














Comments     Threshold


RE: now, that was pathetic
By Master Kenobi (blog) on 9/22/2008 8:20:32 AM , Rating: 5
The problem is that the government is to blame here. The government oversight of the GSE's (OFHEO at the time) mandated that Freddie and Fannie needed to take in more loans to help with lower income families that could not normally afford it to promote "the american dream". Had this not happened, the GSE's would have continued to say no, and refuse to buy those loans. Historically, the GSE's do not dabble in the non-performing loan category or the sub-prime category either. You can thank congress for this entire mess though, since they ultimately hold the leash to OFHEO. /Rant off.

*Disclaimer: I work for one of the GSE's*

RE: now, that was pathetic
By FITCamaro on 9/22/2008 9:11:44 AM , Rating: 2
Yeah I agree with you.

RE: now, that was pathetic
By rtrski on 9/22/2008 9:19:50 AM , Rating: 2
And whose oversight was it that pushed that policy change? (I'm not asking an intentionally leading question - I don't know the answer or how to search for it quickly, so I'll use your response as a starting point to do so.)

Does sound like a bit of a smoking gun though. I find it hard to believe all the "balloon" ARM mortgages the news likes to screech about solely lead to the current fiasco. Certainly they played a part, but usually those were used by people (at least in my personal knowledge) who could've afforded something smaller to get something bigger, e.g. the greedy overreaching, not the low income who wouldve' been below the threshhold).

Something else I rarely see mentioned is new fair-value accounting standards suddenly coming into play in the last year or so meaning everyone had to come clean about what their assets and derivatives were worth "if they were to sell them today". The accounting standards of course didn't create the risk, just suddenly made it glaringly visible to everyone in the room.

RE: now, that was pathetic
By FITCamaro on 9/22/2008 12:43:57 PM , Rating: 2
Bush and others pushed for more oversight of Fannie and Freddie back in 2003 and the Democrats wouldn't have it. They were busy putting their people in there so they could get huge amounts of money.

Love it how Obama says the situation is deplorable when Jim Johnson who's made $90 million of it is on his f*cking staff and one of his key advisors.

RE: now, that was pathetic
By Ringold on 9/22/2008 9:43:05 PM , Rating: 2
And whose oversight was it that pushed that policy change?

If he's talking about what I think he's talking about, it was the mid-90s Clinton years. Thank ACORN, the Marxist housing group, among others.


Everybody is really to blame; government, banks, consumers, and especially lazy consumers who didn't understand the products they were using and probably didn't care to -- or worse, knew what they were getting in to, but didn't even care.


I'm not 100% set on it, but I think mark-to-market isn't quite the great beacon of light you seem to imply. Marking asset values to market is great.. when there is a market! I suppose technically there is a market for these toxic things, but it's so distressed and frozen up that these accounting rules would destroy modern finance for the sake of ideological purity. In reality, most of these things that're going for pennies on the dollar will work out, but god.. 3 month T-bills selling at par? Long bonds traded below 4% today for, I think, the first time in history. Where is the logic in marking to market when the market has gone absolutely insane? Marking to model seems to me to only delay disaster for a firm that bets wrong, not avoid it entirely, while allowing a bank to ignore the vicissitudes of the market in the mean time.

RE: now, that was pathetic
By rtrski on 9/23/2008 9:53:15 AM , Rating: 2
Thanks for the reply. After posting my initial question, I've started to see an awful lot of the same sort of responses in editorials re: Fanny and the congressional (and lobbyist) 'push' to get into low-income mortgages, etc.

And I think I agree with you about the 'fair value' accounting. Makes sense when there is indeed a market, but when there isn't, it becomes undefined in a hurry: how do you assign a liquid value to an aggressively illiquid asset? Still, if they'd been doing so all along, then the fact of the assets being illiquid due to lack of demand would, one hopes, have raised red flags long before they ballooned to the point they did...?

What's really pissing me off now is this continual Obama mantra that "deregulation" lead to this, when the deregulation he's talking about allowed comingling of banking and investment offerings (from his purported economic arch-nemesis, Gramm) and near as I can see is what allowed some banks and investment houses to actually merge and avoid the bailout bandwagon. The ones that had diversified in such a manner were the healthiest remaining.

RE: now, that was pathetic
By sigilscience on 9/23/2008 10:31:45 AM , Rating: 2
He sings that song because he knows his followers are the type that believe that government is the cure to all ills.

When they hear "more government is the solution", they don't even think. Their brains click off, and they experience a warm flood of emotion over their entire bodies. Sort of like lying in a fresh puddle of urine.

