Author Topic: Fannie Mae and Freddie Mac were victims, not culprits  (Read 479 times)

Decker

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Fannie Mae and Freddie Mac were victims, not culprits
« on: October 03, 2008, 02:52:21 PM »
There’s a dangerous — and misleading — argument making the rounds about the causes of our current credit crisis. It’s emanating from Washington where politicians are engaging in the usual blame game but this time the stakes are so high that we can’t afford to fall victim to political doublespeak. In this fact-free zone, government sponsored mortgage giants Fannie Mae and Freddie Mac caused the real estate bubble and subprime meltdown. It’s completely false. Fannie Mae and Freddie Mac were victims of the credit crisis, not culprits.

Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.

There’s a must-read study by staff members of the Federal Reserve Bank of New York analyzing the roots of the subprime crisis that came out in March. I don’t think it got much attention then as the conclusions seemed uncontroversial at the time. But now that Washington politicians are trying to rewrite history, it should be mandatory reading for every American interested in knowing how we got here.

The study identifies five causes of the subprime meltdown:
-Convoluted loan products that consumers didn’t understand.
-Credit ratings that didn’t do a good job highlighting the risks contained in subprime-backed securities.
-Lack of incentives for institutional investors to do their own research (they just relied on the credit ratings).
-Predatory lending and borrowing (which I think means fraud perpetrated by borrowers).
-Significant errors in the models used by credit rating agencies to assess subprime-backed securities.


http://www.businessweek.com/investing/insights/blog/archives/2008/09/fannie_mae_and.html

Instead of wasting time listening to rightwing hacks blaming the scandal solely on poor people and those damn interfering gov. programs, read the study referenced above:

http://www.newyorkfed.org/research/staff_reports/sr318.pdf

Decker

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Re: Fannie Mae and Freddie Mac were victims, not culprits
« Reply #1 on: October 03, 2008, 03:51:02 PM »
Jeez, nobody cares that the predominant rationale for the scandal floating around on this board is a hoax?

Deicide

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Re: Fannie Mae and Freddie Mac were victims, not culprits
« Reply #2 on: October 03, 2008, 03:54:40 PM »
Jeez, nobody cares that the predominant rationale for the scandal floating around on this board is a hoax?

Hmm...care, yes, but what are you going to do... :-\ ??? ?
I hate the State.

Decker

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Re: Fannie Mae and Freddie Mac were victims, not culprits
« Reply #3 on: October 03, 2008, 04:19:14 PM »
Hmm...care, yes, but what are you going to do... :-\ ??? ?
Funtime's over, the wife's home and I'm hungry.

Deicide

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Re: Fannie Mae and Freddie Mac were victims, not culprits
« Reply #4 on: October 03, 2008, 04:20:28 PM »
Funtime's over, the wife's home and I'm hungry.

Married life seems so difficult.
I hate the State.