And I can do without your smart alec "I have all the facts and data and you don't" comments.
is that why you use the roll eyes and call me clueless? hmm.
I never said they didn't. But they've existed since 1913. We didn't have a housing bubble in 1913.
no, fannie was founded in 1938 and freddie in 1968.
Fannie and Freddie were the government conduit for taking ultra low monetary policy into the housing market and creating the housing bubble.
no, fannie and freddie are no conduit for monetary policy, which is set by the federal reserve and influence banks.
Fannie and Freddie lead by example by adopting lax lending standards in the first place.
no, fannie and freddie don't lend money, banks do. banks also lied about the quality of borrowers and were complict with fradulent assessments so that they could shovel over loans to fannie and freddie. there is a rather infamous chat sheet from countrywide iirc on how to put lies into their system to do this. what are delinquency rates of mortgages that did meet requirements?
The regulations weren't enforced against them because of their special status as GSEs.
no, the regulations that weren't enforced were on banks
Fannie and Freddie were part of that mix.
according to you not understanding the above, i guess...
http://communities.washingtontimes....ul/25/credit-ratings-agencies-foxes-hen-coop/
With Democrat pet projects Fannie Mae and Freddie Mac “guaranteeing” these increasingly bad mortgages, the banks were, in fact, encouraged to issue more and more reckless loans since they were highly profitable and ostensibly risk free. In effect, the government (thru Fannie and Freddie), the banks, and finally the ratings agencies were colluding in a massive scam to maximize profits to themselves while abandoning all pretense of fiduciary responsibility to consumers of loans and taxpayers alike. All three are guilty of the mess, not just the ratings agencies.
what were fannie and freddie guaranteeing here? and as i already said (and provided data for) everything was going AROUND fannie and freddie. banks were packaging up debt and selling it directly COMPETING with fannie and freddie.
http://hnn.us/articles/1849.html
Editor's Note: This article was published in 2003.
For the first thirty years following its inception, Fannie Mae held a veritable monopoly over the secondary mortgage market. In 1968, due to fiscal pressures created by the Vietnam War, Lyndon B. Johnson privatized Fannie Mae in order to remove it from the national budget. At this point, Fannie Mae began operating as a GSE, generating profits for stock holders while enjoying the benefits of exemption from taxation and oversight as well as implied government backing. In order to prevent any further monopolization of the market, a second GSE known as Freddie Mac was created in 1970. Currently, Fannie Mae and Freddie Mac control about 90 percent of the nation's secondary mortgage market.
hey, you could have pulled the correct dates off of this. this is just a history lesson though, it's not explaining anything about bubbles.
Maybe you think the housing bubble was "all but said and over" in 2003?
no, i meant what i said. peak volume and price were late 2005/early 2006. fannie and freddie did not really start picking subprime stuff up until around then, late to the game, searching for yield to compete with banks that were providing much higher interest rates. the bubble was already done by this point though.
Actually they have changed quite a bit over the decades. It's the Federal Reserve that hasn't changed. Using your logic there never should have been a housing bubble since there wasn't one in 1913 or 1923 or 1933 and the Federal Reserve is the only government entity responsible in your eyes.
i never made the claim that excessive federal reserve credit will always result in a housing bubble. it can result in a bubble in other things, or just excessive inflation.
http://www.ccc.unc.edu/FannieFreddie.php
Competition
Fannie and Freddie were highly profitable throughout the 1990s and their activities came to dominate the housing market. But financial innovation, such as the introduction of collateralized debt obligations, and de-regulation, such as the repeal of the Glass-Steagall Act and deliberate exclusion of credit default swaps from oversight, began creating competition from private-label securities (i.e. non-agency mortgage-backed securities).
investment banks could already do this, glass-steagal allowed for commercial ones to participate as well. but... this doesn't mean fannie/freddie did anything, it means that the private sector banking market could get crazier. not sure how that helps your story?
Fannie and Freddie were losing business and market share. Without the implicit government guarantee, private-label mortgage-backed securities had always been seen as riskier investments than those issued by Fannie and Freddie. But innovative financiers discovered that by giving different levels of priority to the shares, or "tranches," of a security, along with corresponding rates of risk and return, they could shield a particular income stream from loss. A single security would be divided into higher risk tranches that would absorb earlier losses and lower risk tranches that would be hit only once the others were exhausted. Additional insurance against losses was obtained through derivatives like credit default swaps, where for a fee one company (e.g. AIG) would compensate another for defaults in an investment. Consequently, these investments were considered "safe" enough to warrant AAA credit ratings— that is, there was virtually no predicted risk of loss, despite being built on high risk subprime mortgages. It appeared as if investors could have safety comparable to U.S. Treasury bonds, but with significantly higher returns.
again, not sure how this is helping your story... it's saying banks "got creative" with the mortgages they packaged - this is where the copula formula and paying for ratings came in - FFF garbage went out as AAA pristine. but again, how was fannie/freddie to blame for this misrepresentation of risk? because their iplicit guarantee made them hard to compete against? so what? are you saying fannie and freddie are to blame for banks choosing not to focus on other activities, but to focus essentially on what is fraud? that is pretty laughable - that the banks were "forced" to commit fraud?? is that what you're saying?? because i have a hard time interpreting your theory any other way.
Fannie and Freddie were given an unfair advantage from their inception allowing to dominate the subprime housing market.
no, as i said before fannie and freddie did not participate much in subprime until late in the bubble
home purchase originations:
home refinance originations:
GSE subprime purchases
someone else was buying a whole lot of that stuff...
found a post by barry on this too:
1. GSEs were guaranteeing half of all U.S. mortgages for decades. Why suddenly did it all collapse in 2008?
2. The 2005 SEC waiver of leverage rules — asked for and received by the 5 biggest iBanks (GS, MER, MS, LEH, BSC) — allowed these underwriters to dramatically expand their ability to buy, securitize and sell mortgage backed securities. How is FNM/FRE responsible for that?
3. The GSEs were not allowed to guarantee non-conforming (Subprime and Alt A) mortgages, but they were losing so much market share to Wall Street, they petitioned for a waiver from OFHEO.
Approved late in 2005, by the time they could own the junk, the top was already in. Showing up late to the party is not the same as being a primary cause.
4. After the GSEs became nationalized, they were no longer run as for profit entities. Indeed, they have become a back door bailout for banks to dump bad paper off their books. (Incidentally, this AFTER THE FACT analysis to explain an a priori cause is the single most foolish thing I’ve read from you. Ever.)
5. How did the GSEs cause parallel housing booms and busts around the world? Why did these nations, without affordable housing policies, have similar RE boom bust cycles?
Private banks took advantage of their FDIC backing to have the same illusion of invincibility
no, the FDIC has nothing to do with making people who lose on mortgages whole.
that Fannie and Freddie had to do the same poor lending.
no, fannie and freddie do not lend.
did fannie/freddie force these guys to overleverage up too?
They helped created it. They were the primary conduit for creating it.
no, they are not a "conduit" in any form. they didn't help create it at all. they were late to the party of participating, going from a more responsible mortgage bundler to a less responsible one. again, late to the game. that certainly didn't help - but they certainly didn't cause the bubble either.
And just to piss you off for being silly, I didn't blame the "banks". I blamed GSE's Fannie Mae and Freddie Mac which are semi private government sponsored entities that are in many ways similar to the Fed. If you listen sometimes you might learn something.
Or you can just be like Joe Walsh. (Sorry the singer has to share the same name as this turkey).
