I need a little help here. Please.

[verges]

A few times when discussing things with a certain right -wing leaning Independent friend, he has pointed the blame for the economic crisis at Freddie Mac and Fannie May. But I am not at all knowledgable of where they fit into the puzzle. And I'm really not sure where or how to look it up! Could someone enlighten this poor soul on what the heck he's referring to?

[sinkingfeeling]

1. That's a RW talking point directly from AEI. Read up on the subject here...

http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932010#Sub-prime_lending

[verges]

4. Thanks! That helped. nt

[bherrera]

2. Banking Crisis

The Freddie Mac and Fannie May purchase mortages from banks, and package those to re-sell to speculators. The loans made in the last 15 years were irresponsible, giving too much money to people who were not able to pay. This is not a problem of the Fannie May and Freddie Mac only, because all bankers and insurance companies were engaged in this system. This was also encouraged by governments in many countries. For example, in Iceland the government allowed their banks to make loans to people buying houses in Spain. These loans were made with money they borrowed from others, including bonds purchased by retired people. This irresponsible behavior caused Iceland's bankrupcy as a nation.

We had a similar problem all over the place in Europe, I think the solution is to reduce the size of banks, which means they can be allowed to fail. And also the banking management should receive their bonuses in deferred fashion, effective only if the bank is profitable. But this is difficult to implement, because banks have political power.

Maybe the eventual solution will be to take all their personal wealth if the bank fails. That should make them be responsible. But the problem is many more crises will happen before the people are mad sufficiently to change their parliaments and force some justice into this system.

[Hepburn]

3. Thanks for the info...

...helped to clarify the picture for me. :hi:

[mdmc]

5. ..