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Correct. What caused it is the Clinton/Cisneros/Cuomo HUD requirement that F&F buy $2.4 trillion worth of high-risk mortgages made to borrowers who would otherwise be unqualified, for their "Affordable Lending" program.
Barney Frank admitted it on C-SPAN in 2013, after he had retired from Congress.
I saw your Barney Frank quote. You will notice he said contributed. He didn't say caused it.
Your focus on "Clinton/Cisneros/Cuomo" blinds you to other factors that contributed with much larger impact.
Again at the height of the bubble the GSEs had 40% of the market. Some time you should look at what was occurring in the other 60% of the market and the type of loans they were pushing and who they were selling them too. Until you do you will never fully understand what occurred.
Again, because you weren't paying attention, it was a worldwide CREDIT crisis. Why? Because foreign financial institutions found their GSE MBS to be decreasing in value, reducing their lending capital, so as foreign balloon mortgages, etc., needed to be refinanced, there wasn't enough capital lending reserves to do so.
None of which explains why huge volumes of bad loans were made in foreign countries as well. You can't even answer a simple question without screwing it up and conflating mortgages with mortgage bonds.
As for the rest of your gibberish, it's as wrong now as it was when you posted it 9 years ago.
Ratings Agencies rubber-stamping things without due diligence fanned the flames.
That's an interesting point. I have NO idea why anyone would ever have confidence in a Rating Agency rating, and here's why...
From the SEC in July 2008:
Quote:
"There is no requirement that a rating agency verify the information contained in RMBS loan portfolios presented to it for rating. Additionally, rating agencies are not required to insist that issuers perform due diligence, and they are not required to obtain reports concerning the level of due diligence performed by issuers.
...The [SEC] Staff notes that each rating agency publicly disclosed that it did not engage in any due diligence or otherwise seek to verify the accuracy or quality of the loan data underlying the RMBS pools they rated during the review period. Each rating agency’s “Code of Conduct” (available on each rating agency’s website) clearly stated that it was under no obligation to perform, and did not perform, due diligence. Each also noted that the assignment of a rating is not a guarantee of the accuracy, completeness, or timeliness of the information relied on in connection with the rating."
You are the one arguing the Fed needs a public opinion poll before doing what they want.
No, I explained what the Federal Reserve stepped in and did when Congress wouldn't approve using US Treasury funds to buy troubled assets from foreign financial institutions. Very, very few people understand what happened and why.
Their capital reserve portfolios held GSE MBS that were declining in value. Banks fail when they have insufficient capital reserves.
Oh i totally agree.
Property markets in most developed countries were being massively pumped.
Era of Light-touch regulation.
Lehman Brothers, Deutsche Bank provding a nice stream of cash until it stopped.
But those bad mortgages were being packed inside towers of synthetic CDO's that eventually crumpled.
synthetic CDO's were unregulated so it was a wild west money-spinner while good times lasted.
I saw your Barney Frank quote. You will notice he said contributed.
"Very much so." Direct quote from Barney Frank.
He also said "No more goals," in reference to the HUD "Affordable Lending" goal requirements placed on F&F.
Quote:
Again at the height of the bubble the GSEs had 40% of the market. Some time you should look at what was occurring in the other 60% of the market and the type of loans they were pushing and who they were selling them too. Until you do you will never fully understand what occurred.
Why didn't the other 60% of the market need the $2 trillion bail out F&F needed, $1.7 trillion if which is STILL on the Federal Reserve's H.4.1? Meanwhile, Maiden Lane, the Federal Reserve's bail out of the private sector, was nearly all paid off by 2012? Maiden Lane's outstanding debt balance is 0.1% of what F&F's is.
But yes prudent banking, deposits to loan ratios went out the window and Regulators in most countries believed in "light touch" and let the banks self-regulate.
Oh i totally agree.
Property markets in most developed countries were being massively pumped.
Era of Light-touch regulation.
Lehman Brothers, Deutsche Bank provding a nice stream of cash until it stopped.
But those bad mortgages were being packed inside towers of synthetic CDO's that eventually crumpled.
synthetic CDO's were unregulated so it was a wild west money-spinner while good times lasted.
Synthetic CDOs normally wouldn't own the mortgages or RMBS. Want they owned were swaps geared to pay off or not pay off based on other financial assets that they didn't own performed.
Just another glaring example of how out of wack the market was at the top of the bubble. Investment banks could not find enough securities to sell so they started selling bets on securities they did not own.
He also said "No more goals," in reference to the HUD "Affordable Lending" goal requirements placed on F&F.
Why didn't the other 60% of the market need the $2 trillion bail out F&F needed, $1.7 trillion if which is STILL on the Federal Reserve's H.4.1? Meanwhile, Maiden Lane, the Federal Reserve's bail out of the private sector, was nearly all paid off by 2012? Maiden Lane's outstanding debt balance is 0.1% of what F&F's is.
You haven't yet demonstrated that "F&F" got a $2 trillion bail out.
The total amount invested in Fannie and Freddie so far is $187B.
The Treasury has been earning a return on its investments, which has resulted in a profit. So far the companies have paid $271B in dividends to the Treasury.
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