The big picture is the general economy, not the movement of Lehman Brothers (or others) stock.If you cannot correctly predict general price movements there must be something fundamentally wrong with your economic model.Go back to the drawing board.

Liebowitz’s perspective basically confirms Robert Smythe’s post. The “mortgage innovation” movement was not just one law. It was an across-the-board thrust from Washington as a whole, from ACORN’s racist mau-mauing to George W. Bush’s crusade for “minority homeownership.” It is certainly hard to say that Republicans are any less responsible than Democrats, for example. No – it’s the whole lying system that is guilty.

Howard Husock at City Journal made this excellent prediction that CRA and friends were creating bad loans. Eight years ago.

Note to Schiff-haters: (a) saying Nouriel Roubini predicted deflation is a bit different from saying the New Keynesians predicted the crash. They didn’t, and the Austrians (including Schiff, who is hardly an academic Austrian) did. Big picture beats details.

Also, since you’re so proud of those fancy pieces of paper you have, you might want to go back to your copy of Keynes and read the way he talks about “orthodox” economists. By “orthodox,” basically, Lord Keynes means Austrian and other hard-money economists.

Ie, honest economists. Frankly, it takes a lot of nerve for a bunch of Gesellian quacks and inflation enthusiasts, who just happened to hijack the field of economics about 75 years ago by calling their opponents orthodox fuddy-duddies, who have demonstrated no predictive skill or success in economic planning whatsoever, and whose gigantic paper house-of-cards is in the process of collapsing, to pull out the “crank” label.

Causes of Foreclosure (July 2007)

58.3% Curtailment of income
13.2% Illness/Medical
8.4% Divorce
6.1% Investment property/Unable to sell
5.5% Low regard for property ownership
3.6% Death
1.4% Payment adjustment
3. Other

When one also considers that on average 80% of all mortgages are refis not new mortgages the picture becomes a little clearer.
Homeowner has good industrial job and qualifies for normal mortgage. Mortgage operates well until homeowner’s job is outsourced and he is unemployed/McJobbed and can no longer qualify for a normal mortgage at renewal time. Homeowner gets ‘trick’ mortgage and believes right agenda lies/hype saying ‘Its free trade and it’ll grow the economy and displaced/unemployed workers will get better jobs in the new economy! Homeowner believes that before his ‘trick’ mortgage morphs into serious trouble he/she will have a better job – as promised by neocon ideologues that dominate the media – and he/she will get a new normal mortgage that he/she can now qualify for because “the new economy” has generated an even better job for him/her.
Of course this never happened because for former manufacturing workers the ‘new economy’ is unemployment or McJobs.
There has never been, in the history of industrialization, a country that has exported its manufacturing jobs and not destroyed its economy; an inconvenient fact no neocon is willing to recognize.
“Free trade is good” is a syllogism (Two premises and a conclusion: free is good, trade is good, therefore free trade is good. If you accept this syllogism critical thought ends, and you are suckered!). Syllogisms are the most manipulative form of logic. Syllogisms are regular fare for neocons as they prefer that citizens do not think about what is being foisted on them, and acceptance of syllogisms by design ends critical thought.
Neocon benefactors (the idle wealthy) never had it so good relative to average people as in the 1930′s. A few of them lost money but most had already cashed out their stocks to the little suckers in ’27 and ’28. When the economy fell apart stocks were virtually worthless and real assets became worth 10 cents on the dollar and the economic financial elites wealth was relatively 10 times as much as it was pre-crash. Rich people do very well during economic depressions and recessions for that matter as asset price deflation always favours money, and the wealthy – they have the money! Assets, labour and consumer products lose value while money increases in value in an economic depression. In the ‘30’s Rolls Royce autos went for $100 as few could afford to own such a vehicle, benefit to the monied classes.
Neocon ideology dictates, that every decision be made exclusively on the basis of dollars. This is amoral – English has three positions for morality; moral which means that you know what it is and you do it, immoral which means you know what it is and you don’t do it, and amoral which means you never take morals into account in the first place.
Seeing as there is not one human or social moral value which can be expressed in terms of dollars; there can be no better description of amorality than someone whose deciding factor in every decision is dollars. Neocons are amoral and they only recognize morality that does not interfere with dollar denominated greed. John Kenneth Galbraith’s seminal study on the Great Depression, points to the concentration of wealth in very few hands as the cause of the economic depression that followed the ’29 crash.
The neocon agenda which has dominated for the last 25 years has achieved an unprecedented accumulation of wealth in very few hands putting even the excesses of the ‘30’s to shame! Until this imbalance is corrected by strengthening the value of labour economic recovery will be impossible.
Free trade and other neocon ideological policies have currently created an even more pronounced relative concentration of wealth in very few hands in large part by unemploying the North American middle class – (after all the rich can only know they have Hoovered up as much wealth as possible when there are only two economic classes, rich and poor) and by making the wealthy miniscule or non-existent taxpayers.
The wealthy and corporations can only be made to be socially responsible by national governments and so they hate national governments and use the media they own to get lower economic classes to hate national government too. State and local governments can all be easily manipulated to do whatever the wealthy and corporations want, by threat of job transfer to more compliant jurisdictions. The neocons have spent decades convincing us that the national governments, and naescent world governments for that matter, are evil and corrupt in order to diminish the public support for and power of national government to restrain rich elites and moderate their rapacious greed. This contention from the group that gave us Enron, WorldCom, Madoff and dozens of other similar fraudulent systematic looting schemes fed by corporate malfeasance, irresponsibility, and senior management greed. Veritably it is a case of the kettle calling the pot black!
The second best way to disguise wolves is to put them in sheep’s clothing, but then they have to act like sheep; the best way to disguise them is to put wolves clothing on the sheep – this way the wolves can continue on being wolves unabated. The neocons and their media cronies are never idle in daily slandering and vilifying government and regulators who act in the public interest and protect the public the way sheepdogs protect the sheep, – making wolves out of sheepdogs allows the real Wall Street wolves to go on filling their pockets and defrauding the public while the public is distracted into microscopic and constant examination of regulators and government policy, regulation, and oversight, thereby diminishing the ability of governments to protect the public interest and increasing the wealthy elites ability to pilfer at will.
The wolves have the sheep revolting against the sheepdogs, leaving the sheep very easy to slaughter! Doesn’t the American Constitution begin “We the people…”? The government is not some foreign oppressor, it is us. The oppressors are not the government, the oppressors are political neocons and their wealthy benefactor patrons.

I’m not sure why Wallison would pursue this line of reasoning. If the conclusion is true (the CRA relaxed lending standards) his argument points in the direction of outright fraud by the banks. “We knew many of these loans would go bad due to government meddling, but we made them anyway, sold them to investors and pocketed the loot.”

It concludes that just 22.8% of ALL loans originated in 2006- the height of the subprime boom- were made by CRA-regulated banks. The other 77.2% came from non-CRA regulated entities (thrifts, bank affiliates, brokerages, etc). There is a lot of information in the report.

The CRA didn’t cause this, greed did.

http://www.financialsense.com/fsu/editorials/schiff/2007/1221.html

Here is a good rebuttal from about a year ago (with an exchange):

http://www.freedom4um.com/cgi-bin/readart.cgi?ArtNum=69366

The “Peter Schiff Was Right” video is even funnier when you realize that all of the so called “economists” on Fox Noise got it wrong including Peter Schiff.

On the other hand many New Keynesians were forecasting deflation a year ago. Here is a January entry from Nouriel Roubini’s blog (you’ll need premium access to read the whole thing, but you’ll get the gist of it from the beginning):

http://www.rgemonitor.com/blog/roubini/238726/

One reason why so many of the “economists” on Fox Noise got it wrong was that almost none of them were economists. Art Laffer has a PhD in economics and Ben Stein has a Bachelor’s in economics but that’s about it. Beware of people who claim to be economists. Ask to see their credentials.

“No but I stayed at a Holiday Inn last night.”

http://seekingalpha.com/article/106824-being-wrong-for-five-years-makes-peter-schiff-right-now

So why does Peter Schiff have such a poor track record? The reason is simple. Peter Schiff is Austrian School cultist with no formal background in economics who knows very little about what he talking about.