Posted on 05/03/2011 1:17:58 PM PDT by Jeff F
In January 2009, I wrote that the housing crisis was mostly a consequence of the private sector. Why? US Agencies appeared to be responsible for only 20% of all subprime, Alt A and other mortgage exotica. However, over the last 2 years, analysts have dissected the housing crisis in greater detail. What emerges from new research is something quite different: government agencies now look to have guaranteed, originated or underwritten 60% of all “non-traditional” mortgages, which totaled $4.6 trillion in June 2008. What’s more, this research asserts that housing policies instituted in the early 1990s were explicitly designed to require US Agencies to make much riskier loans, with the ultimate goal of pushing private sector banks to adopt thesame standards. To be sure, private sector banks and investors are responsible for taking the bait, and made terrible mistakes. Overall, what emerges is an object lesson in well-meaning public policy gone spectacularly wrong.
He includes the following footnote:
Why was it hard to figure this out in the immediate aftermath of the housing collapse? Creative Reporting. According to Pinto, Fannie Mae classified a loan as subprime only if the loan was originated by a lender specializing in subprime, or by subprime divisions of large lenders. They did not use FICO scores to report all subprime exposure, despite their use to define subprime as far back as 1995 in Freddie Mac’s industry letters, and guidelines issued by Federal regulators in 2001. As Pinto notes, this had the effect of reducing its reported subprime loan count.
The path the Hell is paved with Democrat Socialist plans.
Creative Reporting-
a.k.a.
Corruption.
This is the result of central planning.
Please read the above again.
Creative Reporting-
a.k.a.
Corruption.
I’m finding it hard to get excited about this ,, we know what happened ... I’d need to see the underlying data to say “guaranteed, originated or underwritten” means little if the loans are presented to the agencies as being good solid prime borrowers...
An honest and detailed study of any major problem will find government in it up to their neck.
“government agencies now look to have guaranteed, originated or underwritten 60% of all “non-traditional” mortgages, which totaled $4.6 trillion in June 2008. What’s more, this research asserts that housing policies instituted in the early 1990s were explicitly designed to require US Agencies to make much riskier loans, with the ultimate goal of pushing private sector banks to adopt thesame standards. To be sure, private sector banks and investors are responsible for taking the bait, and made terrible mistakes.” What a joke, took the bait? These loans were GUARANTEED by the G, what bait, the government and the banks were colluding against the public big time. And to this day, none of the top crooks have gone to jail. They should all be put up against a wall and shot.
The loans weren’t guaranteed and could have been allowed to fail. Fannie and Freddie had been stockholder owned businesses since the government spun them out back in the 1970s.
The decision to guarantee the loans by making them the responsibility of the taxpayer was a decision made by Dubya and Paulson, for reasons that I’ve yet to see explained. My most charitable guess is that they feared that widespread failure of these loans would collapse the banking system.
Mortgage failures were a symptom of the economy at large. They weren’t the cause of the economic downturn.
Oil prices and unwise trade policies, were the cause of the economic downturn.
This is news?
BM
“Mortgage failures were a symptom of the economy at large. They weren’t the cause of the economic downturn”
I’d say you’re mistaken here. Housing led the downturn, something that is normally unheard of.
The recovery out of the 2001 low was led by housing. And housing dominated economic growth all during Dubya’s administration. It turned out to be a massive bubble, and when it blew it took the world economy down with it.
Oil price led the downturn too.
When people have to choose between buying gas and paying the mortgage, they buy gas, so they can keep their job. And then when they lose their jobs anyway they really can’t pay their mortgage.
Lots of downturns get termed real estate bubble, but it always looking backwards and missing the real causes.
It’s news. Studies run by investment firms such as JP Morgan and Lazard had previously found that private loans had dominated the subprime market, and that they failed at a far greater rate than GSE sponsored subprime loans.
Somebody needs to contact Barry Ritholtz immediately.
“Lots of downturns get termed real estate bubble, but it always looking backwards and missing the real causes.”
Unemployment began to rise when the Democrat Congress passed the Minimum Wage law, CAFE, and a whole host of other job-killing legislation.
Business went Galt, like any responsible entity would, given the double whammy of gas prices, and out-of-control fascist Democrats.
This exposed the under-lying weakness already in the system, bogus mortgages.
“Housing led the downturn, something that is normally unheard of”
And yet, anyone actually paying attention already knew that massive mortgage frauds were undermining the system as far back as 2000. Fannie Mae’s cooked books should have been the wake-up call, but it wasn’t.
Everyone was afraid to upset the apple cart.
My observation is that organized criminals twisted and gamed the noble notion of the "ownership society" into the fraudulent mess that unfolded... and left W holding the bag.
"Ooops"
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