10 Replies to “Mortgage Meltdown, in a Nutshell”

1. AJB says:

   October 12, 2008 at 11:34 am

   Private sector loans, not Fannie or Freddie, triggered crisis

   As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

   Commentators say that’s what triggered the stock market meltdown and the freeze on credit. They’ve specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie’s and Freddie’s financial problems.

   Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

   Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height vrom 2004 to 2006.

   Federal Reserve Board data show that:

   _ More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

   _ Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

   _ Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.

   It’s okay though. Just keep believing that the glorious free market in infallible and that the darkies are to blame.

2. B Moe says:

   October 12, 2008 at 11:42 am

   How long are these retards going to keep linking that same fucking article?

3. Darleen says:

   October 12, 2008 at 11:43 am

   AJB

   Cleo was spamming that mendacity on the other thread.

   You might like to keep in mind that Fannie does NOT ISSUE mortgages, it buys ’em.

   You could also supplement your reading with this.

   Most of the mortgage industry debt is managed by GSE’s which are unique animals in government being part government and part private.

4. Darleen says:

   October 12, 2008 at 11:45 am

   B Moe

   As long as they lovingly like to pull out the ‘race card’.

   Facts mean nothing to cultists and Obama is The Messiah.

5. Darleen says:

   October 12, 2008 at 12:05 pm

   Also this written by

   Mr. Calomiris is a professor of finance and economics at Columbia Business School and a scholar at the American Enterprise Institute. Mr. Wallison, a senior fellow at the American Enterprise Institute, was general counsel of the Treasury Department in the Reagan administration.

   A bit more credibility than two McClatchy reporters.

   And Calomiris and Wallison write:

   Now the Democrats are blaming the financial crisis on “deregulation.” This is a canard. There has indeed been deregulation in our economy — in long-distance telephone rates, airline fares, securities brokerage and trucking, to name just a few — and this has produced much innovation and lower consumer prices. But the primary “deregulation” in the financial world in the last 30 years permitted banks to diversify their risks geographically and across different products, which is one of the things that has kept banks relatively stable in this storm.

   As a result, U.S. commercial banks have been able to attract more than $100 billion of new capital in the past year to replace most of their subprime-related write-downs. Deregulation of branching restrictions and limitations on bank product offerings also made possible bank acquisition of Bear Stearns and Merrill Lynch, saving billions in likely resolution costs for taxpayers.

   If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.

   Come ON, AJB, stop being a cultist.

6. geoffb (JARAIP) says:

   October 12, 2008 at 12:45 pm

   I think it would be fair to call Fannie and Freddie “laundries”. Bad paper in, nice freshly washed, government “gar-on-teed”, paper out. With the usual cut for the laundry managers, Raines, Gorelick et al.

7. N. O'Brain says:

   October 12, 2008 at 1:16 pm

   Nope, it was the Democrats (quelle supise!)

   via Hot Air:

   “CUOMO: To take a greater risk on these mortgages, yes. To give families mortgages that they would not have given otherwise, yes.
   Q: [unintellible] … that they would not have given the loans at all?
   CUOMO: They would not have qualified but for this affirmative action on the part of the bank, yes.
   Q: Are minorities represented in that low and moderate income group?
   CUOMO: It is by income, and is it also by minorities? Yes.
   CUOMO: With the 2.1 billion, lending that amount in mortgages — which will be a higher risk, and I’m sure there will be a higher default rate on those mortgages than on the rest of the portfolio …”

   “Here, in fact, is the genesis of the problem, the ideology that created the monster. Cuomo, the Clinton administration, and Congress believed they had the right and the power to determine acceptable risk for the lenders, rather than lenders determining it for themselves in a free market. Even while imposing risk standards on lenders, Cuomo admits that he expects a higher default rate on the new loans — which is why the lenders didn’t want to write them in the first place.
   In other words, the CRA didn’t get used to fight discrimination, but to force lenders to give money to high-risk borrowers for political purposes. And Cuomo knew it.”

   http://hotair.com/archives/2008/10/12/the-quotes-that-explain-the-entire-financial-meltdown/

8. Affirmative Action+Lending Practices=Financial Meltdown | Right Voices says:

   October 12, 2008 at 4:21 pm

   […] Mortgage Meltdown, in a Nutshell […]

9. pan says:

   October 13, 2008 at 12:23 am

   Wow. I mean, I do belive that there wee certain pressures from the left to lend ot those that couldn’t afford it, and there should be some accountibility there.

   But the complete denial that there was a mirepresentation of investment risk associated with the down the stream repackaging of said loans (and how was that risk mitigated?) is insane. If you’re going to claim that this whole financial crisis was simply driven by poor people getting loans they shoudln’t have gotten, then you should not be writing about these issues becasue you don’t understand them.

10. pan says:

    October 13, 2008 at 12:25 am

    “Affirmative Action+Lending Practices=Financial Meltdown”

    Luckily, people aren’t buying this absurdly simplistic and selectively chosen nonsense.

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