Serious Question About Fannie and Fredie...

[Steely_Dan]

I've read and had some RW friends tell me that the housing crisis was caused by the Left. I feel it was due to deregulation by the Right. But what do I know.

They say that the housing situation we are in is due to the Left regulating Fannie and Fredie to make homes available to people who really could not afford them. Thus...the crash.

Can someone enlighten me on this point?

Thanks...

-PLA

[BootinUp]

1. Here is what Krugman says on it

http://krugman.blogs.nytimes.com/2010/06/03/things-everyone-in-chicago-knows/

Ezra Klein says that Krugman eviscerated the bogus argument from the RW with that blog post.

[Warpy]

3. I'll add to that the problems at Fannie and Freddie

are a result of default due to personal financial disaster like prolonged unemployment or illness, not yuppies sending in jingle mail when their mortgages are underwater and not because the undeserving poor are failing to keep up with their obligations.

One thing about poor people, they know that roof comes first. They've seen homelessness up close and personally, if only second hand, and they know what happens when you lose your roof. The poor have a much better record of staying current if they still have jobs.

[BootinUp]

4. I agree with that. nt

[Steely_Dan]

9. Thanks...

Excellent article....

[katanalori]

2. I will give it a try...................

Fannie Mae and Freddie Mac DID buy mortgages of homes purchased at inflated prices. But the real culprits were the private banks.
Fannie and Freddie did NOT securitize the subprime junk that collapsed in value.
This was done by Goldman Sachs, Merrill Lynch, and the Wall Street crew.
Fannie and Freddie subsequently bought into this sector because they were losing market share at a frightenig pace.
The real story is clear: The Wall St.brokers stuffed their pockets until everyting collapsed.

Your RW friends want to blame the poor people (and those who helped them) - that is laughable.


During the time of the sub-prime glut, Fannie and Freddie had aprrox. 35% of the total of all loans originated. The other 65% were origiated by Wall St. - Wall St. originated subprime loans, NOT Freddie and Fannie (a borrower at least had to have a job in order to obtain financing from Freddie Mac or Fannie Mae).

[pscot]

5. As I understand it, the law governing Fannie & Freddie

was signed by Richard Milhouse Nixon. Whatever lending they did before the collapse was done with the approval of the Bush cabal. And two quasi-governmental agencies didn't create the derivative pyramid that brought down the global financial system.

[Poboy]

6. Derivative, securitized asset mortgages being sold as investment vehicles, etc.

It creates a market that leveraged those assets over and over, then bundled them into further hidden risk.

The bailout funds, had they been spent directly on the mortgages themselves, instead of bailing out the X-fold bad bets on bets, would/could have PAID OFF those bad mortgages. We bailed out the casino banks instead.
It will happen again, too. The problem will be paid for by us, and our bought off legislature will cover for them again.

[izquierdista]

7. Sure

When Wall Streeters needed more pawns to keep their collateralized debt obligation bubble inflated, they gave loans to people who could not afford them. And then they left Fannie and Freddie holding a lot of the paper. I never realized how devious those Leftist Wall Street bankers could be!

[jtuck004]

8. There is a book called "It Takes a Pillage" by Nomi Prins,

she has a website by the same name. If you want a good overview of the financial mess, largely caused by the roughly $160 trillion in leveraged complex mortgage paper run up by the hedge funds and investment banks (the shadow banking industry - so called because they could keep those assets off the books and away from the regulation of commercial banks) you might want to check out a copy.

That's the most detailed one I have found so far.