On 12/19/2012 9:38 PM, Stephen P. King wrote:
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
-
"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%!
It doesn't say that 70% were subprime and neither does the paper you cited; it just
implies it. But "Fannie and Freddie .... didn't like losing their market share, and they
pushed the envelope on credit quality as far as they could inside the constraints of their
charter: they got into "near prime" programs (Fannie's "Expanded Approval," Freddie's "A
Minus") that, at the bottom tier, were hard to distinguish from regular old "subprime"
except-- again-- that they were overwhelmingly fixed-rate "non-toxic" loan structures.
And
"As originators and investors with more energy than brains expanded their (subprime)
lending to those borrowers and neighborhoods, it was difficult for Fannie and Freddie to
increase their shares. They didn't want to buy or guarantee subprime loans, correctly
perceiving them to be insanely risky. Instead they purchased securities created by
subprime lenders, taking only the supposedly-safe tranches."
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.
Same to you, fella.
Brent
--
You received this message because you are subscribed to the Google Groups
"Everything List" group.
To post to this group, send email to [email protected].
To unsubscribe from this group, send email to
[email protected].
For more options, visit this group at
http://groups.google.com/group/everything-list?hl=en.
