Rep. Joe Walsh (R-IL) freaks out on constituents,"Don't Blame The Banks!"

[hillbilly123069]

I been saying that. The gov manipulated us into this mess. OWS should be at the White House.
http://www.huffingtonpost.com/2011/11/08/joe-walsh-screams-at-cons_n_1083014.html

[Cowlesy]

He pointed the gun at himself. That's pretty impressive for a government employee.

[jmdrake]

Let's see....from the article....

"I don't want government meddling in the marketplace," Walsh said. "Yeah, they move from Goldman Sachs to the White House, I understand all of that. But you gotta’ be consistent. And it’s not the private marketplace that created this mess. What created mess was your government, which has demanded for years that everybody be in a home. And we’ve made it easy as possible for people to be in homes."

Uhhhh...no Joe! That's not what happened! It's not because we just "wanted everybody to be in a home". We could have taken the money stolen by the banksters and put everyone in a home cheaper if that was the case. The "put everyone in a home" argument might have been the front that was used for this grand-theft-financial, but it wasn't the end.

To better understand what's going on read an article from the "San Fransisco Chronicle" which explains how the 2008 Bush/Pelosi stimulus package upped Fannie Mae's lending limits to $750,000. You do not need $750,000 lending limits just to put someone in "a home". It's a shame that the "leftist" San Fransisco Chronicle better understood how Fannie Mae and Freddie Mac and the Bush/Pelosi stimulus package created this mess than a "tea party favorite".

And Cowley, THIS is why we can't just look at these economic problems from a myopic "leftist versus rightest" lens.

http://articles.sfgate.com/2008-02-03/opinion/20870511_1_fannie-and-freddie-fannie-mae-freddie-mac
Stimulus Plan A Scam To Benefit The Rich
Higher loan limits will lead to Fannie Mae, Freddie Mac bailout
February 03, 2008|By Sean Olender

Congress is about to sell us the biggest fraud in American history.

It's been highly touted as an economic stimulus bill that will help millions of Americans - and has the backing of both President Bush and House Speaker Nancy Pelosi. In the coming year, individuals would receive rebates of up to $600 and families up to $1,200. There are other goodies, too, including tax write-offs for small businesses and an expansion of the child tax credit.

But, as the old adage goes, nothing comes for free. As part of the bill, Congress is set to rush through an increase in the mortgage loan limits for Fannie Mae and Freddie Mac (and Federal Housing Administration insurance, too) - from $417,000 to $729,750 - the first step toward a massive financial disaster in which taxpayers will end up paying through the nose.
Sponsored Links

Fannie Mae Mortgage 2.5% Get the Best Fannie Mae Mortgage Rate. Refinance & Lower Your Payment! (FannieMae-Mortgage.LeadSteps.com)
FHA Loan Preapproval Do you qualify for a FHA Loan? Find out now. Bad credit welcome. (FHA.MortgageDigger.com)
Loan Modification Program 11 Million Homeowners can modify but the program will run out soon. (Save-Home.us)

advertisement | your ad here

Here's how we got to this point. Domestic and international investors hold hundreds of billions of dollars in bad debt, because U.S. investment houses sold them junk securities based on often fraudulent mortgages. Many of these mortgages were sold to unqualified buyers under terms that made widespread foreclosures a certainty once the housing market began to fall.

Investment banks and bond rating agencies sat down and tried to figure out how to describe Americans with insufficient incomes and little for a down payment as great credit risks on loans too big for their incomes. The new rules focused on credit scores, because it was a good excuse to avoid looking at income and down payment, factors that would have restricted this moneymaking fiasco.

Now, thanks to Congress, junk bond investors will be able to pawn off their bad debt to Fannie and Freddie, instead of suing the big investment houses for ripping them off. This shift will certainly doom Fannie Mae and Freddie Mac, so don't be surprised if we, the taxpayers, have to bail out poor Fannie and Freddie - to the tune of more than $1 trillion.

[klamath]

I may not blame all the banks but I do blame a government run monoply called the fed and I also blame the millions that got free money out of their homes and blew it on worthless toys.

[jmdrake]

I may not blame all the banks but I do blame a government run monoply called the fed and I also blame the millions that got free money out of their homes and blew it on worthless toys.

If you only look at the Fed you're missing a huge part of the equation. People need to study Fannie Mae and Freddie Mac and understand what a "government sponsored entity" is to untangle this all. You also need to understand why Ron Paul, who is usually for deregulation voted against the repeal of the Glass Stegall regulations. Once you understand all of that you will realize that Joe Walsh is as full of it as George Soros.

[TCE]

My brother has met and spoken with him twice. Aside from his unfortunate Patriot Act vote, he is, deep down, a libertarian, specifically in the economic sense. He voted against the Debt Ceiling increase and is more liberty-oriented than most of the current crop of Congressmen. Especially for an Illinois Republican, that is essentially as good as we're going to get. He's definitely not perfect and there are obviously better, but I don't hate him for being on the wrong side of a few issues.

[jmdrake]

My brother has met and spoken with him twice. Aside from his unfortunate Patriot Act vote, he is, deep down, a libertarian, specifically in the economic sense. He voted against the Debt Ceiling increase and is more liberty-oriented than most of the current crop of Congressmen. Especially for an Illinois Republican, that is essentially as good as we're going to get. He's definitely not perfect and there are obviously better, but I don't hate him for being on the wrong side of a few issues.

Well I don't hate him either and I've never met him. But his economic analysis leaves a lot to be desired.

[redbluepill]

I may not blame all the banks but I do blame a government run monoply called the fed and I also blame the millions that got free money out of their homes and blew it on worthless toys.

The fed is not run by the government, it is run by a private corporation. But yes, the fed deserves a large chunk of the blame.

[Brian4Liberty]

My brother has met and spoken with him twice. Aside from his unfortunate Patriot Act vote, he is, deep down, a libertarian, specifically in the economic sense.

Like Hannity and Levin?

[LibForestPaul]

I may not blame all the banks but I do blame a government run monoply called the fed and I also blame the millions that got free money out of their homes and blew it on worthless toys.
I only blame those that point guns at my head...

[Brian4Liberty]

Who would vote for this asshat?

What do we need to be "consistent" about? He never really says, but he repeats it a couple of times. Kind of convenient to only blame government, a nebulous entity that is never liable and never takes responsibility for anything. And nobody "attacked" the free market as he kept repeating.

He says: "All the marketplace does is respond to what the government does. The government sets the rules."

Hello McFly? McDouchebag! The same Wall St bankers that you are defending are the ones who write those damn rules! There is no separation. They are the same people. What the hell are you saying? Hank Paulson and Jon Corzine are as pure as the driven snow when they have their Goldman Sachs hats on, and they are only guilty (but not liable or accountable) when they are in the government? He complains about Dodd-Frank, yet that is just another example of law written by Wall St interests. It's a total sham. And no one was defending Dodd-Frank either.


http://www.youtube.com/watch?feature=player_embedded&v=nb73zqY6lZM#!

[klamath]

The fed is not run by the government, it is run by a private corporation. But yes, the fed deserves a large chunk of the blame.
but the board is appointed by the government.

[MJU1983]

but the board is appointed by the government.

That doesn't make his statement any less true and I doubt 'government' is given many choices.

[sickmint79]

joe does not put enough blame on the banks. i think too much on fannie/freddie/cra as well - they didn't help but they didn't cause the bubble.

walsh is my rep.

[TCE]

The video reflects his personality and he does get like that. He was attacked for being a libertarian during the 2010 race and again, from the conversations my brother had with him along with my personal knowledge of him, I know him to be good on many issues, including his support of free markets. Yes, there are some things he is completely wrong on, but he is not Levin or Hannity. He is more in the mold of a Jeff Flake as opposed to Amash, but he will vote with us most of the time. As the Freedom Rankings show, he voted correctly on every issue except for the Patriot Act: http://www.jbs.org/legislation/new-freedom-index-rates-congressmen-based-on-constitution

[TCE]

joe does not put enough blame on the banks. i think too much on fannie/freddie/cra as well - they didn't help but they didn't cause the bubble.

walsh is my rep.

Seriously? I live in the next city over from where he represents. Cool.

[sickmint79]

yeah, i talked to him a few times before and once after election. i gave him eric janszen's book. ej does macro analysis at itulip.com and has an outstanding record. he is a practical libertarian. joe, ehhh, he likes ron paul but doesn't agree with him on foreign policy at all. i wouldn't call him a libertarian. he is definitely a tea party guy though, and someone the GOP doesn't totally have their hands on. they really groaned when he won the primary. he won the general election with the closest race in the country - 202k votes cast, he won by 291.

i live in third lake - right north of bill's pub north next to CLC. you? are you in the lake county young republicans?

[Brian4Liberty]

The video reflects his personality and he does get like that.

Can't imagine how he'll get re-elected being a jerk like that. Yelling in someone's face like that often doesn't end like that...he could become even more famous as the Congressman with a blackeye.

He should shut up and play his guitar!


http://www.youtube.com/watch?v=qF2OP_gFsz4

[Travlyr]

If you only look at the Fed you're missing a huge part of the equation. People need to study Fannie Mae and Freddie Mac and understand what a "government sponsored entity" is to untangle this all. You also need to understand why Ron Paul, who is usually for deregulation voted against the repeal of the Glass Stegall regulations. Once you understand all of that you will realize that Joe Walsh is as full of it as George Soros.
It is the Fed. The Fed "creates" elastic money. Money is not created by man. Oil is not created by man. It cannot be. What that means is the Federal Reserve steals money. They are counterfeiters. That is the purpose of the Fed... Power and Control.

Stop the counterfeiters and solve the problem.

[Travlyr]

The Federal Reserve Bank of Minneapolis (http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3815
http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3815
http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3815)


Warburg's Contribution
The idea of an "elastic currency," which would expand to meet the legitimate needs of business and commerce, was not new. In fact, Warburg himself claimed no originality for the idea, but through his writings, speeches and counsel to others he began to have a greater impact than anyone else. Warburg did, however, succeed in injecting two new ideas into the discussion: first, shifting of emphasis from the currency problem to the reserve problem; and second, advocacy of the principle of rediscounting a new kind of commercial paper.


Elastic money means unlimited money for the bankers to control society at the expense of liberty. That's what it does.

[Brian4Liberty]

It is the Fed.

Of course. We never forget about the Fed's role at the head of the table!

http://www.onepennysheet.com/wp-content/uploads/2009/10/greenspan_summers.gif

[Travlyr]

You must spread some Reputation around before giving it to Brian4Liberty again.

Not everyone knows that. A lot of people believe it is the State that initiates force. It's not. It is the counterfeiters who initiate force because they must hunt down competition and stop them.

The Fed enables the wars, the police state, oppressive regulations, distortions in the marketplace, and is the enemy of private property.

The "Greenback" = The Civil War and the first policemen.
The Federal Reserve Act of 1913 = WWI & 100 years of wars, the State Police, FBI, CIA, The New Deal, IRS, Debt Society, Marxist Ideals.

The bankers own the Earth because of the power of "legalized" counterfeiting which is unconstitutional. Nearly everyone buys their home from the banker with the approval of the banker. The same with their car, their education, their toys, and their meals. Approved. Approved. Approved.

It ends when the bankers lose their power to "create" steal from the rest of us... not before.

[jmdrake]

It is the Fed. The Fed "creates" elastic money. Money is not created by man. Oil is not created by man. It cannot be. What that means is the Federal Reserve steals money. They are counterfeiters. That is the purpose of the Fed... Power and Control.

Stop the counterfeiters and solve the problem.

.....unless the Fed is replaced by another entity that does the same thing like the new "global financial order" the Vatican was calling for recently. I fully agree that the fed is central to the problem. But to understand it you have to understand how the 2008 Bush/Pelosi stimulus scam which was tied to Fannie and Freddie exacerbated the problem. We've got to fully inform people about how this is all tied together.

[Travlyr]

.....unless the Fed is replaced by another entity that does the same thing like the new "global financial order" the Vatican was calling for recently. I fully agree that the fed is central to the problem. But to understand it you have to understand how the 2008 Bush/Pelosi stimulus scam which was tied to Fannie and Freddie exacerbated the problem. We've got to fully inform people about how this is all tied together.
I do agree with you on some of that. But all the talk about stimulus/Fannie/Freddie/Ginny stuff is merely obfuscation. It's sort of like a Hollywood wedding. It's irrelevant.

If people in the 21st century are dumb enough to buy the Global counterfeiter bullshit is better than a National or State counterfeiter, then at least 40 more years of oppression, wars and poverty will be the fate of the people, and maybe 80 more years if their children buy into Universal counterfeiter bullshit. After that... maybe people will realize who has their boot on their throat.

[jmdrake]

I do agree with you on some of that. But all the talk about stimulus/Fannie/Freddie/Ginny stuff is merely obfuscation. It's sort of like a Hollywood wedding. It's irrelevant.

If people in the 21st century are dumb enough to buy the Global counterfeiter bullshit is better than a National or State counterfeiter, then at least 40 more years of oppression, wars and poverty will be the fate of the people, and maybe 80 more years if their children buy into Universal counterfeiter bullshit. After that... maybe people will realize who has their boot on their throat.

I disagree with your "obfuscation" comment. Tell me this. Are you familiar with kudzu? It's an invasive vine that FDR brought over from Japan to control erosion. To kill it you need to dig up the crown. But before you can find the crown you have to cut away the leaves and vines. Fannie/Freddie and the stimulus are the "leaves and vines" of this financial crisis. You can talk about "End the Fed" all day and most people don't really know what the hell you're talking about. They have to understand how government actually undermines the prosperity that they seek before they can understand that the counterfeiting is bad. People also need to know why Ron Paul, who usually votes for deregulation, voted against deregulation when it came to Glass Stegall. You can't get that just from "end the Fed".

[Travlyr]

I disagree with your "obfuscation" comment. Tell me this. Are you familiar with kudzu? It's an invasive vine that FDR brought over from Japan to control erosion. To kill it you need to dig up the crown. But before you can find the crown you have to cut away the leaves and vines. Fannie/Freddie and the stimulus are the "leaves and vines" of this financial crisis. You can talk about "End the Fed" all day and most people don't really know what the hell you're talking about. They have to understand how government actually undermines the prosperity that they seek before they can understand that the counterfeiting is bad. People also need to know why Ron Paul, who usually votes for deregulation, voted against deregulation when it came to Glass Stegall. You can't get that just from "end the Fed".
How is the Fannie/Freddie stuff different than the Savings & Loan debacle in the 80's?
You really just have to pull the thorn and let the healing begin.

[jmdrake]

How is the Fannie/Freddie stuff different than the Savings & Loan debacle in the 80's?

Well it's bigger for one. For another Fannie and Freddie are actually government sponsored entities. That means they are quasi private/quasi public just like the Federal Reserve itself. Really for me the financial crisis didn't make sense until I understood the history of Fannie and Freddie and how they tie into the Federal Reserve. For me when I talk to people about the financial crisis I want to be able to say more than just "End the Fed". I want to be able to explain how it all fits together. Otherwise it just becomes a slogan.

[Travlyr]

Well it's bigger for one. For another Fannie and Freddie are actually government sponsored entities. That means they are quasi private/quasi public just like the Federal Reserve itself. Really for me the financial crisis didn't make sense until I understood the history of Fannie and Freddie and how they tie into the Federal Reserve. For me when I talk to people about the financial crisis I want to be able to say more than just "End the Fed". I want to be able to explain how it all fits together. Otherwise it just becomes a slogan.

Then you should go all the way back to the Bank of England (http://en.wikipedia.org/wiki/Bank_of_England) in 1694.

Wars are profitable. When the Vietnam conflict ended investors needed somewhere to put money. They put it into development land and cheated the system. The Bush Family and the Clinton were both involved in the Savings & Loan scandal (quasi private/quasi public) Resolution Trust Corporation. It was as big at the time as Fannie & Freddie are today. Then when that bubble blew up money went from there into retirement accounts and the stock market investments. The Internet bubble was formed. When that bubble blew up, then money went into the housing bubble Fannie/Freddie, etc. Now that the real estate bubble is blown up, money is going into bonds. The bond bubble is the biggest bubble yet. It is all a big Ponzi Scheme. When it blows, then everyone will be wishing that the Fed had been ended first and a smooth transition made into honest sound money rather than destroy everyone's paper wealth first.

Fannie & Freddie are late comers to the game.

[jmdrake]

Then you should go all the way back to the Bank of England (http://en.wikipedia.org/wiki/Bank_of_England) in 1694.

Wars are profitable. When the Vietnam conflict ended investors needed somewhere to put money. They put it into development land and cheated the system. The Bush Family and the Clinton were both involved in the Savings & Loan scandal (quasi private/quasi public) Resolution Trust Corporation. It was as big at the time as Fannie & Freddie are today. Then when that bubble blew up money went from there into retirement accounts and the stock market investments. The Internet bubble was formed. When that bubble blew up, then money went into the housing bubble Fannie/Freddie, etc. Now that the real estate bubble is blown up, money is going into bonds. The bond bubble is the biggest bubble yet. It is all a big Ponzi Scheme. When it blows, then everyone will be wishing that the Fed had been ended first and a smooth transition made into honest sound money rather than destroy everyone's paper wealth first.

Fannie & Freddie are late comers to the game.

The Resolution Trust Corporation was created to clean up the S & L crisis. (Basically it was the S & L's TARP). In contrast Fannie and Freddie helped create the current crisis. I have nothing against someone going back and learning about the bank of England. But for the current crisis understand Fannie and Freddie for me was quite helpful. I don't understand why you seem so reluctant for people to look at it, but for me it's the clearest example of how the Fed works in modern times to undermine the economy.

[teacherone]

Let's see....from the article....

"I don't want government meddling in the marketplace," Walsh said. "Yeah, they move from Goldman Sachs to the White House, I understand all of that. But you gotta’ be consistent. And it’s not the private marketplace that created this mess. What created mess was your government, which has demanded for years that everybody be in a home. And we’ve made it easy as possible for people to be in homes."

Uhhhh...no Joe! That's not what happened! It's not because we just "wanted everybody to be in a home". We could have taken the money stolen by the banksters and put everyone in a home cheaper if that was the case. The "put everyone in a home" argument might have been the front that was used for this grand-theft-financial, but it wasn't the end.

To better understand what's going on read an article from the "San Fransisco Chronicle" which explains how the 2008 Bush/Pelosi stimulus package upped Fannie Mae's lending limits to $750,000. You do not need $750,000 lending limits just to put someone in "a home". It's a shame that the "leftist" San Fransisco Chronicle better understood how Fannie Mae and Freddie Mac and the Bush/Pelosi stimulus package created this mess than a "tea party favorite".

And Cowley, THIS is why we can't just look at these economic problems from a myopic "leftist versus rightest" lens.

http://articles.sfgate.com/2008-02-03/opinion/20870511_1_fannie-and-freddie-fannie-mae-freddie-mac
Stimulus Plan A Scam To Benefit The Rich
Higher loan limits will lead to Fannie Mae, Freddie Mac bailout
February 03, 2008|By Sean Olender

Congress is about to sell us the biggest fraud in American history.

It's been highly touted as an economic stimulus bill that will help millions of Americans - and has the backing of both President Bush and House Speaker Nancy Pelosi. In the coming year, individuals would receive rebates of up to $600 and families up to $1,200. There are other goodies, too, including tax write-offs for small businesses and an expansion of the child tax credit.

But, as the old adage goes, nothing comes for free. As part of the bill, Congress is set to rush through an increase in the mortgage loan limits for Fannie Mae and Freddie Mac (and Federal Housing Administration insurance, too) - from $417,000 to $729,750 - the first step toward a massive financial disaster in which taxpayers will end up paying through the nose.
Sponsored Links

Fannie Mae Mortgage 2.5% Get the Best Fannie Mae Mortgage Rate. Refinance & Lower Your Payment! (FannieMae-Mortgage.LeadSteps.com)
FHA Loan Preapproval Do you qualify for a FHA Loan? Find out now. Bad credit welcome. (FHA.MortgageDigger.com)
Loan Modification Program 11 Million Homeowners can modify but the program will run out soon. (Save-Home.us)

advertisement | your ad here

Here's how we got to this point. Domestic and international investors hold hundreds of billions of dollars in bad debt, because U.S. investment houses sold them junk securities based on often fraudulent mortgages. Many of these mortgages were sold to unqualified buyers under terms that made widespread foreclosures a certainty once the housing market began to fall.

Investment banks and bond rating agencies sat down and tried to figure out how to describe Americans with insufficient incomes and little for a down payment as great credit risks on loans too big for their incomes. The new rules focused on credit scores, because it was a good excuse to avoid looking at income and down payment, factors that would have restricted this moneymaking fiasco.

Now, thanks to Congress, junk bond investors will be able to pawn off their bad debt to Fannie and Freddie, instead of suing the big investment houses for ripping them off. This shift will certainly doom Fannie Mae and Freddie Mac, so don't be surprised if we, the taxpayers, have to bail out poor Fannie and Freddie - to the tune of more than $1 trillion.

excellent!

[Travlyr]

The Resolution Trust Corporation was created to clean up the S & L crisis. (Basically it was the S & L's TARP). In contrast Fannie and Freddie helped create the current crisis. I have nothing against someone going back and learning about the bank of England. But for the current crisis understand Fannie and Freddie for me was quite helpful. I don't understand why you seem so reluctant for people to look at it, but for me it's the clearest example of how the Fed works in modern times to undermine the economy.
I do not have a problem with people explaining it in whatever way makes the most sense to them. I intend to encourage you to do what works best.

When you understand "elastic" money, then you see the thorn.

[angelatc]

Who would vote for this asshat?

What do we need to be "consistent" about? He never really says, but he repeats it a couple of times. Kind of convenient to only blame government, a nebulous entity that is never liable and never takes responsibility for anything. And nobody "attacked" the free market as he kept repeating.

He says: "All the marketplace does is respond to what the government does. The government sets the rules."

Hello McFly? McDouchebag! The same Wall St bankers that you are defending are the ones who write those damn rules! There is no separation. They are the same people. What the hell are you saying? Hank Paulson and Jon Corzine are as pure as the driven snow when they have their Goldman Sachs hats on, and they are only guilty (but not liable or accountable) when they are in the government? He complains about Dodd-Frank, yet that is just another example of law written by Wall St interests. It's a total sham. And no one was defending Dodd-Frank either.


http://www.youtube.com/watch?feature=player_embedded&v=nb73zqY6lZM#!

I would totally vote for Joe. If I still lived in Illinois, he would be my rep. He's great!

[angelatc]

joe does not put enough blame on the banks. i think too much on fannie/freddie/cra as well - they didn't help but they didn't cause the bubble.

walsh is my rep.

Just to piss jmdrake off, I don't blame the banks either. Banking is a business, and business will always take every advantage it can get to maximize profit. I think it's laughable to imagine that we should expect the bankers not to lobby for rules that benefit them, especially considering that Washington has the welcome mat out 24/7.

[Travlyr]

Just to piss jmdrake off, I don't blame the banks either. Banking is a business, and business will always take every advantage it can get to maximize profit. I think it's laughable to imagine that we should expect the bankers not to lobby for rules that benefit them, especially considering that Washington has the welcome mat out 24/7.
Ron Paul blames the banks.

[jmdrake]

Just to piss jmdrake off, I don't blame the banks either. Banking is a business, and business will always take every advantage it can get to maximize profit. I think it's laughable to imagine that we should expect the bankers not to lobby for rules that benefit them, especially considering that Washington has the welcome mat out 24/7.

:rolleyes: And just to piss you off for being silly, I didn't blame the "banks". I blamed GSE's Fannie Mae and Freddie Mac which are semi private government sponsored entities that are in many ways similar to the Fed. If you listen sometimes you might learn something. ;) Or you can just be like Joe Walsh. (Sorry the singer has to share the same name as this turkey).

[Brian4Liberty]

I would totally vote for Joe. If I still lived in Illinois, he would be my rep. He's great!

I bet the woman whose face Joe was yelling into about something she didn't even say will not be voting for him.

[mconder]

I been saying that. The gov manipulated us into this mess. OWS should be at the White House.
http://www.huffingtonpost.com/2011/11/08/joe-walsh-screams-at-cons_n_1083014.html


Walsh, a Tea Party Favorite, then suggested that the federal government stop funding the U.S. Postal Service.
"If the Postal Service can't compete in the marketplace," Walsh shouted. "I am tired of propping it up."

One of the few things the Federal government does that's actually authorized by the Constitution. Seriously, there's not a better target for cutting than the Post Office? Wars maybe?

[redbluepill]

Just to piss jmdrake off, I don't blame the banks either. Banking is a business, and business will always take every advantage it can get to maximize profit. I think it's laughable to imagine that we should expect the bankers not to lobby for rules that benefit them, especially considering that Washington has the welcome mat out 24/7.

Using that logic let's not blame the politicians who give out the subsidies to the corporations. Making the corporations happy ensures re-election. The politicians are just looking out for their own benefit.

[sickmint79]

Can't imagine how he'll get re-elected being a jerk like that. Yelling in someone's face like that often doesn't end like that...he could become even more famous as the Congressman with a blackeye.

He should shut up and play his guitar!


http://www.youtube.com/watch?v=qF2OP_gFsz4

i think he used some of his music during his campaign and got in trouble for it.

[sickmint79]

Just to piss jmdrake off, I don't blame the banks either. Banking is a business, and business will always take every advantage it can get to maximize profit. I think it's laughable to imagine that we should expect the bankers not to lobby for rules that benefit them, especially considering that Washington has the welcome mat out 24/7.

rules aside, they completely abandoned lending standards. banks that don't care about that eventually go out of business. unless they're really big, in soviet america i guess.

[sickmint79]

:rolleyes: And just to piss you off for being silly, I didn't blame the "banks". I blamed GSE's Fannie Mae and Freddie Mac which are semi private government sponsored entities that are in many ways similar to the Fed. If you listen sometimes you might learn something. ;) Or you can just be like Joe Walsh. (Sorry the singer has to share the same name as this turkey).

fannie and freddie didn't make ultra low monetary policy
fannie and freddie didn't use the copula formula incorrectly to misrepresent risk
fannie and freddie didn't cause banks to abandon lending standards
fannie and freddie didn't cause ratings agencies to give bs AAA opinions
fannie and freddie were not even really participants in subprime repackaging until the bubble was all but said and over

they didn't help, they didn't create this bubble either though.

[LibertyIn08]

fannie and freddie didn't make ultra low monetary policy
fannie and freddie didn't use the copula formula incorrectly to misrepresent risk
fannie and freddie didn't cause banks to abandon lending standards
fannie and freddie didn't cause ratings agencies to give bs AAA opinions
fannie and freddie were not even really participants in subprime repackaging until the bubble was all but said and over

they didn't help, they didn't create this bubble either though.

Banks were able to do all of the above knowing they had government insured short-term liquidity (FDIC insurance) and that they'd get bailed out if they screwed up.

They learned their lesson from the S&L crisis: they just hadn't bought off enough politicians.

[sickmint79]

they didn't do any of that because of fdic insurance and did not expect or even think they were heading towards a bailout. the banks were controlled failures during s&l crisis

[jmdrake]

fannie and freddie didn't make ultra low monetary policy
fannie and freddie didn't use the copula formula incorrectly to misrepresent risk
fannie and freddie didn't cause banks to abandon lending standards
fannie and freddie didn't cause ratings agencies to give bs AAA opinions
fannie and freddie were not even really participants in subprime repackaging until the bubble was all but said and over

they didn't help, they didn't create this bubble either though.

:rolleyes: So many uninformed people who think they know everything and just spout out pithy statements with no facts to back them up. Do you research and educated yourself before you try to discuss what you don't understand. Fannie and Freddie were given preferential treatment by the government and were allowed to take over most of the housing market when other banks were at a regulatory disadvantage. Once those regulations were lifted other banks tried to do what Fannie and Freddie had been doing. Investors thought it wasn't risky because Fannie and Freddie being "federal" (hence the "F" in the name) were almost guaranteed to be bailed out. THAT is what caused the housing bubble.

[jmdrake]

they didn't do any of that because of fdic insurance and did not expect or even think they were heading towards a bailout. the banks were controlled failures during s&l crisis

Except the San Fransisco Chronicle predicted Fannie and Freddie were headed for a bailout thanks to the 2008 stimulus scam. Educate yourself.

Edit: And if you want listen to the San Fransisco Chronicle, will you at least listen to Ron Paul's 2008 economic adviser Peter Schiff?


http://www.youtube.com/watch?v=A18zTHSxGHY

[sickmint79]

Except the San Fransisco Chronicle predicted Fannie and Freddie were headed for a bailout thanks to the 2008 stimulus scam. Educate yourself.

Edit: And if you want listen to the San Fransisco Chronicle, will you at least listen to Ron Paul's 2008 economic adviser Peter Schiff?


http://www.youtube.com/watch?v=A18zTHSxGHY

what does needing a bailout have to do with creating the bubble? literally nothing. FNM/FRE were holding a bunch of shit paper. their debt was implied as good as treasuries and was vastly held (china had a ton) so we either had to bail them out, or stick it to china on the tune of hundreds of billions of dollars. in any case, the bailout has nothing to do with bubble creation.

here is them saying f agency bonds and going for treasuries after that, btw.

http://housingdoom.com/wp-content/uploads/2011/07/52-Week-Change-in-A-and-T-07-20.png

[jmdrake]

what does needing a bailout have to do with creating the bubble?

You didn't even watch the video did you? :rolleyes: Peter Schiff predicted they would cause an economic crisis because they were causing the bubble by being the source of the moral hazard since everybody knew ahead of time that no matter what they did the government would bail them out. Really dude you are clueless.


their debt was implied as good as treasuries and was vastly held (china had a ton) so we either had to bail them out, or stick it to china on the tune of hundreds of billions of dollars. in any case, the bailout has nothing to do with bubble creation.

That is the point! The reason their debt was held out as "good as treasuries" is BECAUSE THEY ARE GOVERNMENT SPONSORED ENTITIES! Everybody knew ahead of time that the WOULD be bailed out!

[sickmint79]

:rolleyes: So many uninformed people who think they know everything and just spout out pithy statements with no facts to back them up. Do you research and educated yourself before you try to discuss what you don't understand. Fannie and Freddie were given preferential treatment by the government and were allowed to take over most of the housing market when other banks were at a regulatory disadvantage. Once those regulations were lifted other banks tried to do what Fannie and Freddie had been doing. Investors thought it wasn't risky because Fannie and Freddie being "federal" (hence the "F" in the name) were almost guaranteed to be bailed out. THAT is what caused the housing bubble.

i could do without the rolley eyes, especially when the actual facts and data do not support your narrative. i highly recommend the book bailout nation by barry ritholtz. as stated:

fannie and freddie didn't make ultra low monetary policy (federal reserve)
fannie and freddie didn't use the copula formula incorrectly to misrepresent risk (banks)
fannie and freddie didn't cause banks to abandon lending standards (banks and federal reserve regulatory capture - not enforcing regulations on the books)
fannie and freddie didn't cause ratings agencies to give bs AAA opinions (banks/agencies - conflict of interest; agencies paid to rate well)
fannie and freddie were not even really participants in subprime repackaging until the bubble was all but said and over (they didn't start packaging subprime stuff until the bubble was well and blown)


Fannie and Freddie were given preferential treatment by the government and were allowed to take over most of the housing market when other banks were at a regulatory disadvantage.

they haven't really changed much for decades - no reason to magically have a bubble now without a change right?


Once those regulations were lifted other banks tried to do what Fannie and Freddie had been doing.

but fannie and freddie weren't lenders. they also weren't going after subprime and repackaging trash as gold. what regulations are you talking about? did glass-steagal bar banks from bundling loans for a secondary market? (i did not think this was the case, provide link if so)


Investors thought it wasn't risky because Fannie and Freddie being "federal" (hence the "F" in the name) were almost guaranteed to be bailed out.

again, GSEs didn't begin packaging shit until late in the game. it was banks selling this stuff on the secondary market that everyone hoovered up.

here's some actual data -

timeline
http://upload.wikimedia.org/wikipedia/commons/d/dd/Case-shiller-index-values.jpg

monetary policy and rates
http://upload.wikimedia.org/wikipedia/commons/e/e6/Fed_Funds_Rate_%26_Mortgage_Rates_2001_to_2008.png

subprime timeline
http://upload.wikimedia.org/wikipedia/commons/e/ef/U.S._Home_Ownership_and_Subprime_Origination_Share .png

outdate chart, but prevalence of fraud per fbi iirc
http://upload.wikimedia.org/wikipedia/commons/e/e7/Mortgage_loan_fraud.svg

massive increase of market share in secondary market by banks
http://www.ritholtz.com/blog/wp-content/uploads/2011/02/OB-MK956_FANFRE_NS_20110208232002.jpg

asset back security issuance
http://www.americanprogress.org/issues/2010/12/img/fcic_column1.jpg

how much fannie and freddie?
http://www.americanprogress.org/issues/2010/12/img/fcic_column2.jpg

i'm not big fans of fannie and freddie. and they certainly didn't help the bubble get quashed any earlier. but they hardly created it.

[sickmint79]

You didn't even watch the video did you? :rolleyes: Peter Schiff predicted they would cause an economic crisis because they were causing the bubble by being the source of the moral hazard since everybody knew ahead of time that no matter what they did the government would bail them out. Really dude you are clueless.

i've seen the video dude, i know all about peter. look here is me chilling with my brotatos.

http://mike.developer10.com/schiffmerp.jpg

unlike you though i'm able to use my own critical thinking abilities and not be an ideologue. i am "clueless" yet you are saying things that don't even make any sense. no one did things to hand shit to fnm/fre because they "knew they'd get bailed out." as the charts i presented show fan/fre didn't even pick up the toxic stuff until late in the game, and banks were performing the function of REPLACING fannie/freddie as bundlers of CDOs for the secondary market to invest in. which they sold DIRECTLY and had *nothing to do* with fan/fre.



That is the point! The reason their debt was held out as "good as treasuries" is BECAUSE THEY ARE GOVERNMENT SPONSORED ENTITIES! Everybody knew ahead of time that the WOULD be bailed out!

by "everyone" you basically mean people like the chinese and others who had been investing in them (for decades) - the implicit guarantee predated the bubble and had nothing to do with creating the bubble.

[jmdrake]

i could do without the rolley eyes, especially when the actual facts and data do not support your narrative. i highly recommend the book bailout nation by barry ritholtz. as stated:


And I can do without your smart alec "I have all the facts and data and you don't" comments.



fannie and freddie didn't make ultra low monetary policy (federal reserve)


I never said they didn't. But they've existed since 1913. We didn't have a housing bubble in 1913. Fannie and Freddie were the government conduit for taking ultra low monetary policy into the housing market and creating the housing bubble.



fannie and freddie didn't cause banks to abandon lending standards (banks and federal reserve regulatory capture - not enforcing regulations on the books)


Fannie and Freddie lead by example by adopting lax lending standards in the first place. The regulations weren't enforced against them because of their special status as GSEs.



fannie and freddie didn't cause ratings agencies to give bs AAA opinions (banks/agencies - conflict of interest; agencies paid to rate well)


Fannie and Freddie were part of that mix.

http://communities.washingtontimes.com/neighborhood/prudent-man/2011/jul/25/credit-ratings-agencies-foxes-hen-coop/
With Democrat pet projects Fannie Mae and Freddie Mac “guaranteeing” these increasingly bad mortgages, the banks were, in fact, encouraged to issue more and more reckless loans since they were highly profitable and ostensibly risk free. In effect, the government (thru Fannie and Freddie), the banks, and finally the ratings agencies were colluding in a massive scam to maximize profits to themselves while abandoning all pretense of fiduciary responsibility to consumers of loans and taxpayers alike. All three are guilty of the mess, not just the ratings agencies.



fannie and freddie were not even really participants in subprime repackaging until the bubble was all but said and over (they didn't start packaging subprime stuff until the bubble was well and blown)


http://hnn.us/articles/1849.html
Editor's Note: This article was published in 2003.

For the first thirty years following its inception, Fannie Mae held a veritable monopoly over the secondary mortgage market. In 1968, due to fiscal pressures created by the Vietnam War, Lyndon B. Johnson privatized Fannie Mae in order to remove it from the national budget. At this point, Fannie Mae began operating as a GSE, generating profits for stock holders while enjoying the benefits of exemption from taxation and oversight as well as implied government backing. In order to prevent any further monopolization of the market, a second GSE known as Freddie Mac was created in 1970. Currently, Fannie Mae and Freddie Mac control about 90 percent of the nation's secondary mortgage market.

Maybe you think the housing bubble was "all but said and over" in 2003?



they haven't really changed much for decades - no reason to magically have a bubble now without a change right?


Actually they have changed quite a bit over the decades. It's the Federal Reserve that hasn't changed. Using your logic there never should have been a housing bubble since there wasn't one in 1913 or 1923 or 1933 and the Federal Reserve is the only government entity responsible in your eyes.



but fannie and freddie weren't lenders. they also weren't going after subprime and repackaging trash as gold. what regulations are you talking about? did glass-steagal bar banks from bundling loans for a secondary market? (i did not think this was the case, provide link if so)


http://www.ccc.unc.edu/FannieFreddie.php
Competition

Fannie and Freddie were highly profitable throughout the 1990s and their activities came to dominate the housing market. But financial innovation, such as the introduction of collateralized debt obligations, and de-regulation, such as the repeal of the Glass-Steagall Act and deliberate exclusion of credit default swaps from oversight, began creating competition from private-label securities (i.e. non-agency mortgage-backed securities).

Fannie and Freddie were losing business and market share. Without the implicit government guarantee, private-label mortgage-backed securities had always been seen as riskier investments than those issued by Fannie and Freddie. But innovative financiers discovered that by giving different levels of priority to the shares, or "tranches," of a security, along with corresponding rates of risk and return, they could shield a particular income stream from loss. A single security would be divided into higher risk tranches that would absorb earlier losses and lower risk tranches that would be hit only once the others were exhausted. Additional insurance against losses was obtained through derivatives like credit default swaps, where for a fee one company (e.g. AIG) would compensate another for defaults in an investment. Consequently, these investments were considered "safe" enough to warrant AAA credit ratings— that is, there was virtually no predicted risk of loss, despite being built on high risk subprime mortgages. It appeared as if investors could have safety comparable to U.S. Treasury bonds, but with significantly higher returns.

Fannie and Freddie were given an unfair advantage from their inception allowing to dominate the subprime housing market. Private banks took advantage of their FDIC backing to have the same illusion of invincibility that Fannie and Freddie had to do the same poor lending.



i'm not big fans of fannie and freddie. and they certainly didn't help the bubble get quashed any earlier. but they hardly created it.

They helped created it. They were the primary conduit for creating it.

[jmdrake]

i've seen the video dude, i know all about peter. look here is me chilling with my brotatos.

Wow. You've got a picture with Schiff. I'm soooo impressed. :rolleyes: :rolleyes: :rolleyes: I figured out the truth on my own. You want to hide behind charts that don't explain the moral hazard that Fannie and Freddie created, fine. You're still clueless.

Edit: And this chart of yours actually proves my point.

http://www.ritholtz.com/blog/wp-content/uploads/2011/02/OB-MK956_FANFRE_NS_20110208232002.jpg

Fannie and Freddie dominated the market. Glass Steagall was repealed allowing FDIC backed institutions to get into the game. Investors thought they all of these were "federally backed" instead of Fannie and Freddie. The rest is history.

Here's another graph for you.

http://www.ccc.unc.edu/images/fannieFreddie1.jpg

Note the date for the caption "Freddie Mac issues its first MBS". MBS = Mortgage Backed Security. This was in 1970. But according to you they weren't doing that back then. So what gives?

[sickmint79]

And I can do without your smart alec "I have all the facts and data and you don't" comments.

is that why you use the roll eyes and call me clueless? hmm.



I never said they didn't. But they've existed since 1913. We didn't have a housing bubble in 1913.

no, fannie was founded in 1938 and freddie in 1968.


Fannie and Freddie were the government conduit for taking ultra low monetary policy into the housing market and creating the housing bubble.

no, fannie and freddie are no conduit for monetary policy, which is set by the federal reserve and influence banks.



Fannie and Freddie lead by example by adopting lax lending standards in the first place.

no, fannie and freddie don't lend money, banks do. banks also lied about the quality of borrowers and were complict with fradulent assessments so that they could shovel over loans to fannie and freddie. there is a rather infamous chat sheet from countrywide iirc on how to put lies into their system to do this. what are delinquency rates of mortgages that did meet requirements?

http://rortybomb.files.wordpress.com/2011/05/alternative_subprime.jpg


The regulations weren't enforced against them because of their special status as GSEs.

no, the regulations that weren't enforced were on banks



Fannie and Freddie were part of that mix.

according to you not understanding the above, i guess...



http://communities.washingtontimes.com/neighborhood/prudent-man/2011/jul/25/credit-ratings-agencies-foxes-hen-coop/
With Democrat pet projects Fannie Mae and Freddie Mac “guaranteeing” these increasingly bad mortgages, the banks were, in fact, encouraged to issue more and more reckless loans since they were highly profitable and ostensibly risk free. In effect, the government (thru Fannie and Freddie), the banks, and finally the ratings agencies were colluding in a massive scam to maximize profits to themselves while abandoning all pretense of fiduciary responsibility to consumers of loans and taxpayers alike. All three are guilty of the mess, not just the ratings agencies.


what were fannie and freddie guaranteeing here? and as i already said (and provided data for) everything was going AROUND fannie and freddie. banks were packaging up debt and selling it directly COMPETING with fannie and freddie.



http://hnn.us/articles/1849.html
Editor's Note: This article was published in 2003.

For the first thirty years following its inception, Fannie Mae held a veritable monopoly over the secondary mortgage market. In 1968, due to fiscal pressures created by the Vietnam War, Lyndon B. Johnson privatized Fannie Mae in order to remove it from the national budget. At this point, Fannie Mae began operating as a GSE, generating profits for stock holders while enjoying the benefits of exemption from taxation and oversight as well as implied government backing. In order to prevent any further monopolization of the market, a second GSE known as Freddie Mac was created in 1970. Currently, Fannie Mae and Freddie Mac control about 90 percent of the nation's secondary mortgage market.

hey, you could have pulled the correct dates off of this. this is just a history lesson though, it's not explaining anything about bubbles.


Maybe you think the housing bubble was "all but said and over" in 2003?

no, i meant what i said. peak volume and price were late 2005/early 2006. fannie and freddie did not really start picking subprime stuff up until around then, late to the game, searching for yield to compete with banks that were providing much higher interest rates. the bubble was already done by this point though.




Actually they have changed quite a bit over the decades. It's the Federal Reserve that hasn't changed. Using your logic there never should have been a housing bubble since there wasn't one in 1913 or 1923 or 1933 and the Federal Reserve is the only government entity responsible in your eyes.

i never made the claim that excessive federal reserve credit will always result in a housing bubble. it can result in a bubble in other things, or just excessive inflation.




http://www.ccc.unc.edu/FannieFreddie.php
Competition

Fannie and Freddie were highly profitable throughout the 1990s and their activities came to dominate the housing market. But financial innovation, such as the introduction of collateralized debt obligations, and de-regulation, such as the repeal of the Glass-Steagall Act and deliberate exclusion of credit default swaps from oversight, began creating competition from private-label securities (i.e. non-agency mortgage-backed securities).

investment banks could already do this, glass-steagal allowed for commercial ones to participate as well. but... this doesn't mean fannie/freddie did anything, it means that the private sector banking market could get crazier. not sure how that helps your story?


Fannie and Freddie were losing business and market share. Without the implicit government guarantee, private-label mortgage-backed securities had always been seen as riskier investments than those issued by Fannie and Freddie. But innovative financiers discovered that by giving different levels of priority to the shares, or "tranches," of a security, along with corresponding rates of risk and return, they could shield a particular income stream from loss. A single security would be divided into higher risk tranches that would absorb earlier losses and lower risk tranches that would be hit only once the others were exhausted. Additional insurance against losses was obtained through derivatives like credit default swaps, where for a fee one company (e.g. AIG) would compensate another for defaults in an investment. Consequently, these investments were considered "safe" enough to warrant AAA credit ratings— that is, there was virtually no predicted risk of loss, despite being built on high risk subprime mortgages. It appeared as if investors could have safety comparable to U.S. Treasury bonds, but with significantly higher returns.

again, not sure how this is helping your story... it's saying banks "got creative" with the mortgages they packaged - this is where the copula formula and paying for ratings came in - FFF garbage went out as AAA pristine. but again, how was fannie/freddie to blame for this misrepresentation of risk? because their iplicit guarantee made them hard to compete against? so what? are you saying fannie and freddie are to blame for banks choosing not to focus on other activities, but to focus essentially on what is fraud? that is pretty laughable - that the banks were "forced" to commit fraud?? is that what you're saying?? because i have a hard time interpreting your theory any other way.


Fannie and Freddie were given an unfair advantage from their inception allowing to dominate the subprime housing market.

no, as i said before fannie and freddie did not participate much in subprime until late in the bubble

home purchase originations:

http://www.philadelphiafed.org/community-development/publications/special-reports/FHA-lending-activity/_images/chart-5.gif

home refinance originations:

http://www.philadelphiafed.org/community-development/publications/special-reports/FHA-lending-activity/_images/chart-6.gif

GSE subprime purchases

http://www.frumforum.com/wp-content/uploads/2009/10/gse_loan_and_security_purchases.jpg

someone else was buying a whole lot of that stuff...

found a post by barry on this too:

1. GSEs were guaranteeing half of all U.S. mortgages for decades. Why suddenly did it all collapse in 2008?
2. The 2005 SEC waiver of leverage rules — asked for and received by the 5 biggest iBanks (GS, MER, MS, LEH, BSC) — allowed these underwriters to dramatically expand their ability to buy, securitize and sell mortgage backed securities. How is FNM/FRE responsible for that?
3. The GSEs were not allowed to guarantee non-conforming (Subprime and Alt A) mortgages, but they were losing so much market share to Wall Street, they petitioned for a waiver from OFHEO. Approved late in 2005, by the time they could own the junk, the top was already in. Showing up late to the party is not the same as being a primary cause.
4. After the GSEs became nationalized, they were no longer run as for profit entities. Indeed, they have become a back door bailout for banks to dump bad paper off their books. (Incidentally, this AFTER THE FACT analysis to explain an a priori cause is the single most foolish thing I’ve read from you. Ever.)
5. How did the GSEs cause parallel housing booms and busts around the world? Why did these nations, without affordable housing policies, have similar RE boom bust cycles?



Private banks took advantage of their FDIC backing to have the same illusion of invincibility

no, the FDIC has nothing to do with making people who lose on mortgages whole.



that Fannie and Freddie had to do the same poor lending.

no, fannie and freddie do not lend.

did fannie/freddie force these guys to overleverage up too?

http://upload.wikimedia.org/wikipedia/commons/9/9f/Leverage_Ratios.png


They helped created it. They were the primary conduit for creating it.

no, they are not a "conduit" in any form. they didn't help create it at all. they were late to the party of participating, going from a more responsible mortgage bundler to a less responsible one. again, late to the game. that certainly didn't help - but they certainly didn't cause the bubble either.

[sickmint79]

Edit: And this chart of yours actually proves my point.

http://www.ritholtz.com/blog/wp-content/uploads/2011/02/OB-MK956_FANFRE_NS_20110208232002.jpg

Fannie and Freddie dominated the market. Glass Steagall was repealed allowing FDIC backed institutions to get into the game. Investors thought they all of these were "federally backed" instead of Fannie and Freddie. The rest is history.

got it, i understand your theory now! so investors who thought the implicit government guarantee for fannie/freddie products...

:rolleyes: :rolleyes: :rolleyes: also thought that guarantee was on the products of countrywide, citigroup, bank of america, goldman sachs. :rolleyes: :rolleyes: :rolleyes:



Here's another graph for you.

http://www.ccc.unc.edu/images/fannieFreddie1.jpg

Note the date for the caption "Freddie Mac issues its first MBS". MBS = Mortgage Backed Security. This was in 1970. But according to you they weren't doing that back then. So what gives?

i never claimed that, that must be another one of those theories in your head... also, so what? the mere existence of an MBS isn't bad, it's when it's full of rated FFF garbage and sold as AAA gold that it's bad. :rolleyes: :rolleyes:

[jmdrake]

i never claimed that, that must be another one of those theories in your head.

You're just not being honest. You said:


fannie and freddie were not even really participants in subprime repackaging until the bubble was all but said and over (they didn't start packaging subprime stuff until the bubble was well and blown)

Fannie Mae and Freddie Mac were created to do subprime lending. And the graph I posted showed they had repackaged subprime loans and early as 1970.

[sickmint79]

You're just not being honest. You said:



Fannie Mae and Freddie Mac were created to do subprime lending. And the graph I posted showed they had repackaged subprime loans and early as 1970.

you have entirely no idea what you are talking about.

The Federal National Mortgage Association (FNMA; OTCBB: FNMA), commonly known as Fannie Mae, was founded in 1938 during the Great Depression as part of the New Deal. It is a government-sponsored enterprise (GSE), though it has been a publicly traded company since 1968.[2] The corporation's purpose is to expand the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities (MBS),[3] allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on thrifts.[4]

[jmdrake]

you have entirely no idea what you are talking about.

The Federal National Mortgage Association (FNMA; OTCBB: FNMA), commonly known as Fannie Mae, was founded in 1938 during the Great Depression as part of the New Deal. It is a government-sponsored enterprise (GSE), though it has been a publicly traded company since 1968.[2] The corporation's purpose is to expand the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities (MBS),[3] allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on thrifts.[4]

http://hnn.us/articles/1849.html
Fannie Mae was created in 1938 as part of Franklin Delano Roosevelt's New Deal. The collapse of the national housing market in the wake of the Great Depression discouraged private lenders from investing in home loans. Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing.

Fannie Mae = secondary mortgage market + affordable housing (subprime). I accept your apology accepted in advance.

[sickmint79]

after many roll eyes towards me, we've found that you think

1. that investors believed the implied government backing on FNE/FRE products also magically extended to countrywide, citigroup and goldman sachs products
2. that all mortgage backed securities are bad
3. that fannie/freddie only deal with subprime

so everything you believe is incorrect, and if i wasn't stuck on a conference call, i'd consider this part of the conversation over and it finally time for me to get to lunch.

[sickmint79]

http://hnn.us/articles/1849.html
Fannie Mae was created in 1938 as part of Franklin Delano Roosevelt's New Deal. The collapse of the national housing market in the wake of the Great Depression discouraged private lenders from investing in home loans. Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing.

Fannie Mae = secondary mortgage market + affordable housing (subprime).

hey you're learning! they do more than pick up high risk mortgages. the ones they do pick up are called non-conforming. see the credit rating? see how they are performing? see how they are performing against the real subprime mess, that is new and has not been around since 1968? the bullshit that the banks made?

http://www.noradarealestate.com/Images/Fico-Credit-Rating.gif

http://rortybomb.files.wordpress.com/2011/05/alternative_subprime.jpg

i guess you missed this part too... they couldn't even play in that market


3. The GSEs were not allowed to guarantee non-conforming (Subprime and Alt A) mortgages, but they were losing so much market share to Wall Street, they petitioned for a waiver from OFHEO. Approved late in 2005, by the time they could own the junk, the top was already in. Showing up late to the party is not the same as being a primary cause.


I accept your apology accepted in advance.

:rolleyes:

[jmdrake]

hey you're learning! they do more than pick up high risk mortgages. the ones they do pick up are called non-conforming. see the credit rating? see how they are performing? see how they are performing against the real subprime mess, that is new and has not been around since 1968? the bullshit that the banks made?

The whole point of Fannie and Freddie's existence is to soak up credit so that the banks could make the "bullshit" you despise so much. They are the conduit of the Fed.



i guess you missed this part too... they couldn't even play in that market


They could and they did long before the bubble burst. Here's an article from 2002.

http://www.nhi.org/online/issues/125/goingsubprime.html
Interestingly, subprime market growth in the 1990s occurred largely without the participation of Fannie Mae and Freddie Mac. The GSEs started showing interest in this market toward the end of the decade and now purchase A-minus mortgages as a regular part of their business. National Mortgage News, a trade publication, estimates their combined market share in 2001 grew by 74 percent, representing about 11.5 percent of all subprime loan originations in that year. Some market analysts estimate that GSEs will soon be purchasing as much as one-half of all subprime originations.

Let's see, what was happening in 2001? Oh yeah. The dot-com bubble was busting and the most recent housing bubble was just taking off.

See: http://www.rntl.net/history_of_a_housing_bubble.htm

So no matter how you try to slice it, your claim that Fannie and Freddie didn't get into subprime repackaging until the housing bubble was about to burst is simply unfounded.

[sickmint79]

The whole point of Fannie and Freddie's existence is to soak up credit so that the banks could make the "bullshit" you despise so much.

no, they take the loans off the books of the banks so that the banks can continue lending. this does not mean the integrity of the loans are good or bad. fannie also has criteria that must be met for them to take a loan.



They are the conduit of the Fed.

no, they have nothing to do with monetary policy or the federal reserve.




They could and they did long before the bubble burst. Here's an article from 2002.

http://www.nhi.org/online/issues/125/goingsubprime.html

"The recent foray into the subprime mortgage" - from the article you linked - keep that in mind went posting about your 1970 or older subprime claims eh?

"Fannie and Freddie traditionally have purchased a small share of these loans, but this figure is expected to grow significantly in the next few years." - and it did, and i never claimed it didn't. it didn't really get moving strongly until reference above with barry ritholz's quote regarding 2005 and the OFHEO waiver - when the bubble was topping. the brunt of subprime was packaged and spun off as beautiful crap by banks and never touched the GSEs up until that topping point.


Just because you can post "pretty graphs" doesn't mean you understand them. Clearly you don't.

clearly you don't understand the difference between an article talking about things that might happen in 2002, and charts that show data of what actually happened after it was published.

[jmdrake]

no, they take the loans off the books of the banks so that the banks can continue lending. this does not mean the integrity of the loans are good or bad. fannie also has criteria that must be met for them to take a loan.


And where does Fannie get the money from? The Fed. You're complaining about the Fed but Fannie and Freddie are tools of the Fed. Without that steady inflow of cash the banks would have naturally been less risky. The repeal of Glass Steagall meant that the investment banks taking these risks had the veneer of federal backing since their deposits were FDIC insured.



no, they have nothing to do with monetary policy or the federal reserve.


The Fed is the source of their money. I didn't say they were anything but a conduit. You do know what a conduit is right? A hot water pipe has nothing to do with heating up the water. It just carries it.




"The recent foray into the subprime mortgage" - from the article you linked - keep that in mind went posting about your 1970 or older subprime claims eh?


It's earlier than your "when the bubble was almost over" claim that's for sure.




"Fannie and Freddie traditionally have purchased a small share of these loans, but this figure is expected to grow significantly in the next few years." - and it did, and i never claimed it didn't. it didn't really get moving strongly until reference above with barry ritholz's quote regarding 2005 and the OFHEO waiver - when the bubble was topping. the brunt of subprime was packaged and spun off as beautiful crap by banks and never touched the GSEs up until that topping point.


It was already at over 10% back in 2001 and it was growing. And the banks wouldn't have been able to even pull any of this off without FDIC backing (thanks to the repeal of Glass Steagall) and Fannie and Freddie buying up their other loans.



clearly you don't understand the difference between an article talking about things that might happen in 2002, and charts that show data of what actually happened after it was published.

Says you. The charts merely showed what was predicted to happen actually did happen.

[jmdrake]

Here is a good article that puts it altogether. It's interesting that "Joe Walsh" and "amy" want to take all of the blame off the banks and put it on the government and you want to take all of the blame off the government (with the exception of the Federal reserve) and put it on the banks. The truth is that multiple players were guilty including Fannie and Freddie.

http://www.sjsu.edu/faculty/watkins/subprime.htm

San José State University
Department of Economics
applet-magic.com
Thayer Watkins
Silicon Valley
& Tornado Alley
USA
The Nature and the Origin
of the Subprime Mortgage Crisis

There has been a long term American policy of promoting home ownership. This entailed making the financing of home purchases as easy as possible. Various financial institutions were set up over time to make the securing of a mortgage quick and convenient. There once were Savings and Loan Associations that were savings institutions which could only invest in home mortgages. Fannie Mae (the Federal Nation Mortgage Association FNMA) was set up in 1938 to provide a secondary market for home mortgages. This meant that if a bank granted a mortgage to someone and later the bank needed funds the bank could readily sell the mortgage to Fannie Mae. However, in order for lending institutions to have access to the secondary mortgage market of Fannie Mae they had to abide by Fannie Mae's rules.

In the past Fannie Mae prohibited the lenders it was dealing with to engage in the practice of red lining. Red Lining meant that a bank would refuse to finance a home purchase in neighborhoods it consider high risk even if the prospective borrowers were themselves good credit risks. In part, this was because the bank did not want, in the event of default and foreclosure, to become the owner of property in a risky neighborhood. The deeper roots of the problem go back to the Community Reinvestment Act of 1977.

In the 1990's under the administration of Franklin Raines, a Clinton Administration appointee, Fannie Mae began to demand that the lending institutions that it dealt with prove that they were not redlining. This meant that the lending institutions would have to fulfill a quota of minority mortgage lending. This in turn meant that the lending agencies would have to lower their standards in terms of such things as down payments and the required incomes. These subprime borrowers would be charged a higher interest rate. Having put the lending agencies into the position of granting subprime mortgages Fannie Mae then had to accept lower standards in the mortgages it purchased. That set the ball rolling. If a bank granted a mortgage to a borrower that was not likely to successfully pay off the mortgage then all the bank had to do was to sell such mortgages to Fannie Mae. The banks typically earned a loan origination fee when the mortgage was granted. The lending agencies could then make substantial profits dealing in subprime mortgages.

Because Fannie Mae and Freddie Mac made a market for subprime mortgages the lenders did not have to worry about of the soundness of the mortgage contract they wrote. Thus the lenders could write the mortgages as adjustable interest rate mortgages knowing full well that an upturn in the interest rates could easily throw the borrower into insolvency. For example, when the interest rate is 6 percent the mortgage payment for a 30-year $200,000 mortgage is $1199 per month. If the interest rate goes up to 7 percent the mortgage payment would increase by $131 per month, an 11 percent increase. For many of the subprime borrowers living on the edge of insolvency this would be enough to push them over the edge. The guilt for the subprime mortgage financial crisis lies both with the lenders who knowingly put borrowers into booby trapped mortgages and the management of Fannie Mae and Freddie Mac for making a market for such booby trapped mortgages thus giving the lenders the incentive for writing them.

The subprime borrowers were charged a higher interest rate to compensate for the higher risks. Obviously the borrower that could not qualify for the mortgage at the lower rate was going to be more of a risk at the higher rate. It seems that everyone but the dimwits running Fannie Mae (into the ground) understood intuitively that a poor risk for a mortgage cannot be made a better risk by charging a higher interest rate. Here are some illustrations of the point.

The graph below shows the relationship between expected rate of return and risk, called the market line, that separates the good investments from the bad investments. The dot shows a subprime mortgage.


The dot being below the market line indicates that it given its risk and return it is not a good investment. No rational investor would invest in it. The next graph shows the attempt to make it a good investment by increasing the interest rate; i.e., to move the dot from point 0 to point 1. But the increase in the interest rate increases the risk of default, so the movement is from point 0 to point 2. Given the increase risk the dot is even farther below the market line and is an even worse investment than at point 0.


There is the experience of the junk bond market that collapsed once investors realized that the higher rate of interest on the junk bonds was not sufficient to compensate for their higher risk.

The presumption was that although there would be a higher default rate at the higher interest rates there would be some lenders large enough to pool these mortgages and even with their higher default rates make a higher rate of return. This was the logic behind junk bonds market created by Michael Milken at Drexel Burnham Lambert. In the case of the junk bonds the higher interest rates were not enough higher to compensate for their higher risk and the junk bond market collapsed. A similar sort of thing occurred with the subprime mortgages. Fannie Mae and Freddie Mac pooled the subprime mortgages and then created securities which were sold around the world. When the subprime borrowers defaulted on their mortgage payments that led to the real estate market being flooded with houses for sale. The subsequent decline in housing prices then led even prime borrowers to walk away from mortgages where the mortgage debt exceeded the market value of the property. Fannie Mae and Freddie Mac were inundated by default claims from the mortgage default insurance they had provided. When Fannie Mae and Freddie Mac were declared bankrupt by their managers there was an instantaneous loss in value for not only the subprime mortgages but also the prime mortgages. Fannie Mae and Freddie Mac had provided default insurance on approximately one half of all American home mortgages. Thus the bankruptcy of Fannie Mae and Freddie Mac could have led to the bankruptcy of any major holder of mortgages or securities based upon mortgages.

In 1968 Fannie Mae was turned into a private company in large part because Congress wanted to separate Fannie Mae from its own budget accounting. Fannie Mae up until that time had had a virtual monopoly in the secondary mortgage market. Having privatized Fannie Mae it was appropriate for the Federal Government to create competition in the secondary mortgage market. It did this in 1970 when it created the Federal Home Loan Mortgage Corporation (FHLMC). Since the FNMA had the euphonic nickname of Fannie Mae the FHLMC was given the catchy but illogical name of Freddie Mac. Freddie Mac was intended for expanding the secondary mortgage market.

Fannie Mae and Freddie Mac both not only purchased mortgages they also provided payment insurance, for a fee, for other mortgages. They also created pools of mortgages and issued securities based upon the revenue received. This procedure was called securitization and the securities created were called collateralized debt obligations, CDO's. Such securities allowed investors to invest in the mortgage market by diversifying the risk. If such investors purchased a single mortgage there would have been too much risk concentrated in that single mortgage but if they, in effect, purchase one percent of a hundred such mortgage their risk would be diversified.

Not only did Fannie Mae, Freddie Mac and other institutions create diversification through securitization but they created securities that partitioned the risk. One security would have first claim to the mortgage payments, another second claim; i.e., that security would receive payments only after the first claim security's obligations had been met. And so on down the line. The security last in line was the most risky and came to be known as toxic waste. Thus this partitioned securitization created some securities that were riskier than the original mortgages. It was difficult to ascertain what values the various securities should have.

The market could be relied upon to eventually establish appropriate values. But in the short run the market would punish buyers who paid too much for a security by imposing losses that would take those buyers out of the market. However if buyers erroneously believe that even in the short run the market prices are appropriate values then process of finding appropriate prices for the securities is delayed.

In the case of the graduated risk, mortgage-backed securities the market worked perversely in the short run. The prices established for those securities made it seem that a profit could be made by buying mortgages and using them to create mortgaged-backed securities. Thus a demand was created for mortgages, even subprime mortgages. Not only did it seem that a profit could be made in securitization of even subprime mortgages, profits were being made. Securitizers like Fannie Mae and Freddie Mac were being drawn into the process from the apparent profitability of the process, thus justifying their creation of a market for subprime mortgages. It was as though the U.S. Treasury started buying pyrite (fool's gold) as well as real gold. The fact that the Treasury was buying pyrite resulted in private companies also buying pyrite and thus the price of pyrite would increase. The Treasury then seeing the value of its stocks of pyrite increasing would then believe that the original decision to buy pyrite was justified and thus buy more.

In the case of the subprime borrowers they were charged higher interest rates and were required to pay for default insurance. This higher burden increased the risk of default. The subprime mortgages became bad investments and no amount of securitization would alter this aspect. But the process of producing graduated risk securities backed by the subprime mortgages disguised the fact that they were bad investments. The perceived status of Fannie Mae and Freddie Mac as quasi-governmental institutions enabled them to sell their toxic product world-wide.

Although some people erroneous attribute the financial crisis to this mortgage default insurance and/or to securitization, these practices are perfectly legitimate and appropriate for financial markets. The problem arose because Fanny Mae and Freddie Mac were the key institutions in providing mortgage default insurance and in buying subprime mortgages. There were abuses of the derivative instruments that should have been punished by the market but were not because the perpetrators were ultimately bailed out.

The primary abuse was that banks bought credit default swaps (CDS) from parties who could not possibly make good on their agreements. The banks wanted such insurance to remove the risk associated with the mortgages and mortgage-backed securities which they had purchased. Removing the risk allowed the banks to invest more deeply in such securities. The sellers of such insurance did so because they received a premium now for a future obligation. It was rational although fraudulent for those sellers of CDS's to do so even though they could not make good on the future obligations. It was up to the banks to ascertain whether they were transferring the default risk to another party or simply changing their default risk into counter-party risk. If the CDS's had been legally insurance then the state and federal insurance regulators would have had a say in their regulation, but the CDS contracts were written in such a way that they did not technically qualify as an insurance contract. The CDS contracts might also have come under the regulation of the Commodity Futures Trading Commission (CFTC) of the Federal Government, but there was an act of Congress passed and signed into law in the year 2000 by William Clinton which specifically excluded CDS's from regulation by the CFTC.

It was in the late 1990's, as shown below, under the urging of the Clinton Administration that Fannie Mae and Freddie Mac began to operate as social welfare agencies instead of financial institutions. The insurance premiums on subprime mortgages were too low for the risks involved. No rational buyer would have purchased those subprime mortgages except at a drastic discount; Fanny Mae and Freddie Mac did purchase them. No amount of securitization could alleviate the fact that the subprime mortgages were not good investments. The practice of securitization and the credibility of Fanny Mae allowed the bad investments of the U.S. subprime mortgages to be spread throughout the world.

There was also a flawed view of the nature of risk in the mortgage market involved in the crisis. Securitization was based upon the notion that the risks of default for the different mortgages were independent. When housing prices fall there are some borrowers who find the market value of their property is less than the amount of debt outstanding and they decide to walk away from their debt obligations. No amount of diversification will reduce this risk. The default, foreclosure and resale of the properties then feed back into the mortgage market further increasing the risk. See Market Risk for more on this topic.

An article by Steven A. Holmes from the September 30, 1999 edition of the New York Times describes how the process began that culminated in the financial crisis of September 2008. The article reveals how much wishful thinking there was on the part of government officials that financial institutions could be run like social welfare agencies and how they were forewarned of their folly yet they went ahead and did it.

Fannie Mae Eases Credit To Aid Mortgage Lending

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

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.

The September 1999 New York Times article continues:

"Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements," said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. "Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market."

That is the end of the quotation in the article of Franklin Raines comments. Steven Holmes' article continues:

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

The Savings and Loan Associations were part of what was known as the thrift industry, which included credit unions as well as savings and loan associations. The New York Times article makes reference to the collapse of the thrift industry in the 1980's.

"From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry."

The article then goes on to give some of the details of mortgage industry's operation.

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

The 1999 article goes on to give some of the statistics of the performance of Fannie Mae program to extend mortgage lending to minorities.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

The Accounting Scandal at Fannie Mae

In May of 2006 the Office of Federal Housing Enterprise Oversight (OFHEO) issued the report on its three year investigation of the Federal National Mortgage Association (Fannie Mae). The acting director of OFHEO, James B. Lockhart, said

Our examination found an environment where the ends justified the means. Senior management manipulated accounting, reaped maximum, undeserved bonuses, and prevented the rest of the world from knowing.
The reported charged that the reported earnings from 1998 to mid-2004 were bogus values generated by erroneous accounting practices. These fraudulent earnings then were used to justify enormous bonuses for the senior management. The extent of the fraudulent accounting profits was a mind-boggling $11 billion. The sizes of the undeserved bonuses were not just millions of dollars, or even tens of millions of dollars. Instead they were hundreds of millions of dollars.

The report said,

The conduct of Mr. Raines, CFO Timothy Howard and other members of the inner circle of senior executives at Fannie Mae was inconsistent with the values of responsibility, accountability, and integrity. […] Those individuals engaged in improper earnings management in order to generate unjustified levels of compensation for themselves and other executives.
The manipulations not only involved raising the level of reported earnings but also reducing the variability of earnings to give the impression to the public that Fannie Mae's business operations were less risky than they actually were.

As a result of the findings Fannie Mae was fined $400 million. The major portion of this fine, $350 million, was levied by the Security and Exchange Commission to compensate the people who bought stock in Fannie Mae on the basis of these false accounts.

Fannie Mae was enjoined to limit its holdings and insurance of mortgages at $727 billion and meanwhile correct its accounting procedures and risk management practices. The chief executive of Fannie Mae, Franklin Raines, and its chief financial officer, J. Timothy Howard, were allowed to resign from the organization. The report suggested that Fannie Mae consider retroactively firing Raines and Howard. This would deny them retirement benefits.

Freddie Mac had undergone a similar probe concerning improper accounting procedures before the investigation of Fannie Mae.

After about ten years of the operation of Fannie Mae and Freddie Mac under social objectives, including making top management rich, rather than financial probity the enormous institutions were nearing collapse in 2007. Below are shown the financial statistics for both Fannie Mae and Freddie Mac.

Financial Characteristics of
Fannie Mae and Freddie Mac
as of 2007
Characteristic Fannie Mae Freddie Mac
Revenue $44.8 billion $43.1 billion
Operating
Income −5.1 billion −6.0 billion
Net Income −2.0 billion −3.1 billion
Total
Assets $882.5 billion $794.4 billion
Equity $44.0 billion $26.7 billion
These were the statistics for 2007. The statistics for 2008 are not yet available, but the financial conditions obviously worsened.

Summary

The subprime mortgage crisis had its origin in the program the directors of Fannie Mae initiated in the late 1990's to pursue social welfare goals rather than maintain financial viability. Lenders were strongly encouraged to reduce the requirements for mortgage below what had been found to be the minimum adequate levels. Having pushed the lenders into the subprime mortgage market Fannie Mae made the financially infeasible feasible by being willing to buy such subprime mortgage and to grant default insurance on such mortgages. When Fannie Mae effectively went bankrupt the lenders who had written such subprime mortgages found that there was no longer a market for them and thus they were stuck with them. Also those lenders who had obtained default insurance now find that insurance is useless if Fannie Mae cannot pay off on the defaulted mortgages. The lenders should have been aware that there is a risk with any insurance company that it might not be willing and able to pay off on claims. The supposed guarantee of Fannie Mae obligations by the Federal Government removed any concern of businesses with the risk of counter-party default. It is unwise to encourage such behavior.

On May 6, 2009 the Center for Public Integrity published a study entitled Who's Behind the Financial Meltdown. The six member team of journalists preparing the study surveyed government data on millions of subprime mortgages issued between 2005 and 2007. Some of their major findings were

Nine of the top 10 lenders were based in California, including all of the top five: Countrywide Financial Corp., Ameriquest Mortgage Co., New Century Financial Corp., First Franklin Corp., and Long Beach Mortgage Co.
Altogether 56 percent of the $1.38 trillion of subprime mortgages in the study period were written by California firms.
Some lenders allowed borrowers to state their incomes without providing documentation.
There are plenty of parties to blame for the subprime mortgage crisis, but a large share of that blame rests with Franklin Raines, Timothy Howard and the other members of the inner circle of Fannie Mae. The lenders would not have written the flawed mortgages with their bobby-trapped conditions if they could not have counted on selling them to Fannie Mae or getting default insurance from such sources. And finally scuttling Fannie Mae in September of 2008 before it was technically bankrupt produced a shocked surprise for the stock market that produced the panic selling and the collapse of stock prices.

HOME PAGE OF applet-magic
HOME PAGE OF Thayer Watkins

[sickmint79]

And where does Fannie get the money from? The Fed.

no, they used to be on the federal budget, and then they became public companies. they had their own money when they went public and investors were able to give them more by buying their stock. this money would be used to buy mortgages, package them, and sell them to get more money. they do not get their money from the federal reserve. well, aside from this bailout mess. they were not in 2000 or 2005 when the bubble was starting and topping.


You're complaining about the Fed but Fannie and Freddie are tools of the Fed. Without that steady inflow of cash the banks would have naturally been less risky.

no, they are not tools of the fed.
no, their purchase of mortgages has gone through little change, and it would be no more risky than it had been for a long time.

you ignore that fannie and freddie couldn't hoover up loads of toxic stuff until 2005.
you ignore that the toxic stuff is far worse than the non-conforming loans (fannie's traditional subprime)
you ignore that the majority of subprime up until bubble top was packaged and sold OUTSIDE of fannie/freddie, with misrepresented risk and misrepresented ratings


The repeal of Glass Steagall meant that the investment banks taking these risks had the veneer of federal backing since their deposits were FDIC insured.

no, the investment banks always could take these risks. glass steagal just allowed commercial ones to do it too.
no, FDIC insurance didn't matter, which you just applied to investment banks (which don't get any) - again a point where you don't know what you're talking about. FDIC has nothing to do with mortgages, and it also has nothing to do with why GSE debt had an implied backing. and certainly
no, no investor ever thought mortgages packaged by citigroup or countrywide were guranateed.



The Fed is the source of their money. I didn't say they were anything but a conduit. You do know what a conduit is right? A hot water pipe has nothing to do with heating up the water. It just carries it.

no, that's not where they get their money.


It's earlier than your "when the bubble was almost over" claim that's for sure.

no, i never said they couldn't buy any ever. i even posted a chart with how much they bought. i said they couldn't buy serious amounts until 2005, when they were only doing so because of wall street pressure to chase the higher yields the banks were getting. of key importance here is also the amount.



It was already at over 10% back in 2001 and it was growing. And the banks wouldn't have been able to even pull any of this off without FDIC backing (thanks to the repeal of Glass Steagall) and Fannie and Freddie buying up their other loans.

it was just starting at best because of ultra low interest rates from the fed, nothing to do with the GSEs. and geez, certainly nothing to do with the FDIC, i have never even heard such a claim before.


Says you. The charts merely showed what was predicted to happen actually did happen.

what matters is the amount and by whom and what they did with it. the data is clear on this again as i mentioned above.


Here is a good article that puts it altogether. It's interesting that "Joe Walsh" and "amy" want to take all of the blame off the banks and put it on the government and you want to take all of the blame off the government (with the exception of the Federal reserve) and put it on the banks. The truth is that multiple players were guilty including Fannie and Freddie.

i have no bias as you clearly do to blame everything on the government. i have said multiple times over the GSEs did not help. they acted, once they could, just as bad as the private sector when packaging up trash, once it was late 2005 and they were able to. and they were big so they did a lot. they definitely made the bubble bigger. but you are claiming they *caused* the bubble. the point at which they got in and helped keep it alive was when it was already peaking though. they are guilty of making it larger. they are not guilty of starting it.

i'm not going to bother to read this whole paper. regarding redlining, CRA loans have already found to perform better than subprime. additionally it did not apply to many of the reckless lenders. the theory that it made all this is bunk. again, did the CRA make ultra low interest rates? over leverage banks? misrepresent risk? etc.



i'm a practical libertarian and a computer scientist, i go where the data and logic take me and look for practical real world solutions. i try not to let my ideological beliefs get in the way of me finding the truth and getting to real solutions. you don't appear to let that slow you down. i'm done having this conversation with you. i can explain it to you, i can't make you understand it. have a good weekend.

[Steven Douglas]

"There has been a long term American policy of promoting home ownership."

Wow, as soon as I read something like that I want to strangle the idiot who wrote it, and pretty much anyone who sees nothing wrong with that sentence.

[Lovecraftian4Paul]

No, Walsh, I will blame the banks. Specifically, the monopoly men behind the Fed.

[CUnknown]

To say the banks weren't at fault at all is just as rediculous as saying the government wasn't at fault at all. There is so much blame to go around here, anyone who has any power at all can have a share. Heck, there's even blame for us the people, we've been voting for these bozos and have accepting the banks and the Fed, and some of us bought homes we couldn't afford, etc. Almost everybody in the whole country has some share of the blame for this, but the more power you have, the more blame you have.