The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending. Most policy failures in the United States stem from a failure to appreciate this truism and therefore to take steps that would have been productive pre-crisis but... [more]
The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending. Most policy failures in the United States stem from a failure to appreciate this truism and therefore to take steps that would have been productive pre-crisis but are counterproductive now, with the economy severely constrained by lack of confidence and demand.
First, and perhaps most fundamentally, credit standards for those seeking to buy homes are too high and rigorous in America today. This reduces demand for houses, lowers prices and increases foreclosures, leading to further tightening of credit standards and a vicious growth-destroying cycle. Publicly available statistics suggest that the characteristics of the average applicant in 2004 would make an applicant among the most risky today. Of course the pattern should be opposite, given that the odds of a further 35 percent decline in house prices are much lower than they were at past bubble valuations.
http://blogs.reuters.com/lawrencesummers/2011/10/24/to-fix-the-economy-fix-the-housing-market/[less]
Response by Riversider
over 14 years ago
Posts: 13573
Member since: Apr 2009
I love it. Larry Summers wants to go back to the NINJA,NINA,STATED DOC and poor underwriting that got us into this mess under the premise that home prices never go down(twice?)
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Response by tommy2tone
over 14 years ago
Posts: 218
Member since: Sep 2011
I think the standards in place before the bubble were probably more prudent; the US went from one extreme to another which is not good imo.
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Response by Riversider
over 14 years ago
Posts: 13573
Member since: Apr 2009
Can't see how Summers has the chutzpah to even comment on how to fix housing or any financial mess considering his role in repealing Glass Stegal, Citibank bail out, and deregulating derivatives. That's my two cents.
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Response by notadmin
over 14 years ago
Posts: 3835
Member since: Jul 2008
Larry Summers - the world's smartest idiot. Enough said.
On Fed policy of keeping rates low and promising to keep them there: Fed and Congress can't write checks to banks anymore. So they will give them money to recapitalize them by allowing them to borrow at 0% from Fed and lend to the Treasury at 2%. It will take a decade.
On Larry Summers: We now find out that the single biggest asshole in America is Larry Summers, who browbeat Obama into bailing out Citibank. Larry Summers oversaw the repeal of Glass Steagall as Treasury Secretary in the Clinton Whitehouse, and oversaw the Commodities Futures Modernization Act which took the entire universe of derivatives and hid them from federal regulators. The Treasury Secretary should have advised Clinton that it was garbage. Then, when he went back to the White House, he wasn't done fucking the country. He gave us one last bend over and grab your ankles.
On Robert Rubin: Another giant asshole - he gave us Geithner and Summers. You don't send the same surgeon in after a botched surgery because the first surgeon is more interested in covering up his work.
On Obama: Putting Rubin, Summers and Geithner in power was the tragedy of the Obama administration. Obama and Bush were both given an opportunity to be transformational - a Churchill, a Roosevelt. Obama's problem was that he sought out the biggest asshole in America - Robert Rubin.
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Response by jmarrus
over 14 years ago
Posts: 8
Member since: Sep 2009
I'm trying to get a construction loan for a house in Lawrence but it's impossible.
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Response by rb345
over 14 years ago
Posts: 1273
Member since: Jun 2009
To go with the low admissions standards that got Obama into law school
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Response by Riversider
over 14 years ago
Posts: 13573
Member since: Apr 2009
We could fix housing tomorrow, or at least make a good start.
There are countless people with money who would love to become American citizens, so
subject to a background check,having the money, being able to start a business
bring them in and let them buy a home.
Instantly the United States jump starts its economy.
We don't have a monopoly on brains.
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Response by nycjk
over 14 years ago
Posts: 17
Member since: Feb 2010
"I love it. Larry Summers wants to go back to the NINJA,NINA,STATED DOC and poor underwriting that got us into this mess under the premise that home prices never go down(twice?)"
how does one suggest to lower current mortgage standard = lets go back to NINJA loans. Why do ppl insist on right or left extremes? in case you don't know, banks are sitting on hoards of cash, they are not lending, even to each other, (EU crisis, anyone?) If you have applied a loan recently, you would know the amount of details and documents you have to provide, one guy had a signed up cellphone service (which results in credit check) and the lender requested a signed letter whether those inquires resulted in any debt... are you kidding me?
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Response by Riversider
over 14 years ago
Posts: 13573
Member since: Apr 2009
We're talking about two years income verification, an appraisal. There's hard evidence to show that loans where the borrower has very little skin in the game, (high ltv) or payments that exceed too high a percentage of gross income are prone to failure. There's very little upside in making a loan to the lender or investor, but the downside is the entire balance. There's a sense of entitlement in this country that people should just get loans, even if they aren't credit worthy.
For decades we insisted on 20% down, proof of income , etc, The last few years should prove what loose lending standards bring.
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Response by caonima
over 14 years ago
Posts: 815
Member since: Apr 2010
to fix this housing issue, the congress must pass a low to mandatory require 20% down. But those low lives never think for the people
I love it. Larry Summers wants to go back to the NINJA,NINA,STATED DOC and poor underwriting that got us into this mess under the premise that home prices never go down(twice?)
I think the standards in place before the bubble were probably more prudent; the US went from one extreme to another which is not good imo.
Can't see how Summers has the chutzpah to even comment on how to fix housing or any financial mess considering his role in repealing Glass Stegal, Citibank bail out, and deregulating derivatives. That's my two cents.
Larry Summers - the world's smartest idiot. Enough said.
that about sums it up..
http://www.capitalismwithoutfailure.com/2011/10/ritholtz-interview-with-jonathan-miller.html
On Fed policy of keeping rates low and promising to keep them there: Fed and Congress can't write checks to banks anymore. So they will give them money to recapitalize them by allowing them to borrow at 0% from Fed and lend to the Treasury at 2%. It will take a decade.
On Larry Summers: We now find out that the single biggest asshole in America is Larry Summers, who browbeat Obama into bailing out Citibank. Larry Summers oversaw the repeal of Glass Steagall as Treasury Secretary in the Clinton Whitehouse, and oversaw the Commodities Futures Modernization Act which took the entire universe of derivatives and hid them from federal regulators. The Treasury Secretary should have advised Clinton that it was garbage. Then, when he went back to the White House, he wasn't done fucking the country. He gave us one last bend over and grab your ankles.
On Robert Rubin: Another giant asshole - he gave us Geithner and Summers. You don't send the same surgeon in after a botched surgery because the first surgeon is more interested in covering up his work.
On Obama: Putting Rubin, Summers and Geithner in power was the tragedy of the Obama administration. Obama and Bush were both given an opportunity to be transformational - a Churchill, a Roosevelt. Obama's problem was that he sought out the biggest asshole in America - Robert Rubin.
I'm trying to get a construction loan for a house in Lawrence but it's impossible.
To go with the low admissions standards that got Obama into law school
We could fix housing tomorrow, or at least make a good start.
There are countless people with money who would love to become American citizens, so
subject to a background check,having the money, being able to start a business
bring them in and let them buy a home.
Instantly the United States jump starts its economy.
We don't have a monopoly on brains.
"I love it. Larry Summers wants to go back to the NINJA,NINA,STATED DOC and poor underwriting that got us into this mess under the premise that home prices never go down(twice?)"
how does one suggest to lower current mortgage standard = lets go back to NINJA loans. Why do ppl insist on right or left extremes? in case you don't know, banks are sitting on hoards of cash, they are not lending, even to each other, (EU crisis, anyone?) If you have applied a loan recently, you would know the amount of details and documents you have to provide, one guy had a signed up cellphone service (which results in credit check) and the lender requested a signed letter whether those inquires resulted in any debt... are you kidding me?
We're talking about two years income verification, an appraisal. There's hard evidence to show that loans where the borrower has very little skin in the game, (high ltv) or payments that exceed too high a percentage of gross income are prone to failure. There's very little upside in making a loan to the lender or investor, but the downside is the entire balance. There's a sense of entitlement in this country that people should just get loans, even if they aren't credit worthy.
For decades we insisted on 20% down, proof of income , etc, The last few years should prove what loose lending standards bring.
to fix this housing issue, the congress must pass a low to mandatory require 20% down. But those low lives never think for the people