utahcoyote

Fannie and Freddie Are Largely Responsible for the Housing Bubble

This is not true. Despite the reckless disregard with which elements of FEMA and GM were combined to operate Fannie and Fred!

The cause of the housing bubble was created beginning in 2004 when - following two years of bubble-spans solution for the ".com" era of irrational exuberance, and Widjit's "go shopping" directive after 9/11 to create a low interest rate environment and making cheap dollars available, Bear Stearns, Citibank, et al discovered a product that offered "investors" 7-9% "AAA" rated yield in a 3% interest rate world - CDOS, MBS, ABS, etc.

Most of these were operated off balance sheets with SIVs and what not! Wide-stance Angelo at Countrywide, etc. existed to meet this insatiable and artificial demand for yield in which one could borrow at 4 and make 8% - the closest thing to a free lunch one can get. (Also don’t forget the carry trade with the Japanese Yen, which instead of housing, put the money in the S&P etc.)

Fannie and Freddie were not part of this game. But then, anyone who expected competence from the government to be involved in the market, and invested in them, are entitled to and deserve what they get! Congress is not Canute, and ultimately will not stop the tide.

Once this stupidity ends, perhaps we can get back to real world and real money for real work. The era of prospectuers will be over. But ... not for a long time!