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When is the last time the Fed asked for public opinion before taking action? They didn't want to fix it.
When was the last time HUD asked for public opinion before requiring F&F to buy $2.4 trillion worth of high-risk loans, and then peddle them worldwide as GSE-issued MBS that had to be bailed out by $2 trillion worth of QE, $1.76 trillion of which is STILL unpaid?
If the economy is going up when presidents change, the exiting party says "See!? All those things we did helped and now the opposing party is trying to take the credit!" The entering party would say "See!? Just our mere presence has caused such optimism that the economy is recovering after 4-8 years of oppression by the exiting party!"
If the economy is going down the tubes when presidents change, the exiting party says "Well, the other party won and businesses are really negative on that. But when it recovers, it'll be my policies that were in place for 1-2 years to turn it around!" And the entering party will say "See what the other party did? Everything is in ruins!"
And it doesn't matter where the truth lies. Since politicians rely on our short-term memory and our having more interest on who The Bachelor chose and who did the best on Dancing with the Stars as opposed to actually following what matters.
If the question is why didn't Bush reverse HUD's disastrous requirements of Fannie and Freddie, just look at all the trouble Trump is having letting DACA expire on schedule. Several Federal Courts keep blocking the Obama-mandated built-in expiration of DACA.
And yet FNMA/ FHLMC'c market share declined as the bubble inflated and did so because a substantial amount of new/ refinanced money mortgages failed to conform. Originators had found other sources of funding.
This blaming Democrats or Republicans is hooey.
There is a tendency to overlook the acute lack of personal responsibility that occured as the bubble inflated. Tens of millions of people deluded themselves into believing their homes would continue to appreciate at compounded annual double digits, indefinitiely. They sucked the equity out of their homes and used it to live beyond their means which goosed an otherwise lackluster economy.
No one held a gun to the heads of the masses and it certainly was not limited to those who were not worthy of credit.
And yet FNMA/ FHLMC'c market share declined as the bubble inflated and did so because a substantial amount of new/refinanced money mortgages failed to conform. Originators had found other sources of funding.
And yet, it was Fannie and Freddie who needed the $2 trillion bailout. Even the combined total Federal Reserve-held debt of those "other sources" never approached anywhere near $2 trillion.
If other sources of funding were having trouble, it's quite clear the Federal Reserve didn't bail them out. The fact that only F&F needed the $2 trillion bailout even WITH their declining share of the secondary mortgage market makes it quite clear that F&F and their large amount of substandard "Affordable Lending" loan-laced MBS were indeed the problem.
Then, how is there $1.76 trillion worth of F&F MBS on the Federal Reserve's H.4.1 that weren't there in 2008?
Possibly, but the US Treasuries are being paid as required. The F&F MBS are not.
How can we tell? Look at the Federal's Reserve's 2008 H.4.1 compared to now. There's a $2.27 trillion difference in the bottom line, $1.76 trillion of which is solely due to Fannie and Freddie MBS.
The outstanding Maiden Lane balance is 0.1% of the outstanding balance on F&F MBS.
So who pays off the $1.76 trillion still outstanding debt owed on GSE MBS?
Here is an explanation from the FED as to why the made the purchases. Note there is nothing about a bailout. Its called QE. Its the same reason that the Federal Reserve bought billions of dollars of US Treasuries that also where not on the balance sheet prior to 2008.
Agency Mortgage-Backed Securities (MBS) Purchase Program
Background
In response to the emerging financial crisis, and in order to mitigate its implications for the U.S. economy and financial system, the Federal Reserve eased the stance of monetary policy aggressively throughout 2008 by reducing the target for the federal funds rate. By December of 2008, the Federal Open Market Committee (FOMC) had reduced its target federal funds rate to a range of between 0 and 1/4 percent. With the target federal funds rate at the effective lower bound, the FOMC sought to provide additional policy stimulus by expanding the holdings of longer term securities in its portfolio, the System Open Market Account (SOMA), including large-scale purchases of fixed-rate, mortgage-backed securities (MBS) guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae (referred to as "agency MBS"). The purchases were intended to lower longer-term interest rates and contribute to an overall easing of financial conditions.
I'm not sure what you mean by being paid as required. The MBS held by the FED are being paid by the borrowers and the mortgage interest earned is turned over to the US Treasury.
Depending how rapidly the FED wants to reduce liquidity the FED can either not replace the paid off loans or sell the MBS into the marketplace. In either case the timing is up to the FED.
mircea is right, and wrong. the real estate bubble was building for quite some time, since the mid 90s in fact when sub prime mortgages really got going. in the late 90s they added interest only loan payment plans, that had a balloon payment of the unpaid principle over a ten year period.
at the time people were big into flipping houses to make money, and it worked for a while.
thirteen times after bush was elected, he tried to rein in fannie mae and freddie mac, but the democrats were not having any of it as barney frank and chris dodd both claimed there was nothing wrong with those companies.
at the same time, the big banks were buying and selling bundled mortgages to make money, as well as getting into investment banking as well. these two efforts over extended the banks assets. the trigger though was rising oil prices when a few companies tried to corner the market on crude oil, in part to drive another company out of business. these fuel surcharges, and rising as prices added costs to an already over stressed economy, and when the credit markets seized up, people needed money, so they cashed in their stocks and bonds, causing the markets to virtually collapse.
in the end i dont just blame the democrats, since they could have headed off the problem in 2007, i also blame republicans for pushing to repeal glass-steagle, and clinton for going along with it. it was bad for the country then and still bad now. and dodd/frank didnt even scratch the problem, in fact it kind of made things worse by harming the small banks.
it was both sides fault but the main culprit was the banks.
they figured out they could give people subprime mortgages when they didn't even need them. It was easy money until it was time to pay the piper.
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