Fannie, Freddie and the Financial Panic of 2008

The Virginian ^ | 9/18/2008 | Moneyrunner

[moneyrunner]

Much has been written and millions of words expended on the current financial panic, most of it utterly wrong because it's made by people who don't have a clue about the workings of the financial markets. And, yes, that especially includes people in the media.

Todd Zywicki, at Volokh posts: Did Eliot Spitzer Contribute to AIG's Demise?

to which we get the predictable response for the invincibly ignorant: [Responding to a comment made by someone who works for an AIG insurance subsidiary]

Poor you. Maybe if your industry had a few less greedy crooks, you wouldn't have to be so put upon with these questions.

The problem with this answer is not that it's totally BS, but that the writer has a point, but he doesn't know who the "greedy crooks" who started this are.

To help educate a few people about what is happening here's a brief explanation:

Question: What started this mess?

Answer: The housing “bubble” burst.

Question: How did that cause this problem?

Answer: Most mortgages are bundled and sold as fixed income securities (bonds). Once default rates went through the roof and housing values fell, the value of these bonds could not be determined.

Question: Why is that a problem?

Answer: When the value of a bond is unknown, no one wants to buy it.

Question: Why is that a problem?

[smokingfrog]

Who are the greedy crooks? Could they be Democrats?

This is a must read: Jamie Gorelick; Mistress of Disaster

[VRWC For Truth]

Fannie and Freddy were the underwater earthquake that’s now creating this financial tsunami because the mortgage backed securities market involves trillions of dollars spread throughout the globe. History will show that a relatively few Democrat one party cartel political hacks looking to line their own pockets may have cause the most massive financial panic in history.

Ding ding ding. WINNER!