I never really thought of predatory lending as a stab at the right. I would think of it more as a stab at the immoral business people. I'm not saying that all business people are immoral, but some are. I think to an extent greed has corrupted corporate executives to a great extent. So, going back to the Carter years and community reinvestment act, this required banks to make loans to unqualified people. OK, now you have a big task at hand. However, through the Regan years you didn't have a huge change in regulation, so even though there was the law to make these loans to unqualified people, the "tools" weren't available to do it, meaning de-regulation.
Reagan put Greenspan in a year before he left office. Then here comes Clinton. Well, the economy started riding the wave created by the tax cuts of Reagan. Keep in mind, Reagan gave the top tax payers a tax break moving them from 70+% tax rate to 28%. It took a lot of time for the re-investment to take a hold in the economy (I know, trickle down, just stick with me here, don't beat on the desk yet). You had a flood of money pouring into the economy during the Bush 1 administration and during the early part of Clinton's administration. All the while, Greenspan pushing for de-regulation.
Think about the Savings and Loan breakdown in the early 90's. What was going on then was a a pre-cursor to the very problem we have now. Savings and Loans failed like crazy, but investment banks did not. Glass-Steagal kept them separate. A law that was passed after the depression, for that very reason.
During the Clinton years we had some great economic times. I do not give Clinton the credit for this. I don't think the president directly has that much of an affect on economic conditions. Business cycles occur, it does, nothing can be done about that in a free market. It just happened that Clinton was president at a time when technology had started the real mega growth phase. You have the period of time where 401k's really came into their time, so you had a flood of money from everyday Joe's that previously wasn't there. I think that's why the economic growth period lasted so long during that time. Remember, Clinton raised taxes and the economic downturn cycle actually happened before Clinton was out of office.
That leads to the repeal of Glass-Steagal in 1999. Then the lines were blurred between investment banks and deposit banks. But, now the mortgage companies and banks had a "tool" to be able to make the loans necessary to comply with community reinvestment. And you had Greenspan holding the money supply pushing that policy.
Along comes 9-11, and put the nail on the coffin of the economy. Bush acted quickly, gave tax cuts across the board, and the encouraged home ownership (Greenspan still there). Now, the bankers have a real easy avenue to make loans. Make a sketchy loan, whether it be interest only, teaser rate, NINJA loan, whatever. Then package it up and sell it to an investment bank. It's off their back and they take their cut off the top.
I don't know if i would call it predatory lending or just bad business. Anyway, all of the government spending, bad business by the bankers, the fed printing money like crazy has finally caught up to us. However, Americans as a whole have been living above our means for 25 years or so. You have the media screaming that America has to spend or the economy is screwed. We're an economy based on consumer spending. I think at this point we're going to see a major shift in mentality. And yes, it will be at least a few years before there's a major economic turnaround.
As far as the government goes, if they would step back, STOP spending money, and let the free market work, we as Americans would be much better off.
OK,
over. I am not an economist either, only a boring phone man. But, I feel it is my duty as an American to stay as informed as possible. Feel free to criticize and abuse me all you like. I can take it. I love a good debate. Sorry for the long read.
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Topic: Interesting article on our currenct economic situation (Read 950 times)