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Post a Comment On: Steve Sailer: iSteve

""The political economy of the subprime mortgage credit expansion""

6 Comments -

1 – 6 of 6
Anonymous Bob said...

As much as you'd like to blame this all on the government, which does bear some blame, the worst excesses of the housing bubble occurred as a result of private mostly foreign investors stupidly buying repackaged American loans that were too low-quality for Fannie and Freddie to buy under their guidelines.

This graph shows that the Fannie/Freddie/Ginnie market share went from the 70-80% range before the housing bubble to 40-50% during the bubble.

http://cr4re.com/CRimages/Mortgagemarket.jpg

The worst lending, the 0-down loans, the $1 million loans to gardeners with no documented income, etc, the government had a 0% market share.

In 2006, for example, Fannie and Freddie would only buy mortgages of $417,000 or less. In 2005 it was $359,650. Obviously that severely limited their market share in California and other bubble areas.

They went bankrupt because they were so thinly capitalized, not because they were corrupt or reckless. The amount of money required to bail them out, given their size, was also pretty small.

11/3/10, 3:56 AM

Anonymous Anonymous said...

Bobsaid

'The amount of money required to bail them out, given their size, was also pretty small.'

200 billion here 300 billion there. Pretty soon you're talking real money.

Spot on about the greedy, and ignorant euro banks, though. A teeny weeny bit of research would have saved them billions.

Rb London

11/3/10, 3:36 PM

Anonymous Bob said...

RB,

When figuring out how much Fannie/Freddie cost to bail out, you have to remember that some of the money going to them now is to cover their losses on loans made well after the bubble popped and the government took ownership.

Rather than a bailout of dumb loans made during the bubble when they were nominally private, the recent money going into the GSEs is to cover losses they fully expect to occur as a backdoor stimulus.

11/3/10, 7:50 PM

Anonymous Anonymous said...

Uh, Bob, time to call your logician...

"They went bankrupt because they were so thinly capitalized, not because they were corrupt or reckless. The amount of money required to bail them out, given their size, was also pretty small."

If they were thinly capitalized, and bought risky, low quality repackaged American real estate loans anyway, how does that not make them reckless?

If they expected to be, and were, bailed out, how does that not make them corrupt?

If the amount was so "small", why do you ignore the knock on effects that completely F_CKED UP the entire economy?

Bob, apologist for bankster corruption: logic fail.

11/4/10, 2:47 AM

Blogger kurt9 said...

Tim Wise, whom you designated as "Uncle Tim", went into a diatribe yesterday.

http://www.timwise.org/2010/11/an-open-letter-to-the-white-right-on-the-occasion-of-your-recent-successful-temper-tantrum/

An example of a liberal unhinged.

11/5/10, 11:39 AM

Blogger Jason Victor said...

This is a fascinating view of things. I've often felt politicians sometimes do more to hurt than help, not the least of which is ushering the public into a false sense of understanding that basically amounts to "Wall St = Bad".

11/6/10, 6:58 AM

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