Yep, the S.S. Obama is sinking like a rock. Democrats, please keep trying to destroy our economy and take over our health care sytem. We need the votes.

The only people currently looting the treasury are the liberals.

As I recall George W. Bush had some sizeable deficits mainly due to 911 and two wars. Other than that his deficits were very much like all the other presidents.

Of course Obama's 2 trillion a year deficit breaks all records and its not even close.

But hey Slippery Ironfist, I am sure you voted for Obama and his deficits are just fine with you.

Timex, as for a real estate house of cards the democrats hold any and all blame because of their community reinvestment act and their criminal shenanigans at Fannie Mae and Freddie Mac corcerning subprime mortgages.

Overall the economy under Bush was good until the democrats took over congress in November of 2006. It ain't no coincidence that things went to shit then. Also the national debt did not double under Bush it went up 85% which still includes Katrina, 911, and two wars. Also the largest increases in the deficit under Bush came in the last two years when democrats controlled the budget.

The will however double under Obama and I don't mean that it will take 8 years either. It will most likely double in 4 years which is probably all this underqualified community organizer is gonna get.

Wait a minute! Paul Krugman told me the CRA was relaxed during the Bush administration. What about that bit of evolution, buster?
It's true that the CRA requirements were relaxed during the Bush administration. But at this point the lax lending standards were already in place. In any case, the relaxation took a peculiar form that actually made CRA lending more important rather than less. You see, the government let banks drop things like putting in ATMs in rural areas in favor of letting their compliance be judged entirely on CRA loans. This means the CRA had more of an influence on home lending after the requirements were relaxed, not less.

What's more, George W. Bush was a major proponent of the kind of mortgages that banks had started making under the CRA. He urged low-to-no doc mortgages and the elimination of downpayments, just like the CRA regulators had long done. "We certainly don't want there to be a fine print preventing people from owning their home," the President said in a 2002 speech. "We can change the print, and we've got to."

What about "No Money Down" Mortgages? Were they required by the CRA?
Actually, yes they were. The regulators charged with enforcing the CRA praised the lowering of down payments and even their elimination. They told banks that lending standards that exceeded that of regulators would be considered evidence of unfair lending. This effectively meant that no money down mortgages were required. A Treasury Department study published in 2000 found that the CRA had successfully lowered down payments not just for CRA loans, but for all mortgages.

Explain the shift in loan to value away from the traditional lending requirement of 80%.
Again, the regulators told banks that much higher LTVs was an appropriate way to meet the CRA obligations.

What about the elimination of payment history? How about income requirements?
Regulators instructed banks to consider alternatives to traditional credit histories because CRA targeted borrowers often lacked traditional credit histories. The banks were expected to become creative, to consider other indicators of reliability.

Similarly, banks were expected by regulators to relax income requirements. Day labors and others often lack reportable income. Stated-income was a way of resolving the gap between actual income of borrowers and reported income. The problem, of course, comes when the con-artists and liars come into the game.

Did the CRA require banks to develop automated underwriting systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?
This was another lending innovation praised by regulators to the point that it became mandatory for banks. Those who were not employing automated underwriting would be putting their CRA ratings at risk. Automated underwriting was seen as a way of eliminating bias in lending.

Point out to me where in the CRA or any regulation that any of this is required.
I cannot. But this kind of legislative fundamentalism misconstrues the way laws constrain business activity. An unenforced law exercises little constraint, regardless of how onerous it is worded. Think of the way anti-trust enforcement changes from presidential administration to presidential administration.

In the case of the CRA, it was the activity of the regulators that matters. And each of these credit innovations described above was put into place to satisfy the CRA regulators.

Wouldn't lending standards have been lax during the boom even if we didn't have a CRA?
That's an interesting question to which we'll never have a satisfactory answer. It's possible. But this kind of counter-factual is just a game. We know that we had the CRA and that it caused relaxed lending standards in the reality we actually live. In another universe, another reality? Well, if you get there send us a post-card and let us know how it turns out.

Couldn't the increase in CRA loans have been accomplished without these lax lending standards?
This is another interesting question about an alternate universe. It is possible that banks may have been able to meet their CRA obligations with tighter, more traditional lending standards. But we'll never know. We know that they thought they needed to employ lax standards, and so did the regulators. A banker who refused to relax standards risked the wrath of regulators, andmore importantlyif his unorthodox, novel attempts failed he'd be found to be in non-compliance with the CRA. In the real world, lax lending standards were the only known way of satisfying the CRA regulators.

Isn't it really securitization that is the culprit?
The government pushed for greater mortgage securitization in an effort to increase CRA lending. At the behest of HUD Secretary Andrew Cuomo, Fannie and Freddie promised to buy $2 trillion of "affordable" mortgages. The government was intentionally decreasing the risks to the original lenders in order to increase loans to low-income borrowers, and minorities in particular. In short, you can't blame securitization without coming back around to the CRA.

Weren't the majority of the subprime loans made by mortgage service companies not subject to the CRA?
This is true. But it is largely beside the point. A huge driver of the demand for subprime loans was the demand for CRA bonds. Banks operating under the CRA could meet their obligations by buying up CRA loans or MBS built from CRA loans. The CRA created a demand that the mortgage servicers were meeting.

What's more, many smaller mortage service companies hoped to be acquired by larger banks. Increasing their CRA lending made them more attractive take-over targets.

A study put out by the Treasury Department in 2000 found that the CRA was encouraging the mortgage servicers to provide loans to low-income borrowers, in part because the CRA loans had been so successful.

Finally, the Clinton adminstration threatened to subject the mortgage companies to the CRA if they didn't comply voluntarily. They promptly agreed to increase their CRA-type lending in order to escape the kind of public scrutiny that comes with official CRA regulated status.

If the CRA was forcing all this lax lending, why weren't bankers objecting?
Are you really in the dark about why the leaders of large public corporations wouldn't publicly object to a piece of civil rights legislation? Fine. I'll be totally open with you: this would have been career suicide and an open invitation to bias litigation and increased scrutiny from regulators. In this case, silence is misleading.

What's more, no one said the bankers hated the lax lending the CRA was requiring. Sure, some did. But those people were quickly shown the door, while the enthusiasts were promoted. The regulations themselves selected for enthusiasts for the program of lax lending.

How do you explain the fact that CRA loans historically had low levels of default. Doesn't this mean that loan standards were not relaxed?
Actually, no. We know that lending standards were relaxed under the CRA. The fact that they had relatively low default levels was initially a surprise but it isn't an indicator that lending standards were secretly high. There are plenty of explanations for this, including the lack of borrower ruthlessness in unsophisticated home owners and a tendency of delinquent low-income borrowers to sell the home and prepay the mortgage rather than default. Especially during a period of rising home prices, the default option was not heavily exercised.

But even during the crisis, CRA loans didn't default at higher rates than other mortgages. CRA banks aren't failing more than other financial institutions, CRA areas aren't hotspots of defaults. What about that?
In part, this is evidence that the lending standards of the CRA had spread to the rest of the mortgage market.

I thought you said CRA loans caused this crisis.
Nope. It isn't losses from CRA loans that drove the crisis (although they are disproportionately responsible for losses at some banks). Instead, the CRA required lax lending standards that spread to the rest of the mortgage market. That fueled the mortgage boom and bust.

So how and why did the CRA lax lending spread to the rest of the mortgage market?
The structure of the CRA regulations encouraged the spread. Banks that were the best at making CRA loans were allowed to grow by making acquisitions and opening new branches. This created a kind of political-financial Darwinism that reward the biggest enthusiasts for lax CRA lending standards. Of course, the most successful people under this regime were not the types who needed their arms twisted to make loose loans. They were who were predisposed to engage in loosey-goosey finance, who discovered that the CRA had made the world their oyster.

As for the "why" part of your question, the answer is a bit ironic. Banks making CRA loans initially expected that defaults would be higher due to lax lending standards. When they discovered the low-income borrowers had an unexpected propensity to pay their mortgages. After years of data poured in showing that borrowers were paying mortgages despite high LTVs, low down payments and unconventional income measures, bankers began to believe that many of the traditional measure of credit worthiness were overly conservative. Recall what I said earlier about how mortgage service providers started pursuing low-income borrowers in part because of the CRA.

What they didn't take into account was that different types of borrowers may behave differently, and that much of the data on those lax lending mortgages was warped by increasing home prices. Wealthier, more sophisticated borrowers ruthlessly default when their mortgage goes underwater, for example. What's more, the reversal of housing prices meant that defaults across all borrower classes increased.

Making matters worse, President Bush pushed hard for lax lending standards. He wanted to expand minority and low income home ownership far beyond what the CRA required. So he pushed even harder for the broadening of these lending standards.

Wait. So you're saying that the CRA's lax lending to low income borrowers became dangerous when it was extended more broadly?
In part. Ironically, the low income lending practices, particularly when undertaken on a limited basis in a low-securitization and rising house price period, seemed safe. This led to the practices being spread across the much broader category of loans. In a sense, you can look at the mortgage mess as what happens when CRA lending was applied much more broadly. If we'd confined the lax lending standards to just the geographical areas and low-income borrowers directly targeted by the CRA, our mortgage crisis would be far more manageable.

Studies have suggested that only 6 percent of subprime loans were extended by CRA-regulated lenders to either lower-income borrowers or neighborhoods in the lenders' CRA assessment areas. Since these loans suffer from outsized losses (for reasons not yet clear), we'd still have a major problem. But it would probably be only about 1/4 of the size of the current mortgage mess.

That doesn't sound very Republican of you.
I told you from the start this wasn't some plot to make the GOP look good.

But don't get carried away with this irony. Now that we are in this crisis, loans located in low income areas are almost twice as likely to be in foreclosure as other loans. There's also an unfortunate racial angle, with African Americans being 1.8 as likely to be in foreclosure as whites, and Latinos being 1.4 likely to be in foreclosure.

What's more, an enormous amount of subprime loans were made to lower-income borrowers target by the CRA. Forty-five percent of subprime loan originations went to lower-income borrowers or borrowers in lowerr-income neighborhoods in 2005 and 2006, where the foreclosures are almost twice as likely. This suggests that the kind of low income borrowers targeted by the CRA are likely to be responsible for the majority of subprime foreclosures.

Yep dumbfork, you should try reading sometime but you won't because you might learn the truth. That would be just too much for you tiny little closed mind handle.