That is a dodge. Fannie and Freddie were holding guarantees on more than $500 billion in Alt-A mortgages as of 2007. They didn't actually lend the money themselves, oh no, but they guarantees the loans. Those guarantees, as we now know, were worthless. Fannie and Feddie opened up the vaults at the request of Democrats in Congress, and people stole the money, as you are so fond of saying.
Furthermore, Fannie and Freddie hold securities that are backed by both subprime and Alt-A mortgages. Oh yeah, and they have been cooking the books for the last several years to allow them to continue the loose lending practices. http://www.nytimes.com/2008/09/07/business/07fannie.html?hp "The accounting issues that brought so much urgency to the bailout appear to center on Freddie Mac's capital cushion, the assets that regulators require it to keep on hand to cover losses. The methods used to bolster that cushion have caused serious concerns among the companies' regulator, outside auditors from Morgan Stanley brought in by the Treasury Department and some investors. For example, while Freddie Mac's portfolio contains many securities backed by so-called subprime and alt-A loans, which are one step up from the riskier mortgages, the company has not written down those loans' values to reflect current market prices." See this on Alt-A mortgages: http://en.wikipedia.org/wiki/Alt-A One problem associated with Alt-A loans is the lack of necessary proof or documentation needed to be approved for a loan. Thus, lenders may be inclined to suggest borrowers skew their incomes or assets in order to qualify for a larger loan; in the long run, the borrowers may turn out to be unable to afford their payments but the lenders still collect a hefty profit. Because Alt-A loans are also the financing of choice for most non-owner occupied, investment properties, as a class they represent a far greater likelihood of borrower default than conventional, conforming mortgages, since people are more likely to abandon a property in which they do not live than they are to risk losing their primary homes. As of 2008, there was strong evidence of weakness among securities backed by Alt-A mortgages for reasons similar to the crisis in those backed by subprime. Because Alt-A loans were not primarily purchased by the GSEs, they thus became more expensive and much harder to find as a result of the general crisis in markets for mortgage-backed securities. Alt-A loans were still available from individual institutions which held them "in portfolio" rather than re-selling them to investors, and as of mid-2008 there was a strong push for the FNMA and FHLMC to be permitted to buy more of them. However, the interest rates in this lending category increased substantially between 2006 and 2008 as a result of the shrinking secondary market<http://en.wikipedia.org/wiki/Secondary_mortgage_market> .. On Tue, Sep 30, 2008 at 4:09 PM, Gruss wrote: > > > Fannie & Freddie are prevented by law from making or buying sub-prime > loans. > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:271664 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
