Philip Gvinter

So the Perpetrators Are Now Our Saviors?

The GSEs were the symptom and not the cause of this problem. The issue at hand was not the volume of mortgages originated but rather the quality. While putting in place caps on the portfolio size would have lowered the level of the losses it would in no way have prevented them. The level of leverage and the extremely low capital requirements were what did the GSEs in and no one was discussing this Republican or Democrat. The GSE share of the mortgage securitization market also dropped dramatically as BSC, LEH and others began to act as securitizers for ALT-A and subprime debt that the GSEs would not touch. The real cause of this mortgage crisis are the OCC and the OFTS allowing institutions to drastically lower their credit standards to unsustainable levels along with the relaxation of the leverage limits on investment banks.