If you can read this, either the style sheet didn't load or you have an older browser that doesn't support style sheets. Try clearing your browser cache and refreshing the page.

(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 20
    More: Obvious, Freddie Mac, Federal Housing Finance Agency, ProPublica, investment strategy, conflict of interest  
•       •       •

2492 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»



Voting Results (Smartest)
View Voting Results: Smartest and Funniest


Archived thread
2012-09-27 12:47:13 PM
3 votes:
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 02:44:35 PM
2 votes:
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 10:51:33 AM
2 votes:

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 09:16:32 AM
2 votes:
2012-09-28 12:46:29 AM
1 votes:

Debeo Summa Credo: Laughably silly. "treasury bonds in short supply because of the surplus". So farking funny.


Wrong. The Asian Stock Market Crash coupled with the collapse of the Russian ruble sent capital flooding into America which fueled the credit bubble and helped fund the surplus through increased tax revenue. There was so much capital flowing in that no one knew what to do with it. Mortgage backed securities were ideal in that they represented an investment vehicle that permitted transfer of capital from high capital low demand housing markets (Rust Belt) to low capital high demand areas such as the Southwest and Florida. Moreover, collateralized debt obligations provided a vehicle for direct investment in the housing market depending on the desired risk strategy of the investor. There was nothing wrong with any of that and in fact it represented a neat mechanism for increasing the efficiency of capital flow through the markets. The problem was that the flood of cheap credit sent everyone from homeowners to banks to mortgage lenders into an irrational debt binge that ended up blowing the fark out of everything.
2012-09-27 04:51:11 PM
1 votes:

Debeo Summa Credo: Who here KNEW it was a bubble in 2005?


Paul Krugman

Warren Buffet
2012-09-27 04:14:33 PM
1 votes:

Debeo Summa Credo: Wow. The GSE share of mortgage issuance during the bubble run up was 'pissing into the ocean'? That was quite an expensive tinkle I have to say.


subprime took off in 2004:
growlersoftware.com

Right when FAM/FRE's market share of bundled securities dropped:
growlersoftware.com
2012-09-27 04:00:41 PM
1 votes:

CPennypacker: The ratings agencies didn't.


A++++ Would THIS again.

In the phrasing of Jon Stewart, this is the core of Bullshiat Mountain. The bubble collapsed *because* of people failing on their mortgages. The collapse had EXTREME consequences *because* of the shenanigans ratings agencies and banks were pulling. The responsibility was so diffuse that nobody noticed until demand dried up that flipping houses wasn't sustainable. Most of that value was fictional, and all of it was bundled and assessed *well below* it's real risk threshold. The left hand didn't know what the right hand was doing, and nobody bothered to ask because everyone involved was making money hand over fist.

The bottom fell out of that particular market, and instead of it just depressing property values, it did that, AND dried up people's 401ks, AND froze lending. All in the space of like... 48 hours.

/Damn you freddie mac!
2012-09-27 03:54:02 PM
1 votes:

zappaisfrank: Had a REALLY long debate with a right winger about this very thing recently.


I had this come up in conversation with a "tea party member" recently. I told him that it has been four years since the crash and multiple books about it had been written about it by experts in the field and if he didn't know what happened then a 15 minute conversation wasn't going to make a difference. He got all offended and claimed that I was calling him stupid but I told him to go read a book written by someone who didn't have a radio or tv show and we'd talk. I'm not holding my breath waiting for that phone call.
2012-09-27 03:46:37 PM
1 votes:

youmightberight: Ny Times: Fannie-Mae eases credit to aid subprime mortgages in 1999


From that link:

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

That is what caused the crisis. These guys weren't using Fannie Mae because the loans were too risky and Fannie Mae wouldn't have a part of it.
2012-09-27 03:09:37 PM
1 votes:
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 03:09:32 PM
1 votes:
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 02:59:08 PM
1 votes:

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 12:59:57 PM
1 votes:

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 12:55:22 PM
1 votes:

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 12:48:23 PM
1 votes:

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 12:47:52 PM
1 votes:
Link 

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

(fark won't let me link it)
2012-09-27 12:38:10 PM
1 votes:

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 11:46:17 AM
1 votes:

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 09:49:56 AM
1 votes:

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.
 
Displayed 20 of 20 comments

View Voting Results: Smartest and Funniest

This thread is closed to new comments.

Continue Farking
Submit a Link »






Report