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BWX
join:2006-10-10
Elmira, NY | reply to amigo_boy
Re: Sure amigo_boy said:
"But, (IMO) the leading component was unregulated, opaque derivatives which were at the heart of obscuring risk. Turning sub-prime mortgages into AAA-rated bonds sold on the open market."
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Which couldn't and wouldn't have happened w/o those sub-prime mortgages... that were mandated by the government.
amigo_boy said:
"That's a gross over-simplification. To the extent that it's false."
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Yes it is so false that your "summary" repeats the same thing you said was so over simplified as to be false. (sub-prime mortgages being the root cause)
amigo_boy said:
"Although originating in 1995, and increased in 1999 under President Clinton[1], sub-prime lending actually exploded under President Bush:"
"I think that's an important point because those who toss the socialismword-bomb often suggest democraticsocialism -- while ignoring republicansocialism.For example, President Bush didn't stop HUD. And, that happened at a time when Republicans controlled the House, Senate andPresidency for 4 years! (Jan. 2003 to Jan. 2007.) At the height of the maddness!. Just 18 months before the meltdown began!Not only that, but Republicans controlled Congress (both the House and Senate) for 6 years between Jan. 1995 to Jan. 2001.In other words, Republicans were the Congress who gave us the two problematic CRA revisions........................"
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No one said it was all the democrats.. I said it was "government". By making that argument you show who you are trying to defend though.. The people most responsible, the "social justice" crowd. - Liberal democrats like Barney Frank. | |
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3 edits | said by BWX:Which couldn't and wouldn't have happened w/o those sub-prime mortgages... that were mandated by the government. Sub-prime mortgages existed before the CRA legislative change of 1992. There's no reason to believe the derivative market (which took off in the '97-'07 timeframe) wouldn't have seized upon that market.
It wasn't a government mandate which caused Wall St. banks to securitize mortgages using exotic derivatives. Well over half the mortgage market.
It wasn't a government mandate which caused investors to pour money into those derivatives (sold as bonds), creating even greater demand.
And, it wasn't a government mandate that required investors to buy unregulated "insurance" (on things they didn't even own) which was insufficiently capitalized to pay claims.
said by BWX:amigo_boy said: "That's a gross over-simplification. To the extent that it's false." -------------- --------------------- ----------------------- Yes it is so false that your "summary" repeats the same thing you said was so over simplified as to be false. (sub-prime mortgages being the root cause) Your assertion was false because you said "fannie/freddie started this entire financial meltdown. It was government giving out loans for McMansions ..."
As I pointed out in my reply, Fannie/Freddie were far from entirely responsible. In fact, they held the least toxic mortgage-backed securities. It was the secondary market's mortgages which were far more out of control (standards-wise).
The problem wasn't McMansions (jumbo loans) either. It was little, average homes. Often refinancing. Often in poorer parts of town.
Fannie/Freddie magnified the problem due to the size of their holdings. But, it wasn't Fannie/Freddie loans that initiated the collapse. It was the truly toxic stuff, and all the CDS side-bets that took place. The stuff Lehman was shifting off their books every month to hide their liability. The stuff they would orchestrate an overnight swap with another Wall St. bank just to create a "market price" (when there was no market).
Fannie/Freddie's assets were collateral damage. In the same way some AAA-rated variable-interest mortgages were.
said by BWX:By making that argument you show who you are trying to defend though.. The people most responsible, the "social justice" crowd. - Liberal democrats like Barney Frank. Well... it seems a little strange to blame Barney Frank and his ilk when HUD's sub-prime lending literally exploded in size under President Bush. At a time when Republicans held the House, Senate and Presidency for 4 whole years.
Not only that, but Republicans controlled Congress (both the House and Senate) for 6 years between Jan. 1995 to Jan. 2001.
In other words, Republicans were the Congress who gave us the two problematic CRA revisions ('95 and '99). They were also the Congress of '99 which barred states from regulating Credit Default Swaps (regulation which had been on the books since the 1907 Panic). And, they controlled the agenda (committees, bringing bills to the floor) for an astonishing 10 years during the 12 years that we are told today (by Republicans) should have been obvious to everyone a problem was brewing. Not a single revision brought to the floor for a vote!
Did Barney Frank make all that happen?
I'm detecting a common thread in your argument. Wall St. wouldn't have gone crazy selling derivatives on bad loans (they were buying without the help of Fannie/Freddie) if Fannie/Freddie hadn't set the example first.
President Bush wouldn't have increased bad HUD loans if it hadn't been for President Clinton making it possible.
And, Rs controlling Congress for 10 out of the 12 years would have fixed the problem if it hadn't been for Barney Frank liking sub-prime loans.
It's everyone else's fault!
Anyway. I hope we've settled the crux of the problem with your assertion that the problem entirely started with Fannie/Freddie. There were many factors. A "perfect storm."
Mark | |
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