On 12/20/2012 12:26 AM, meekerdb wrote:
On 12/19/2012 8:44 PM, Stephen P. King wrote:
Also: http://www.sjsu.edu/faculty/watkins/subprime.htm


That's a very biases analysis that implies Fannie Mae and Freddie Mac bought subprime loans, which they did not. It was the banks and private mortgage companies that created the adjustable rate loans with teaser rates. FM's only bought fixed rate loans with substantial down payments. The did however buy 'liar loans'. And their very existence made private lenders assume (correctly) that they would be bailed out. Here's a much more balanced view of the events: http://www.econbrowser.com/archives/2008/07/did_fannie_and.html

Brent


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"Causing" and "allowing to occur" are not the same thing... Exactly how was it that banks where capable of making a profit from the loans that they could easily predict would have a very high default rate? How did the securitization process occur that least to the bundling?

    from the article you linked:
"Fannie and Freddie had _purchased $4.9 trillion of the mortgages outstanding as of the end of 2007, 70% of which the GSEs had packaged and sold to investors with a guarantee of payment_, and the remainder of which Fannie and Freddie kept for their own portfolios. The fraction of outstanding home mortgage debt that was either held or guaranteed by the GSEs (known as their "total book of business") rose from 6% in 1971 to 51% in 2003."

So did Fannie and Freddie buy "packaged" subprime loans? yes indeed they did! 70%!

I invite you to dive deep into this and see the facts for yourself. Don't take any one's summary as a fact, see the full picture for your self.

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Onward!

Stephen

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