"ALL CAPS IN DEFENSE OF LIBERTY IS NO VICE."

Monday, November 24, 2008

BERNANKE: FANNIE MAE THE ROOT CAUSE

NEW YORKER:
Bernanke couldn’t say so publicly, but he agreed with some of the critics. For years, the Fed had warned that Fannie and Freddie were squeezing out competitors and engaging in risky mortgage-lending practices. Bernanke would have liked to combine a rescue package with extensive reforms, but he realized that an overhaul of the companies was not politically feasible. Despite their financial problems, Fannie and Freddie still had many powerful allies in Congress [DEMOCRATS!], and Bernanke was determined that the plan be approved quickly, in order to restore confidence in the markets.

... Like the Wall Street firms, Fannie and Freddie had suffered big losses on their vast loan portfolios, and many Wall Street analysts believed that the companies were on the verge of insolvency—an alarming prospect for the U.S. government.

In order to finance their purchases of mortgages and mortgage bonds, Fannie and Freddie had issued $5.2 trillion in debt, and although they were technically private companies, their debt traded as if the government had guaranteed it. If the companies defaulted, the creditworthiness of the entire government would be called into question.
THE GOP, BUSH, GREENSPAN, SNOW AND MCCAIN WARNED CONGRESS THAT FANNIE MAE MIGHT COLLAPSE IF FANNIE MAE WASNLT REFORMED - AND THAT THIS WOULD CASUE A FINANCIAL MELTDOWN.

  • THE DEMOCRATS BLOCKED REFORM OF FANNIE MAE AND THAT'S WHY THE FINANCIAL SYSTEM HAS MELTED DOWN.
  • THE ROOT CAUSE WASN'T DEREGULATION OF THE BANKS - WHICH OCCURED IN 1998. IT WAS THE LACK OF REGULATION AND OVERSIGHT ON FANNIE MAE, AND THE SOCIALISTIC HUD POLICIES DATING FROM 1998.
  • THE ULTIMATE REMEDY ISN'T MORE SOCIALISM.

3 comments:

Bruce Hall said...

While the loan abuses at Fannie and Freddie certainly contributed to the financial meltdown... and while the hedge funds and mortgage funds certainly contributed to the financial meltdown... the root cause was actual actions by the Fed itself.

http://hallofrecord.blogspot.com/2008/06/driving-interest-rates.html

The availability of cheap money followed by the rapid increase in the cost of that money tipped the borrowers who were in the precarious financial situation. It wasn't the absolute levels of the interest rates, but the relative change in the rates that began the cascade of both housing prices and defaulted loans.

The Fed was so busy protecting the banks from inflation that it micromanaged the economy right into a recession... and worse.

Jason said...

With the Treasury Secretary on his spending spree he surely isn’t trying to get a good return on the tax payers’ investment. The bailout was to buy up bad mortgage debt but it never did. What is the purpose of the fund? Paulson’s has warrants on many banks and they average 1 – 3 percent when enacted. Yet the cash investment is about 20 percent of the market cap. Maybe the next Treasury Secretary will be less erratic.

http://nomedals.blogspot.com

Anonymous said...

Comments welcome here, but I honestly think it's not fannie mae, it is the people. Most people don't realize how much money there is out there. During economic times like this, there is more money to be had than ever. Because of the bailouts and economy, lenders are bending over backwards to bail you out too. Believe it or not, there is people getting tons of cheap money nowdays to start businesses, buy homes, pay off debt, and more. Bailouts for Everyone