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BigMeatballDave
06-11-2012, 06:15 PM
Awesome.

Family Net Worth Drops to Level of Early ’90s, Fed Says

http://finance.yahoo.com/news/family-net-worth-drops-level-185603451.html

WASHINGTON — The recent financial crisis left the median American family in 2010 with no more wealth than they had in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said Monday.
The median family, richer than half of the nation’s families and poorer than the other half, had a net worth of $77,300 in 2010, down from $126,400 in 2007, the Fed said. The crash of housing prices explained three-quarters of the loss.
This vast loss of wealth was compounded by a loss of income, as the earnings of the median family fell by 7.7 percent over the same period.

AustinChief
06-11-2012, 06:22 PM
Ok, let's be honest. OBAMA didn't destroy all that wealth. (you can blame a HUGE amount of that on Barney Frank and his boyfriend)

Obama is just the reason it is taking 2-3 times as long to get it back.

Bewbies
06-11-2012, 06:28 PM
Ok, let's be honest. OBAMA didn't destroy all that wealth. (you can blame a HUGE amount of that on Barney Frank and his boyfriend)

Obama is just the reason it is taking 2-3 times as long to get it back.

Bingo.

BigMeatballDave
06-11-2012, 07:45 PM
Ok, let's be honest. OBAMA didn't destroy all that wealth.

:D My thread title may contain a bit of hyperbole.

Direckshun
06-11-2012, 07:47 PM
:D My thread title may contain a bit of hyperbole.

May.

A bit.

KC native
06-11-2012, 09:29 PM
Ok, let's be honest. OBAMA didn't destroy all that wealth. (you can blame a HUGE amount of that on Barney Frank and his boyfriend)

Obama is just the reason it is taking 2-3 times as long to get it back.

How can you blame Barney Frank? Please don't say CRA. That shit has been debunked repeatedly.

Bump
06-11-2012, 10:14 PM
Yet, the elite's net worth has tripled over the past 10 years. But no big deal, I know the routine, you're lazy if you aren't rich, entitled, etc.

But until you people wake up and smell the coffee, the disparity will grow to levels that will be a scary place to be in.

cdcox
06-11-2012, 10:29 PM
Consider that most middle class American's net worth is mostly in home equity and their 401K. Consider that Obama took office in 2009. Facts are curious things.

Comrade Crapski
06-12-2012, 01:30 AM
The Soviet Union collapsed in 1991, so yeah, twenty years, twentyish, around twenty.

LOCOChief
06-12-2012, 06:43 AM
How can you blame Barney Frank? Please don't say CRA. That shit has been debunked repeatedly.


how bought dodd frank bank reform you fucking dumbass?

blaise
06-12-2012, 06:45 AM
Yet, the elite's net worth has tripled over the past 10 years. But no big deal, I know the routine, you're lazy if you aren't rich, entitled, etc.

But until you people wake up and smell the coffee, the disparity will grow to levels that will be a scary place to be in.

Since this is the only thing you ever say, it might save you time if you just copy this and paste it over and over, rather than retyping paraphrased versions.
Just trying to help. You don't seem very bright and I'm thinking typing out a couple of sentences may be difficult for you. Pasting it could free up time for you to do other things dumb people do. Whatever that is.

Cave Johnson
06-12-2012, 10:14 AM
how bought dodd frank bank reform you ****ing dumbass?

Christ you people are stupid. A bill that deals with the banking sector, which was passed in July 2010 and is still being implemented, is responsible for the drop in household net worth from 2007 to 2010??

Direckshun
06-12-2012, 10:20 AM
Christ you people are stupid. A bill that deals with the banking sector, which was passed in July 2010 and is still being implemented, is responsible for the drop in household net worth from 2007 to 2010??

It makes perfect sense.

cosmo20002
06-12-2012, 02:15 PM
Christ you people are stupid. A bill that deals with the banking sector, which was passed in July 2010 and is still being implemented, is responsible for the drop in household net worth from 2007 to 2010??

Also, lets ignore that the freefall started well prior to Obama taking office in late Jan 2009, so clearly the prior administration should not be mentioned here at all.

vailpass
06-12-2012, 02:55 PM
Also, lets ignore that the freefall started well prior to Obama taking office in late Jan 2009, so clearly the prior administration should not be mentioned here at all.

BUSH lmao Boy, you are one sorry bastard.

blaise
06-12-2012, 03:00 PM
"All I know is, while Clinton was in office, things were good."

cosmo20002
06-12-2012, 03:48 PM
BUSH lmao Boy, you are one sorry bastard.

Not sorry about anything. I didn't vote for Bush. Also, the bastard part is not factually accurate.

boogblaster
06-12-2012, 03:55 PM
poor stupid sheep .. follow the herd over the cliff .. you'll are slaves and too stupid to know it .....

AustinChief
06-12-2012, 05:55 PM
How can you blame Barney Frank? Please don't say CRA. That shit has been debunked repeatedly.

What has been debunked? The FACT that Frank and Moses pushed HARD for looser regulations on Fannie and Freddie? The FACT that both Clinton and Bush pushed for tighter regs and were blocked by Frank? The FACT that Bill Clinton has specifically blamed Frank for sowing the seeds that blossomed into the housing collapse?

Please enlighten me how this is not true?

Cave Johnson
06-12-2012, 07:01 PM
What has been debunked? The FACT that Frank and Moses pushed HARD for looser regulations on Fannie and Freddie? The FACT that both Clinton and Bush pushed for tighter regs and were blocked by Frank? The FACT that Bill Clinton has specifically blamed Frank for sowing the seeds that blossomed into the housing collapse?

Please enlighten me how this is not true?

Yes, and loans from Fannie/Freddie defaulted at the same or lower rates than those from the private sector. Your point being?

mlyonsd
06-12-2012, 07:40 PM
Yes, and loans from Fannie/Freddie defaulted at the same or lower rates than those from the private sector. Your point being?The federal government was just as responsible for the housing collapse as Wall Street. And if you follow the contribution trail from F&F guess who received the most in political contributions? Mostly democrats.

And who warned us about F&F's policies before the great collapse? McCain and the Bush administration.

AustinChief
06-12-2012, 07:56 PM
Yes, and loans from Fannie/Freddie defaulted at the same or lower rates than those from the private sector. Your point being?

My point being that Freddie/Fannie led the charge into bad lending practices. Without their "leadership" the problem would have been minuscule compared to what it became. This isn't to say that Wall Street doesn't deserve its share of the blame... but they were following Fannie/Freddie's lead.

I was the It Director for a mortgage company and a mortgage bank at the time all of this was going down. It was simply ridiculous and it never would have been anywhere close to where it did without Moses and Frank.

AustinChief
06-12-2012, 07:56 PM
The federal government was just as responsible for the housing collapse as Wall Street. And if you follow the contribution trail from F&F guess who received the most in political contributions? Mostly democrats.

And who warned us about F&F's policies before the great collapse? McCain and the Bush administration.

be fair... CLINTON was the first to raise the red flag... which Frank promptly shot down.

mlyonsd
06-12-2012, 08:07 PM
be fair... CLINTON was the first to raise the red flag... which Frank promptly shot down.Before McCain raised the flag in 2005? If true, I didn't know that. Kudos Bill.

AustinChief
06-12-2012, 08:18 PM
Before McCain raised the flag in 2005? If true, I didn't know that. Kudos Bill.

Yup, when Clinton was president, he wanted tighter standards and kept proposing them and getting shot down by Frank.

KC native
06-13-2012, 10:36 AM
My point being that Freddie/Fannie led the charge into bad lending practices. Without their "leadership" the problem would have been minuscule compared to what it became. This isn't to say that Wall Street doesn't deserve its share of the blame... but they were following Fannie/Freddie's lead.

I was the It Director for a mortgage company and a mortgage bank at the time all of this was going down. It was simply ridiculous and it never would have been anywhere close to where it did without Moses and Frank.

So much wrong.

Also, ROFL @ I was IT director at a mortgage company so I know about mortgages. Did you stay in a Holiday Inn Express too?

Fannie and freddie were late to the subprime game. They only got into it because they were losing market share to non traditional lenders which ftr weren't subject to CRA and had loans that defaulted at a much higher rate.

Google Ritholtz and the big lie if you want something o read in the interim.



On my phone so no links right now. But the info is out there

Amnorix
06-13-2012, 10:38 AM
My point being that Freddie/Fannie led the charge into bad lending practices. Without their "leadership" the problem would have been minuscule compared to what it became. This isn't to say that Wall Street doesn't deserve its share of the blame... but they were following Fannie/Freddie's lead.


According to some of the books I have read, this isn't really true, though I certain acknowledge that AT THE VERY LEAST, the loosening of standards by Freddie/Fannie greatly accelerated what may already have been a problem gathering steam.

Amnorix
06-13-2012, 10:44 AM
There is more than enough blame to go around. Frank and the Democrats certainly get a slice, but they weren't commiting mortgage fraud, which was RAMPANT at the big sub-prime lenders. They weren't shopping and basically lying to the rating agencies, which the big investment banks were doing. They weren't repackaging debt a thousand different ways so that the RISK on one mortgage was multiplied by a hundred or a thousand. They weren't misleading investors as to the riskiness of what they were investing in by packing up a ball of subprime crap and then selling the top tranches of that teetering pile of garbage as A rated securities. They weren't stupidly lying on their mortgage applications. They weren't incurring far more debt than they could possibly pay back.

It's flat out comical to point to ANY single politican (or group of them) and say "they did it!"

KC native
06-13-2012, 11:07 AM
An additional point, and this is the most important, the too low interest rates of Greenspan drove this.

The rush to securitize was driven by fixed income managers need for yield. The rating agencies got in on the game and started rating everything AAA. At that point lenders abdicated their credit responsibilities because they were lending for securitization.

Judgements against lenders for motrtgage securitization failures (too high default rates, composition of portfolio) are just now starting to come in.

Fannie and Freddie were peanuts.

KC native
06-13-2012, 11:09 AM
According to some of the books I have read, this isn't really true, though I certain acknowledge that AT THE VERY LEAST, the loosening of standards by Freddie/Fannie greatly accelerated what may already have been a problem gathering steam.

It didn't accelerate anything. Fannie and Freddie couldn't even buy subprime loans until 2006 or 2007 which was well after the peak in the housing bubble.

Sure you can say they had some blame, but it's like complaining about a flat tire when you're motor just threw a rod.

KC native
06-13-2012, 11:11 AM
And who warned us about F&F's policies before the great collapse? McCain and the Bush administration.

McCain may have said something but no one from the Bush administration said shit about the housing bubble until after the fact.

AustinChief
06-13-2012, 04:59 PM
So much wrong.

Also, ROFL @ I was IT director at a mortgage company so I know about mortgages. Did you stay in a Holiday Inn Express too?

Fannie and freddie were late to the subprime game. They only got into it because they were losing market share to non traditional lenders which ftr weren't subject to CRA and had loans that defaulted at a much higher rate.

Google Ritholtz and the big lie if you want something o read in the interim.



On my phone so no links right now. But the info is out there

You really are ignorant on this topic and it's showing, badly.

#1 Do you have any idea what an IT Director for a mortgage bank does? Before you spout of like an idiot, you may want to get your facts straight. The point of that statement was that I know the industry far better then your average political hack who swallows talking points whole and gets their info solely from partisan sources. (Funny that both Bush and Clinton agree with me on the subject)

#2 You seem stuck on pigeonholing everything related to this topic. This is again where your ignorance of how the industry works comes to bear. FM/FM developed the market for subprime loans back in the 90s. Yes, they EXPANDED much further into the market in the mid 2000s but that was long after the market had been developed. They were buying subprime loans for years before. If they hadn't been, the market would have never been as huge as it became. Before they were involved it was seen for what it was... a very risky proposition. FM/FM "legitimized" it.

#3 This isn't just about "subprime" .. it's about a trend toward looser and looser regs. FM/FM blocked every attempt by both Clinton and Bush to install more oversight.

#4 If you want to distort facts/figures and lay the blame on private sector loans.. you may want to look at the ACTUAL facts. By no means are they blameless, they were horrendous... but they just didn't matter as much based on pure VOLUME. When I was in the industry, FM/FM owned somewhere around 90% of the loans out there. I think (this may be off) they owned something like 40% of all subprime. This harkens back to point #2, yes, many of these loans originated as private-label but were quickly bought up by FM/FM. Which then frees up capital for the originator to make more bad loans! So don't give me the bullshit about FM/FM being a small part of the picture. The only people who think that way are either a)clueless about the industry or b)lying through their teeth due to partisan interests

(for this discussion FM/FM include Fannie Mae, Freddie Mac, Ginnie Mae, and any other govt program or GSE)

AustinChief
06-13-2012, 05:01 PM
McCain may have said something but no one from the Bush administration said shit about the housing bubble until after the fact.

I honestly don;t have a clue what McCain did or didn't say... but you're dead wrong on Bush. Just like Clinton, there was a push from his administration for more oversight. Just like under Clinton, Frank blocked it.

AustinChief
06-13-2012, 05:05 PM
There is more than enough blame to go around. Frank and the Democrats certainly get a slice, but they weren't commiting mortgage fraud, which was RAMPANT at the big sub-prime lenders. They weren't shopping and basically lying to the rating agencies, which the big investment banks were doing. They weren't repackaging debt a thousand different ways so that the RISK on one mortgage was multiplied by a hundred or a thousand. They weren't misleading investors as to the riskiness of what they were investing in by packing up a ball of subprime crap and then selling the top tranches of that teetering pile of garbage as A rated securities. They weren't stupidly lying on their mortgage applications. They weren't incurring far more debt than they could possibly pay back.

It's flat out comical to point to ANY single politican (or group of them) and say "they did it!"

No, Frank wasn't committing fraud. FM/FM were. As was proven when they were audited and later went bankrupt. THEY were securitizing loans and buying them from the private labels. FRANK was the leading force behind allowing this to continue with almost no oversight.

Not to be a dick here, but you guys seem to have a grasp on about HALF of what was going on. It's like whatever your sources are just ignore FM/FM almost complete dominance over the secondary mortgage market.

AustinChief
06-13-2012, 05:15 PM
It didn't accelerate anything. Fannie and Freddie couldn't even buy subprime loans until 2006 or 2007 which was well after the peak in the housing bubble.

Sure you can say they had some blame, but it's like complaining about a flat tire when you're motor just threw a rod.

Wanna bet on this one? FM/FM was buying subprime loans all the way back to the 90s. You don't seem to understand just how MASSIVE FM/FM are when you look at the raw numbers. Any small shift by them is more influential then the largest shift by all the private labels combined.

KC native
06-13-2012, 07:57 PM
You really are ignorant on this topic and it's showing, badly.

#1 Do you have any idea what an IT Director for a mortgage bank does? Before you spout of like an idiot, you may want to get your facts straight. The point of that statement was that I know the industry far better then your average political hack who swallows talking points whole and gets their info solely from partisan sources. (Funny that both Bush and Clinton agree with me on the subject)

I know that the IT director for a mortgage bank isn't underwriting loans.

And I don't give a shit what Bush and Clinton agree about on this matter. They both have a lot of egg on their face from the crisis. Clinton signed CFMTA and GLB. Bush put anti-regulatory people into regulatory positions. They were both a large part in the crisis.

#2 You seem stuck on pigeonholing everything related to this topic. This is again where your ignorance of how the industry works comes to bear. FM/FM developed the market for subprime loans back in the 90s. Yes, they EXPANDED much further into the market in the mid 2000s but that was long after the market had been developed. They were buying subprime loans for years before. If they hadn't been, the market would have never been as huge as it became. Before they were involved it was seen for what it was... a very risky proposition. FM/FM "legitimized" it.

So explain to me how the increase in leverage limits by the SEC weren't the prime driver in how outrageously large this market became? Fannie and Freddie, acting as profit seeking enterprises, chasing market share late in the game weren't responsible for housing boom.

When the housing boom went nuts, everyone got in on the traditional boring securitization scheme. Add in the compliant rating agencies and lazy fixed income managers looking for yield but not doing due diligence, and that's where the housing boom came from.

Fannie and Freddie got into subprime to compete with private label securitizers.

#3 This isn't just about "subprime" .. it's about a trend toward looser and looser regs. FM/FM blocked every attempt by both Clinton and Bush to install more oversight.

Fannie and Freddie have been corrupt companies for years. After several accounting scandals, they should have been put under a thumb. However they just apologized, threw some money at subprime while saying it was for affordable housing (which it wasn't. They were chasing profit) and congress backed off.

Subprime is what killed Fannie and Freddie though. So it is about subprime. Traditional conforming mortgages were not what brought them down.

#4 If you want to distort facts/figures and lay the blame on private sector loans.. you may want to look at the ACTUAL facts. By no means are they blameless, they were horrendous... but they just didn't matter as much based on pure VOLUME. When I was in the industry, FM/FM owned somewhere around 90% of the loans out there. I think (this may be off) they owned something like 40% of all subprime. This harkens back to point #2, yes, many of these loans originated as private-label but were quickly bought up by FM/FM. Which then frees up capital for the originator to make more bad loans! So don't give me the bullshit about FM/FM being a small part of the picture. The only people who think that way are either a)clueless about the industry or b)lying through their teeth due to partisan interests

(for this discussion FM/FM include Fannie Mae, Freddie Mac, Ginnie Mae, and any other govt program or GSE)

And here we get to your fundamental misunderstanding. All of those loans were issued private label. Fannie and Freddie do not, have not, nor will they ever originate loans. You have bought into the big lie.

You're the one seeking to assign partisan blame. I have said through the entire crisis that both sides are to blame and the roots of the crisis were in the early 80's.

KC native
06-13-2012, 07:58 PM
http://www.ritholtz.com/blog/2011/11/what-caused-the-financial-crisis-the-big-lie-goes-viral/
I have a fairly simple approach to investing: Start with data and objective evidence to determine the dominant elements driving the market action right now. Figure out what objective reality is beneath all of the noise. Use that information to try to make intelligent investing decisions.

But then, I’m an investor focused on preserving capital and managing risk. I’m not out to win the next election or drive the debate. For those who are, facts and data matter much less than a narrative that supports their interests.

One group has been especially vocal about shaping a new narrative of the credit crisis and economic collapse: those whose bad judgment and failed philosophy helped cause the crisis.

Rather than admit the error of their ways — Repent! — these people are engaged in an active campaign to rewrite history. They are not, of course, exonerated in doing so. And beyond that, they damage the process of repairing what was broken. They muddy the waters when it comes to holding guilty parties responsible. They prevent measures from being put into place to prevent another crisis.

Here is the surprising takeaway: They are winning. Thanks to the endless repetition of the Big Lie.

A Big Lie is so colossal that no one would believe that someone could have the impudence to distort the truth so infamously. There are many examples: Claims that Earth is not warming, or that evolution is not the best thesis we have for how humans developed. Those opposed to stimulus spending have gone so far as to claim that the infrastructure of the United States is just fine, Grade A (not D, as the we discussed last month), and needs little repair.

Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash . You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.

Indeed, the arguments these folks make fail to withstand even casual scrutiny. But that has not stopped people who should know better from repeating them.

The Big Lie made a surprise appearance Tuesday when New York Mayor Michael Bloomberg, responding to a question about Occupy Wall Street , stunned observers by exonerating Wall Street: “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”

What made his comments so stunning is that he built Bloomberg Data Services on the notion that data are what matter most to investors. The terminals are found on nearly 400,000 trading desks around the world, at a cost of $1,500 a month. (Do the math — that’s over half a billion dollars a month.) Perhaps the fact that Wall Street was the source of his vast wealth biased him. But the key principle of the business that made the mayor a billionaire is that fund managers, economists, researchers and traders should ignore the squishy narrative and, instead, focus on facts. Yet he ignored his own principles to repeat statements he should have known were false.

Why are people trying to rewrite the history of the crisis? Some are simply trying to save face. Interest groups who advocate for deregulation of the finance sector would prefer that deregulation not receive any blame for the crisis.

Some stand to profit from the status quo: Banks present a systemic risk to the economy, and reducing that risk by lowering their leverage and increasing capital requirements also lowers profitability. Others are hired guns, doing the bidding of bosses on Wall Street.

They all suffer cognitive dissonance — the intellectual crisis that occurs when a failed belief system or philosophy is confronted with proof of its implausibility.

And what about those facts? To be clear, no single issue was the cause. Our economy is a complex and intricate system. What caused the crisis? Look:

1. Fed Chair Alan Greenspan dropped rates to 1 percent — levels not seen for half a century — and kept them there for an unprecedentedly long period. This caused a spiral in anything priced in dollars (i.e., oil, gold) or credit (i.e., housing) or liquidity driven (i.e., stocks).

2. Low rates meant asset managers could no longer get decent yields from municipal bonds or Treasurys. Instead, they turned to high-yield mortgage-backed securities. Nearly all of them failed to do adequate due diligence before buying them, did not understand these instruments or the risk involved. They violated one of the most important rules of investing: Know what you own.

3. Fund managers made this error because they relied on the credit ratings agencies — Moody’s, S&P and Fitch. They had placed an AAA rating on these junk securities, claiming they were as safe as U.S. Treasurys.

4. Derivatives had become a uniquely unregulated financial instrument . They are exempt from all oversight, counter-party disclosure, exchange listing requirements, state insurance supervision and, most important, reserve requirements. This allowed AIG to write $3 trillion in derivatives while reserving precisely zero dollars against future claims.

5. The Securities and Exchange Commission changed the leverage rules for just five Wall Street banks in 2004. The “Bear Stearns exemption” replaced the 1977 net capitalization rule’s 12-to-1 leverage limit. In its place, it allowed unlimited leverage for Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns. These banks ramped leverage to 20-, 30-, even 40-to-1. Extreme leverage leaves very little room for error.

6. Wall Street’s compensation system was skewed toward short-term performance. It gives traders lots of upside and none of the downside. This creates incentives to take excessive risks.

7. The demand for higher-yielding paper led Wall Street to begin bundling mortgages . The highest yielding were subprime mortgages. This market was dominated by non-bank originators exempt from most regulations. The Fed could have supervised them, but Greenspan did not.

8. These mortgage originators’ lend-to-sell-to-securitizers model had them holding mortgages for a very short period. This allowed them to get creative with underwriting standards, abdicating traditional lending metrics such as income, credit rating, debt-service history and loan-to-value.

9. “Innovative” mortgage products were developed to reach more subprime borrowers. These include 2/28 adjustable-rate mortgages, interest-only loans, piggy-bank mortgages (simultaneous underlying mortgage and home-equity lines) and the notorious negative amortization loans (borrower’s indebtedness goes up each month). These mortgages defaulted in vastly disproportionate numbers to traditional 30-year fixed mortgages.

10. To keep up with these newfangled originators, traditional banks developed automated underwriting systems. The software was gamed by employees paid on loan volume, not quality.

11. Glass-Steagall legislation, which kept Wall Street and Main Street banks walled off from each other, was repealed in 1998. This allowed FDIC-insured banks, whose deposits were guaranteed by the government, to engage in highly risky business. It also allowed the banks to bulk up, becoming bigger, more complex and unwieldy.

12. Many states had anti-predatory lending laws on their books (along with lower defaults and foreclosure rates). In 2004, the Office of the Comptroller of the Currency federally preempted state laws regulating mortgage credit and national banks. Following this change, national lenders sold increasingly risky loan products in those states. Shortly after, their default and foreclosure rates skyrocketed.

Bloomberg was partially correct: Congress did radically deregulate the financial sector, doing away with many of the protections that had worked for decades. Congress allowed Wall Street to self-regulate, and the Fed the turned a blind eye to bank abuses.

The previous Big Lie — the discredited belief that free markets require no adult supervision — is the reason people have created a new false narrative.

Now it’s time for the Big Truth.

KC native
06-13-2012, 08:02 PM
Edit:It's showing redX for me but here's the link. Feel free to kick around that report. http://www.ritholtz.com/blog/2010/09/fannie-freddie-acquitted/

There's a ton of data in this post but here's about the most relevant chart. Got it to work below.

KC native
06-13-2012, 08:04 PM
http://modeledbehavior.files.wordpress.com/2010/08/image7.png

KC native
06-13-2012, 08:07 PM
Another good one from the same report, showing what Fannie and Freddie were actually buying.

http://modeledbehavior.files.wordpress.com/2010/08/image8.png

KC native
06-13-2012, 08:09 PM
There is more than enough blame to go around. Frank and the Democrats certainly get a slice, but they weren't commiting mortgage fraud, which was RAMPANT at the big sub-prime lenders. They weren't shopping and basically lying to the rating agencies, which the big investment banks were doing. They weren't repackaging debt a thousand different ways so that the RISK on one mortgage was multiplied by a hundred or a thousand. They weren't misleading investors as to the riskiness of what they were investing in by packing up a ball of subprime crap and then selling the top tranches of that teetering pile of garbage as A rated securities. They weren't stupidly lying on their mortgage applications. They weren't incurring far more debt than they could possibly pay back.

It's flat out comical to point to ANY single politican (or group of them) and say "they did it!"

This.

AustinChief
06-13-2012, 08:36 PM
I know that the IT director for a mortgage bank isn't underwriting loans.


But you don;t seem to understand that as a director I was in on every meeting with the board, every meeting with ownership and had complete intimate knowledge of the inner working of the software that handles underwriting. The entire industry follows very specific "rules" that are all written into the software.


So explain to me how the increase in leverage limits by the SEC weren't the prime driver in how outrageously large this market became? Fannie and Freddie, acting as profit seeking enterprises, chasing market share late in the game weren't responsible for housing boom.

When the housing boom went nuts, everyone got in on the traditional boring securitization scheme. Add in the compliant rating agencies and lazy fixed income managers looking for yield but not doing due diligence, and that's where the housing boom came from.

Fannie and Freddie got into subprime to compete with private label securitizers.


Once again you are missing two important points.
#1 FM/FM got DEEPER into subprime late in the game. They had already been involved back in the 90s.
#2 FM/FM control the industry. Period. A small shift by them resonates throughout. Much more so than any shift by private investors.


Fannie and Freddie have been corrupt companies for years. After several accounting scandals, they should have been put under a thumb. However they just apologized, threw some money at subprime while saying it was for affordable housing (which it wasn't. They were chasing profit) and congress backed off.


Yes they have been corrupt for many years. BUT during 16 years of Clinton/Bush attempting to install oversight, instead the corruption went rampant because of Frank. I am not being partisan here. I don't blame "the democrats".. I blame the inner circles at FM/FM and Barney Frank.


And here we get to your fundamental misunderstanding. All of those loans were issued private label. Fannie and Freddie do not, have not, nor will they ever originate loans. You have bought into the big lie.


Ok I should have said backed and bought though private investors instead of private label. That is generally how we termed it but I can see the confusion. The problem also may be that you think of the secondary market as existing somewhere down the road. That isn't the case. The mortgage banks, the loan originators are basically a pass through in most cases. So what you get is FM/FM setting the rules because if they aren't buying what you are originating... you aren't going to do much business.

AustinChief
06-13-2012, 08:41 PM
http://www.ritholtz.com/blog/2011/11/what-caused-the-financial-crisis-the-big-lie-goes-viral/

Yes, I have read this. It is correct on many levels. Entities like FM/FM need regulations.. that has been my entire point. Yes, Wall Street and the Fed created an environment that made it tempting and easy for FM/FM to lurch headfirst into bad lending. BUT that's about like blaming the nightclub environment for making it easy for me to drink too much. The fact remains, FM/FM should have had oversight and if they did, much of the housing bust would have been avoided. You definitely would have still had a bust, no question... but not one of the epic scale we saw.

AustinChief
06-13-2012, 09:14 PM
Just to be clear.. I think FM/FM (or more accurately OFHEO) are 70% responsible for the housing crisis. I blame Frank for about 50% of that. So I personally blame Frank for 35% of the problem. I seriously hate Barney Frank.. and yes I am biased. I think he is one of the worst humans in public office since Nixon or LBJ.

KC native
06-13-2012, 09:19 PM
Just to be clear.. I think FM/FM (or more accurately OFHEO) are 70% responsible for the housing crisis. I blame Frank for about 50% of that. So I personally blame Frank for 35% of the problem. I seriously hate Barney Frank.. and yes I am biased. I think he is one of the worst humans in public office since Nixon or LBJ.

Cognitive disssonance is a motherfucker.

AustinChief
06-13-2012, 09:27 PM
Cognitive disssonance is a motherfucker.

disSsonance? :D

Not sure how that would apply in this case. I have known Frank to be a corrupt asshole for ages. This is just one of the few topics that come up where I can spout off on it. I will say that I have no problems with Dodd-Frank though. I'm not blinded by my hatred.

mlyonsd
06-13-2012, 09:32 PM
Cognitive disssonance is a mother****er.Question, do Freddie and Fannie play any part in the subprime meltdown? Just a little?

KC native
06-13-2012, 10:16 PM
disSsonance? :D

Not sure how that would apply in this case. I have known Frank to be a corrupt asshole for ages. This is just one of the few topics that come up where I can spout off on it. I will say that I have no problems with Dodd-Frank though. I'm not blinded by my hatred.

I was referring to the blame % for Fannie and Freddie :)

KC native
06-13-2012, 10:22 PM
Question, do Freddie and Fannie play any part in the subprime meltdown? Just a little?

Yes, they did play a role. They definitely made things worse, however they were not a cause for the housing bubble.

Again, I cite Ritholtz but the guy has been great on the whole crisis as well as making rather prescient market calls. I'm a huge fan of his investment process and willingness to go against Wall St orthodoxy

But I digress. Here is my Fannie Mae thought experiment:

The Facts: Its 1995, and the private securitization market has developed on its own. Fannie Mae looks around, and notices that they are not really all that necessary anymore. Wall Street had become a securitizer of not just mortgages, but student loans, credit card receivables, auto loans.

The Hypothetical Counter-Factual: So the CEO of Fannie announces they were going to sell off their mortgage portfolio, dissolve,, returning their capital to shareholders.

Question: Would the Housing boom and bust have occurred? What about the credit bubble? Derivative crisis? Abdication of lending standards? Leverage increases to Wall Street? Misaligned Compensation packages?

Unless your answer is NO to all of these, than its impossible to blame Fannie Mae for the collapse . . .

AustinChief
06-13-2012, 10:27 PM
I was referring to the blame % for Fannie and Freddie :)

ahhh. well I will admit that my figure is totally unscientific. I can say that they are over 50% and below 100%.. that's about all I can say with any certainty.

If I can get you guys to agree that they are at least 50% responsible... I'll consider my work here done! :D

(oh and to be clear, the crisis would've happened either way.. I attribute FM/FM with the magnificent scale we were stuck with)

cdcox
06-13-2012, 10:46 PM
ahhh. well I will admit that my figure is totally unscientific. I can say that they are over 50% and below 100%.. that's about all I can say with any certainty.

If I can get you guys to agree that they are at least 50% responsible... I'll consider my work here done! :D

(oh and to be clear, the crisis would've happened either way.. I attribute FM/FM with the magnificent scale we were stuck with)

This article strongly argues that their share of the blame would be smaller.

http://www.washingtonpost.com/realestate/fannie-and-freddie-dont-deserve-blame-for-bubble/2012/01/23/gIQAn3LZMQ_story.html


Specifically the part where they show that during the worst part of the bubble, 2002 to 2006, Fannie and Freddie were losing market share to the private lending market. Frontline had a very good 4-hour report on the anatomy of the whole financial collapse about a month ago.

AustinChief
06-13-2012, 11:08 PM
This article strongly argues that their share of the blame would be smaller.

http://www.washingtonpost.com/realestate/fannie-and-freddie-dont-deserve-blame-for-bubble/2012/01/23/gIQAn3LZMQ_story.html


Specifically the part where they show that during the worst part of the bubble, 2002 to 2006, Fannie and Freddie were losing market share to the private lending market. Frontline had a very good 4-hour report on the anatomy of the whole financial collapse about a month ago.

Yes they definitely were losing market share, that's a given. My point has been that they are such an influential force that YEARS before they set the stage for this type of idiocy.. even if the private market took it further. They legitimized the shady practices that became the status quo during the worst part of the crisis. Again, I just don't think people realize how massive of a force they are. The "they aren't the real problem" crowd came in far after the fact and seem to be ignoring huge chunks of history. Another reason why it's important to look at the opinion of someone like Bill Clinton who was there to see the crisis coming and try to prevent it but was completely blocked by Frank.

cdcox
06-13-2012, 11:19 PM
Yes they definitely were losing market share, that's a given. My point has been that they are such an influential force that YEARS before they set the stage for this type of idiocy.. even if the private market took it further. They legitimized the shady practices that became the status quo during the worst part of the crisis. Again, I just don't think people realize how massive of a force they are. The "they aren't the real problem" crowd came in far after the fact and seem to be ignoring huge chunks of history. Another reason why it's important to look at the opinion of someone like Bill Clinton who was there to see the crisis coming and try to prevent it but was completely blocked by Frank.

The credit default swaps, slicing and dicing of risk, and fraudulent representation of the actual risk of those financial instruments put the problem on steroids. Most of those problems still exist. Our financial system is still very vulnerable.