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they(banks) became 'too big to fail' before the repealing of G-S
1987 chemical bank merged into jp morgan
1992 manufactorers hanover and trust into jp morgan
1996 chase manhattin into jp morgan
1993 Banc one into JPmorgan
1995 first chicago into jpmorgan
1995 NDBancorp into jpmorgan
1988 fleet into norstar... into bank of america
1990 bank of new england into BOA
1990 Citizens into BOA
1998 travelrs into citi
1987 first fidelity into wells fargo
1996 Meridian Bancorp into wells fargo
1997 signet into first union into wells fargo
1988 barclays into wells fargo
yes some happend after gs.. but the 'too big to fail' happend before Gs
GS had nothing to due with the housing bubble...the bubble/bust was GOVERNMENT CAUSED... banks are NOT going to lend to people that cant pay UNLESS they are DIRECTED to from the GOVERNMENT..in 1995 clinton/cisneros changed the rules for mortgages through hud/fannie/freddie\
Merrill Lynch was not under a government mandate when they bought First Franklin. They specifically bought First Franklin, and several others at the time, to gain access to a stream of sub-prime (riskier, non-conforming) mortgages. The government wasn't forcing them to buy into the sub-prime mortgage origination. Merrill Lynch, at the time, thought this would be great for profits because it would feed their (not the GSEs) securitization business.
Merrill Lynch was not under a government mandate when they bought First Franklin. They specifically bought First Franklin, and several others at the time, to gain access to a stream of sub-prime (riskier, non-conforming) mortgages. The government wasn't forcing them to buy into the sub-prime mortgage origination. Merrill Lynch, at the time, thought this would be great for profits because it would feed their (not the GSEs) securitization business.
then why didnt the government step in??? if the government was so "anti-monopy" as they were back in the rockerfeller days (std oil) or in the ATT(ma-bell) days, then NO-BANK would have been 'too big to fail'....they government QUIT making monopolies an issue(except when they WANT to make it a political issue (ie the government vs microsoft))...and this goes back many decades
From a Bear Streans guide to Non-Agency Mortgage Backed Securities from 2006 (when the private banks share was still expanding). Non-Agency meaning not the GSEs (Not Fannie, Freddie, Ginnie).
Beginning in 2004, U.S. mortgage lending began to move away from its traditional roots in the 30-year fixed-rate product. Adjustable-rate mortgages (ARMs) captured a larger slice of the origination market, as did non-amortizing (i.e. interest-only) or negatively amortizing product. The non-agency market was at the vanguard of this product innovation, and as a result captured an increasing portion of market share from the agency sector beginning in 2004. While non-agency ABS/MBS had comprised only a 21% share of the securitized market between 1996 and 2003, that percentage rose to 44% in 2004 and reached 54% in 2005, the first time in history it had been higher than 50%. Through the first half of 2006, non-agency share has moved slightly higher, to 56%.
The non-agency share rose even higher after this guide was written. The non-agency products contained large percentages of mortgages that the GSEs would not touch.
And it was a textbook example of a credit-fueled asset bubble based on a flawed assumption that the aggregate housing markets will continue to rise. ARMs are entirely sensible if property prices rise fast enough that a borrower can pay off one mortgage by leveraging a higher paper property value into another mortgage. Private lenders, and massive institutional investors buying into them, created innovative financial products that took advantage of existing market conditions but lacked foresight and were incredibly vulnerable to instability in the underlying housing market. What's more, investors so heavily leveraged their own borrowing capacities to invest in these products that the vulnerability of the mortgage-backed securities threatened the global financial system.
Like... all, combined. They weren't the single largest mortgage funding source as the GSEs have been for decades.
F&F bought sub-prime loans, too, only they called them "conforming." Or are you suggesting that F&F ever reported that 50% of the loans they were buying were sub-prime?
Not when they default. And private investment banks know that.
Again, what are you missing about what Barney Frank admitted on C-Span?
Asked about the government's affordable housing goals compelling Fannie Mae and Freddie Mac before the crisis to devote more than half their portfolios to riskier nonprime mortgages for low-income borrowers, Frank blurted out: "No more goals, no more telling the private sector" how to invest in the housing market."
"...telling the private sector..."
I'm not missing what Barney Frank "admitted". I have never claimed that the GSEs are without fault or that a failure of the GSEs could create a crisis.
However, investment firms, like Merrill Lynch, Bear Streans, Lehman Brothers, Goldman Sachs at the time of the housing bubble were not operating under a government mandate telling them "how to invest in the housing market.".
The investment firms had figured out a way, at least for several years, that they could make billions of dollars in profits by securitizing mortgage loans into instruments like CDOs. The GSEs never created a single CDO. At the height of the bubble the combined market share of the investment banks exceeded the combined share of the GSEs. This is a result, at least in part, due to the fact that the GSEs wouldn't touch the low quality loans and/or jumbo loans that investment banks were dealing in.
Exactly. Not even private investment banks. Why? Because they and their investors LOSE money when the loans default.
Have you even bothered to look at what happened at Bear Stearns, Lehman Brothers, Merrill Lynch, AIG, etc. Yes in the end they lost billions of dollars, but before the fall that were making billions and paying there staffs millions of dollars in bonuses.
The non-agency products contained large percentages of mortgages that the GSEs would not touch.
BS. If so, Fannie and Freddie wouldn't have needed a blank check bailout. And the bailout bill wouldn't have contained this specific provision intended to back GSE-issued MBS sold to financial institutions, investors, and foreign governments, worldwide:
"Fannie Mae and Freddie Mac are where they are because they were run as the largest hedge fund on the planet...
Consider the scale and complexity of the problem. The government cannot simply
default on the GSE debt with the intention of passing losses onto creditors. About 50% of this debt is held by financial institutions and about 20% by foreign investors, who also own the majority of government debt. Due to their size and interconnectedness, the GSEs cannot simply
be unwound in the ways that have been successful for smaller financial firms. We are dealing with $3.5 trillion mortgage guarantees, a $1.7 trillion mortgage portfolio, and a $2.2 trillion position in derivatives. Not only does the unwinding from the GSEs have to be handled well, the Federal Reserve also has to plan its own exit from the $1.5 trillion position of GSE debt and GSE-backed securities that it accumulated as part of the rescue package for the economy. It is
clear thus that any resolution to the problem of the GSEs will likely involve several years, if not
decades, of careful crafting and execution."
I'm not missing what Barney Frank "admitted". I have never claimed that the GSEs are without fault or that a failure of the GSEs could create a crisis.
However, investment firms, like Merrill Lynch, Bear Streans, Lehman Brothers, Goldman Sachs at the time of the housing bubble were not operating under a government mandate telling them "how to invest in the housing market."
They were, in fact, negatively impacted by the drastically reduced lending standards the GSEs dubbed "conforming" in order to meet Clinton's/Cisneros's HUD mandate when such never should have been the case.
The private investment firms are VERY small potatoes compared to the disaster that is Fannie and Freddie. Read the St Louis Fed document I just posted.
then why didnt the government step in??? if the government was so "anti-monopy" as they were back in the rockerfeller days (std oil) or in the ATT(ma-bell) days, then NO-BANK would have been 'too big to fail'....they government QUIT making monopolies an issue(except when they WANT to make it a political issue (ie the government vs microsoft))...and this goes back many decades
Because the of the Libertarian attitudes towards regulating derivatives. At the time, before the bursting of the housing bubble, many people (by people I mean people in the financial industries) believed that they had sufficiently mitigated the risks via the derivatives themselves. Which is why firms like AIG did not set aside reserves to handle losses on Credit Default Swamps they had sold to back the CDOs. They never imagined they would have significant losses. One exec at AIG boasted that the losses would never exceed .1%.
I would point out, and I haven't researched it in detail, but my understanding is a lot of the funding for the expansion of the energy sector for oil and gas has come from derivatives. If the price of oil remains low then a lot of the financial instruments will fail. I don't now how wide spread the practice is or who is holding them, but if it is widespread then it could be similar to what occurred with the mortgage derivatives.
BS. If so, Fannie and Freddie wouldn't have needed a blank check bailout. And the bailout bill wouldn't have contained this specific provision intended to back GSE-issued MBS sold to financial institutions, investors, and foreign governments, worldwide:
While most non-agency ABS/MBS are backed by loans which meet or exceed agency underwriting guidelines, some loans do not meet those standards. In general, such loans fall into the lower credit score regime, and may have additional features which, in combination with other attributes or with the credit score, prevent them from being securitized in an agency pool. Note that agency eligibility must be established on the basis of both loan size and underwriting standards. A loan that fails on either test
cannot be included in an agency pool. Thus, the vast majority of loans in prime jumbo deals (discussed in more detail below) are loans with excellent credit quality that fail the agency loan size test (i.e. they are too large to be included in an agency pool, but otherwise meet very high underwriting and credit quality standards).
The non-Agency (not GSEs) were working with mortgages that the GSEs would not handle. Its just a fact.
While most non-agency ABS/MBS are backed by loans which meet or exceed agency underwriting guidelines, some loans do not meet those standards. In general, such loans fall into the lower credit score regime, and may have additional features which, in combination with other attributes or with the credit score, prevent them from being securitized in an agency pool. Note that agency eligibility must be established on the basis of both loan size and underwriting standards. A loan that fails on either test
cannot be included in an agency pool. Thus, the vast majority of loans in prime jumbo deals (discussed in more detail below) are loans with excellent credit quality that fail the agency loan size test (i.e. they are too large to be included in an agency pool, but otherwise meet very high underwriting and credit quality standards).
The non-Agency (not GSEs) were working with mortgages that the GSEs would not handle. Its just a fact.
What underwriting standards did no FICO score loans meet?
I can post a link to a Fannie Mae publication discussing their HUD-mandate affordable lending program with Countrywide that required no FICO credit score whatsoever.
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Or are you suggesting that F&F ever reported that 50% of the loans they were buying were sub-prime? 
