You are spot on 100% correct. I worked for ABN AMRO, one of this country's largest mortgage providers and mortgage servicing providers from 2003 - 2007.
Fannie & Freddie were under pressure to buy every single loan that was presented to them due to regulatory requirements and the prevailing "wisdom" in Washington D.C. that "everyone deserved a home."
It wasn't just banks that wrote all these bad loans (that they KNEW were bad loans) and then bundled them with good loans (a process called "mixing") to package and sell to Fannie & Freddie or as "investment vehicles", Mortgage Brokers were much bigger bad actors. They knowingly not just wrote bad loans, they pursued bad loans because they were the easiest to make and the highest profit margins for them. Nearly 100% of those loans went straight to Fannie & Freddie within days of loan closure, lest the mortgage brokers get stuck holding paper they knew was bad.
It's important to paint the whole picture here. It wasn't just the bankers. An entire cottage industry sprang up to take advantage of bad government policy which helped create the housing bubble and subsequent crisis.
“They knowingly not just wrote bad loans, they pursued bad loans because they were the easiest to make and the highest profit margins for them.”
The government used threats of legal action for racial discrimination to force them to issue bad loans; the lenders were simply doing the bidding of the government. We pretended minority homeownership was improving, and I’m sure it helped Dems at the ballot box.
THE DERANGED PROGRESSIVE MIND IN MOTION---As a "community organizer" Obama sued banks to give loans to ne'er do wells who clearly could not afford them......even people on disability got loans, for instance.
As president, Obama sued banks for burdening people w/ loans they could not pay back.
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It's important to paint the whole picture here. It wasn't just the bankers. An entire cottage industry sprang up to take advantage of bad government policy which helped create the housing bubble and subsequent crisis.
More on this below.
The price tag for the Wall Street bailout is popularly put at $787 billion—---the actual size of TARP--the Troubled Assets Relief Program. But TARP is just the best known program in an array of more than 30 overseen by Treasury Department and Federal Reserve that have paid out or put aside untraceable money to bail out financial firms and inject money into the markets.
To get a sense of the size of the real $14 trillion bailout, see MJ chart at web site. A guide to the pieces of the puzzle includes massive untraceable Treasury Department bailout programs.
Money Market Mutual Fund: In September 2008, the Treasury controlled by Obama/Emanuel announced that it would insure the holdings of publicly offered money market mutual funds. According to the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), these guarantees could have potentially cost the federal government more than $3 trillion [PDF].
Public-Private Investment Fund: This joint Treasury-Federal Reserve program bought toxic assets from banks and brokerages—as much as $5 billion of assets per firm. According to SIGTARP, the government's potential exposure from the PPIF is between $500 million and $1 trillion [PDF].
TARP: As part of the Troubled Asset Relief Program, the Treasury controlled by Obama/Emanuel made loans to or investments more than 750 banks and financial institutions. $650 billion has been paid out (not including HAMP; see below). As of December 21, 2009, $117.5 billion of that has been repaid.
Government-sponsored enterprise (GSE) stock purchase: The Treasury controlled by Obama/Emanuel bought $200 million in preferred stock from Fannie Mae and another $200 million from Freddie Mac [PDF] to show that they "will remain viable entities critical to the functioning of the housing and mortgage markets."
GSE mortgage-backed securities purchase: Under the Housing and Economic Recovery Act of 2008, the Treasury controlled by Obama/Emanuel may buy mortgage-backed securities from Fannie Mae and Freddie Mac. According to SIGTARP, these purchases could cost as much as $314 billion ---SNIP---.
LONG READ---go to web site to read more and checkout the shocking financial charts.
SOURCE http://motherjones.com/politics/2009/12/behind-real-size-bailout