Originally posted by MerkI admit that I'm not intimately aware of ACORN's involvement. However, 1) it seems that the ammount of pressure they put on banks is being exaggerated, 2) even so, the banks are under no obligation act because of some activist group.
Actually, the CR Act and groups like ACORN put a lot of pressure on these banks, but it wasn't until Fannie felt the pressure to lower it's credit requirements that subprime loans became profitable for private banks. Then the profit motive came into play and that was the runaway point.
Regarding the MBS, I do not think it is the cart before the horse at all, the MBS's stoked the fire in a big way.
Originally posted by MrHandIt was hte CR Act that allowed ACORN to threaten lenders. And no, ACORN is not the cause, but a minor contributing factor. It was Fannies move that allowed subprime lending to be profitable for private banks.
I admit that I'm not intimately aware of ACORN's involvement. However, 1) it seems that the ammount of pressure they put on banks is being exaggerated, 2) even so, the banks are under no obligation act because of some activist group.
Regarding the MBS, I do not think it is the cart before the horse at all, the MBS's stoked the fire in a big way.
Now, if we had interest rates that reflect actual borrowing costs and no safety net for these banks to unload their subprime garbage on, there would have been no housing bubble. MBS would have meant nothing. Again, they didn't get out of hand until the Fannie change.
The housing bubble deflating has been a tremendous loss of wealth for the average American. That in itself makes a major economic impact. MBS or no MBS, it's a huge problem. That is what is sending us into this period of deflating asset values. MBS is not causing that.
MBS is certainly adding to the stock market troubles, but that's not what's causing the bulk of the effect on the average American. Without the deflating asset values, this bear market would have been no more of a problem than the last bear market (.com bubble)
The housing bubble effects asset values, the .com bubble didn't.
If an overvalued company like olivemeister.com goes to zero, it doesn't effect your net worth much, but a rash of housing defaults and an oversupply from too much new construction makes your house worth way less, that effects your worth. Which in turn effects your spending and your ability to access credit should the need arise.