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If you mean ending Fannie and Freddie then I would note unless the current situation of Fannie and Freddie is changed they are going to have a hard time operating by 2018.
Under the Preferred Stock Purchase Agreements that went into effect when the government took the GSEs into conservatorship, Fannie and Freddie send dividends to the Department of the Treasury each quarter that they are profitable.
Freddie Mac, for example, will send $1.7 billion to the Treasury, based on its fourth quarter 2015 results.
But under the PSPAs, the GSEs are prohibited from rebuilding capital and each of the GSEs capital base is required to be reduced, with their capital reserves scheduled to be drawn down to $0 in 2018.
I have no idea how capital intensive entities like Fannie and Freddie can operate with zero capital reserves. This process has been supported by the Obama administration and many in congress.
Well since Congress can't seem to agree on anything that may well occur. I do worry about the ramifications on the availability of mortgages (and therefore the economy as a whole) if the only players left are forced suddenly out of business.
Well since Congress can't seem to agree on anything that may well occur. I do worry about the ramifications on the availability of mortgages (and therefore the economy as a whole) if the only players left are forced suddenly out of business.
Vacuums always get filled. That's why the previous arguments were a lie. If one of the big banks had failed, someone would have filled the need.
Willys, AMC, REO, Pontiac, etc all failed but there is still plenty of cars to go around.
Vacuums always get filled. That's why the previous arguments were a lie. If one of the big banks had failed, someone would have filled the need.
Willys, AMC, REO, Pontiac, etc all failed but there is still plenty of cars to go around.
Size and breadth matters. Sure any individual entity can be replaced. The problem in 2008 is that no one was sure who the strong or healthy entities were. Even previously healthy entities can be pushed to the breaking point if the market perception is that they are weak. Contributing to the situation in 2008 was the opaque nature of OTC derivatives; there was no easy way to determine an entities exposure.
I wasn't. Nearly the entire development where I lived was purchased this way. The problem isn't necessary low down payment loans. The problem was in many cases unverifiable income and conniving loan officers looking for bigger commissions.
Those do contribute, no doubt. But it was the plethora of low down payments. Put down 20 percent and default early vs putting down 3 percent and defaulting early which is worse for the banks?
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Originally Posted by pknopp
I have no idea and that isn't the point.
Of course it's the point. Again it's not about what you did, it's about what others did. They didn't have enough for the down payment why in the world would you think they had enough to invest in other things?
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Originally Posted by pknopp
You said..... People good with money usually don't take those loans. if they have the down payment, they'll make it in order to save in the long run.
People good with money will indeed put down as little as possible in many cases.
No, not in many cases. Again in 1989 1 in 240 loans was 3 percent down or less. 1 in 240 isn't many. That is called hardly ever.
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Originally Posted by pknopp
My argument is not that there wasn't plenty of bad loans made. There was but the reasons were many and no one reason should be stopped because someone abused it.
It starts with Congress bypassing the free market and encouraging little to no down payment loans. Again in 1989 1 in 240 loans was 3 percent or less. In 2007 it was 1 in 3. An entire industry which never failed as a whole, never, ever made those type of loans with that frequency ever. Not even close.
There is one big difference. There were many held accountable for the S&L crash. Not so with the Housing crash even though there were many just as guilty of breaking our laws.
Agreed. But the concept was exactly the same. Inflating the money supply with easy lending.
Quote:
Originally Posted by pknopp
They most certainly did even if not in the conventional sense. None of these entities had the investments to make the loans or investments they were making. The created the bad loan with the knowledge that others would end up responsible for them.
Okay but none combined investment with commercial banking
Quote:
Originally Posted by pknopp
How do I prove this? It's exactly what happened. There is NO reason why Lloyd Blankfein, Angelo Mozilo and others should not be in prison right beside Madoff.
Blankfein was even allowed to get away with perjury. Lack of regulations, no enforcement of our laws, there is no difference. Laws not enforcement might as well not even be there.
Those do contribute, no doubt. But it was the plethora of low down payments. Put down 20 percent and default early vs putting down 3 percent and defaulting early which is worse for the banks?
Of course it's the point. Again it's not about what you did, it's about what others did. They didn't have enough for the down payment why in the world would you think they had enough to invest in other things?
No, not in many cases. Again in 1989 1 in 240 loans was 3 percent down or less. 1 in 240 isn't many. That is called hardly ever.
It starts with Congress bypassing the free market and encouraging little to no down payment loans. Again in 1989 1 in 240 loans was 3 percent or less. In 2007 it was 1 in 3. An entire industry which never failed as a whole, never, ever made those type of loans with that frequency ever. Not even close.
Have you ever bothered to research where the funds for 97+ LTV loans were coming from in the 2000s? Hint, the funds were not coming from Congress mandated loan programs. The funds were coming from the private free market enterprises.
Size and breadth matters. Sure any individual entity can be replaced. The problem in 2008 is that no one was sure who the strong or healthy entities were. Even previously healthy entities can be pushed to the breaking point if the market perception is that they are weak. Contributing to the situation in 2008 was the opaque nature of OTC derivatives; there was no easy way to determine an entities exposure.
There were many things that caused the collapse particularly investment banks making some very bad bets. This is a step in the wrong direction but it looks like the banking lobby is making this happen.
And the SEC (Government) along with the ratings agencies helped them do this by turning a blind eye and giving bad batches of loans high ratings until they were dumped onto smaller banks crippling them.
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