And it should have been clearer about debunking the GSE thesis. This is good, but it doesn’t mention Fannie and Freddie:
Other analysts say the lure of profits, not government encouragement, prompted companies to get into subprime. From 2001 to 2005, private lenders’ share of mortgage-backed security issuance rose to 55.2 percent of the market from 19.7 percent.
Bloomberg had the right idea with this piece, but its execution was a bit off.
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Is it me, or did you write a long post about a Bloomberg article without actually linking to the article?
#1 Posted by Doug, CJR on Wed 21 Dec 2011 at 05:29 PM
This isn't an issue of too little regulation, but of too much government.
#2 Posted by Clay, CJR on Wed 21 Dec 2011 at 05:40 PM
Markets' CAN'T have catastrophic failures...
Not when the Gubmint pays off the morons who made the problem.
The lenders who made bad loans should lose money. The borrowers who took out bad loans should lose money. The taxpayers shouldn't be on the hook for this nonsense.
Ryan can gripe all he wants about his so-called "Big Lie", but the REALITY is that in the three years just before the sub-prime meltdown, the GSE's put a HALF A TRILLION DOLLARS into subprime securities..
Anyone who argues that such a huge amount money had nothing to do with the subprime crisis is either dishonest, stupid or crazy.
#3 Posted by padikiller, CJR on Wed 21 Dec 2011 at 06:54 PM
Bringing some reality to padislayer perspective: In Mar 2007, the total amount of outstanding subprime loans is estimated at 1.3 trillion dollars. By padislayers statistics, private lenders put at least .8 TRILLION DOLLARS into subprime securities. Anyone who argues that such a large amount of money had nothing to do with the subprime crisis is either dishonest, stupid, or crazy.
Clearly, the excesses of the private lending market, Wall Street securitization of loans, derivatives, and, yes, the "ownership society" promoted by government were all factors in the mortgate crisis.
#4 Posted by Rick Sullivan, CJR on Wed 21 Dec 2011 at 08:16 PM
The subprime crisis would never have happened if...
1. The Gubmint didn't back more than half of all the mortgages in the country...
2. The GSE's hadn't dumped half a trillion dollars into securitized subprime mortgages... and
3. If the GSE's had heeded their own advisors regarding subprime lending exposure.
Had the Gubmint stayed out of the equation, the bubble would never have inflated to the extent it did, nor would it have exploded to the extent it did.
#5 Posted by padikiller, CJR on Wed 21 Dec 2011 at 08:31 PM
"Ron Paul, currently leading in Iowa in some polls, has been saying for nearly a decade that Fannie and Freddie would cause/did cause a housing bubble."
Not so fast.
Was Ron Paul warning of the boom/bust in housing all those years? YES.
Was he saying that the Fannie and Freddie were THE cause of the bubble? NOT QUITE.
What was Ron Paul saying?
Here (from your link), he explains how market actors were getting unduly bullish signals to act (my emphasis):
"This explicit promise by the Treasury to bail out these GSEs in times of economic difficulty helps them attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a massive unconstitutional and immoral income transfer from working Americans to holders of GSE debt."
He then addresses:
"the explicit grant of legal authority given to the Federal Reserve to purchase the debt of housing-related GSEs. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors."
Get it?
Paul doesn't want to merely abolish the GSEs (Fannie, Freddie, HLBB).
His root concern is the morally hazardous SYSTEM of govt intervention — subsidies, loose credit, guaranteed bailouts, "regulation" — that encourages market-wide malinvestment (a.k.a., "private sector recklessness").
The GSEs just happen to be the vehicles through which that system distorts a particular (housing) market.
#6 Posted by Dan A., CJR on Wed 21 Dec 2011 at 08:51 PM
Dan A wrote: "His root concern is the morally hazardous SYSTEM of govt intervention — subsidies, loose credit, guaranteed bailouts, "regulation" — that encourages market-wide malinvestment (a.k.a., "private sector recklessness").
padikiller takes it up a notch: Clearly this monkeying with the market by Gubmint doesn't just "encourage" private-sector recklessness... It directly causes it.
No matter what the people I formerly called "commies" (before doing so was banned by Pravda's... er, I mean CJR's censors) babble to the contrary.
#7 Posted by padikiller, CJR on Wed 21 Dec 2011 at 09:12 PM
I did indeed, Doug. Many thanks for the catch. Fixed.
#8 Posted by Ryan Chittum, CJR on Thu 22 Dec 2011 at 12:15 AM
I love padikiller's Amos-&-Andy-style rendering of "government" as "Gubmint."
Lawlz @ black people.
#9 Posted by Hardrada, CJR on Thu 22 Dec 2011 at 05:41 PM
"Gubmint" is a redneck term, Hardrada, at least in my estimation...
But if you want to claim a racist origin...
Blame Mr. Chittum, not me:
"The Wall Street Journal editorial page is like the proverbial fish in a barrel. If I ever lack material to criticize, I can just hop over to A16 or whatever and pick from several semi-clever, mostly misleading columns extolling the unlimited virtues of Mr. Market and Corporate America and the bottomless evils of The Gubmint and Big Labor.
http://www.cjr.org/the_audit/wsj_op-ed_page_fleischer_bogen.php
#10 Posted by padikiller, CJR on Thu 22 Dec 2011 at 10:11 PM
Hardrada,
"gubmint" is a (mostly) Southern thing, not a black thing. that's how half my family says it, anyway.
#11 Posted by Ryan Chittum, CJR on Thu 22 Dec 2011 at 10:57 PM
Another person who I would have formerly called a "commie" (before doing so was banned by Pravda's.. er, I mean CJR's censors) has just been schooled.
Old school.
Think about this the next time you try to play the Race Card, Hardrada.
Typical liberal racist bullshit.
#12 Posted by padikiller, CJR on Thu 22 Dec 2011 at 11:12 PM
Speaking of bs.
"The subprime crisis would never have happened if...
1. The Gubmint didn't back more than half of all the mortgages in the country...
2. The GSE's hadn't dumped half a trillion dollars into securitized subprime mortgages... and
3. If the GSE's had heeded their own advisors regarding subprime lending exposure."
Have we not done this to death?
A) the government did not back more than half the mortgages, the GSE's (which were private with an implicit guarantee in exchange for a binding charter on their business practices) bought the prime loans of of banks so they could allocate their capital reserves to making new loans. If what you are upset by is that government guarantee, that's the same implicit guarantee that every big bank walking has nowadays with no restrictions on their risk. Let's see you get pissy about JP Morgan and the government.
Furthermore, the real problems originated in the subprime market which were made by private lenders, not federally chartered banks or the GSE's, 84% of the time. This market and these lenders took near half of the GSE market share, the rank half as it turns out, during the bubble.
If you want to get pissy about the bubble, get pissy about the Fed holding the interest rates low and the SEC allowing the big banks to double and triple their leverage. Your focus is on "housing goals" and "regulation" because you don't like goals and regulation, I get it. But you cannot make a fact based case on these things causing the crisis.
You can make on based on real estate bubbles inflated by low interest rates and expanded credit with a huge amount of fraud in the subprime market thrown in for spice.
B) They purchased subprime securities. ONE TRILLION-ish. Big number. But put in context:
http://www.iwatchnews.org/2011/01/17/2197/factwatch-fannie-and-freddie-were-followers-not-leaders-mortgage-frenzy
"Fannie and Freddie also purchased mortgage-backed securities produced by Wall Street. From 2002 to 2007, Wall Street produced more than $3 trillion dollars in securities backed by subprime mortgages and so-called “Alt-A” mortgages, another class of risky home loans. During that time, Fannie and Freddie purchased 23 percent of Wall Street securities underpinned by subprime and Alt-A loans, according to Inside Mortgage Finance."
Less than a quarter. You'd still have 70% of a problem had they not made a single subprime security purchase.
c) Geez, wouldn't it have been nice if everyone listened to their wiser advisors. JP Morgan had advisors. They didn't stop them.
Goldman Sachs had advisors. They didn't stop them (until they did and decided to dump their positions on their clients).
Lehman Brothers, Merrill Lynch, AIG, the SEC, the Fed, all of them had advisors warning them about predatory lending, fraud, and out of control risk and none of them were listened to. They all were making money. Nobody listens when the sounds of clinking money drown you out. You claim the subprime crisis wouldn't have happened if the GSE's were different somehow.
How? According to your sources, in which this topic was done to death before,
http://www.cjr.org/the_audit/the_big_lie_of_the_crisis_call.php#comment-53931
""We conclude that these two entities [Fannie and Freddie] contributed to the crisis, but were not a primary cause.""
To which you weasled:
"One can be a "major culprit" without being the "primary culprit"
How does the crisis not occur in the absence of one actor who is not even the primary one? HUH?!
#13 Posted by Thimbles, CJR on Fri 23 Dec 2011 at 12:42 AM
Meanwhile:
http://www.chicagomag.com/Chicago-Magazine/The-312/December-2011/The-Chicago-Reporter-and-Lisa-Madigan-Nail-Bank-of-America-on-Racial-Bias-in-Lending/
I blame the CRA... and Acorn... and the basket of puppies I hold in my lap.
Stupid puppies.
#14 Posted by Thimbles, CJR on Fri 23 Dec 2011 at 12:47 AM
LOL...
So Ryan's use of "Gubmint" is not intended as a racial slur, but merely as a (mostly) geographical slur against the "South"...
Cause Southerners are stoopid, in his estimation, I suppose.
#15 Posted by padikiller, CJR on Mon 26 Dec 2011 at 01:34 PM
Well then why are you using it, Padikiller?
I don't care who said it first; it's snarky and unhelpful, so knock it off.
#16 Posted by Hardrada, CJR on Tue 27 Dec 2011 at 06:08 PM
Hardrada...
Why are you saying that Ryan's creation is "snarky and unhelpful"?
HUH?
You think that Ryan's use of "Gubmint" is an "Amos-&-Andy-style rendering"?
Take it up with Ryan, dude... Not me.
You have some support in his admission that his use of the term was intended to castigate those of the "Southern" (his word) persuasion... Given the fact that that black Americans are disproportionately represented in the South... I think you have a valid point in criticizing Ryan's tacit racism... But that's just my opinion... Ask him about it.. Not me...
Liberals are the racists, pal.. Not libertarians..
Deal with the Reality...
#17 Posted by padikiller, CJR on Tue 27 Dec 2011 at 10:12 PM
Padi,
It's douchebag language, period, and you know it. Regardless of who uses it or who used it first. I couldn't care less, frankly.
You shouldn't use it, and neither should Ryan. And as long as you keep using it, I'm going to keep scolding you.
#18 Posted by Hardrada, CJR on Wed 28 Dec 2011 at 12:20 AM
I shall be taunted a second time? I can't speak for Ryan, but the fear of a second taunting is almost enough to persuade me to capitulate.
You screwy liberals are fixated on lingo because you can't take scrutiny. Undoubtedly the result of Gubmint education. Why not deal with substance?
Speaking of lingo, isn't your use of "douchebag" not only deliberately "snarky" and "unhelpful" but also clearly vulgar and sexist, Hardrada?
HUH?
#19 Posted by padikiller, CJR on Wed 28 Dec 2011 at 07:37 AM
"Speaking of lingo, isn't your use of "douchebag" not only deliberately "snarky" and "unhelpful" but also clearly vulgar and sexist, Hardrada?"
I myself don't see anything wrong with le bag du shower. Nor is gubmint, gubnatorial, and gubgubgubthreemeninatub a problem for me, though that last one might be a problem for libertarians like Ron Paul - who aren't racist at all, no sirree!
What was this topic about again?
#20 Posted by Thimbles, CJR on Wed 28 Dec 2011 at 02:52 PM