying to figure out what the point of this is.
To re-hash the business of subprimes? To what end? To blame Bush? To blame Bush, after all that had gone before and after him, his bit in this is miniscule, so... again, what would that be for?
Oh, I agree, MI. Crap loans were an issue.
But not an issue in that they were crappy per se. Possibly we'd be facing a crisis if it was just them, but it would indeed be a different sort of crisis, one we were better equipped to deal with.
And I'll argue that if that crisis had show up in this alternate universe without insane instruments tying up money, it would have shown up regardless of 'bad loans', as falling housing prices made quite a few loans 'bad' that started out quite good.
Like I was trying to make with my 'house of cards' analogy, wobbles happen to the market, and pretending that housing market, which was absurdly overpriced for years, would have been okay without some 'bad loans' is crazy. At the very least, even with perfect lending practices, the market would be in a slump and a lot of people would still be underwater and thus defaulting on their loans, and people would not be getting new ones. Bad loans are the straw that broke the camel's back, but the camel was pretty overloaded.
The thing that made this worse than a slum was that banks had so tied themselves together with some absurdly complicated gambling schemes that no one can sort any of it out. A major side effect of this, indeed, was to cause them to randomly issue loans because they knew that they had managed to entangle those loans up so badly that they were (probably) responsible for a fraction of them.
The reason I have to push back against 'bad loans' being at fault is that people seem to think banks were somehow forced or even encouraged to issue them, usually by the Democrats but, in this case, Republicans. Which leads to the inane logic that the government should stop regulating or encouraging who should be lended to.
In actuality, banks loaned to too many people because they no longer had any fear of bad loans, which is entirely the fault of unregulated trades, which 'in theory' protected everyone involved, magically, from their effects. And they were able to suck so many people in because interest rates were so low, as Kristen M pointed out. And because of the housing bubble, which wasn't caused by anything but irrational market behavior that the government didn't bother to damp down because it made their economic numbers look good.
It was the perfect storm, and it consisted of unregulated trades that should have been regulated by the government, interest rates way too low by the Fed, and a housing bubble that no one bothered to deflate back in 2004 or so when it because obvious what was going on. The effect of that was overly risky loans that no one knew what would happen if enough fell at once...and enough did.
It didn't have anything with Democrats loaning to poor people, or the Republicans 'ownership society'. (Although I have separately criticized that as starting the housing bubble.)
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