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(NPR)   Turns out that whole "Freddie Mac helped cause the housing crisis" bit is about as true as any other piece of conservative economic wisdom   (npr.org) divider line 168
    More: Obvious, Freddie Mac, Federal Housing Finance Agency, ProPublica, investment strategy, conflict of interest  
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2498 clicks; posted to Politics » on 27 Sep 2012 at 2:51 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-09-27 08:11:00 AM
According to my Teabagger brother, who has great sources like Sean Hannity and Glenn Beck, it was Barney Frank who brought down the housing market all by himself.
 
2012-09-27 08:21:14 AM

clancifer: According to my Teabagger brother


You've got one of those? I've got a teabagger brother in law... which is worse.

Acorn infiltrated Freddie Mac don't you know.
 
2012-09-27 08:37:50 AM
Yes, Freddie did have a role in causing the housing crisis. What they did or didn't do in 2010 has absolutely nothing to do with that.
 
2012-09-27 09:16:32 AM
 
2012-09-27 09:49:56 AM

kmmontandon: rumpelstiltskin: Yes, Freddie did have a role in causing the housing crisis.

Hardly:

Private sector loans, not Fannie or Freddie, triggered crisis

Reckless Endangerment of the Truth

Some Lies About the Economic Crisis


So you're claiming that an NGO which securitized a full quarter of sub-prime mortgages in its lean years (and almost half in its good years) had no role whatsoever in the bubble?
That's absurd. They didn't cause the bubble by themselves, but the private market couldn't have done it without their help.
 
2012-09-27 10:51:33 AM

rumpelstiltskin:
So you're claiming that an NGO which securitized a full quarter of sub-prime mortgages in its lean years (and almost half in its good years) had no role whatsoever in the bubble?
That's absurd. They didn't cause the bubble by themselves, but the private market couldn't have done it without their help.


Fannie and Freddie were followers, not leaders. You seem to be missing that.

You also seem to be under the bizarre impression that the sub-prime bubble popping was the only thing that occurred to create the financial crisis.
 
2012-09-27 11:12:01 AM

kmmontandon: rumpelstiltskin:
So you're claiming that an NGO which securitized a full quarter of sub-prime mortgages in its lean years (and almost half in its good years) had no role whatsoever in the bubble?
That's absurd. They didn't cause the bubble by themselves, but the private market couldn't have done it without their help.

Fannie and Freddie were followers, not leaders. You seem to be missing that.

You also seem to be under the bizarre impression that the sub-prime bubble popping was the only thing that occurred to create the financial crisis.


You seem to be under the bizarre impression that I'm claiming they were the primary cause of it. Where have I said that? I said they had a role in it. Are you disupting that they had a role in it? Are you claiming that the 25-50% of subprime mortgages that they securitized didn't have any impact on the crisis?
 
2012-09-27 11:46:17 AM

rumpelstiltskin: You seem to be under the bizarre impression that I'm claiming they were the primary cause of it. Where have I said that? I said they had a role in it. Are you disupting that they had a role in it? Are you claiming that the 25-50% of subprime mortgages that they securitized didn't have any impact on the crisis?



Simple:

1.) Take away Freddie and Fannie in 2002. Does the bubble still happen? Yes.

2.) Take away the entire private sub-prime mortgage market (and concomitant securities market) in 2002. Does the bubble still happen? No.
 
2012-09-27 11:58:28 AM

kmmontandon: rumpelstiltskin: You seem to be under the bizarre impression that I'm claiming they were the primary cause of it. Where have I said that? I said they had a role in it. Are you disupting that they had a role in it? Are you claiming that the 25-50% of subprime mortgages that they securitized didn't have any impact on the crisis?


Simple:

1.) Take away Freddie and Fannie in 2002. Does the bubble still happen? Yes.

2.) Take away the entire private sub-prime mortgage market (and concomitant securities market) in 2002. Does the bubble still happen? No.


You're wrong. Take away Freddie and Fannie in 2002, and real estate craters in 2002, and it's a much smaller crash.
 
2012-09-27 12:38:10 PM

rumpelstiltskin: So you're claiming that an NGO which securitized a full quarter of sub-prime mortgages in its lean years (and almost half in its good years) had no role whatsoever in the bubble?
That's absurd. They didn't cause the bubble by themselves, but the private market couldn't have done it without their help.


Yet they did.

growlersoftware.com

growlersoftware.com

growlersoftware.com
 
2012-09-27 12:47:13 PM
Sheila Blair did a great interview on NPR yesterday about how bad it was. She cam into the FDIC in 2006 and left in 2011. She was there through it all. She blamed both Dems and Repubs for allowing deregulation. The SEC and the FDIC were weakened to the point they could not do their jobs. She is a Republican and she firmly believes that the markets need rules that must be followed and enforced. She mentioned at some point that people 'forgot' how important regulations were. I was in disbelief that they conveniently forgot.

I don't recall hearing anything about Fannie or Freddie but the banks were all engaging in the whole house market mess. Chase was the worst, she noted, at something like leverage rates of 35 to 1 when most everyone else was 12 to 1. A healthy bank is 3 to 1 (or so she said).

Click on the first link to listen.

Oh, she has a book on the crisis.
 
2012-09-27 12:47:52 PM
Link 

feed://www.npr.org/rss/podcast.php?id=510071

(fark won't let me link it)
 
2012-09-27 12:48:23 PM

rumpelstiltskin: You seem to be under the bizarre impression that I'm claiming they were the primary cause of it. Where have I said that? I said they had a role in it. Are you disupting that they had a role in it? Are you claiming that the 25-50% of subprime mortgages that they securitized didn't have any impact on the crisis?


growlersoftware.com

taken from a Lehman Brothers analyst report published in August 2005, shows predicted losses for a pool of subprime loans originated in the second half of 2005 under different assumptions for U.S. house prices (Mago and Shu 2005). The top three house price scenarios, which range from "base" to "aggressive," predict losses of between 1 and 6 percent. Such losses had been typical of previous subprime deals and implied that investments even in lower-rated tranches of subprime deals would be profitable

The first source of error is that we have assumed that each investor has a 3% chance of defaulting. How do we know that? It must be from historical data.

In fact, the default probability in the US has quadrupled from the 3% as assumed in the model to 12% since 2007, making it four times riskier.


Link
Link

That wasn't FAM/FRE's fault.
 
2012-09-27 12:51:30 PM
If only there wasnt this cult like party break, where you could have a discussion of issues. Unless supply side Jesus comes down from on high and states it after landing on a US carrier deck, is the Beck crowd going to listen?
 
2012-09-27 12:55:22 PM

Nadie_AZ: but the banks were all engaging in the whole house market mess. Chase was the worst, she noted, at something like leverage rates of 35 to 1 when most everyone else was 12 to 1. A healthy bank is 3 to 1 (or so she said).


Which brings us to the credit markets freezing in 2008 - the thing that caused companies to go bankrupt, and the stock market to crash.


Since 2008, many commentators on the financial crisis of 2007-2009 have identified the 2004 rule change as an important cause of the crisis on the basis it permitted certain large investment banks (i.e., Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley) to increase dramatically their leverage (i.e., the ratio of their debt or assets to their equity).[7] Financial reports filed by those companies show an increase in their leverage ratios from 2004 through 2007 (and into 2008),
Net capital rule

Regulate themselves they say...
 
2012-09-27 12:59:57 PM

Party Boy: If only there wasnt this cult like party break, where you could have a discussion of issues. Unless supply side Jesus comes down from on high and states it after landing on a US carrier deck, is the Beck crowd going to listen?


Republican Party Platform 2012:
Fannie Mae and Freddie Mac were a primary cause of the housing crisis because their implicit government guarantee allowed them to avoid market discipline and make risky investments. Their favored political status enriched their politically connected executives and their shareholders at the expense of the nation. 

This is why we can't have nice things.
 
2012-09-27 01:19:36 PM

impaler: Party Boy: If only there wasnt this cult like party break, where you could have a discussion of issues. Unless supply side Jesus comes down from on high and states it after landing on a US carrier deck, is the Beck crowd going to listen?

Republican Party Platform 2012:
Fannie Mae and Freddie Mac were a primary cause of the housing crisis because their implicit government guarantee allowed them to avoid market discipline and make risky investments. Their favored political status enriched their politically connected executives and their shareholders at the expense of the nation. 

This is why we can't have nice things.


Yeah, they keep using this taking point. Without it, there would be a need to reevaluate an entire pillar of the current platform.
 
2012-09-27 01:30:12 PM

rumpelstiltskin: You seem to be under the bizarre impression that I'm claiming they were the primary cause of it. Where have I said that?


to be fair it did seem like you were saying that here:

They didn't cause the bubble by themselves, but the private market couldn't have done it without their help.
 
2012-09-27 01:59:46 PM

impaler: rumpelstiltskin: You seem to be under the bizarre impression that I'm claiming they were the primary cause of it. Where have I said that? I said they had a role in it. Are you disupting that they had a role in it? Are you claiming that the 25-50% of subprime mortgages that they securitized didn't have any impact on the crisis?

[growlersoftware.com image 473x279]

taken from a Lehman Brothers analyst report published in August 2005, shows predicted losses for a pool of subprime loans originated in the second half of 2005 under different assumptions for U.S. house prices (Mago and Shu 2005). The top three house price scenarios, which range from "base" to "aggressive," predict losses of between 1 and 6 percent. Such losses had been typical of previous subprime deals and implied that investments even in lower-rated tranches of subprime deals would be profitable

The first source of error is that we have assumed that each investor has a 3% chance of defaulting. How do we know that? It must be from historical data.

In fact, the default probability in the US has quadrupled from the 3% as assumed in the model to 12% since 2007, making it four times riskier.

Link
Link

That wasn't FAM/FRE's fault.


You're taking a Lehman projection from 2005 and using it to claim Freddie wasn't involved? And then you point out the projection was wrong? Why did you even post that nonsense?
You can't just take out 25-50% of the securitization and say the market would be the same. No market works like that. It's a ridiculuous, political position.
 
2012-09-27 02:41:47 PM
Anyone who was paying attention even at the time was aware of this.
 
2012-09-27 02:44:35 PM
Sigh.

Look: the housing bubble, like all bubbles, was caused by greed. Greedy commission-based agents working for companies like Countrywide (who should have known better) gave wildly inappropriate "liars' loans" to greedy unqualified home owners (who should have known better). These loans were backed by greedy subprime lenders (who should have known better) who then sliced these and other loans up into tranches to sell as securities. Those securities were rated AAA by ratings agencies (who DAMN sure should have known better), so they were bought by, well...everyone. Who actually *shouldn't* have known better, because of the ratings and they way they were sold.

It wasn't caused by any one person or agency, or even any one small group of people or agencies. It was caused by a pervasive culture of greed, a disturbing lack of oversight or protection (internal or external, public or private), and because it came from everyone, it burned everyone.

But instead of saying 'gee...we ALL screwed up, and we ALL need to take steps to keep that greed reigned in in the future', we're looking for scapegoats instead, and scapegoats that align neatly with partisan ideology at that.

And in the meantime...greed is infecting the student loan industry. And everyone is cashing in on it. And no one on either the left OR the right is trying to reign it in or provide oversight...

/the definition of insanity is doing the same thing over and over but expecting a different outcome
 
2012-09-27 02:52:55 PM

rumpelstiltskin: You're taking a Lehman projection from 2005 and using it to claim Freddie wasn't involved? And then you point out the projection was wrong? Why did you even post that nonsense?


Sorry, I assumed you knew what I was talking about.

The way bundled mortgage securities work is that the risk of a default is spread across the whole bundle (sort of like how car insurance spreads the risk of an accident over many customers). The people bundling the mortgages in 2005 figured a default rate of around 3% average - i.e. a default rate around 3% would produce a profitable security. This was based on historical averages.

Many banks were wrong, and the failure rate went up to 12% in 2007.

FAM/FRE's failure rate was still around historical averages rather than the massive 12%+ failure rates of private subprime bundles. They didn't trigger the credit default swaps.
 
2012-09-27 02:56:09 PM
Shhh. It's always poor people's fault. Everything is poor people's fault.
 
2012-09-27 02:58:00 PM

rumpelstiltskin: kmmontandon: rumpelstiltskin: Yes, Freddie did have a role in causing the housing crisis.

Hardly:

Private sector loans, not Fannie or Freddie, triggered crisis

Reckless Endangerment of the Truth

Some Lies About the Economic Crisis

So you're claiming that an NeGrO which securitized a full quarter of sub-prime mortgages in its lean years (and almost half in its good years) had no role whatsoever in the bubble?

 

i45.photobucket.com

Sorry, couldn't resist.
 
2012-09-27 02:58:48 PM
I work for a quality control company where Freddie and Fannie are our major clients so in getting a kick out of the replies...
 
2012-09-27 02:59:08 PM

whistleridge: And in the meantime...greed is infecting the student loan industry. And everyone is cashing in on it. And no one on either the left OR the right is trying to reign it in or provide oversight...


Senate Hears Testimony On For-Profit College Rules
 
2012-09-27 02:59:19 PM
So, not at all?
 
2012-09-27 03:01:00 PM
I know no one reads the articles but damn, subbies should at least
 
2012-09-27 03:04:39 PM
Do the neocons still get to slit it up for massive personal profit?
 
2012-09-27 03:05:45 PM
This looks like one of those headlines where the "obvious" tag just isn't emphatic enough.
 
2012-09-27 03:09:32 PM
Had a REALLY long debate with a right winger about this very thing recently.

He swore up and down that it was CLINTON who caused the whole thing because of the low income lending stipulation in the GBL repeal that FORCED all those poor, besotten lending institutions to give loans to people they know couldn't afford them.

THEN..I pointed out how Wall Street had been gambling with mortgage securities since the mid 1990's and almost had a major meltdown in 1998 saved only by a huge influx of cash. Then, I went on about how all these poor widdle lenders would fudge numbers to get people loans who didn't qualify for them so they could boost the value of their mortgage backed securities they were fencing off; how ordinary people suddenly thought they could get rich by "house flipping" and got suckered into "interest only" loans that ultimately blew up in their faces; how Wall Street artificially inflated home values AND started roping people into high interest home equity loans that ultimately collapsed as well; how not every home buyer during that time were "high risk" and that regular people with jobs and good credit got hornswaggled because they paid more than their house was worth because of the artificially inflated property values created to fence off the securities.

Nope, none of that mattered because it was CLINTON who started the whole process....

/like talking to a wall..
 
2012-09-27 03:09:37 PM
Uh, Fannie and Freddie don't issue mortgages. They buy them. Then they pool them. Then they sell them.

The banks job was to assess the risks and issue mortgages to creditworthy people who could afford them at an interest rate that reflected their risk. The credit agencies' job was to rate the securitized mortgages based on their default and delinquency rates (How likely the instrument was to meet its "obligations"). Fannie Mae and Freddie mac's job was to buy mortgages, securitize them, and sell them on the market as investment instruments by spreading the risk of default and delinquency across the instruments. The whole point was to help banks get the mortgages off their books so that they could make more loans and more people could buy homes.

Fannie and Freddie did their jobs. The banks didn't. The ratings agencies didn't.

But its totally cool to blame Fannie and Freddie cuz RAWR GOVERNMENT BAD

So we get rid of them. Big deal. Someone else will securitize the mortgages. The problem is the two contrbutors who actually caused the problem get off scott free cuz LOOK AT THE SILLY MONKEY!
 
2012-09-27 03:09:54 PM

Nadie_AZ: I don't recall hearing anything about Fannie or Freddie but the banks were all engaging in the whole house market mess. Chase was the worst, she noted, at something like leverage rates of 35 to 1 when most everyone else was 12 to 1. A healthy bank is 3 to 1 (or so she said).


I forget if it was Boesky or Milken (I'm thinking Milken) who said that what banks were doing - severely overleveraging themselves, legally and with the government's blessing - was so far beyond what he had done (I think he said eyebrows were raised when he went 5- or 7-to-1), it's insane to think that just 15 years after Boesky and Milken brought down an economy, the same methods were being used that would again bring down economies. Only this time, exacerbated by the magnitudes of difference between his overleveraging and Chase/Lehman/Bear's.
 
2012-09-27 03:11:17 PM
Continuing from my above post..

This same right winger, when confronted with the reality of the FRAUD Wall Street committed in inflating the housing values, he said that it was perfectly justified given the horrible burdens enforced upon them by the CLINTON administration that they had to do something to offset their losses. B

Unbelievable..
 
2012-09-27 03:12:34 PM
The inspector general's examination, which relied on the word of the Freddie employees it interviewed, found no evidence


Might as well ask Zimmerman if he murdered Trayvon in cold blood.
 
2012-09-27 03:12:46 PM

zappaisfrank: He swore up and down that it was CLINTON who caused the whole thing because of the low income lending stipulation in the GBL repeal that FORCED all those poor, besotten lending institutions to give loans to people they know couldn't afford them.


GBL passed with an overwhelming majority, and would have survived a veto.
 
2012-09-27 03:12:48 PM
It was Bush's fault.
 
2012-09-27 03:13:43 PM

Nadie_AZ: She is a Republican and she firmly believes that the markets need rules that must be followed and enforced.



Then she's not a Republican. Sorry.
 
2012-09-27 03:15:44 PM

CPennypacker: Uh, Fannie and Freddie don't issue mortgages. They buy them. Then they pool them. Then they sell them.


exactly. Buying mortgages from banks allowing them to make more questionable loans which they then also buy allowing them to make more questionable loans knowing. Hell, if I knew I'd get an institution (which is wink wink nod nod not explicitly backed by the US government) to buy a loan I made, I might even lend money to you :)
 
2012-09-27 03:15:51 PM
I'm here to laugh at subby for failing reading comprehension.
 
2012-09-27 03:15:52 PM
i.imgur.com

RIP Freddie.
 
2012-09-27 03:16:29 PM

whistleridge: But instead of saying 'gee...we ALL screwed up, and we ALL need to take steps to keep that greed reigned in in the future', we're looking for scapegoats instead, and scapegoats that align neatly with partisan ideology at that.



No, "we all" didn't screw up. Bad loans make up less than 5% of all the loans on the books. It was the lenders forging documents and the investment firms packaging them into securities and getting the rating agencies to rate them all triple A.

When you assign blame you make it easier to figure out ways to make sure it doesn't happen again.

Stop trying to play the both sides are bad game, otherwise you end up like this idiot in life:

badaboom: It was Bush's fault.

 
2012-09-27 03:17:13 PM

skullkrusher: CPennypacker: Uh, Fannie and Freddie don't issue mortgages. They buy them. Then they pool them. Then they sell them.

exactly. Buying mortgages from banks allowing them to make more questionable loans which they then also buy allowing them to make more questionable loans knowing. Hell, if I knew I'd get an institution (which is wink wink nod nod not explicitly backed by the US government) to buy a loan I made, I might even lend money to you :)


Bullshiat. You would never lend me money.
 
2012-09-27 03:18:12 PM
 
2012-09-27 03:18:21 PM

impaler: whistleridge: And in the meantime...greed is infecting the student loan industry. And everyone is cashing in on it. And no one on either the left OR the right is trying to reign it in or provide oversight...

Senate Hears Testimony On For-Profit College Rules


Yeah. I've heard that one before:

The US Senate held hearings on the housing bubble in 2006.

The student loan bubble is just like the housing bubble. Everyone knows it's there. Everyone knows it's going to be a HUGE problem. But the money is just. too. good. right now, so no one actually wants to take the action needed to head things off. If it's allowed to bust like the housing bubble did in 08, instead of a generation being unable to get a mortgage, it will be a generation unable to get a student loan.
 
2012-09-27 03:19:13 PM

CPennypacker: skullkrusher: CPennypacker: Uh, Fannie and Freddie don't issue mortgages. They buy them. Then they pool them. Then they sell them.

exactly. Buying mortgages from banks allowing them to make more questionable loans which they then also buy allowing them to make more questionable loans knowing. Hell, if I knew I'd get an institution (which is wink wink nod nod not explicitly backed by the US government) to buy a loan I made, I might even lend money to you :)

Bullshiat. You would never lend me money.


yeah you;re right. You libby lib libs aren't good at managing finances. You'd probably spend it on birkenstocks and patchouli or something
 
2012-09-27 03:19:42 PM
nothing political about this report.
 
2012-09-27 03:20:25 PM

whistleridge: impaler: whistleridge: And in the meantime...greed is infecting the student loan industry. And everyone is cashing in on it. And no one on either the left OR the right is trying to reign it in or provide oversight...

Senate Hears Testimony On For-Profit College Rules

Yeah. I've heard that one before:

The US Senate held hearings on the housing bubble in 2006.

The student loan bubble is just like the housing bubble. Everyone knows it's there. Everyone knows it's going to be a HUGE problem. But the money is just. too. good. right now, so no one actually wants to take the action needed to head things off. If it's allowed to bust like the housing bubble did in 08, instead of a generation being unable to get a mortgage, it will be a generation unable to get a student loan.


Well we do need more infrastructure improvements....and we would need alot more people swinging a pick axe or using a shovel then experts on pre elizabtehan lesbian poetry to get that done.
 
2012-09-27 03:21:08 PM

Dafatone: zappaisfrank: He swore up and down that it was CLINTON who caused the whole thing because of the low income lending stipulation in the GBL repeal that FORCED all those poor, besotten lending institutions to give loans to people they know couldn't afford them.

GBL passed with an overwhelming majority, and would have survived a veto.


Doesn't matter..this guy hates Clinton with the heat of a thousand suns. Supposedly one of the Clinton's "free trade" agreements cost him his big money IT job because his company outsourced to India for it. Never mind that his company did it to save a few bucks because that's what they do...Nope, Clinton's fault! He blames Clinton for a rainy day. It's kinda sad, really.
 
2012-09-27 03:22:32 PM

rumpelstiltskin: kmmontandon: rumpelstiltskin:
So you're claiming that an NGO which securitized a full quarter of sub-prime mortgages in its lean years (and almost half in its good years) had no role whatsoever in the bubble?
That's absurd. They didn't cause the bubble by themselves, but the private market couldn't have done it without their help.

Fannie and Freddie were followers, not leaders. You seem to be missing that.

You also seem to be under the bizarre impression that the sub-prime bubble popping was the only thing that occurred to create the financial crisis.

You seem to be under the bizarre impression that I'm claiming they were the primary cause of it. Where have I said that? I said they had a role in it. Are you disupting that they had a role in it? Are you claiming that the 25-50% of subprime mortgages that they securitized didn't have any impact on the crisis?


They had a role in it as much as any other banking institution.

What this article is saying is that they did not engage in the predatory lending schemes that WERE the proximate cause of the housing bubble collapse. And that in fact Freddy Mac did what it could to discourage predatory lending--in it's own institutions. They were not and could not be responsible for similar practices in other banks and mortgage companies, or the loans they purchased from them.
 
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