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posted on Sep, 4 2012 @ 02:27 PM
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reply to post by fulllotusqigong
 

Dear fulllotusqigong,

I admire your brevity, but might it be too short an answer? Besides that, I think it's the wrong question. From your source:

Fannie Mae and Freddie Mac did not, by themselves, cause the subprime mortgage crisis.
That makes me think that they were part of the cause, but not the whole cause. Isn't that what everybody thinks already? The headline seems to be setting up a strawman. I don't know of anyone who thinks Fannie and Freddie were the (one and only) cause of the crisis.

But were they any part of the problem at all? I think so. Again from your source:


It was the preponderance of exotic loans in addition to subprime borrowers that made Fannie and Freddie's loan acquisitions so toxic.

As GSEs, Fannie and Freddie weren't required to offset the size of their loan portfolio with enough capital from stock sales to cover it. This was a result of both their lobbying efforts and the fact that their loans were insured, so they felt they didn't need to. Instead, they used derivatives to hedge the interest-rate risk of their portfolios. When the value of the derivatives fell, so did their ability to insure loans.

This exposure to derivatives proved their downfall, as it did for most banks.


With respect,
Charles1952




posted on Sep, 4 2012 @ 06:09 PM
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reply to post by desert
 



The main policy argument for repealing Glass-Steagall’s firewall was to enhance the ability of commercial banks to compete against so-called “shadow banks.” Shadow banks are non-depository financial firms that hold assets similar to commercial banks (such as mortgages and other loans) but rely on funding sources like those of investment banks (i. e., the capital markets). The term covers a diverse array of companies, including pension funds, money-market funds, government-sponsored enterprises like Fannie Mae and Freddie Mac, finance companies like GE Capital and GMAC, and securities firms. Shadow banks began to supplant the commercial banking system in the 1970s, as rising interest rates induced savers to shift from bank accounts, which were subject to regulator caps on interest rates, to mutual funds; mortgages migrated to Fannie Mae and Freddie Mac; corporations abandoned bank loans for commercial paper that carried better terms, and auto and other consumer loans moved to finance companies. Although the commercial banking sector continued to grow, its dominance of the financial system receded. Commercial banks’ share of total financial assets declined by more than half in the 25 years leading up to GLBA. As Raj Date and Michael Konczal noted in a recent paper:”Before GLBA, and on into the credit bubble, shadow banks could secure funding at lower cost than commercial banks, while constructing similar asset portfolios. This funding advantage over banks was often compounded by a leverage advantage, as credit rating agencies, for many asset classes, required less capital support than would be required by bank regulators. With both funding and capital advantages in hand, shadow banks grew to more than half of the U. S. financial system.” Faced with this evolving financial system, Congress might have concluded that the smartest path forward was to better regulate shadow banks, holding them to the same capital requirements and other standards imposed on depository institutions. Instead, lawmakers decided to release commercial banks from the constraints of Glass-Steagall, allowing them to trade in securities, derivatives, and other high-risk products, even as these institutions continued to benefit from the safety net provided by federal deposit insurance. Throughout the debate, Glass-Steagall was derided as an old-fashioned law out of step with modern finance. Indeed, the formal name for Gramm-Leach Bliley was the Financial Modernization Act. It passed both the House and Senate by overwhelming margins. Only eight Senators voted no: seven Democrats —Barbara Boxer, Byron Dorgan, Richard Bryan, Russ Feingold, Tom Harkin, Barbara Mikulski, and Paul Wellstone — and one Republican, Richard Shelby.


The real cause of the housing bubble collapse

Fannie Mae’s Last Stand Many believe the government-backed mortgage giants known as Fannie Mae and Freddie Mac were major culprits in the economic meltdown. But, for decades, Fannie Mae had been under siege from powerful enemies, who resented its privileged status, its hard-driving C.E.O.’s, and its huge profits. Surveying Fannie’s deeply dysfunctional relationships with Congress, the White House, and Wall Street, the author tells of the long, vicious war—involving most of Washington’s top players—that helped propel one of the world’s most successful companies off a cliff. by Bethany McLean

So basically Fannie and Freddie didn't issue the subprime mortgages that were then repacked and given fraudulent credit ratings to be resold.


Fannie and Freddie have been justifiably but inaccurately maligned in the aftermath of the mortgage crisis. In recent years, their executives ran the firms like out-of-control hedge funds, lobbied Congress like arrogant Wall Street banks and did nothing beyond the bare minimum required by law to help low-income borrowers. But Fannie and Freddie did not go headlong into subprime mortgages—the primary source of their losses came from loans to relatively high-quality borrowers. The terrible mortgages that crashed the economy were issued by banking conglomerates and Wall Street megabanks—Fannie and Freddie were almost entirely divorced from that line of business. The problem with Fannie and Freddie was largely structural– investors and managers saw the potential for big profits from taking on loads of risk, but believed (accurately) that the government would eat losses if those risks backfired. So Fannie and Freddie ramped up risk, taking on as many mortgages as they could while keeping as little money as possible on hand to cushion against losses. Eventually the strategy destroyed them.



posted on Sep, 4 2012 @ 06:13 PM
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reply to post by desert
 



Banks would issue these loans because they knew they could dump them into the secondary market where securitizers would peddle them off to suckers all round the world. This is where Fannie and Freddie came in. They purchased many of the junk mortgages issued by banks in the years 2005 to 2007. According to the Flat-Earthers, this makes Fannie and Freddie the cause of the current crisis. There is one basic problem with the Flat Earth story: Fannie and Freddie jumped into the junk mortgage market because they were trying to keep pace with the private issuers of mortgage-backed securities. Fannie and Freddie made a conscious decision to dive into the junk in order to protect their market share, which was being seriously eroded by the aggressive tactics of private giants like Citigroup and Merrill Lynch.


The Flat Earthers Try to Pin Financial Meltdown on Fannie and Freddie



posted on Sep, 4 2012 @ 06:24 PM
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reply to post by desert
 



“If it grows like a weed, it probably is a weed.” This age-old banking adage aptly applies to the private mortgage lending business during the housing bubble. Between 2004 and 2007, private lenders originated three quarters of all subprime and alt-A mortgage loans. These were loans to financially fragile homeowners with credit scores under 660, well below the U.S. average, which is closer to 700. But only a fourth of such loans were originated by government agencies, including Fannie, Freddie and the Federal Housing Administration. The dollar amount of subprime and alt-A loans made during this period by the private sector was jaw-dropping, reaching nearly $600 billion at the height of the lending frenzy in 2006. For context, this is about equal to the total amount Americans currently owe on bank credit cards. By contrast, government lenders made just over $100 billion in subprime and alt-A loans in 2006. Even in 2007, when the housing market was beginning its free fall, private lenders still handed out more than $300 billion via these very shaky mortgage loans. All this can be seen in the share of total residential mortgage debt insured or owned by Fannie Mae and Freddie Mac. At the start of 2002, before the housing boom got going, the two agencies’ market share accounted for almost 54 percent of all mortgage debt. By summer 2006, the bubble’s apex, their share had fallen to only 40 percent. It is difficult to see how the agencies could have been responsible for inflating the housing bubble at a time when they were losing a full 14 percentage points of market share. Indeed, the opposite was true, as their position in the housing market rapidly diminished.


In 2006, almost half the loans made by private lenders required no down payment and no documentation. Fannie and Freddie simply couldn’t play in that league, even though Congress had given them aggressive lending targets to help boost homeownership among lower-income and minority households.

Fannie and Freddie don’t deserve blame for bubble


Federal Housing Finance Agency's securities suits against 17 banks that issued almost $200 billion in mortgage-backed securities the "litigators' world series." (Thanks for the shout-out, Steve!) You remember the FHFA MBS suits: The all-at-once filings by Fannie Mae and Freddie Mac's conservator sent the markets into a brief tizzy right after Labor Day. Since then, however, we haven't heard much about the litigation. Brill's column prompted me to check the FHFA dockets, and I'm glad I did: U.S. District Judge Denise Cote of Manhattan federal court, who's now overseeing all but one of the FHFA MBS suits, has put the litigation on a fast track. And UBS, the first defendant FHFA sued, has already teed up a dismissal motion based on an obscure issue that could decimate the FHFA's cases against every defendant. The Housing Agency, as you surely recall, claims Fannie and Freddie were duped into purchasing mortgage-backed securities that didn't measure up to representations by issuers and underwriters. The cases assert various federal and state-law theories, from strict liability claims under the Securities Act of 1933 to common law fraud. The cases were originally split between Manhattan state and federal courts, but defendants in the four state-court suits removed them to federal court. (FHFA has moved to remand.)


FHFA MBS cases about to heat up

So the "litigation world series" is Fannie and Freddie suing the banks that sold them fraudulent mortgage-backed securities.



posted on Sep, 4 2012 @ 09:06 PM
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reply to post by charles1952
 


Charles, I blush! Remember, it's not the size of one's intellect, it's how ya use it.


I used William K. Black's article for a couple reasons, to try to put to rest the notion (put forth by those with media influence) that Freddie and Fannie loans/and rules for loans to poor and minorities are the cause of the crisis, and to illustrate how a lack of ethics made for fraud at the highest corporate levels, driven by greed.... for years.

As Woody said, Some rob you with a sixgun, some with a fountain pen.

Greed, this love of money, makes a person constantly hungry for more, and, too often, the only way to get more is to take from someone else or to devise financial laws in your favor or outright fraudulent schemes.

There are people who push envelopes and put others on the brink. It is selfish and unethical at best, sociopathic at worst.

reply to post by fulllotusqigong
 


Great stuff!
Oh, God, don't get me started on Phil Gramm!! And Texan based scams.

Well, maybe the wheels of more justice will continue to grind slow, and crush those who do no good.



posted on Sep, 4 2012 @ 09:53 PM
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reply to post by EvilSadamClone
 


I'm watching the documentary The Flaw on Netflix streaming. I'll quote two economic professors -- one from Harvard, Louis Hayman, economic historian and another from London, Robert Wade, professor of political economy, London School of Economics:


You ask an American, when was America the most prosperous in the 20th Century? Most Americans outside of financiers and Wall Street, will tell you the 1950s. It's thought of as this time of perfection, this golden age of capitalism, with big fin cars and houses and anybody, any guy, could get a job and support his wife and kids....and this kind of lifestyle isn't possible for most people today. Now this is also the moment in America that has the LEAST income inequality in our history. And I don't think that's a coincidence. Before this sort of World War II period, income inequality was very high, and the share of total income going to just the top 1% peaked in 1929 at about 22% which is an extraordinary figure. And then as you go into World War II, income inequality falls, from 1945 to 1970. In the 1970s the top 1% were getting only 9%. That's a huge fall. And then in the 1970s you start to see it rise again, accelerating in the 1980s.
edit on 4-9-2012 by fulllotusqigong because: (no reason given)
edit on 4-9-2012 by fulllotusqigong because: (no reason given)


An incredible explosion of Installment Credit in the 1920s.

So this is what the economics professors are saying in the doc - installment credit being private lending by banks.


15,000 Americans earned $700 Billion, half the GDP of Brazil.
edit on 4-9-2012 by fulllotusqigong because: (no reason given)



posted on Sep, 4 2012 @ 09:56 PM
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reply to post by crankySamurai
 


The fed gov is supposed to provide infrastructure. If some of the contractors did a bad jobs, the way that the gov is wrong is on their failure to properly regulate their contractors. The failure of the railroad companies belongs to the railroad contractors.


I agree that government distribution of wealth is not equal but I also think that its not governments role to be in control of so much money. When a government has control over such huge quantities of money the result will always be people fighting over who gets what.


I don't like the idea of anyone having so much control over huge amounts of money, corporations and individuals having control of huge amounts of money bother me more than government.

At least we have some say in how government spends its money, and politicians voted out of office no longer have control of all that money.
edit on 4-9-2012 by poet1b because: Add first paragraph



posted on Sep, 4 2012 @ 10:09 PM
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reply to post by hawkiye
 


Your sources are well known for putting out propaganda nonsense. Provide a link that backs your claims and you could get some credibility. You quote numbers from the wrong decades.



posted on Sep, 4 2012 @ 10:11 PM
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Originally posted by poet1b

I don't like the idea of anyone having so much control over huge amounts of money, corporations and individuals having control of huge amounts of money bother me more than government.

At least we have some say in how government spends its money, and politicians voted out of office no longer have control of all that money.


There is no individual or corporation that has the unlimited credit our government has. No corporation is able to continually create money and inflate the market.

If a business or individual becomes wealthy it is because they supplied something for which other people voluntarily gave them their dollars.



posted on Sep, 4 2012 @ 10:34 PM
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reply to post by crankySamurai
 



If a business or individual becomes wealthy it is because they supplied something for which other people voluntarily gave them their dollars.


Not at all. The most successful borrowed large amounts of money to buy something, which they managed to sell for a whole lot more money. This isn't business, its fraud. They sold a bill of goods, a lot of promises with no real value.

It doesn't matter if they have the power of the fed gov, the people they screw are screwed none the less.

Free market policies allow these scum bags to get by with their scams.

It's time they paid the piper.

edit on 4-9-2012 by poet1b because: Typos



posted on Sep, 4 2012 @ 10:37 PM
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reply to post by fulllotusqigong
 


So what are you trying to say? Are you trying to agree with me or disagree with me and coutner my point?



posted on Sep, 4 2012 @ 10:45 PM
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reply to post by EvilSadamClone
 




Here - the doc "The FLAW" is titled from Greenspan's comment on why the economic collapse happened. It's a spoof that his little flaw was a huge hole in capitalism. The economic professors in the Flaw are basically saying the exact same thing as the above economics professor lecture by Richard Wolff.

Enjoy.



posted on Sep, 4 2012 @ 10:50 PM
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Originally posted by poet1b

Not at all. The most successful borrowed large amounts of money to buy something, which they managed to sell for a whole lot more money. This isn't busTiness, it fraud. They sold a bill of goods, a lot of promises with no real value.

It doesn't matter if they have the power of the fed gov, the people they screw are screwed none the less.

Free market policies allow these scum bags to get by with their scams.

It's time they paid the piper.



Your miss understanding of the free market shocks me. Fraud and theft are precisely what the free market prevent. It is government as well as businesses with government sanction that are the primary perpetrators of these things.



posted on Sep, 4 2012 @ 10:59 PM
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reply to post by crankySamurai
 


In the fantasy world of free market idealism, the magical system or hidden market forces prevent all fraudulent business activities.

In the real world, free market economics bends the commoner over the barrel, and lines up an army of drilling machine robots to bone the poor buggers dry.

Let go of you ankles and stop trying to pretend it isnt happening.



posted on Sep, 4 2012 @ 11:17 PM
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Originally posted by poet1b
reply to post by crankySamurai
 


In the fantasy world of free market idealism, the magical system or hidden market forces prevent all fraudulent business activities.

In the real world, free market economics bends the commoner over the barrel, and lines up an army of drilling machine robots to bone the poor buggers dry.

Let go of you ankles and stop trying to pretend it isnt happening.


I am in no way supporting what is going on in current economics so there's no pretending going on here.

What I see as the problem to the current economic system is people using force, such as fraud or theft. The solution is then to reduce the use of this force. The way this is done is by decreasing government power since it is the very definition of force.

The court system is not what I mean when I say government reduction.



posted on Sep, 4 2012 @ 11:18 PM
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Originally posted by crankySamurai

Originally posted by poet1b

Not at all. The most successful borrowed large amounts of money to buy something, which they managed to sell for a whole lot more money. This isn't busTiness, it fraud. They sold a bill of goods, a lot of promises with no real value.

It doesn't matter if they have the power of the fed gov, the people they screw are screwed none the less.

Free market policies allow these scum bags to get by with their scams.

It's time they paid the piper.



Your miss understanding of the free market shocks me. Fraud and theft are precisely what the free market prevent. It is government as well as businesses with government sanction that are the primary perpetrators of these things.


The problem that you seem to missing is that in this CURRENT environment
the term "free market" is used as a tool to engineer policies for players in the
market.

All those politicians hollering "free market" regularly demolish just enough
regulation to legalize fraudulent policies that negatively impact the consumer
the public and the tax payers.

In 98 there was an environmental bill that impacted oil production, namely spills
and bi products.

In that case the "free market" side was voting to let the company dump their waste
into and aquifer that sources wells in the locale.

Same forces did the same routine with medical waste.

The point WE are making is that the ideology and the practice are NOT the same.

The practice is to call it "free market" so people like you support the action being
proposed. The businesses hiding behind the "fee market" monicker use the words
as a tool to cover up their desire to pass off their cost and the pollution or responsibility
on others.

edit on 4-9-2012 by thepresident because: (no reason given)



posted on Sep, 4 2012 @ 11:24 PM
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Duplicate post
edit on 4-9-2012 by poet1b because: (no reason given)



posted on Sep, 4 2012 @ 11:30 PM
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Originally posted by thepresident

The problem that you seem to missing is that in this CURRENT environment
the term "free market" is used as a tool to engineer policies for players in the
market.

All those politicians hollering "free market" regularly demolish just enough
regulation to legalize fraudulent policies that negatively impact the consumer
the public and the tax payers.

In 98 there was an environmental bill that impacted oil production, namely spills
and bi products.

In that case the "free market" side was voting to let the company dump their waste
into and aquifer that sources wells in the locale.

Same forces did the same routine with medical waste.

The point WE are making is that the ideology and the practice are NOT the same.

The practice is to call it "free market" so people like you support the action being
proposed.



I in NO way miss understand this.

This is the same way that our government supposedly represents freedom and a democratic republic when in fact it has become the very antithesis of that. Just because Bush passed the patriot act in the name of protecting freedom doesn't mean that freedom is a bad thing.

No politician represents the free market just as none represent liberty. That does not mean that the idea of freedom or liberty has changed!

The politicians do everything in the name of freedom. Does that mean we should oppose freedom? That is what you are suggesting with your opposition to the free market.

I am in no way fooled by their rhetoric... you seem to be though.
edit on 4-9-2012 by crankySamurai because: (no reason given)



posted on Sep, 4 2012 @ 11:32 PM
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Originally posted by poet1b
reply to post by crankySamurai
 


In the fantasy world of free market idealism, the magical system or hidden market forces prevent all fraudulent business activities.

In the real world, free market economics bends the commoner over the barrel, and lines up an army of drilling machine robots to bone the poor buggers dry.

Let go of you ankles and stop trying to pretend it isnt happening.


Hello Poet,

The problem is that talking about a free market is powerful because it is revered
as an idea. People cannot except that businessmen and politicians have learned
how to use the phase as a sales tool. If people were true to their intellect they would
see that the phrase is used in conjunction with policies that defraud, pollute or
corrupt something.

The Oil Companies use the FREE MARKET words to pollute, rig the market and
find ways to keep the world dependent on oil.

The insurance companies use it to find ways to rescind policies of sick people, charge
people hidden fees, penalties and higher premiums.

The PHARMA market uses it to protect themselves from lawsuits that arise from the bad
bad drugs they speed to market.

It is a pattern isn't it?



posted on Sep, 4 2012 @ 11:37 PM
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reply to post by thepresident
 


Again if people started going around injecting people with aids in the name of good health does that mean that we should oppose good health?





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