On Mar 19, 11:26 am, "Lamont Cranston"
Post by Lamont Cranston
Tell us how credit default swaps work.
AIG is the insurance business. They bet on the real
estate market by
selling CDS, now it's time to pay the insured.
That's a hell of an explanation, Shill. You have shown that
you have no idea what is going on. ROTFL!
By the way. How much
does AIG owe the gub'ment entities Fannie & Freddie? You
guys who drove this bubble by financing 50%+ of all
THAT'S A FUCKING LIE, SHILL! You lying is chronic. Seek
Businessweek Magazine wrote last September of the argument
that Freddy Mac/Frannie Mae caused the subprime meltdown:
"It's s completely false. Fannie Mae and Freddie Mac were
victims of the credit crisis, not culprits." Almost none of
the $1.5 trillion of subprime loans were made by Fannie Mae
or Freddie Mac; most subprimes did not meet their lending
standards. 84 percent of the subprime loans were made by
private lending institutions.
Why aren't you blaming Barney Fag and Chris "where's my
loan" Dodd? They knew all of this was going on.
They squelched the
regulators who testified, in committee, that Fannie &
assumed too much risk. Why are you shilling Crampston?
Fannie and Freddie did not cause this mess, you fucking
moron. They were victims. Why are you lying and shilling,
McClatchy Washington Bureau
Posted on Sun, Oct. 12, 2008
Private sector loans, not Fannie or Freddie, triggered
David Goldstein and Kevin G. Hall | McClatchy Newspapers
last updated: October 27, 2008 03:12:24 PM
WASHINGTON — 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 from 2004 to 2006.
Federal Reserve Board data show that:
a.. More than 84 percent of the subprime mortgages in 2006
were issued by private lending institutions.
b.. Private firms made nearly 83 percent of the subprime
loans to low- and moderate-income borrowers that year.
c.. Only one of the top 25 subprime lenders in 2006 was
directly subject to the housing law that's being lambasted
by conservative critics.
The "turmoil in financial markets clearly was triggered by a
dramatic weakening of underwriting standards for U.S.
subprime mortgages, beginning in late 2004 and extending
into 2007," the President's Working Group on Financial
Markets reported Friday.
Conservative critics claim that the Clinton administration
pushed Fannie Mae and Freddie Mac to make home ownership
more available to riskier borrowers with little concern for
their ability to pay the mortgages.
"I don't remember a clarion call that said Fannie and
Freddie are a disaster. Loaning to minorities and risky
folks is a disaster," said Neil Cavuto of Fox News.
Fannie, the Federal National Mortgage Association, and
Freddie, the Federal Home Loan Mortgage Corp., don't lend
money, to minorities or anyone else, however. They purchase
loans from the private lenders who actually underwrite the
It's a process called securitization, and by passing on the
loans, banks have more capital on hand so they can lend even
This much is true. In an effort to promote affordable home
ownership for minorities and rural whites, the Department of
Housing and Urban Development set targets for Fannie and
Freddie in 1992 to purchase low-income loans for sale into
the secondary market that eventually reached this number: 52
percent of loans given to low-to moderate-income families.
To be sure, encouraging lower-income Americans to become
homeowners gave unsophisticated borrowers and unscrupulous
lenders and mortgage brokers more chances to turn dreams of
homeownership in nightmares.
But these loans, and those to low- and moderate-income
families represent a small portion of overall lending. And
at the height of the housing boom in 2005 and 2006,
Republicans and their party's standard bearer, President
Bush, didn't criticize any sort of lending, frequently
boasting that they were presiding over the highest-ever
rates of U.S. homeownership.
Between 2004 and 2006, when subprime lending was exploding,
Fannie and Freddie went from holding a high of 48 percent of
the subprime loans that were sold into the secondary market
to holding about 24 percent, according to data from Inside
Mortgage Finance, a specialty publication. One reason is
that Fannie and Freddie were subject to tougher standards
than many of the unregulated players in the private sector
who weakened lending standards, most of whom have gone
bankrupt or are now in deep trouble.
During those same explosive three years, private investment
banks — not Fannie and Freddie — dominated the mortgage
loans that were packaged and sold into the secondary
mortgage market. In 2005 and 2006, the private sector
securitized almost two thirds of all U.S. mortgages,
supplanting Fannie and Freddie, according to a number of
specialty publications that track this data.
In 1999, the year many critics charge that the Clinton
administration pressured Fannie and Freddie, the private
sector sold into the secondary market just 18 percent of all
Fueled by low interest rates and cheap credit, home prices
between 2001 and 2007 galloped beyond anything ever seen,
and that fueled demand for mortgage-backed securities, the
technical term for mortgages that are sold to a company,
usually an investment bank, which then pools and sells them
into the secondary mortgage market.
About 70 percent of all U.S. mortgages are in this secondary
mortgage market, according to the Federal Reserve.
Conservative critics also blame the subprime lending mess on
the Community Reinvestment Act, a 31-year-old law aimed at
freeing credit for underserved neighborhoods.
Congress created the CRA in 1977 to reverse years of
redlining and other restrictive banking practices that
locked the poor, and especially minorities, out of
homeownership and the tax breaks and wealth creation it
affords. The CRA requires federally regulated and insured
financial institutions to show that they're lending and
investing in their communities.
Conservative columnist Charles Krauthammer wrote recently
that while the goal of the CRA was admirable, "it led to
tremendous pressure on Fannie Mae and Freddie Mac — who in
turn pressured banks and other lenders — to extend mortgages
to people who were borrowing over their heads. That's called
subprime lending. It lies at the root of our current
Fannie and Freddie, however, didn't pressure lenders to sell
them more loans; they struggled to keep pace with their
private sector competitors. In fact, their regulator, the
Office of Federal Housing Enterprise Oversight, imposed new
restrictions in 2006 that led to Fannie and Freddie losing
even more market share in the booming subprime market.
What's more, only commercial banks and thrifts must follow
CRA rules. The investment banks don't, nor did the
now-bankrupt non-bank lenders such as New Century Financial
Corp. and Ameriquest that underwrote most of the subprime
These private non-bank lenders enjoyed a regulatory gap,
allowing them to be regulated by 50 different state banking
supervisors instead of the federal government. And mortgage
brokers, who also weren't subject to federal regulation or
the CRA, originated most of the subprime loans.
In a speech last March, Janet Yellen, the president of the
Federal Reserve Bank of San Francisco, debunked the notion
that the push for affordable housing created today's
"Most of the loans made by depository institutions examined
under the CRA have not been higher-priced loans," she said.
"The CRA has increased the volume of responsible lending to
low- and moderate-income households."
In a book on the sub-prime lending collapse published in
June 2007, the late Federal Reserve Governor Ed Gramlich
wrote that only one-third of all CRA loans had interest
rates high enough to be considered sub-prime and that to the
pleasant surprise of commercial banks there were low default
rates. Banks that participated in CRA lending had found, he
wrote, "that this new lending is good business."
McClatchy Newspapers 2008