Economic Growth, Business Cycles, and Obama's performance

[imreallyperplexed]

In this I defer to you degs, you are more informed than I am. (Given my relative ignorance, I did not find it implausible that Fannie and Freddie might have had a little involvement. But I did know that the sub-prime mortgages and the bundling were the major problem.)

Sorry they WERE BLAMELESS. by the time the GSEs were authorized to purchase and tranch "non-conforming loans" - remember the very definition of "non-conforming" is one the GSEs could not buy - it was 2005 and

• over 75% of all the "sub-primes" aka "nonconforming" mortgages HAD ALREADY BEEN WRITTEN
• the foreclosure rate had already started accellerating

Remember that the thing that triggered the foreclosures was the coming due of 3 and 5 year balloon payments. Since these mortgages started to be written in late 2001/early 2002, add 3 years and 3 mos for foreclosure and Voila!!! the expectation, if the problem was NOT the GSEs but Gramm-Leach-Bliley, you should see the foreclosure rate start upwards in 2005

Guess what... here's the chart. http://www.kansascityfed.org/publicat/econrev/pdf/4q07Edmiston.pdf (see chart 4)... Perfect upturn in 2005 of..."sub-prime" ARMS... exactly the kind of mortgage the GSEs were forbidden to hold prior to late 2005

No the GSEs are blameless FOR THE CRASH.


They aren't blameless for the cost of the bailout since their accounting practices and conflicts of interest resulted in a deeper hole than otherwise they would have been in... but linked to the CAUSE of the crash??? not in the slightest way.

Even Greenspan agrees with that one.

 

[degsme]

In this I defer to you degs, you are more informed than I am. (Given my relative ignorance, I did not find it implausible that Fannie and Freddie might have had a little involvement. But I did know that the sub-prime mortgages and the bundling were the major problem.)

Well to the extent that they were suckered into buying into the subprime market as it was starting to crash, they essentially extended how long there was liquidity in the market by about an additional year. so about an addition 10% of mortgages written and thus about 10% greater exposure by Bear Sterns, AIG et. al But that's a minor cost increase compared to actual triggers.

HEre's Frank talking about what really happened. http://www.youtube.com/watch?v=c5nBddKn4TQ vs. the Breitbart retelling http://www.breitbart.tv/barney-franks-fannie-freddie-problem/

See here's the thing. The chairman of the committee at the time of Breitbarts montage was ... Oxley (R) the person who "tried to reform Fannie" was rep Royce (R-CA) on Oxley's committee. Remember this is 2005. R's control the House Rules committee. Which means that nothing gets voted on that the R's don't approve of. And that means the GOP also has all the chairmanships of the House Committees (Oxley in this case) and if no democrat voted for any of the GOP's bills in committee or on the floor, THE WOULD STILL PASS

So the folks that stripped the GSE regulation from the bill in 2005 were..... REPUBLICANS.. and CONSERVATIVE REPULBICANS AT THAT....And the Senate was GOP Controlled


and in 2004 GWB himself ORDERED FNMA to increase its CRA underwriting.

So CB here is just making up things that are verifiably not so.

 

[degsme]

Note also that the DEMS passed a tightening of the GSEs in 2007, which went into effect 2008. And that put the GSEs into receivership. And they were there for THREE WHOLE MONTHS before the market completely imploded.... IOW there was no connection.