dlaw

How Much Are Fannie and Freddie to Blame?

AlexS, that is a complete and total lie.

Fannie and Freddie DID NOT EVER turn subprime mortgages into agency securities.

That is a ridiculous Limbaugh talking point.

How Much Are Fannie and Freddie to Blame?

Realist, you're either a dupe or a liar.

The numbers aren't there. This is a ridiculous attempt to scapegoat Fannie and Freddie to cover up for massive fraud by the American banking system.

The private institutions that issued this paper are to blame and all your anti-government talk will do you no good now.

How Much Are Fannie and Freddie to Blame?

Fannie and Freddie were CUSTOMERS of the fraudster-bankers who put out this junk. The NONSENSE out of AEI is a politically-motivated canard and the author does himself and all his readers a disservice by taking it seriously.

Because of poor management, Fannie and Freddie became BUYERS of the bad paper - just like hundreds of other institutions. They were duped by the fraudsters who issued this private-label junk and their capital base was too small ever to have taken that kind of risk.

But that in no way "contributes" to the bad paper. They issued no bad paper, they did not make markets in this paper, this is about McCain being able to run ads with Barack Obama's face next to Harold Raines's face.

Hmm, what's similar about those two guys?

Again ... It Wasn't Fannie and Freddie

Thank Goodness!

Finally somebody focuses on this issue.

Fannie and Freddie were largely victims of crooked originators.

And please, can we remember something? No banker was ever under any obligation to lie to the secondary mortgage market about borrower income. They had the means, opportunity, wherewithal and standard business practices to determine borrower income and they chose not to.

It's just plain, old securities fraud.

Fannie Mae: 'Business As Usual'

Deep Creek Dan,

The private system simply can't touch the capital efficiency of the agencies. If Fannie and Freddie's book exploded in size, Mr. Shedlock's site will show you that the private book double-exploded. Maybe triple.

If you're a goldbug, you think that all fiat money is nonsense and the world has to be de-leveraged by 95% or something. Obviously that's silly. The government's capital efficiency is what got America out of the Great Depression and it's what we're going to turn to now.

There are plenty of capital-inefficient, commoditized financial services which can and should be absorbed by government or quasi-government agencies - running them not as programs but as going concerns with balance sheets.....and a little credit enhancement. Since the entire banking system depends on either loaning money to or borrowing money from the government at the risk-free GOVERNMENT rate, it's not a question of whether the government CAN handle the debt load, it's that the government already does, whether we want to acknowledge it or not.

If you want to call that socialism or something, fine. Look at the growth in world GDP since the end of WW2. If that's socialism, we need more of it.

Fannie Mae: 'Business As Usual'

Yeah, think that.

Whenever the government bails out incompetent capitalists it's a "power grab".

Why do conservatives want to get grabbed so often, I wonder.

Maybe Barney Frank and Larry Craig can tell you.


On Sep 10 06:54 PM vanyali wrote:

> Fannie & Freddie weren't broke. Citi, Merrill & Goldman all said
> so in August, and Paulson and Barney Frank both said so during the
> takeover. Paulson said thought that there was some danger that they
> *might* go broke in the future *if* market conditions continued to
> worsen *and* market participants decided to stop lending to them.
> This isn't a bankruptcy reorganization, it's a power grab by the
> feds.

Fannie Mae: 'Business As Usual'

They are not going to sell at 10% a year. That's a nonsensical soak to the laissez-faire crowd.

The GSE book will expand ad infinitum.


On Sep 10 08:24 PM DansDeepCree kBlog wrote:

> Amen! $100 billion more to buy loans no one else wants in the short
> then. But then what happens in 2010 when they have to start selling
> off these loans at a rate of 10% per year? What if no one wants
> to buy them either?
>
> dansdeepcreekblog.blog...

Roubini Attacks Bailout, But Misses Boat on Regulation

I heard Roubini just two night ago, talking about $120 oil and a falling dollar.

Apparently he doesn't get out much.

Here' is the rule of markets:

There must be a system to audit the traded inventory or the market will collapse from cheating.

That is the most basic truth of markets and anarcho-capitalist fantasies are just that - fantasies.

When people try to create unregulated markets, the results are perfectly predictable: start with the Credit Crunch, next Enron, then keep going back in time to every market crisis there has ever been. You will find unaudited inventory.

The idea that fiat capital is the problem is just silliness.

If it was true, gold wouldn't be headed through $700.

Fannie Mae: 'Business As Usual'

This is silly.

Of course they've changed their business. They are no longer buying Alt-A "lemon loans" from the crooked originators who created this mess.

Yes, FNM/FRE were badly managed. IF ONLY the rest of the banking system had been manages that WELL!

With their thin capital base, these companies could not hold mortgages itself - let alone the "lemon loans" with their "broken" odometers of inflated appraisals and "get-that-documentatio... docs.

We are enduring the natural consequences of the largest securities fraud in history, perpetrated by almost the entire U.S. banking system.

Palin, On the Ongoing Financial Crisis

MCCAIN'S ACTUAL POSITION ***WAS*** that he was going to make Fannie and Freddie "go away" because there were "other institutions" that could do the job.

Where he thought these other institutions were, I don't know.

Now, of course, he has backed off that "position" because he's an absolute fraud.

Will Securitized Mortgages Rise Again?

Clearly securitization has to rise again, or we're screwed.

With all the Ron Pauliacs on this site chouting about the Fed, people have ignored how much money the "shadow banking system" has created - and how much went away with the credit crisis.

This move by Barney Frank with which Paulson reluctantly went along is a credit enhancement move. But the GSEs will be limited to about 10% in terms of how much they will be able to expand their portfolios.

[The stuff about reducing the size of the GSEs in the out years is nonsensical and a soak to the Republican ideologues who created this disaster but can't admit they are wrong]

So the MBS market is going to be hobbled for a while, but it will and must come back.

A First Look Inside the Fannie / Freddie Bailout Plan

Blah blah blah, Ron Paul, blah.

EUR/USD $1.30 is a mortal lock.

I said it before and I'm right.

Calculated Risk: Why Merging Fannie/Freddie is 'Dumb'

Hating the GSEs when the private banks have TOTALLY failed is ridiculous, and yet it is the preoccupation of the business pages. The problem with Fannie and Freddie is that the managements used anarcho-capitalist politics to argue they should be treated like truly private companies when they are not. They are regulated entities and they should have been regulated more thoroughly.

The idea that Fannie and Freddie are the problem here is nothing short of insane. Yes, they should have been regulated more. But the proximate cause of Fannie and Freddie's troubles is the fact they took on non-qualifying mortgage debt from originators they mistakenly trusted. Fannie's Alt-A book is the nightmare here because of course Alt-A was nothing more than a scam by originators selling lemon loans that were like used cars with "broken" odometers.

Thank goodness for the GSEs. Without them our financial system would be in total collapse. We have to recapitalize them and get them going again with better regulation.

What we really need is a new GSE organized to pool problem mortgage debt into huge tranches so it can find value.

The End of U.S. Financial Domination

First of all, it's "MORAL", not "MORALE".

Second, you're a young fool.

You can't see a reason institutions are not allowed to fail because you have always lived in a world where they don't.

And you can dismiss "fiat paper" but it only makes you look stupider. Fiat money is the only kind of money there is. Since medieval times, we have known that the agreements behind banking (this "fiat" of which you speak) are many orders of magnitude more valuable than the hard assets that back them. That's just the math. I refer you to this paper:

frbatlanta.org/fileleg...

republished by the Atlanta fed.

Finally, the problem we now see is that for all the talk about market efficiency, our financial system was more than slow to put the bad results of bad credit decisions where they belong - onto the holders of equity.

Because of the "Invisible Hand" religion taught to you by people who should really know better, we came foolishly to believe that the financial industry would self-regulate the new world of private-label MBS and derivatives. About 700 years of market history should have told us that when there is nobody there insuring the quality of the inventory, an exchange will inevitably become a "Market For Lemons" and fall apart. It only happens EVERY SINGLE TIME. But this time, we knew better.

If you really want to see what some true tax-inefficiency looks like, keep pushing for liquidations and collapses - just like the Hoover Administration did. Maybe its the only way people can learn, but I hope not.

The bailout will not cause credit damage because the credit damage is already done. It's just a question of where it lands now. If our system of corporate ownership really was an efficient market - which it isn't - bad institutions should have been gobbled up by good institutions already and new capital should have flowed in to take advantage of the crisis mispricing of the financial assets (business efficiencies, valuable agreements) created by the MBS and derivatives markets (which certainly exist).

But since the system is intrinsically inefficient, debt and deception by management and rogue institutions were heaped onto the equity of the good parts of the system to the extent that it may already be broken. The failure of banks to do equity deals during the past little run-up is telling. It shows the private equity finance system in the first stage of failure.

THAT is why the government is coming in here. You don't want to see the second stage and you really don't want to see the third.