Posted on 09/09/2008 7:28:58 PM PDT by Lorianne
As predicted, my Sunday column that praised the Treasury’s takeover of Fannie Mae and Freddie Mac incited outrage from many readers.
Typical comments? “A horrible deal for Americans.” “A sad day for America.” “Pity the taxpayer.” “Appeasement for China.” “It’s time for a taxpayer revolt.”
As for who’s to blame? Anybody and everybody. Congress, Wall Street, Greenspan, Bush, Clinton, Hank Paulson, Freddie’s and Fannie’s CEOs and the Chinese.
Of course, there is plenty of blame to go around. But let’s not just point fingers. It is time to take a hard look in the mirror and see where the blame really lies.
(Excerpt) Read more at blogs.wsj.com ...
Don’t blame me. I considered my house a big-ticket consumption item when I bought it. I never expected to make a net profit, living as I do in a rust-belt city.
“Congress gives the people what they want.”
Actually I don’t totally agree with this statement. I think most people wanted the Macs to make reasonable loans. IMHO it was some people in Washington who wanted to included low income people to be able to share in the American dream. We can see the results of that. There were way to many people getting loans that had no business getting one.
WSJ speaks the truth on this:
Truth No. 1: Congress gives the people what they want.
Truth No. 2: Wall Street helps people get what they want.
Truth No. 3: Hank Paulson did the only thing he could.
Truth No. 4: We are all to blame.
It boils down to greed - on many levels of society. Everyone tried to get a piece of the pie. The American Taxpayer is left holding the bag.
The criminality involved in the whole housing meltdown is mind boggling.
What I see locally is that young people don't want to start out in a "starter" house and work their way up. They also tend to fill the driveway of the house they can't afford with motorized toys they can't afford.
In nearly four decades of dealing with JQ Public it has been my finding that all to many people spend just beyond their means.
Me, I tried to scrimp and save money to buy my first house at a time when Carter (with the help of Burns) made the notion of saving money a great big joke. Greenspan just continued the borrowing spree.
Something I don’t hear in all these stories, is what to do with this massive dearth of homes. In almost every area, there were stories of frenzied homebuilding during the boom. My take is that we have too many homes for anything to recover.
No we are not all to blame. Some us had studied economics and history and had enough science / engineering training to understand the no free lunch principle. Even Whimpy had to pay on Tuesday for today's gluttony.
I bought in at 10.93 and should have sold off at 11.60. Now it is worthless.
Mark Levin was talking about this tonight. It’s basically a scandal which dwarfs any and all other scandals of our times, it’s entirely the work of democrats including many friends of Oinkbama, and the media refuses to touch it while they scour Alaska for stories about Sarah Palin getting parking tickets. This is a GIGANTIC issue for republicans.
So “we” are being punished again for our personal fiscal responsibility, and predatory investors/landlords are being rewarded for bad investments!
“Palin should publically state that she’ll HOUND the “operators” at Fannie Mae and Freddie Mac TEN TIMES HARDER than the legal authorities that managed to convict Ken Lay but were too F-—ing slow to sentence him before he died.
(That is...if Ken Lay is dead! The first question of the sheriff in the Colorado town that Ken Lay vacationed and supposedly died in... “Are you SURE it’s Ken Lay?” In other words...even the local sheriff wondered if Ken Lay’s corpse was actually the remains of one Ken Lay, the head honcho of the greatly diminshed Enron). “
Oh, is it tinfoil time?
Palin has nothing to do with any of this.
“...it’s entirely the work of democrats ...”
Wishful thinking.
Are you saying that the Republican Congress from 1995 to 2006 and Bush in the White House from 2001 until now had nothing to do with it? If you are, you’re completely delusional.
“IMHO it was some people in Washington who wanted to included low income people to be able to share in the American dream. We can see the results of that. There were way to many people getting loans that had no business getting one.”
Wrong W — Wall Street, not Washington. The investment bankers wanted to make money selling loans to poor people (”subprime lending”) and then turned the loans into risky financial instruments. Then everyone else (your mutual fund, probably) bought them and it all looked good until the housing price bubble burst and they couldn’t collect on the loans.
Nobody in Washington had anything to do with it — it was the free market, plain and simple, and a lot of dumb smart bankers in New York City who still got to keep their million-dollar Christmas bonus anyway. Glad I invested in gold and oil instead!
It is not "all our fault." There are specific and namable scoundrels and culprits. They are easy to identify. They have profited enormously running our major financial institutions doing things that only an idiot or an ivy leaguer who thought he/she was smarter than everyone else would do.
Example. Remember the name Michael Milken. He had a whole theory on how this irresponsible investment scam worked. In the end, he theorized, if the mess was big enough and systemic enough - and he and his pals made sure it was - it was all safe because the FED had not choice but to bail them all out. Turns out he was "rights."
PS Milken was a first year boomer - I am keeping count because there are some folks around here who think that what boomers have "accomplished" is a point of pride.
“No we are not all to blame. Some us had studied economics and history and had enough science / engineering training to understand the no free lunch principle. Even Whimpy had to pay on Tuesday for today’s gluttony.”
Read the explanantion behind the reasons.
Keep in mind that one hand washes the other and people VOTED these freaks into office.
Just wait until underwriting standards get more strict with regard to credit history, employment stability, income/debt ratio and down payment (loan-to-value ratio).... Rat howls about “red-lining” and “discriminatory lending practices” will once again fill the halls of Congress.
I would make one minor emendation to your spot on diatribe. While I think DC as a whole does not bear prime culpability, Greenspan does. He kept creating the money that made financing this debacle possible.
Greed is as dangerous, destructive and evil as sloth.
Nope. Sorry. Bought my house for cash, and I've worked for years for pro-growth Republicans and tried to educate as many people as I could about the fact that there should be no "quasi governmental" financial entities, the FDIC and Federal pension guarantee are terrifically underfunded, and that Social Security money has all been spent and there is no "trust fund."
Politicians and bureaucrats should be allowed nowhere near our finances and the coming meltdown in Social Security is going to make the housing bubble correction (which is going to continue for years) look like one bad day in the Market. The currently despised President of the United States tried to put Social Security on the only track that could possibly salvage any part of it: privatization. He was attacked by AARP, Big Labor, the Punditocracy, and of course, Democrats.
The Franny McMay fiasco is the result of political corruption -- mostly but not exclusively -- by Democrats. Now we are compounding our failure by allowing the morons who created this mess to keep their jobs and pay off their bond-holders. People who make bad investments deserve to lose money, and people who lose other people's money deserve to get fired or be sent to prison depending on the circumstances. It's how capitalism works. Period.
We have a political party in this country that's savaged anyone -- in or out of politics -- who's tried to raise the alarm about the financial future of entitlements. Everybody knows the party that demagogues this issue; and everybody knows the party that created these "quasi-governmental" financial entities. Now I have to read in a supposedly reputable business journal how this is everybody's fault.
No. It's not.
I don't buy this we were all in it BS for one second. Many of us saw it for what it was right from the start.
I suspect some of Tigers friends are not going to buy into what you are selling either.
But I know what this is about. If you can blame everyone, then there will not be a populist uprising to go find the hotshots on wall street who made hundreds of millions in bonuses on these financial finagles and nicely request that they give some of it back.
Trace Fannie and Freddie back to their origins, and then tell me that the Feds did not have a big part in this debacle.
Fannie should never have been allowed to be created, and should have been dismantled after the depression when there was an opportunity to do so. Freddie then would not have been necessary, and in any case never should have been created in the first place either.
This is what happens when government interjects itself in what should be private markets, where EVERYONE who invests takes PRIVATE and personal risks...this is what inevitably happens to entities like “GSE’s” (government sponsored enterprises) where risk is assumed by the deep pockets of the U.S. Treasury.
“No, you are not putting the blame on me. I think I have some other friends here you cannot put the blame on.
I don’t buy this we were all in it BS for one second. Many of us saw it for what it was right from the start. “
Some did but they did NOTHING about it. They still voted the crooks in and when it comes to $$$$$ in the business world, well they like money too! Yes, it was a “bubble” and it burst. GEESH! Don’t give me this naieve nonsense.
Most recently the “no money down” was actually true! Banks loved it. Real Estate agents loved it. Homeowners about to retire ADORED it. Flippers LOVED it. People that couldn’t afford the house LOVED it. Builders LOVED it. Appraisers LOVED it. Tax accessors LOVED it. Liberals LOVED it - no more “red lining” and everyone could have the “American Dream”. Getting the picture? They weren’t all Demoncrats that benefitted from this ... .
“I suspect some of Tigers friends are not going to buy into what you are selling either.”
I’m not “selling” anything. I’m just stating the obvious.
“But I know what this is about. If you can blame everyone, then there will not be a populist uprising to go find the hotshots on wall street who made hundreds of millions in bonuses on these financial finagles and nicely request that they give some of it back.”
LOL! I don’t know what’s happened to the American people. I wish people would rise up. I wish they would stop voting these self serving crooks in to pass legislation that enables all this to happen. Unfortunatly one hand washes the other. It’s not just Wall Street that made “millions”. No, it’s not class warfare. Many made money.
It all starts in DC. Legislation allowed this to happen in the housing market.
Maybe this will help you out.
One can only try ...
The Truth About Freddie & Fannie
http://www.rushlimbaugh.com/home/daily/site_090908/content/01125109.guest.html
I happened to catch Rush today and he had a sub in. He was good and gave very good specific on how all this occurred. I wrote down the guys radio station. He claims he has it listed on his website. Tomorrow night after I get home, and remember, I’ll post it.
Horsecrap.
If this is what passes for intellect at the WSJ, is it any wonder why serious investors prefer the IBD over this twaddle?
He does not breath a word about the stunning level of leverage inside Fannie/Freddie. He omits any mention of the drive in the last 10 years to plump up the valuation of the common stock. He neglects to mention that it was the doing of Fannie/Freddie management that they retained a huge portfolio of loans on their balance sheet, when they should have been selling those loans into the market and keeping only a minimum of paper on their own balance sheet.
This clown is a moron. He has no clue what is actually going on inside these two GSE’s.
Here’s the unvarnished truth: Inside Fannie/Freddie, they’re running their own hedge fund(s) - only at levels of leverage at least TWICE what the most absurdly risky hedge funds are using.
Here’s more unvarnished truth: they fail accounting standards. They have consistently failed GAAP accounting. Fannie took years to issue a financial statement after the investigation that deposed Franklin Raines.
The failure here is that Congress failed to exercise their oversight authority. The SEC failed to investigate them. The US Treasury did not make explicit, public pronouncements after the investigation that the US taxpayer would not back Fannie/Freddie paper. And on and on and on.
If Fannie/Freddie stuck to their original mission, ie, providing a conduit to secondary financing, and ONLY that mission, per their charter, and had maintained the levels of capital as required by Congress, then we wouldn’t be in this situation.
This moron of a writer, however, would like to pretend that the common US citizen, or even anyone who got a mortgage as a result of the GSE’s secondary financing of the mortgage market, is to blame. Riiiight. As tho people who complied with the rules/laws had anything to do with 85:1 (or higher) leverage inside their portfolios.
Riiiiight.
The WSJ obviously doesn’t know their pompous buttocks from a warm rock about what is really going on inside these two GSE’s.
preach it budda... while I didn’t pay cash I have a conventional 30yr community bank owned mortgage and I make 10X it’s monthly payment. Sure its austere but I save a lot so hopefully I don’t have to rely on SS or stock market performance.
In the late ‘70s and early 80s the area I live in experienced an oil boom. Housing prices, rents, went through the roof, and many bought too little house for too much. When the boom died, it died hard, and the housing market was glutted with recent construction which had no buyers, nor even renters.
Well, the oil boom is back, housing is tight (locally) and prices are through the roof (for here) again.
Thankfully, I bought an affordable older home while the ‘bust’ was on—for one third what it had sold for during the last boom.
Similar opportunities should open up for home buyers in areas where prices were inflated by flippers and unqualified buyers, if the market is allowed to come down, and there should be some bargains out there.
However, those of us who live within our means should not be called to subsidize those who do not, nor to support those who enabled that sort of irresponsibility—and made a lot of profit for themselves in the process. .
Prosecute the CEO’s?? Sign me up..
But don’t forget the Congressmen behind this debacle either:
http://online.wsj.com/article/SB122091796187012529.html?mod=opinion_main_review_and_outlooks
This is what happens when NON-CONSTITUTIONAL Government is allowed to simply operate without oversight.
Not saying you disagree with this, just that others in the government are equally complicit.
And don’t forget to add that Wall Street, including Paulson’s Goldman Sachs, made a fortune trading this worthless paper
After seeing his pic on the page, I want to punch that smug look right off of his face.
There are a lot of crooks who made out like bandits from this. They knew what they were doing, and this idiot author, and you, are trying to dodge responsibility and palm this off on the rest of us.
They are scoundrels. Keep trying to absolve them, and blame me, and I am going to call you a scoundrel too.
I heard on Rush today that HUD back in the 90’s under Andrew Cuomo mandated that freddie and fannie had to make loans to low income households–ie high risk households. And this on top of the loans to low income neighborhoods (ie high risk loans) fostered by the Community Reinvestment Act 1979.
The CDO concept was developed by (convicted) Michael Milken of (now-defunct) Drexel Burnham Lambert. After the securities scandal, the vehicle lay dormant until picked up by the mortgage industry around 1999/2000. CSPAN aired an interview with a journalist who looked into the subject; took more than a few calls from some articulate folks who objected to placing the blame on Fannie/Freddie for exactly the reason I stated. The CDO package - courtesy of Mikey Milken - is flawed.
A lot of the financial and economic realities of these things would be completely transparent to people if they were not so absolutely innumerate. Imagine somebody saying: "Oh, reading anything more complex than Dick and Jane, I never mastered that." Yet I have overheard these kinds of idiotic conversations so many times in elevators and men's rooms with regards to math: "I can't even balance my checkbook." Duh. "I can't do percentages." You're bragging about that? It's taught in third grade.
I see a number of people on this board blaming Wall Street for this fiasco. It's crap. Byron York has a great column on this at National Review Online: Politics and the Fannie Mae Piggy Bank. These people didn't even follow generally accepted principles of accounting -- for at least ten years -- and they were allowed to get away with it. Now we hear from all the commentators about how necessary it was to bail out the bond-holders. Evidently, though, it wasn't necessary to bail out the stockholders -- most of whom were small investors -- and who're going to get mills on the dollar out of all this. Once again, the rich, politically connected people commit crimes and get bailed out, and small investors who thought they were investing in something as safe as a treasury security are getting hosed.
Oh, and by the way, most of those very rich people were Democrats, but Republicans are still branded as the party of the "the Rich." Figure that one out. When Social Security goes casters up, we'll get to read more bilge of this sort: It's both Parties' fault. Rubbish.
Well, I'm one of the many suckers that got stuck holding the bag for a piece of the pie I never went after. I've owned the same house (my first and only) for 24 years.
Just over three years ago I almost moved for a job change but didn't want to buy into a badly inflated market (NYC). I got an apartment and commuted back every 2-3 weeks. My landlord was a real estate agent who was telling me how bad the market was starting to get. The more I looked the more I realized buying a new house was foolish no matter how good an interest rate I could get. Now I telecommute full time and couldn't be happier I stayed where I was. I refused to get sucked in but still get stuck paying the bill.
Another excellent post. Thank you. I agree 100%.
Democrats benefited overwhelmingly from their mechanizations, from credit challenged constituents Democrats were able to coddle into homes to bailing out their buddies investments on the backs of workers and shareholders.
Something that hasn’t been talked about, but probably not planned, is all the contractors and sub-contractors, developers, and supporting small businesses who lean Republican which have been devastated by the culprits actions. Many are left with properties they can’t sell and employees they had to lay off. Granted that’s their problem however such wild speculation would have never arose with sound lending practices.
Good post!
James Cramer said the Republicans in the Bush administration took a hands off policy toward Mae and Mac. They were viewed as protected Democrat preserves. Tar babies. That to try and rein them in would only bring grief. Such as —”Awful Republicans are preventing blacks, hispanics and poor people from owning homes”
Then there’s wacko so-called Christians ....lol.
This is the key point. Like I said, I am not going to take the fall for this because I did not do it and knew what was up from day one. Expansionary monetary polices, are expansionary debt policies and the debt boom always ends in a bust. A lot of folks were on this gravy train, however, at the expense of the rest of us: real estate agents and brokers, banks and mortgage brokers, financial institutions, land and housing speculators, etc. There are plenty of culprits.
But the guilt is not collective.
Funny.
Hands off till you loose, then get the government to bail you out. Good game if you can play it.
Bail-out hands PIMCO $1.7 billion payday:
http://www.ft.com/cms/s/0/838d3cb4-7e96-11dd-b1af-000077b07658.html?nclick_check=1
I had seen this information yesterday, but couldn’t find it to verify/backup my post. The taxpayers were totally screwed.
I still have my original issue “VA Home Loan” chit.
Why did I never use it?
I was never in the financial position (IMHO) to both afford a mortgage, and assume the total maintenance of a home.
My financial decisions are private, and the direct result of my own personal choices.
But because I was fiscally responsible and risk aversive, and currently have no debt, the Feds are going to force me to pay for the winners and losers in a stupid game I declined to participate in? What harbor do I dump this tea in?
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