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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: ChanceIs who wrote (158779)	10/21/2008 1:10:15 PM
From: CalculatedRisk	Read Replies (1) \| Respond to of 306849

If the argument is Fannie and Freddie played some small role in the bubble - fine, I'll accept that. There will be plenty of blame to go around, but the "blame the GSEs" meme is ... well ... stupid. We (the long term readers of this thread) know that the GSE role was very small compared to other factors. As I noted before, most of the damage was done trying to get around the GSE guidelines. We all know that. Think New Century to Bear Stearns to Norwegian investors! Follow that thread and we realize the GSEs were not involved - and if they had been, the MBS wouldn't have been so toxic (There is a reason the GSE MBS is performing much better than the Wall Street MBS). If the GSEs hadn't existed, the bubble would have happened anyway ... The GSEs have been a disaster in the making for years. All it took was a bubble and a bust to expose the problems. But blaming them for the bubble is definitely wrong, and will lead to the wrong solutions.

To: ChanceIs who wrote (158779)	10/21/2008 1:50:19 PM
From: RockyBalboa	Respond to of 306849

A while back when the wheels came off Fannie and Freddie, I was wondering how it came that they were in such a bad shape; particularly considering the same points you mentioned: -the more exotic loans (and also bigger loans) have been made by the New Centuries, Countrywide etc.. all of which blew up earlier. -the GSEs market share was much lower particularly in the 2006, 2007 vintages and the average quality of their portfolios should have been better. On the other hand, with their limited ability to lend (for various reasons) they have not been the turbo boosters near the end of the bubble. Available capital and the resulting 60x leverage of it was always a problem. >>>> Message 24750866 But then there was a post in seekingalpha which pointed out some side businesses in the GSEs which didn´t really fit their purpose: >>>> Message 24752618 Who to blame? The GSEs definitely not for the "bubble" which was a mix of unsuitably easy monetary conditions (> Fed Policy), combined with lack of oversight in times of radical fináncial innovation (mortgage derivatives...) The GSEs can be rather blamed for inflating their own balance sheet without maintaining sufficient equity and not keeping the house tidy; as well as doing business which is not theirs... "They issue bonds at extremely cheap levels to fund these activities. One former treasury official seems to think that this huge funding advantage seems to have translated into a bit of reckless purchasing on the part of the agencies. Again, its a combination of short term profit maximising and recklessness at the GSEs but combined with an utter lack of regulatory oversight.