Fannie Mae (FNM)

All Comments on FNM

  • commenter
    GaryBG
    Oct 05 11:33 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    "And their response was unwise - Fannie and Freddie followed the shadow banking sector downward." Mark, that is quite the soft pedal for the role Fannie and Freddie played. They at best did this because the thought it was the political right thing to do or they did it because they wanted to make a lot of dough (as Raines had done under the incentive plans he had set up). Unwise? What would have happened if they had NOT done this? If they had just done business as usual? By taking on more risk when they didn't have to (they did not have to in order to fulfill the mission), they created an exothermic like financial reaction and they entire system went up in the resulting reaction. There should not be a quasi-governmental institution who operates without the boundries of economics. They made their own rules and they broke the bank. Reply
  • commenter
    Old_Rick
    Oct 05 11:03 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    As the writer points out " We already know that there was enough available liquidity to inflate a housing bubble. So something went wrong in these markets that allowed the bubble to emerge and then pop..." Having ALMOST hit the root of the problem, he then sidesteps and goes on to blame "...agency problems, the mis-pricing of risk, and the failure of securitization to distribute risks across the financial system."

    Only huangjin came close to the root cause of the housing bubble. That would be "easy money" Al Greenspan who kept fed funds below 2% for the 3 years from December 2001 to December 2004, then below 3% for another 6 months, all in an attempt to avoid a recession. Thanks Al. Take a look at the fed funds chart at www.moneycafe.com/libr... and it is obvious when the easy money mortgage boom started and when it stopped.

    The CRA did not cause the problem (although it was a participant) as the CRA has been around since 1977 with mid-'90s modifications and few resulting problems, at least until 2005/6.

    For rabid Art Rimbaud, go take a look at Senate Bill S.190 of the 05-06 session. Look at the list of co-sponsors. Read the bill. Read the floor speeches. Look at Fannies political "contributions&qu... for the last 20 years and see who ended up #2 after only 3 years in the Senate.     Reply
  • commenter
    Duude
    Oct 05 11:02 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    I certainly don't blame Fannie and Freddie as the sole reason for the current financial crisis, though I know they did contribute as the author says by existing as private entities with a government guarantee. They certainly provided a ready and willing dumping ground for toxic mortgages by design.
    I believe the change in CRA rules are a huge contributing factor, as these changes effectively made banks offer mortgages that weren't in the best interest of investors that later owned these loans including Fannie and Freddie. These rule changes made it extremely difficult to grow your bank and expand if you didn't have a high enough CRA score. Your CRA score went up as you offered mortgages to many people that couldn't afford these loans in the first place. One might reason that they didn't need to use adjustable rate sub-prime loans from Hell, but many of these people had low credit scores and little if any income. If they received the same lower fixed rates offered people with credit scores over 75o, then fixed rates must go up for everyone regardless of one's credit score. This is essential to balance the additional risk associated with high risk individuals. The adjustable got them into the home but time would push them out if they couldn't refinance, or find more income to offset future rate increases. I am of the belief that very few people did not understand this. We had a raging real estate bull market and people saw this as their best and only opportunity to become homeowners. The likely reasoned that they couldn't lose because they could always sell their house for a profit down the road, or at least that's what they thought. So now, we're being asked by many in Congress to bail them out with either a low fixed rate or a freeze on foreclosures. Regardless, this is a rewrite of their contract which makes future contracts not worth the paper they are written on. What does that mean to people with higher credit scores? Higher fixed rates in the future, or an entire block on people with low credit scores and a short income history.
    If we follow this path of bailing out people without the sense to avoid these loans, younger families can expect to remain paying rent for a much longer period of time. I expect then the government will attempt to fiddle again with the market. Being that the GSEs are now fully in government hands I see moral hazard for as far as the eye can see.     Reply
  • commenter
    businessguy8
    8
    Oct 05 10:47 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    What caused the crisis is the community reinvestment act. Look it up Reply
  • commenter
    constructe
    Oct 05 10:45 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    Although Fannie and Freddie didn't cause the losses stemming from Goldman shorting the underlying convertibles and the derivatives being concentrated by people who can't guarantee payment of credit default swaps when mortgages default. Don't you think Fannie, Freddie, the SEC, the Federal Reserve, or the Treasury should have said stop, who can back 85% of the entire wealth of the country. AIG?

    The collapse is a catastrophic proportion, not just the mortgages but the derivatives. The fact that Fannie and Freddie agreed to take mortgages as triple AAA just because they had insurance without evaluating the insurance credibility is an extraordinary oversight that is tantamount to fraud.

    So now... who picks up the check or do we all just lie about our financial institutions and insurers owing close to the net worth of the US in derivatives.     Reply
  • commenter
    richard
    nogginn
    Oct 05 09:41 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    What most people don't realize is that indebtedness is another form of slavery, because the debtor toils day and night to repay his/her debts.


    On Oct 05 08:11 PM valueinvesto r888 wrote:

    > As everyone casts around looking for the reasons for this crisis,
    > everyone seems to ignore the fact that as a nation and on an individual
    > citizen basis we are broke. Spending beyond our means for the last
    > thirty years has finally caught up to us. Triggers, such as housing
    > bubble, etc., are just triggers, not the root cause. Root cause
    > is we are broke and deep in debt -as a nation and as consumers.     Reply
  • commenter
    richard
    nogginn
    Oct 05 09:38 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    Confessions of an Alt-A loan recipient

    In 1988 I received an Alt-A loan to purchase my first home. Although the loan was backed by Fannie, I got it through the VA. I paid $500 for closing costs, and moved in. Since then I've sold that house, bought another, and recently paid the mortgage off. So the Alt-A loans aren't all bad and many of the Alt-A's recipients are vets like me. I still believe that our country should provide low cost home mortgages to the men and women who defend us.     Reply
  • commenter
    bayswim
    Oct 05 09:13 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    Great comments. People are finally realizing that its not to be laid at the feet of any one person or group. When someone sells someone else some sh$t, it probably is likely that they will markup that sh!t and sell it to someone else....and chuckle at having done it. There was a lot of Sh!t sold to a lot of perople who sold it again. Reply
  • commenter
    The Bounty
    Hunter
    Oct 05 09:02 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    It was Freddie and Fannie that got the ball rolling. The author wants to make it sound like it was a bunch of mathematics that caused the problem. Behind mathematics is philosophy. And it was the financial institutions that were willing to change their philosophy to accomodate the false theories that led to the erroneous mathematics. Reply
  • commenter
    valueinvesto
    r888
    Oct 05 08:11 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    As everyone casts around looking for the reasons for this crisis, everyone seems to ignore the fact that as a nation and on an individual citizen basis we are broke. Spending beyond our means for the last thirty years has finally caught up to us. Triggers, such as housing bubble, etc., are just triggers, not the root cause. Root cause is we are broke and deep in debt -as a nation and as consumers. Reply
  • commenter
    aby1366
    Oct 05 07:34 PM
    Mortgages and Lending In The Subprime Meltdown [Housing Tracker] [view article]
    If there is high homeownership in MI then maybe like CA and everyone else the tiny shoebox apartments (do they have any left i wonder) may become the new HOME... Reply
  • commenter
    user225084-j
    ustme
    Oct 05 07:17 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    It would be wiser to use the term "commission issue" or even "agent issue" (not "agency issue") when talking about commission/agent issues and FNM/FRE in the same gasp of air.

    The problem with the terminology used in this article is that the reader can be confused because FNM/FRE loans are commonly referred to as "agency loans", in the sense of "via government agency". Although we all know that FNM/FRE are not really (or supposedly) "government agencies", the terminology seems to be very common.


     Reply
  • commenter
    Investa
    Mania
    Oct 05 07:17 PM
    My Website
    Fannie and Freddie Did Not Cause This Crisis [view article]
    Lots of different minor facts trying to account for the crisis in the comments....

    even such thuings as ...Obama trying to give affordable housing to minorities? ....really ...even if it was millions in loans....you think that created the problem?

    I believe the main problem was the and is the mis-pricing of the mortgage-backed securities/derivatives... The risk was not properly priced...because if it was, everyone would have known what they were getting themselves into. Hence, what it comes down to, is that the lack of regulation and a standard models to price these securities is what created the problem.

    ITS LIKE PRICING OPTIONS WITH OUT THE BLACK - SCHOLES OPTIONS PRICING MODEL...it would just be a big mess...which is exactly what happened to the mortgage securities. When someone is able to come up with a standard model, things will get much better.     Reply
  • commenter
    raylopez99
    Oct 05 07:13 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    I have a theory about the bailout crisis: it's routine--a routine credit contraction caused by overexpansion. I would welcome a comment from the readers of this blog.

    Here's how to prove this yourself: Google "The Curve in the Road by John Mauldin". Look at the two graphs for LIBOR over the last year and for commercial paper outstanding since 1990. Two things stand out: LIBOR also spiked in Dec 07 and from Mar-May 08--to 2% from 0.5%. This past 30 days it spiked from 1% to 3.5%. To me, it doesn't seem unprecedented. I've heard that in the early 1970s a similar spike occurred (can anybody confirm this?). Second, and most damaging: the reduction in commercial paper is not historically abnormal now. From 2000 to 2003, commercial paper dropped 19% (look at the graph: 1600 to 1300). From 2006 to 2008 (today's crisis) commercial paper outstanding dropped 25% (2200 to 1650). Severe yes, but, again, not totally unprecedented.

    Can we therefore say that this credit crisis is a 'routine' (albeit severe) response to the credit expansion we've had over the last five years or so? If so, then why did Bernanke and Paulson panic? Could it be that as middle-aged men who have never witnessed a severe credit contraction (such as happened in the early 1970s and early 1980s), they overreacted? Of course, more cynical and sinister theories are possible, but this is the benign theory: they were simply over their heads in responding to a relatively normal credit contraction. And we taxpayers have to pay, as well as setting an extremely damaging precedent for the USA.

    One final note: you can argue that "but for" the government intervention, the contraction in commercial paper would have been much more severe, which therefore justifies the intervention. But this is complete speculation. In fact, you can argue that $700 B is not enough to prevent further contraction, and therefore this argument is circular.

    PS--A professional economist has independently made a similar argument to the above: Google "What Crisis" by professor John Seater.     Reply
  • commenter
    turkeyeyes
    Oct 05 06:47 PM
    Fannie and Freddie Did Not Cause This Crisis [view article]
    ...short and distort campaign. Now all the hedgies and shorts point fingers at EVERYONE ELSE!

    It's a classic. Can't you people see?     Reply
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