nextrade!
I don't think anyone, including this Poole guy, understood what he said. He just sensed that there would be a disruption but in reality, it could be total systemic failure.
A short history lesson, the entire S&L industry was wiped out, with WM consolidating what was left. When housing stabilized, starting around mid 1990s, all the portfolio lenders are gone. Left behind was a bunch of mortgage originators.
By default, freddie and fannie got all that business so it grew. Then Greenspan, who has no understanding of and therefore never paid attention to real estate, created the biggest real estate bubble while failing to keep the stock bubble inflated.
Here is the problem.
With 42% of all US mortgages sourced to Freddie and Fannie, it is not what happens to the stock that matters, it is the immediate destruction of the secondary market, if these two are not in the position to provide the funding. All the LC lenders may decide to freeze the lines to the brokers if a take out is not assured. This chain can go on and on, essentially shutting down the entire home mortgage financing system.
It is not a question whether it can happen or not but rather, do we have a plan in the event it happens. |
