On May 3, 10:35Â*am, :ПеаБраин wrote:


For objectivity free of political agenda on this fiasco one has to
look north of the American
border:

http://www.theglobeandmail.com/servl...27.COWENT27/TP...

"..In fact, no one wants to level with the people. If they did,
they'd
have to explain that everybody had a hand in creating the credit
crisis - even Democrats. In fact, it was the Republicans who pushed
for tighter regulations on Fannie and Freddie, the government
mortgage
lenders, and the Democrats who opposed them. "These two entities ...
are not facing any kind of financial crisis," said Democratic
congressman Barney Frank back in 2003. "The more people exaggerate
these problems, the more pressure there is on these companies, the
less we will see in terms of affordable housing." Mr. Frank is now a
central figure in the bailout talks.

Both the Republicans and Democrats enthusiastically endorsed the idea
of using government power to expand home ownership to people who had
been shut out of the market....."

Big Brother always knows what is good for us.

gee, why are you not taking your credible empirical evidence, and
collect the reward?

Fannie Mae and Freddie Mac were victims, not culprits
Posted by: Aaron Pressman on September 26, 2008
http://www.businessweek.com/investin...hives/2008/09/...


There s a dangerous and misleading argument making the rounds about
the causes of our current credit crisis. It s emanating from
Washington 
where politicians are engaging in the usual blame game but
this time the 
stakes are so high that we can t afford to fall victim
to political 
doublespeak. In this fact-free zone, government
sponsored mortgage 
giants Fannie Mae and Freddie Mac caused the real
estate bubble and 
subprime meltdown. It s completely false. Fannie
Mae and Freddie Mac 
were victims of the credit crisis, not culprits.
Start with the most basic fact of all: virtually none of the $1.5
trillion of cratering subprime mortgages were backed by Fannie or
Freddie. That s right most subprime mortgages did not meet Fannie or
Freddie s strict lending standards. All those no money down, no
interest 
for a year, low teaser rate loans? All the loans made
without checking a 
borrower s income or employment history? All made
in the private sector, 
without any support from Fannie and Freddie..
Look at the numbers. While the credit bubble was peaking from 2003 to
2006, the amount of loans originated by Fannie and Freddie dropped
from 
$2.7 trillion to $1 trillion. Meanwhile, in the private sector,
the 
amount of subprime loans originated jumped to $600 billion from
$335 
billion and Alt-A loans hit $400 billion from $85 billion in
2003. 
Fannie and Freddie, which wouldn t accept crazy floating rate
loans, 
which required income verification and minimum down payments,
were left 
out of the insanity.
There s a must-read study by staff members of the Federal Reserve
Bank 
of New York analyzing the roots of the subprime crisis that came
out in 
March. I don t think it got much attention then as the
conclusions 
seemed uncontroversial at the time. But now that
Washington politicians 
are trying to rewrite history, it should be
mandatory reading for every 
American interested in knowing how we got
here.
The study identifies five causes of the subprime meltdown: 
-
Convoluted loan products that consumers didn t understand. 
-Credit
ratings that didn t do a good job highlighting the risks 
contained in
subprime-backed securities. 
-Lack of incentives for institutional
investors to do their own research 
(they just relied on the credit
ratings). 
-Predatory lending and borrowing (which I think means fraud
perpetrated 
by borrowers). 
-Significant errors in the models used by
credit rating agencies to 
assess subprime-backed securities.
You ll note in the Fed s five causes that there s some culpability
for 
lenders, borrowers, investors and credit raters. There s no blame
for 
Freddie Mac or Fannie Mae which had little or nothing to do with
the 
entire situation.
It s certainly fair to criticize Fannie and Freddie over real issues
that contributed to their downfall. The companies had numerous
accounting problems and inadequate safeguards covering their own
investment portfolios. Those weaknesses came home to roost when the
real 
estate market cratered. Fannie and Freddie purchased billions of
dollars 
of subprime-backed securities for their own investment
portfolios and 
got hit just like every other investor. But it s some
kind of crazy, 
politically inspired CYA to blame for the mess we re
in.