Who Really Drove the Economy into the Ditch?

Who Really Drove the Economy into the Ditch?

Who Really Drove the Economy into the Ditch?

Who Really Drove the Economy into the Ditch?

Synopsis

Joseph N. Fried examines the factors leading to the financial crisis of 2007/8 and the mess it's put us in today. Although he analyzes the transgressions of Wall Street, the author also presents a wide variety of factors - including some that originated in the governmental sector and others that originated in the private sector. The book includes several rarely mentioned contributing factors such as the detrimental impact of automated underwriting systems that were heavily promoted by Fannie Mae and Freddie Mac. This is an opinionated book with an attitude. However, the author, a CPA and MBA, presents economic information in a conversational tone and meticulously backs up his views with references, charts, and quotes. Joseph N. Fried has published several books with Algora, explaining financial controversies and challenges for the general reader. Here, he highlights eye-popping aspects of the recent financial circus including: Drive-by house appraisals; the impact of hundreds of local housing programs funded by HUD; state governments, and housing advocacy groups; false delinquency statistics put forth by Fannie Mae and Freddie Mac; 'silent second' and 'piggyback loans'.

Excerpt

In the 15 years preceding the financial crisis of 2007/08
United States regulators were primarily concerned with the
expansion of housing — particularly “affordable housing.”
They showed zero concern with regard to the financial
health of banks.

What if these regulators had used their time and
resources to ensure prudent lending standards? Suppose that
government auditors randomly test-checked bank loan files
to make sure down payments were no less than 10 percent,
borrowers had employment, and credit (FICO) scores were
at least 660. Assume that banks could be sued and their
expansion plans blocked if lending standards were found to
be deficient. What would have happened? Nothing. There
would have been no financial crisis.

Republicans as well as Democrats supported liberal housing and lending policies that led to the collapse of loan underwriting standards. The disintegration of lending standards set the stage for the creation of millions of loans to subprime borrowers — at all levels of income and for homes big and small. This was the primary cause of the financial crisis, and it has led to a new era of class warfare politics.

President Barack Obama would have us believe that the financial crisis of 2007 and 2008 was caused by cutting “taxes for millionaires,” “eight years of Republican deregulation,” and Republican deficit spending. After reviewing all aspects of the crisis, I believe that the President’s words are nonsense. This crisis was chiefly caused by aggressive and persistent . . .

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