AlexS

Fannie and Freddie Did Not Cause This Crisis

My understanding is that Freddie and Fannie were 100% government agencies until Lyndon Johnson sold them off in order to help pay for the Great Society/Vietnam War.

How Much Are Fannie and Freddie to Blame?

Essentially, originators would be laundering mortgages through Fannie and Freddie. Junk mortgages in. Implicit government guaranteed mortgages out. What a scam.

How Much Are Fannie and Freddie to Blame?

Trillions of dollars is a small price to pay for the approval of Barney Frank and Chris Dodd, especially now that they're members of the party in power in Congress.

Bailouts: Misunderstanding the Moral Hazard

A portion of the last housing bill was for activist groups like ACORN. It would be a small percentage of each Fannie/Freddie mortgages taken out.

How Did We Get to This Point?

Yep. Securitization's been a great opportunity. Well, it was when we had GNMA pass throughs. But once Fannie and Freddie got together with Congress and decided that subprime lending would be a key goal, and once the SEC decided in 1995 that derivatives were OK with them, and once Glass-Steagall got repealed in 1999, then the perfect storm just kept building and building. And then we were in it. And so we are.

Senator Harry Reid: 'No One Knows What To Do'

Old Harry said we lost the Iraq war when we hadn't. Now he doesn't know what to do. I would suggest he resign. And take Barney and Nancy with him.

John Hussman: Fannie / Freddie Set the Stage for Lehman

Why would you blame this on tax cuts? There have been other tax cuts before but I don't recall a subprime mortgage disaster. I blame it on the Community Reinvestment Act (CRA) of 1977 (Jimmy Carter and a Democratic Congress) followed by the 1995 action of Bill Clinton et. al. in "strengthening" the CRA and allowing institutions to sell derivatives, to hide the sales of subprimes in a basket of otherwise investment grade obligations. Part of the CRA was giving money to "community activist" groups to increase pressure on banks to make subprime loans, the same activity that gave Obama his start in community activist functions. Then of course this year the Congress in its housing bill mandated that a portion of all Fannie and Freddie mortgage loans include a percentage for those same activist groups. Nothing like a wheel to bring us back to where we were.