Bloomberg’s Awful Comment; What Can We Say For Certain Regarding the GSEs?

[Derechos]

Mayor Bloomberg:

"It was not the banks that created the mortgage crisis. It was, plain and simple, Congress, who forced everybody to go and give mortgages to people who were on the cusp….But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody."

My sense is that these are people who can’t accept that some markets, especially financial ones, are disasters when completely unregulated – and thus find any far-fetched excuse to blame the government. But since we are going to hear a lot of it in 2012, how should one respond to the line that Congress and Fannie/Freddie caused the housing crisis?

See link for analysis - http://rortybomb.wordpress.com/2011/11/01/bloombergs-awful-comment-what-can-we-say-for-certain-regarding-the-gses/

[abelenkpe]

1. Fannie and Freddie did not cause the crisis

Gawd I'm so sick of the right trying to blame the poor and needy. They are literally saying if Fannie and Freddie didn't try to help low income families there would be no crisis. That is ridiculous. Banks and wall street started the entire snowball rolling even under cutting Fannie and Freddie offering cheap loans to anyone with a pulse and so Washington's reaction was to emulate wall street and have Fannie and Freddie do the same. They were late to the game and following wall streets lead and made changes requested from wall street. Wall street has gotten everything they wanted, fumbled fabulously, got bailed out and then turned around and blamed the victims. Why? Because wall street is full of psychotic assholes.

[banned from Kos]

2. Fannie /Freddie are a diversion - ask why Lehman, Bear, Merrill, WaMu, Wachovia

and others failed.

If they could sell their loans to a GSE why didn't they?

Answer - the loans did not comply with GSE standards.

[rfranklin]

3. This is the right wing story and they're stickin' to it...

It doesn't matter what facts you present to them--it was Barney Frank who caused the entire financial meltdown by forcing the banks to lend to poor black people and then forcing them to package those mortgages in defective, fraudulent CDOs while backing them up with crazy leverage credit default swaps.

[Coexist]

4. this exchange between Taibbi and York re: Fannie/Freddie and CDS is when I first fell in love

with Matt Taibbi! :)

http://www.theatlantic.com/entertainment/archive/2008/10/matt-taibbi-sons-byron-york/6055/

B.Y.: I think that Fannie Mae and Freddie Mac were also major factors. And I believe that many of the problems in the mortgage area can be attributed to the confluence of Democratic and Republican priorities: the Democrats' desire to give mortgages to people, particularly minorities, who could not afford them, and the Republicans' desire to achieve an "ownership society," in part by giving mortgages to people who could not afford them. Again, I believe that if you are suggesting that the financial crisis is a Republican creation, or even more specifically a McCain creation, I think you're on pretty shaky ground.

M.T.: Oh, come on. Tell me you're not ashamed to put this gigantic international financial Krakatoa at the feet of a bunch of poor black people who missed their mortgage payments. The CDS market, this market for credit default swaps that was created in 2000 by Phil Gramm's Commodities Future Modernization Act, this is now a $62 trillion market, up from $900 billion in 2000. That's like five times the size of the holdings in the NYSE. And it's all speculation by Wall Street traders. It's a classic bubble/Ponzi scheme. The effort of people like you to pin this whole thing on minorities, when in fact this whole thing has been caused by greedy traders dealing in unregulated markets, is despicable.

[FarCenter]

5. GSE's played a small role -- it was mainly Golden West, CountryWide, IndyMac, WaMu, etc.

Mainly the "Thrifts" under supervision by the Office of Thrift Supervision that started the boom, and then the deregulated mortgage lenders, like GMAC, GE Capital, the Household Finance part of Citigroup, etc. that were the big wholesalers.

[Name removed]

6. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Derechos]

7. You should read the whole article.

The evidence presented shows that public lending was a small fraction of housing loans. The majority of lending was from private capital, not government money and those loans where re-packaged and sold as high quality investments leading to the mess we are in today. The argument that government efforts to help minorities buy homes as a cause of the crisis has been disproven over and over again.

[Name removed]

12. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Kingofalldems]

13. Now where have I seen that meme before?

[county worker]

8. You ask them why the banks bundled the mortgages into default swaps and bet against them.

If it was only congress forcing banks to loan to those who could not afford to pay there would not have been enough mortgages to bundle.

[Aerows]

9. Ever notice how it is everyone's fault

but the people who bundled up these bad mortgages and then traded them rampantly on Wall Street, even though they knew they were crap?

It's always EVERYONE else who is to blame, except for the people that benefited most from the bailouts. Sorry, Bloomberg, but most Americans just aren't that uninformed anymore. Nobody held a gun to bankers' heads and forced them to make loans to people. That's the responsibility of banks - to know who they are lending to and make fiscally sound decisions. Nobody held a gun to traders' heads and forced them to trade this paper crap back and forth, making money off it until the house of cards came tumbling down.

If the banks were so reckless that they didn't know who they were lending to, they should have gone the way of the dodo instead of getting a bailout, because clearly, they have no ability to act responsibly.

[Leopolds Ghost]

10. Bloomberg: BLAME POOR BLACK PEOPLE For Economic Crash.

Should be the headline. Just as:

Hillary Clinton BLAMES "DEADBEATS" FOR FAILING TO PURCHASE PRIVATE HEALTH INSURANCE

[True Earthling]

11. The Clinton admin is not totally innocent... there IS evidence of collusion...

I don't believe anyone forced the mortgage lenders to make non-credit worthy loans but there seems to be evidence of collusion between the gov't, banks and mortgage lenders to lower the standards and make riskier loans.

From an August 1995 HUD memo...

http://www.huduser.org/publications/txt/hdbrf2.txt

The National Homeownership Strategy

For over 60 years, the Federal Government has played an important
role in making the American Dream of homeownership a reality for
millions of families. It created the Federal Housing Administration
(FHA) and Government-sponsored enterprises such as Fannie Mae
to enhance the availability and affordability of home mortgage funds.
HUD and other Federal agencies have provided billions of dollars in
grants and loans to support affordable home construction and
rehabilitation and to aid low- and moderate-income families in buying
their first home. Incentives for homeownership have been
written into the Nation's tax code.

However, Federal institutions, policies, and programs alone cannot
meet President Clinton's goal of record-high levels of homeownership
within the next 6 years. Under the leadership of Secretary Cisneros,
HUD has forged a nationwide partnership that will draw on the
resources and creativity of lenders, builders, real estate profession-als,
community-based nonprofit organizations, consumer groups, State and
local governments and housing finance agencies, and many others in a
cooperative, multifaceted campaign to create ownership opportunities
and reduce the barriers facing underserved populations and
communities.

The National Homeownership Strategy is committed to:

MAKING FINANCING MORE AVAILABLE, AFFORDABLE, and FLEXIBLE. The
inability (either real or perceived) of many younger families to qualify
for a mortgage is widely recognized as a very serious barrier to
homeownership. The National Homeownership Strategy commits both
government and the mortgage industry to a number of initiatives
designed to:

Cut transaction costs through streamlined regulations and
technological and procedural efficiences.

Reduce downpayment requirements and interest costs by making
terms more flexible, providing subsidies to low- and
moderate-income families, and creating incentives to save for
homeownership.

Increase the availability of alternative financing products in housing
markets throughout the country.