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Thread: Fannie and Freddie Dont Deserve Blame for Bubble.

  1. #11
    Havakasha is offline
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    http://voices.washingtonpost.com/ezr...nie_and_f.html
    The right way to think about Fannie Mae and Freddie Mac is to think about the widespread availability -- at least before the crisis -- of 30-year, fixed-rate mortgages with no prepayment penalty. That is not a financial product that flourishes in the state of nature, and for obvious reasons. If you're a bank, why do you want those mortgages? If interest rates go down, people refinance and pay the loan back early. If they go up, you might be losing money on the loan. It's heads they win, tails you lose.

    If you've got one of those mortgages, though, you might have Fannie Mae and Freddie Mac to thank. The mortgage giants, slightly confusingly, do not sell mortgages. They buy them from the banks that sell them. About 90 percent of them, to be precise. They do that to make mortgages -- and thus home ownership -- cheaper. That's fine. If the country wants to encourage home ownership as a policy, subsidizing banks so they can offer better mortgage terms is a sensible way to do it.

    The problem is that Fannie and Freddie are not a direct and simple subsidy for the banks. They are private companies with a government charter. Rather than using taxpayer dollars to subsidize mortgages, they were borrowing money very cheaply because their quasi-governmental status assured the market that there'd be a taxpayer bailout in the case of any sort of collapse. That is to say, their business model relied on markets ignoring the risk of their activities. And then, because they were private companies with shareholders to please, they also got into slicing and dicing mortgage packages to make money like an investment bank rather than a housing policy. In theory this should've worried the markets where they borrowed their money, but again, the government backstop saved them. Forget too-big-to-fail. This was not-allowed-to-fail.

    So, of course, they failed. As Raj Date of the Cambridge Winter Center put it to me, "anytime the debt markets aren't paying attention to your risk profile, you're doomed."

    Their failure was not, as some would have it, the cause of the mortgage crisis or even close



    Keep reading....

  2. #12
    SiriuslyLong is offline
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    Quote Originally Posted by Havakasha View Post
    http://voices.washingtonpost.com/ezr...nie_and_f.html
    The right way to think about Fannie Mae and Freddie Mac is to think about the widespread availability -- at least before the crisis -- of 30-year, fixed-rate mortgages with no prepayment penalty. That is not a financial product that flourishes in the state of nature, and for obvious reasons. If you're a bank, why do you want those mortgages? If interest rates go down, people refinance and pay the loan back early. If they go up, you might be losing money on the loan. It's heads they win, tails you lose.

    If you've got one of those mortgages, though, you might have Fannie Mae and Freddie Mac to thank. The mortgage giants, slightly confusingly, do not sell mortgages. They buy them from the banks that sell them. About 90 percent of them, to be precise. They do that to make mortgages -- and thus home ownership -- cheaper. That's fine. If the country wants to encourage home ownership as a policy, subsidizing banks so they can offer better mortgage terms is a sensible way to do it.

    The problem is that Fannie and Freddie are not a direct and simple subsidy for the banks. They are private companies with a government charter. Rather than using taxpayer dollars to subsidize mortgages, they were borrowing money very cheaply because their quasi-governmental status assured the market that there'd be a taxpayer bailout in the case of any sort of collapse. That is to say, their business model relied on markets ignoring the risk of their activities. And then, because they were private companies with shareholders to please, they also got into slicing and dicing mortgage packages to make money like an investment bank rather than a housing policy. In theory this should've worried the markets where they borrowed their money, but again, the government backstop saved them. Forget too-big-to-fail. This was not-allowed-to-fail.

    So, of course, they failed. As Raj Date of the Cambridge Winter Center put it to me, "anytime the debt markets aren't paying attention to your risk profile, you're doomed."

    Their failure was not, as some would have it, the cause of the mortgage crisis or even close

    Keep reading....
    Ripe with failure.

    Keep Listening: http://video.search.yahoo.com/search...on+freddie+mac

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  4. #14
    Havakasha is offline
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    Thomas Sowell endorsed Newt Gingrich. Consider the source.

    Its always good to return these threads back to their origins.
    Simplistic talking points are intended to throw black smoke over truths.

    http://www.washingtonpost.com/reales...y.html?hpid=z3

    By Mark Zandi, Published: January 24

    There is plenty of blame to go around for the U.S. housing bubble, but not much of it belongs to Fannie Mae and Freddie Mac. The two giant housing-finance institutions made many mistakes over the decades, some of them real whoppers, but causing house prices to soar and then crater during the past decade weren’t among them.

    Keep reading the article by clicking on the link. Its illuminating.
    Last edited by Havakasha; 02-07-2012 at 11:06 PM.

  5. #15
    SiriuslyLong is offline
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    Quote Originally Posted by Havakasha View Post
    David Frum, a Republican, just said a little while ago on NPR radio that its absurd to say that Fannie and Freddie cause the mortgage forelcosure crisis. He said they may have added fuel to the fire, but to call it the cause is to deny the facts.
    I know logic is not your Forte, but Fannie and Freddie existed solely because of government policy. You should know with 100% certainty that if housing was truly a free market, all of these bad subprime loans would NOT have been written.

    So were does it start? I will tell you; with government policy. Deny it as you will.

    If we had a truly free market, my children's college funds would be enjoying the power of compounding. But they are not. Yet another way to destroy the middle class via "policy". I feel badly for my parents whose retirement accounts are dwindling and they can't even earn 4% on their savings again destroying the middle class.

  6. #16
    SiriuslyLong is offline
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    Dr. Ron Paul discusses Austrian vs. Keynesian economics on Morning Joe 05/15/2009

    Here on MSNBC Morning Joe, Dr. Paul is complimented by Joe for comments made in 2003 about Fannie Mae, Freddy Mac and the housing bubble.

    It takes a while to get into it (1:45 mark), but enjoy.

    http://www.youtube.com/watch?v=Gf3Nx...eature=related

    I hope our big government aficionado takes the time to listen to this. Doubtful, but one can hope.
    Last edited by SiriuslyLong; 02-16-2012 at 10:02 AM.

  7. #17
    SiriuslyLong is offline
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    Quote Originally Posted by SiriuslyLong View Post
    Dr. Ron Paul discusses Austrian vs. Keynesian economics on Morning Joe 05/15/2009

    Here on MSNBC Morning Joe, Dr. Paul is complimented by Joe for comments made in 2003 about Fannie Mae, Freddy Mac and the housing bubble.

    It takes a while to get into it (1:45 mark), but enjoy.

    http://www.youtube.com/watch?v=Gf3Nx...eature=related

    I hope our big government aficionado takes the time to listen to this. Doubtful, but one can hope.
    Key point here is that Dr. Paul called it in 2003 - a full 3 - 4 years ahead. The proof is right there for the viewing - you can see it, hear it...................

  8. #18
    Havakasha is offline
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    Did you actually read this? It might dissuade you of some of your talking points. You never were good at nuance. All blcack and white. Paul Krugman called the housing bubble back then as well. Housing bubble had to do with Alan Greenspan, and the Bush administrations "ownership society" as well as other things.


    02-07-2012, 10:17 AM #11
    Havakasha
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    http://voices.washingtonpost.com/ezr...nie_and_f.html
    The right way to think about Fannie Mae and Freddie Mac is to think about the widespread availability -- at least before the crisis -- of 30-year, fixed-rate mortgages with no prepayment penalty. That is not a financial product that flourishes in the state of nature, and for obvious reasons. If you're a bank, why do you want those mortgages? If interest rates go down, people refinance and pay the loan back early. If they go up, you might be losing money on the loan. It's heads they win, tails you lose.

    If you've got one of those mortgages, though, you might have Fannie Mae and Freddie Mac to thank. The mortgage giants, slightly confusingly, do not sell mortgages. They buy them from the banks that sell them. About 90 percent of them, to be precise. They do that to make mortgages -- and thus home ownership -- cheaper. That's fine. If the country wants to encourage home ownership as a policy, subsidizing banks so they can offer better mortgage terms is a sensible way to do it.

    The problem is that Fannie and Freddie are not a direct and simple subsidy for the banks. They are private companies with a government charter. Rather than using taxpayer dollars to subsidize mortgages, they were borrowing money very cheaply because their quasi-governmental status assured the market that there'd be a taxpayer bailout in the case of any sort of collapse. That is to say, their business model relied on markets ignoring the risk of their activities. And then, because they were private companies with shareholders to please, they also got into slicing and dicing mortgage packages to make money like an investment bank rather than a housing policy. In theory this should've worried the markets where they borrowed their money, but again, the government backstop saved them. Forget too-big-to-fail. This was not-allowed-to-fail.

    So, of course, they failed. As Raj Date of the Cambridge Winter Center put it to me, "anytime the debt markets aren't paying attention to your risk profile, you're doomed."

    Their failure was not, as some would have it, the cause of the mortgage crisis or even close

  9. #19
    Havakasha is offline
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    I would have thought you would have been too embarassed to bring up the Austrian school of economics and remind us of Mr. Peter Schiff.
    Remember that Peter Shciff (Yes, the one who has gotten many of his economic predictions wildly wrong, yet has NEVER once owned up to his mistakes. Yes, the one you praised on this very site) was Ron Paul's economic advisor.

  10. #20
    SiriuslyLong is offline
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    Quote Originally Posted by SiriuslyLong View Post
    Dr. Ron Paul discusses Austrian vs. Keynesian economics on Morning Joe 05/15/2009

    Here on MSNBC Morning Joe, Dr. Paul is complimented by Joe for comments made in 2003 about Fannie Mae, Freddy Mac and the housing bubble.

    It takes a while to get into it (1:45 mark), but enjoy.

    http://www.youtube.com/watch?v=Gf3Nx...eature=related

    I hope our big government aficionado takes the time to listen to this. Doubtful, but one can hope.
    One can see it right here. Just click the link and watch Dr. Paul predict the future with uncanny accuracy YEARS in advance. This evidence is extremely clear just as it Hava-gafa-kasha extremely left, out of the mainstream and even dangerous to our great nation.

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