Monday, December 12, 2011

On How Fannie Mae and Freddie Mac (More than Likely) Contributed to the Financial Collapse

1) Fannie and Freddie purchased billions of risky loans (nearly 3/4 of new mortgages were going through F & F by 2008) and bundled them to investors. The money that went to these banks allowed them to make even more risky loans. The end-result was that a lot more mortgage lending than would have otherwise taken place DID take place (the bubble argument, in other words).............2) Being that Fannie and Freddie were at least quasi governmental entities, most investors and lenders (justifiably, as it turned out) took for granted that the lines of credit would more than likely be unlimited....AND that they (Fannie and Freddie) would probably be bailed out if necessary.............3) Fannie was deeply involved in the highly political move of lowering lending requirements in an attempt to more adequately meet the needs of disadvantaged groups. They specifically eased the credit requirements on the mortgages that it was purchasing from banks - the end-point being (this, according to the New York Times, September 1999) to encourage banks to extend home mortgages to individuals whose credit hadn't been good enough to qualify for conventional homes......So, no, me-buckos, nobody was "holding a gun to these bankers' heads" (and, yes, there were in fact some very questionable practices - no doubt), but if the government is a) enabling you and b) encouraging you AND you're more than likely going to get bailed out in a worst case scenario, wouldn't you also (in the words of Congressman Frank) be willing to "roll the dice a little"?

6 comments:

Rusty Shackelford said...

Come on Will,the whole crux of F#F was to secure the votes of minorities and the poor,you know the usual democractic voters.The voters they've taken such good care of.

I have to admitt they are masters at keeping this voting bloc.while doing absolutly nothing for them.

Will "take no prisoners" Hart said...

Obama, Dodd, and Frank all seemed to have benefited from this relationship but, then again, so, too, did Mr. Gingrich.

Chakam said...

Will,

I think the monies Gingrich received from F/F was 'hush money'.

Just a theory.

Will "take no prisoners" Hart said...

Thankfully, his wife did get some fancy jewelry out of it.

Rusty Shackelford said...

"Financial Collapse"

Jon Corzine the former CEO of MF Global along with the COO and CFO testified before the Senate today.Again when asked how MF Global misplaced and lost 1.2 BILLION DOLLARS of investors money,Corzine again said he had no idea....now again Corzine was the CEO.

Jon Corzine is the same guy Joe Biden said was one of the smartest economic minds in the country and who the Obama administration called upon to help put together the stimulus package.

This is'nt like having a bucks worth of change fall into the couch....I mean how could an investment company lose 1.2 bil and not know where it went.I'm guessing a big part of it is in the Cayman Islands.

Oh...did I mention that Jon Corzine is a former democratic Senator and Governor of New Jersey?

Liberals are always crying to have one of these guys arrested and jailed.....would'nt Jon Corzine be perfect?

Will "take no prisoners" Hart said...

I agree 100%, Russ. This guy is dirt and MSNBC is silent about it. So much for a grand and principled movement, huh?