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Politics : THE WHITE HOUSE

SPY 694.04

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Jan 9 4:00 PM EST

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To: GROUND ZERO™ who wrote (23255)	10/6/2008 10:57:18 AM
From: DuckTapeSunroof	Read Replies (1) of 25737

Like I've been pointing out... Fannie and Freddie are but SMALL parts of the over-all financial problem. 1) For one thing: they don't originate mortgages. All they do is their assigned job --- they BUY UP mortgages that are 'conforming mortgages', and that have been made by private firms in the public marketplace. ALL of those dodgy sub-prime mortgages were made by FULLY 100% PRIVATE FIRMS... (with the federal regulators that are supposed to be watching over the system asleep at the switch. For example: Bush made large cutbacks among the ranks at F.D.I.C. and F.H.L.B. of examiners and regulators.) Fannie and Freddie collapsed, it's true, but that's because they ran their operations with too-high financial leverage (up to 50-to-1, or even more). It's always the leverage that kills you when there is a big financial downturn. But Fannie and Freddie are not even 10% of the problem... likely far less. (And, 'We The People' own them 100% now... for better or for worse. :-) 2) The MUCH LARGER PROBLEM (tens of times LARGER than all sub-prime mortgages put together) is the TRILLIONS in "liar's loans" --- the totally UNREGULATED GLOBAL SHADOW FINANCIAL MARKET IN DERIVATIVES... notably the $42 TRILLION (or larger) market in Credit Default Swaps. It is that which has caused the global financial system to seize-up. (It is that which collapsed AIG, and it is that which has caused BANKS to not want to even make loans to OTHER BANKS now.) 'Sub-prime mortgages' in America might be the FUSE --- but TRILLIONS and TRILLIONS in totally unregulated financial derivatives, in vastly greater amounts then all the sub-prime put together, is the keg of DYNAMITE. You are spending a heck of a lot of time looking at a few saplings, when you should be standing back and trying to see the whole FOREST.

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