“This would have been on bonds that Fannie and Freddie hold, on 1.5 trillion in mortgages, to the tune of half a billion credit default swaps that are the biggest source of all the CDS failings in the market. “
This is one point where you are mistaken. The securitized mortgage product market wasn’t just Fannie and Freddie. Wall Street investment banks were cranking out an even greater number of mortgage securities than were Fannie and Freddie. And unlike Fannie and Freddie these weren’t built on conforming loans, which are relatively safe. These private label CDOs were made out of option ARMS, stated income loans, and other high risk paper. This is where the meltdown originated. The swaps on this paper failed because the insurers hadn’t taken into account what would happen if failure was systemic.
With all genuflection implied, That's what I've been saying. If Freddie & Fannie were so squeaky clean then why did they fail? Why did they need bailing out? This is kind of funny. Brooksley Born took that into account and warned that something needed to be done more than 10 years earlier. In fact, it was her job. She was the person appointed by President Clinton. The OTC market was her responsibility. I don't get this. Some of you people have all the answers yet you have no intention of watching the Frontline exposé. Wiki_Wonky_Wacky media.
No. I'm a builder and have worked in my field through three housing corrections. The meltdown originated because the tipping point was reached in the speculation reaching its saturation point. The law of diminishing returns came to the point of flat lining. In the past you would get teachers and firemen, watching ten episodes of This Old House, then they would go out a build a spec house. In the past you would get too many new homes on the market and the market would tip past a growing bubble and crash the market rapidly. In this latest market you could just purchase an existing house, hold it for two years, and sell it for a decent profit.
This time is different in several ways. Not only were new homes being speculated but existing homes were added to that spec market based on government's desire to add more people to that growing market. And last but not least, the bail out and the foreclosure intervention has attempted to cause a soft landing in the housing market. All it has accomplished is extending the time it takes to reach the bottom. So they have taken an existing market, manipulated it so that it would crash like the Hindenburg, and purchased a trillion feather beds so as to soften the blow.
More dweebs be in, how nice.