8 Years in Power?
- Thread starter cstfx
- Start date
barney made bush do this? dam hes powerful:
In 1975, the SECâs trading and markets division ruled that investment banks must maintain a debt-to-net capital ratio of less than 12 to 1. In 2004, following extensive lobbying by the investment banks, the SEC under chairman Christopher Cox authorized five investment banks to develop their own net capital requirements. This enabled investment banks to push borrowing ratios to as high as 40 to 1.[4] These five investment banks were Goldman Sachs, Morgan Stanley, Lehman Brothers, Bear Stearns, and Merrill Lynch. This very high debt-to-reserves helped lead to the financial crisis of 2008 by weakening the ability of these institutions to recover from losses incurred when the risky CDO and CDS bets failed.[5][6]
Republicans controlled the House in 2003 and Tom The hammer Delay of K-Street infamy was House Majority Leader. The House, unlike the Senate is ruled by simple majority. Delay controlled the agenda and Bush 43 was in the White House. Frank could have set himself on fire and still had absolutely zero effect on any Republican attempts to legislate new regulations or create regulatory reform. Fannie and Freddie did not cause the housing bubble or the Great Recession. The numbers donât add up. In addition Fannie and Freddie did not have that kind of power. Most of their loans were not subprime.
Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. Thatâs right â most subprime mortgages did not meet Fannie or Freddieâs strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrowerâs income or employment history? All made in the private sector, without any support from Fannie and Freddie.
Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldnât accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.
Fannie and Freddie were not completely innocent they basically started having special sales Fannieâs âExpanded Approvalâ and Freddieâs âA Minusâ- all under Bushâs watch and as Republicans controlled the House 1997 to 2005 ( the place where Frank has super duper legislative powers).
http://thelonggoodbye.wordpress.com...y-frank-the-housing-bubble-and-the-recession/
http://www.ritholtz.com/blog/2010/09/fannie-freddie-acquitted/
Fannie / Freddie Acquitted
The Conservatorâs Report on Fannie and Freddie is out.
Fannie Mae and Freddie Mac are members of a long list of individuals and entities including Gary Condit, Tom Delay, Michael Jackson, Rod Blagojevich and JonBenet Ramseyâs parents. These are folks who were unjustly tried and convicted in the popular press essentially on the grounds that they were creepy or otherwise unsavory characters.
As I hope to continue to argue, being creepy, a bad person, or even a usual suspect does not make one automatically guilty of any particular crime. In this case government subsidies in the housing market are a bad idea for a host of reasons and have been for years. I will testify to this with vigor and passion.
However, that does not mean that Fannie or Freddie caused the housing bubble. Indeed, by my count they were among the biggest victims of it.
The proper question is not: What story is consistent with my general philosophy or worldview?
The proper questions is: What story is consistent with the facts?
>
Fact One: Fannie and Freddieâs primary business of subsidizing conventional loans was not a driver of the housing the bubble.
Indeed, conventional loans represented less than a third of all mortgage originations during the peak price acceleration years.
This was a phenomenon of private-label non-conventional loan securitization.
1.1 Peaking in 2006 at a third of all mortgages originated, the volume of Alt-A and subprime mortgages was extraordinarily high
between 2004 and 2007. In 2005 and 2006, conventional, conforming mortgages accounted for approximately one-third of all
mortgages originated
[ . . .]
1.2 Private-label issuers played a large role in securitizing higher-risk mortgages from early 2004 to mid-2007 while the Enterprises
continued to guarantee primarily traditional mortgages.
>
Fact Two: Fannie and Freddie lost market volume during the boom.
That is, during the boom not only did the fraction of loans securitized by Fannie and Freddie fall, but the absolute number fell. At the same time the absolute number of private-label securitizations rose.
There is a simple and obvious reason for this. The development of structured products meant that for many consumers the free market offered a more attractive loan than the government subsidized one.
>
Fact Three: The major losses to Fannie and Freddie came through their expansion into guaranteeing non-traditional loans, not through their portfolio.
That is, yes like every other financial entity Fannie and Freddie were buying subprime packages in the secondary market. However, these losses were relatively mild.
The Investments and Capital Markets segment accounts for $21 billion, or 9 percent, of capital reduction from the end of 2007 through the second quarter of 2010. Losses in the Investments and Capital Markets segment stemmed from impairments of private-label securities, fair-value losses on securities, and fair-value losses on derivatives (used for hedging interest rate risk).
>
Fact Four:The key change in the Fannie / Freddie business model was their expansion in the types of loans they willing to guarantee. In particular moving into the Alt-A and Interest-Only categories.
As we can see these loans began to seriously underperform as the economy deteriorated. These loans were not a part of the original âcrap hidden by structureâ subprime business. Fannie / Freddie borrowers on had on average credit scores above 710 and equity (or down payment) of above 25%.
(more)
Fannie / Freddie Acquitted
The Conservatorâs Report on Fannie and Freddie is out.
Fannie Mae and Freddie Mac are members of a long list of individuals and entities including Gary Condit, Tom Delay, Michael Jackson, Rod Blagojevich and JonBenet Ramseyâs parents. These are folks who were unjustly tried and convicted in the popular press essentially on the grounds that they were creepy or otherwise unsavory characters.
As I hope to continue to argue, being creepy, a bad person, or even a usual suspect does not make one automatically guilty of any particular crime. In this case government subsidies in the housing market are a bad idea for a host of reasons and have been for years. I will testify to this with vigor and passion.
However, that does not mean that Fannie or Freddie caused the housing bubble. Indeed, by my count they were among the biggest victims of it.
The proper question is not: What story is consistent with my general philosophy or worldview?
The proper questions is: What story is consistent with the facts?
>
Fact One: Fannie and Freddieâs primary business of subsidizing conventional loans was not a driver of the housing the bubble.
Indeed, conventional loans represented less than a third of all mortgage originations during the peak price acceleration years.
This was a phenomenon of private-label non-conventional loan securitization.
1.1 Peaking in 2006 at a third of all mortgages originated, the volume of Alt-A and subprime mortgages was extraordinarily high
between 2004 and 2007. In 2005 and 2006, conventional, conforming mortgages accounted for approximately one-third of all
mortgages originated
[ . . .]
1.2 Private-label issuers played a large role in securitizing higher-risk mortgages from early 2004 to mid-2007 while the Enterprises
continued to guarantee primarily traditional mortgages.
>
Fact Two: Fannie and Freddie lost market volume during the boom.
That is, during the boom not only did the fraction of loans securitized by Fannie and Freddie fall, but the absolute number fell. At the same time the absolute number of private-label securitizations rose.
There is a simple and obvious reason for this. The development of structured products meant that for many consumers the free market offered a more attractive loan than the government subsidized one.
>
Fact Three: The major losses to Fannie and Freddie came through their expansion into guaranteeing non-traditional loans, not through their portfolio.
That is, yes like every other financial entity Fannie and Freddie were buying subprime packages in the secondary market. However, these losses were relatively mild.
The Investments and Capital Markets segment accounts for $21 billion, or 9 percent, of capital reduction from the end of 2007 through the second quarter of 2010. Losses in the Investments and Capital Markets segment stemmed from impairments of private-label securities, fair-value losses on securities, and fair-value losses on derivatives (used for hedging interest rate risk).
>
Fact Four:The key change in the Fannie / Freddie business model was their expansion in the types of loans they willing to guarantee. In particular moving into the Alt-A and Interest-Only categories.
As we can see these loans began to seriously underperform as the economy deteriorated. These loans were not a part of the original âcrap hidden by structureâ subprime business. Fannie / Freddie borrowers on had on average credit scores above 710 and equity (or down payment) of above 25%.
(more)
You're asking the wrong question. FNM and FRE may not have "caused" the mortgage crisis, but their recklessness has cost the taxpayers over a trillion bucks and counting. They were clearly a contributing factor to the mortgage crisis. Their de facto bankruptcy and subsequent bailout were important factors in the financial crisis from which we have yet to climb. The Bush administration and the agency charged with regulating them tried to rein them in, but ran into a stone wall of congressional opposition, led by Barney Frank, whose boyfriend worked at FNM, and Chris Dodd, recipient of sweetheart deals.
One of the signal failures of Obama and Bush has been the failure to prosecute any of the ex-execs of FNM and FRE for criminal fraud and to recoup the enormous bonuses they received. The vast majority of those execs were democrats, such as ex-CEO Franklin Raines and the human disaster Jamie Gorelick, who presided over various fiascos at Justice then was shuttled off to FNM, where she cashed huge bonuses and options that were based on fraudulent accounting.
The thing that really annoys me is that absolutely nothing has been done to avoid a repeat of this disgrace. The government has no business in the mortgage business. We proved rather conclusively that the political hacks that were detailed to run these organizations were incompetent or corrupt or both. Why should the taxpayers be giving them another blank check?
One of the signal failures of Obama and Bush has been the failure to prosecute any of the ex-execs of FNM and FRE for criminal fraud and to recoup the enormous bonuses they received. The vast majority of those execs were democrats, such as ex-CEO Franklin Raines and the human disaster Jamie Gorelick, who presided over various fiascos at Justice then was shuttled off to FNM, where she cashed huge bonuses and options that were based on fraudulent accounting.
The thing that really annoys me is that absolutely nothing has been done to avoid a repeat of this disgrace. The government has no business in the mortgage business. We proved rather conclusively that the political hacks that were detailed to run these organizations were incompetent or corrupt or both. Why should the taxpayers be giving them another blank check?