Hmmm 🤔 Why not just sell all of both companies to the public, eliminate any express or implied government guarantee and get the government out of the business?? 🤷♂️🤷♂️ As we all know, the government, in the long run, tends to screw up whatever it gets involved in operating. Let the private sector underwrite the risk, price the product and succeed or fail on its own.
That works until a crisis and the mortgage market seizes up and every voter complains no mortgages are available. And then pols panic and the next thing you know the Fed is buying their junk bonds and also underwriting your mortgage.
If the pols were willing to let the mortgage market get a lot smaller, have the standard mortgage move to 15-20 years and have tighter credit terms, then privatization might work, but the pols love easy money and so do voters and eventually they’d force the regulated banks to do the same stuff the GSEs are doing, or just recreate the GSEs.
In theory you are dead right, of course, Given the polticial dynamics mortgages are never going to be a “free market”, with or without the GSEs.
Your explanation and insight sound spot on to me. No one will let the market be a free market when it comes to these mortgages. Daily we hear the younger generation complaining about how hard it is to buy a home etc. compared to the boomers' experience at the same stage of life. This kind of sentiment drives politicians seeking votes to "do something." That something is never to let the "invisible hand" of the free market work. (And by the way, my first mortgage was over 15% annually. We made it work...and we did not whine about it.)
Yes, but there's a way to protect people and not get snowed into protecting rich stockholders as well.
For example, the gov't didn't need to save Chrysler's stockholders to save the jobs at Chrysler. Simply let the stockholders lose all of their money and buy all of the assets with new investors dirt cheap, including taxpayers owning shares, and then run the assets as a new company, keeping all the jobs intact.
Let the stockholders lose like capitalism dictates, and save the jobs which is the political goal. The problem is we let the rich, influential execs and bankers trick our pols into thinking that it's necessary to save the original company and its shareholders to save the jobs or other affected groups.
Same thing with AIG - you didn't need to save the company, its shareholders, and the bonus payments of other divisions to pay out the insurance claims. The gov't could have stood up a new entity with new investors to take on the positive assets, separately paid out the insurance claims willingly, and let the stockholders lose everything as they should have.
Same thing here. If a MBS company fails, let it fail, but save the homeowners by taking over the portfolio in a new company that all your tax dollars can protect them in without saving the stockholders, who deserve to lose and will only stop creating the problems when they stop getting bailed out. They are the Hunter Bidens of business, acting worse and worse because the family will protect them every time.
I want to rephrase that. There is actually ample supply for the natural level of demand. But to the natural level of demand from people who can afford a mortgage is added the artificial demand from people who are not really financially stable enough to hold a mortgage. This makes it seem that supply is too low - because of all those nasty boomers who want to continue living in the homes that they own...shame on those boomers...
The 🇺🇸 young are presently moving towards Revolution with one of their main material problems being lack of housing; because THEY WANT FAMILY AND CHILDREN.
…and they’ll kill to get it.
Perhaps a little jolt to the housing market will unjam the preferred Boomer deadlock, as in “if it isn’t broke don’t fix it.” I think anything that lets young men buy houses to form families is GOOD and anyone in the way BAD.
Like exactly Ms Don’t fix it, she’s a symptom of a disease.
I totally agree. You can have taxpayer backstopped lower rates, or market driven (slightly) higher rates. I prefer the latter for the reasons you mentioned.
😂. Objectively and statistically the world hasn’t changed sr all when it comes to mortgages. In fact, GSE-backed mortgages have doubled in 10 years. Nothing has changed.
Perhaps you’re saying that Trump is going to change things in the mortgage market? Sure, everyone knows he hates easy credit wants to be known as the guy who killed the 30 year mortgage. Government will just find different ways to keep credit easy and keep writing stupid mortgages no private sector lender ever would.
"Those who blame it on things like affordable housing initiatives and the Community Reinvestment Act don’t know what they are talking about." So... what then exactly was the point of state intervention into mortgage markets, if not to expand credit for home loans? And why should the state do this at all?
I was thinking the same thing. Otherwise the government would not have gotten involved in mortgages in the first place. It would rather be let the free market decide, and individuals could sink or swim.
As someone who dealt with bank regulators I took offense at the comment. We were literally forced to take on bad paper to satisfy racial diversity targets under the CRA. Everyone knew these borrowers couldn’t pay back the loans. And they didn’t. The government created the problem, and the taxpayers paid for it.
Obviously, according to Mr. Salzman, you don’t know what you’re talking about. That’s BS. Yes, banker greed and stupid investors were primarily to blame. But, they both needed product to sell (or buy). That’s why they needed to juice the supply side.
Well, you can blame "greed" if you like, but typically speaking- in terms of American history, and in terms of other countries-- banks don't like to make loans to people who are unlikely to pay those loans back.
But if the state forces you to make NINJA loans {and they did, basically-- if you didn't meet social lending targets, then business could become difficult for you , courtesy of federal regulators) then you have to extend similar terms to middle class and upper middle class borrowers.
Suddenly, you've got a LOT of credit floating around-- driving up prices across the board.
Yes there are other factors-- maybe the crisis could have caused simply by low interest rates alone.
For those who object: what am I getting wrong? Do you think the state interventions didn't occur? Or am I misunderstanding something about the second order effects? I don't pretend to have the final word on this, it is incredibly complicated...
You're getting nothing wrong. This is what happened. Yes there is blame to go around, but the government created a huge mess and failed on every front, from allowing esoteric tranches of securities to the ratings oligopoly to the comp structure for F&F. The worst was, as you said, forcing bad loans on lenders.
I do not really understand Freddie and Fannie. My general philosophy is that the Government is involved in much too many things including the mortgage market.
I understand that the Government is relatively unconcerned about profitability or efficiency. I has incentives for neither. Which is why they need to get out and stay out of the business.
"relativly unconmcerned"? How about don't give a crap about such matters. A private concorn would have declared bankruptcy long ago. But mention SS and the participants would burn it all down.
If goverment got out of the way the banking industry would no longer be competitive (not that it is anyway). Constitutional checks and balances are based on the Founders' understanding of nature. They knew that there must be a wall between government and business. Reagan tore down that wall. What followed was inevitable and tragic. Especially when this new free-market ideology was forced down the throats of the rest of the world at the point of a gun.
I wish I knew a little more about this from the banking end, but the banking practices seemed to be mostly the problem. We owned a small apartment complex and rental houses and suddenly we couldn't rent because they put poor people on variable mortgages at 125% loan to value (so they could buy a house as cheaply as rent) and when the mortgages went up, they all walked away. So first we couldn't rent, then our properties hadn't appreciated in value, so they ruined our retirement. And yes, then we tax payers also bailed out the banks while we barely have a retirement now. I am not sure if going public is as much the problem, but they sure better not do that again. So it's not just that the government "guaranteed" the loan as the terms upon which these people were allowed to borrow--when we couldn't get terms like that. The government should guarantee nothing.
As Orenv says in the string: there is a home buyer subsidy and a price subsidy (higher).
Just as the government subsidy for higher education sent the costs of university soaring, this has done the same for housing.
Of course, as someone who has managed to own a house despite the government manipulation I'm not really looking forward to actions that may devalue my home.
This is why government must withdraw from all subsidies. Regardless of the intent there are consequences.
If they want to help prospective homeowners how about limiting the % a hedge fund can own within any neighborhood? Or the length they can hold them off the market?
A little trimming of the regulations and the costs of permits wouldn't hurt either.
Clinton said thou shalt loan money to people who can’t afford the loans. Banking industry figured out a way to make money under the mandated system. Both were prime examples of outright fuckery that we, the taxpayers, paid for.
I had a ringside seat (my ex was in the business). Here's a primer: The crisis is complicated. Truth often is. A combination of de-regulatory decisions made by a coalition of the willing on both sides of the aisle (many such decisions were in fact made by an unholy alliance between "Democrats" Larry Summers/Robert Rubin: and "Republican" Alan Greenspan with unwitting assistance from then Fed chair Paul Volcker) and called by Clinton the Third Way—i.e., the Republican way in Democrat clothing (just as neoconservatism became neoliberalism under Clinton and NAFTA replaced fair global trade not to mention unions).
The first BIG decision that no one ever mentions was to take mortgage banking away from local banks who's formerly held onto the loans for their duration, thus had skin in the game. The business was handed to Wall Street. The mortgage industry became a branch of the investment banking industry. Key to this was the decision to tear down the wall between the investment banks and the consumer banks (i.e., a Goldman Sachs/Lehman/Bear-Sterns type bank and a Wells Fargo). The insurance behemoth AIG was recruited to backstop any risk here, which is why when it went down the jig was up. The big-picture objective was ALWAYS to enable Wall Street to profit from the biggest asset Americas have, their own homes. Which is why we were also told at the time to get into the stock market. That was a warning to hedge our bets, because our homes were suddenly at risk in the same way stocks were, though not for the same reason. Stock prices depend on how a company is performing. Homes are not businesses. Their value should not be subject to extreme ups and downs. And their value wasn't in the era of 30-year fixed-rate mortgages serviced by our friendly local banker.
As always, great work Matt. Wall St sits around thinking how to screw the average schmo out of his last buck and disguising their work as good for the common man. We are due for another banker's crash, so why not.
I love the way you write like a Marine speaks. Thanks.
"Those who blame it on things like affordable housing initiatives and the Community Reinvestment Act don’t know what they are talking about."
Were it not for the goals set by housing initiatives and the CRA, the relaxed mtg requirements would not have been necessary. These relaxed requirements and loan terms were virtually paying people like bus boys and gardeners to buy $500K homes, creating a risk that created the CDS industry that was the real cause of the crash in 08. This of course, has led to a crisis in the insurance industry (re-insurance) that is spreading across all insurances from life to health to property/casualty.
Omitting this reality, and suggesting that said initiatives and the CRA suggests an agenda intellectually dishonest, and much more partisan than thorough.
Trump talked about doing this during his first term. Long before Lutnick and Bessent were in his orbit. Are we supposed to have an indefinite ownership stake in these companies?
It seems like any arrangement that fairly apportions risk to Fannie and Freddie equity owners would also make mortgages more expensive. The implication is that there is currently a hidden subsidy to home buyers. There is not going to be any popular way to square this circle.
Wonderful. Those who fail to read history are doomed to follow it. This will end the same way as it did in 2008/9 and we will see an even worse recession because of it. Jeezus, WTF is going on here? Again, we the tax payer have zero input on this. It goes to show it matters not the party in power the screw is in for the commoners. The rich get richer and the middle class gets smaller. We need change and fast and I don’t mean democrats. More libertarian fiscally conservative that follows the constitution as it really reads. Term limits in congress should help a bit and senators chosen instead of elected. We are on a dangerous track here.
That would be great but how does that work? Shift them around from agency to agency? Which doesn’t allow them to get comfortable and have real decision making power? Something needs to be done about it for sure.
I dk, honestly. I just know they right now, have no fear of disobeying new appointees directives. They can't be fired. So yes,perhaps sending them to gar flung agency outposts would help.
Prefer we outlaw federal unions as who are they negotiating their contracts with? Certainly not the people who are paying (taxpayers), to me, it's more like collusion between union and democrats.
Very true. I believe they changed some rules when it comes to getting a mortgage and maybe it’ll be enough but I get concerned when the govt backs financial things. Check out student loans. That’s gonna hurt for decades for sure.
Generally speaking--the cash cartel thugdom isn't concerned with history--in fact its "woke" arm is tasked with severing the connection and erasing access to history altogether. The thugdom is only interested in getting away with the grift. We live --( and thank you RACKET and Eric for the light)--in a pretty much artificial reality. Term limits absolutely--is there a conscious effort underway to destroy the middle class--without doubt--does the grift operate independently of voter/citizen concern--obviously. The "bottom line" evil is the stolen lives and labor of We the People. Our tax dollars used to sharpen the blade that cuts our throats.
Selling the belief that We the People are powerless and the managerial/surveillance elite serving the ascending totalitarianism is competent is what the psyop does. Look at shadow side drug addled homeless encamped gutted industrial car jacked ain't got a future ain't got a job ain't got an education young America. Weaponized class hatred/divison and forced migration/"great replacement" chaos is one tactic. The real issue--the reason WE are staring at this screen--is the capture and subversion (hooray for Walter and Matt) of the human truth/fact based national conversation our Republic must have to survive. Corny as it may sound: Truth is a kind of light. As the boys in Procol Harumph used to say--"Shine on Brightly."
(They can kill us and eat us but they can't beat us. Depart the psyop and live.)
F&F have done a great job insuring US citizens have an opportunity at home ownership since the mid-1930s. They did not cause the mortgage crisis. F&F does not originate mortgages; they bundle mortgages and resell them as investments to recycle mortgage money. F&F insures mortgages; they do not originate mortgages or qualify borrowers. The Countrywide's; Wells Fargo's; and greedy bankersters pushed no income check verification and deliberately submitted applications to unqualified borrowers. That's not the fault of F&F.
Your recitation of facts is incomplete. For example, you leave out the fact that F&F became gigantic scale purchasers/holders of third party subprime MBS and MBS "squared" crap-sandwich "products" - all of which were improperly sliced and diced to produces traunches of MBS as "AAA rated." They bought/held all of that garbage and didn't even have the common sense to buy cheap "credit default swap" insurance on those shitty "portfolios." F&F's whole raison d'etre was to engage in strict underwiting not only for what they resold but also what they purchased to "hold for their own account." They clearly didn't do that, and their good friend Barney Frank supported them and especially supported Harold Raines all the way until the bomb detonated.
Good point, Valerie. And F&F were regulated by Congress. Still, the equity/incentive structure encouraged risk taking by F&F CEO’s and boards that should have behaved like fiduciaries.
My proposal would be to cancel all primary home residential mortgages and return the properties to the actual owners rather than the money manipulators. Banks would die (great), scum's influence over government would decrease (also great), individual Americans would get a return on their forced investment via bailouts (super great), and housing prices would come down-down-down, thereby making them reflect something like the real value of labor in the US, and placing property ownership again within reach of Americans. No longer an "investment" but instead a home. This collapse in pumped up value would also plunge banks into insolvency as they create fake money based on the value of wildly exaggerated assets. This fake money is used to "buy" and then liquidate functioning companies in the US. Thus (hopefully) destroying these rapacious criminal gangs to the betterment of all humanity.
Banks don’t write mortgages. They get paid to service them.
You, the taxpayer, write mortgages, and guarantee all the MBS that fund the mortgages.
Sounds like you just want to seize the banks. Of course then you would be the dirty banker, in addition to a dirty commie! 😊. That’s the way things always seem to roll when the means of production are seized
You’ll find that most of the bank’s value is actually as a going concern and that their book value capital really isn’t a massive amount of money relative to their loans and deposits, Also your checking account has been invested in their loans (corporate loans, CRE, MBS, treasuries, credit cards). Are you going to cancel those loans, too, and wipe out depositors? Nope- you’ll just be the dirty banker.
Hmmm 🤔 Why not just sell all of both companies to the public, eliminate any express or implied government guarantee and get the government out of the business?? 🤷♂️🤷♂️ As we all know, the government, in the long run, tends to screw up whatever it gets involved in operating. Let the private sector underwrite the risk, price the product and succeed or fail on its own.
That works until a crisis and the mortgage market seizes up and every voter complains no mortgages are available. And then pols panic and the next thing you know the Fed is buying their junk bonds and also underwriting your mortgage.
If the pols were willing to let the mortgage market get a lot smaller, have the standard mortgage move to 15-20 years and have tighter credit terms, then privatization might work, but the pols love easy money and so do voters and eventually they’d force the regulated banks to do the same stuff the GSEs are doing, or just recreate the GSEs.
In theory you are dead right, of course, Given the polticial dynamics mortgages are never going to be a “free market”, with or without the GSEs.
Your explanation and insight sound spot on to me. No one will let the market be a free market when it comes to these mortgages. Daily we hear the younger generation complaining about how hard it is to buy a home etc. compared to the boomers' experience at the same stage of life. This kind of sentiment drives politicians seeking votes to "do something." That something is never to let the "invisible hand" of the free market work. (And by the way, my first mortgage was over 15% annually. We made it work...and we did not whine about it.)
Yes, but there's a way to protect people and not get snowed into protecting rich stockholders as well.
For example, the gov't didn't need to save Chrysler's stockholders to save the jobs at Chrysler. Simply let the stockholders lose all of their money and buy all of the assets with new investors dirt cheap, including taxpayers owning shares, and then run the assets as a new company, keeping all the jobs intact.
Let the stockholders lose like capitalism dictates, and save the jobs which is the political goal. The problem is we let the rich, influential execs and bankers trick our pols into thinking that it's necessary to save the original company and its shareholders to save the jobs or other affected groups.
Same thing with AIG - you didn't need to save the company, its shareholders, and the bonus payments of other divisions to pay out the insurance claims. The gov't could have stood up a new entity with new investors to take on the positive assets, separately paid out the insurance claims willingly, and let the stockholders lose everything as they should have.
Same thing here. If a MBS company fails, let it fail, but save the homeowners by taking over the portfolio in a new company that all your tax dollars can protect them in without saving the stockholders, who deserve to lose and will only stop creating the problems when they stop getting bailed out. They are the Hunter Bidens of business, acting worse and worse because the family will protect them every time.
Preach! Capitalism doesn't work without failure. There's a lot of dead wood out there - and JP Morgan is near the top of the list imo.
Yes!!!
Yes. And one of the reasons housing is so expensive is that mortgage credit has been easy to get
Exactly, too much artificially inflated demand for too little supply...
I want to rephrase that. There is actually ample supply for the natural level of demand. But to the natural level of demand from people who can afford a mortgage is added the artificial demand from people who are not really financially stable enough to hold a mortgage. This makes it seem that supply is too low - because of all those nasty boomers who want to continue living in the homes that they own...shame on those boomers...
LOL
F the public.
And what “public”?
Corporate media whores?
The 🇺🇸 young are presently moving towards Revolution with one of their main material problems being lack of housing; because THEY WANT FAMILY AND CHILDREN.
…and they’ll kill to get it.
Perhaps a little jolt to the housing market will unjam the preferred Boomer deadlock, as in “if it isn’t broke don’t fix it.” I think anything that lets young men buy houses to form families is GOOD and anyone in the way BAD.
Like exactly Ms Don’t fix it, she’s a symptom of a disease.
Any questions?
I wouldn't go attacking the ole boomers...They learned to fight the old fashion way..
💯‼️
I totally agree. You can have taxpayer backstopped lower rates, or market driven (slightly) higher rates. I prefer the latter for the reasons you mentioned.
Shut down Fannie & Freddie and return the risk back to the lenders.
THIS.
Fannie and Freddie would be recreated within 5 years after that event, unfortunately
No. They won’t.
They’re probably being uncreated.
The world changed.
😂. Objectively and statistically the world hasn’t changed sr all when it comes to mortgages. In fact, GSE-backed mortgages have doubled in 10 years. Nothing has changed.
https://fred.stlouisfed.org/series/AGSEBMPTCMAHDFS
Perhaps you’re saying that Trump is going to change things in the mortgage market? Sure, everyone knows he hates easy credit wants to be known as the guy who killed the 30 year mortgage. Government will just find different ways to keep credit easy and keep writing stupid mortgages no private sector lender ever would.
Objectively I observe Boomer snark spitting on the rest. No worries.
I observe an amigo thinking himself safe in a tree house, laughing at the young and young men who want family and home and are shut out.
Keep your “markets” and your FRED fraud.
We’ll keep Steel and fire 🔥 and enjoy burning the Treehouse.
Trump embraces being the Usher of Doom even though he must know it’s likely his own, yet he continues.
By all means keep posting snark and that FRED nonsense I have been watching with amusement for 18 years.
Amused not Bemused.
Ta
Try more tinfoil, geezer, and some MDMA and you’ll observe even more!
This made me horse laugh..
"Those who blame it on things like affordable housing initiatives and the Community Reinvestment Act don’t know what they are talking about." So... what then exactly was the point of state intervention into mortgage markets, if not to expand credit for home loans? And why should the state do this at all?
I was thinking the same thing. Otherwise the government would not have gotten involved in mortgages in the first place. It would rather be let the free market decide, and individuals could sink or swim.
As someone who dealt with bank regulators I took offense at the comment. We were literally forced to take on bad paper to satisfy racial diversity targets under the CRA. Everyone knew these borrowers couldn’t pay back the loans. And they didn’t. The government created the problem, and the taxpayers paid for it.
I wish I could give 5 stars for this comment..
Obviously, according to Mr. Salzman, you don’t know what you’re talking about. That’s BS. Yes, banker greed and stupid investors were primarily to blame. But, they both needed product to sell (or buy). That’s why they needed to juice the supply side.
Well, you can blame "greed" if you like, but typically speaking- in terms of American history, and in terms of other countries-- banks don't like to make loans to people who are unlikely to pay those loans back.
But if the state forces you to make NINJA loans {and they did, basically-- if you didn't meet social lending targets, then business could become difficult for you , courtesy of federal regulators) then you have to extend similar terms to middle class and upper middle class borrowers.
Suddenly, you've got a LOT of credit floating around-- driving up prices across the board.
Yes there are other factors-- maybe the crisis could have caused simply by low interest rates alone.
For those who object: what am I getting wrong? Do you think the state interventions didn't occur? Or am I misunderstanding something about the second order effects? I don't pretend to have the final word on this, it is incredibly complicated...
You're getting nothing wrong. This is what happened. Yes there is blame to go around, but the government created a huge mess and failed on every front, from allowing esoteric tranches of securities to the ratings oligopoly to the comp structure for F&F. The worst was, as you said, forcing bad loans on lenders.
I was being sarcastic. I agree with you.
I do not really understand Freddie and Fannie. My general philosophy is that the Government is involved in much too many things including the mortgage market.
I understand that the Government is relatively unconcerned about profitability or efficiency. I has incentives for neither. Which is why they need to get out and stay out of the business.
"relativly unconmcerned"? How about don't give a crap about such matters. A private concorn would have declared bankruptcy long ago. But mention SS and the participants would burn it all down.
If goverment got out of the way the banking industry would no longer be competitive (not that it is anyway). Constitutional checks and balances are based on the Founders' understanding of nature. They knew that there must be a wall between government and business. Reagan tore down that wall. What followed was inevitable and tragic. Especially when this new free-market ideology was forced down the throats of the rest of the world at the point of a gun.
If the government weren't involved (i.e., the rule of law) the private sector would have us all in chains.
I wish I knew a little more about this from the banking end, but the banking practices seemed to be mostly the problem. We owned a small apartment complex and rental houses and suddenly we couldn't rent because they put poor people on variable mortgages at 125% loan to value (so they could buy a house as cheaply as rent) and when the mortgages went up, they all walked away. So first we couldn't rent, then our properties hadn't appreciated in value, so they ruined our retirement. And yes, then we tax payers also bailed out the banks while we barely have a retirement now. I am not sure if going public is as much the problem, but they sure better not do that again. So it's not just that the government "guaranteed" the loan as the terms upon which these people were allowed to borrow--when we couldn't get terms like that. The government should guarantee nothing.
Sell the rental houses and go condo with the apartments. Then buy them back for half price two years later.
With 20/20 hindsight, of course
As Orenv says in the string: there is a home buyer subsidy and a price subsidy (higher).
Just as the government subsidy for higher education sent the costs of university soaring, this has done the same for housing.
Of course, as someone who has managed to own a house despite the government manipulation I'm not really looking forward to actions that may devalue my home.
This is why government must withdraw from all subsidies. Regardless of the intent there are consequences.
If they want to help prospective homeowners how about limiting the % a hedge fund can own within any neighborhood? Or the length they can hold them off the market?
A little trimming of the regulations and the costs of permits wouldn't hurt either.
Clinton said thou shalt loan money to people who can’t afford the loans. Banking industry figured out a way to make money under the mandated system. Both were prime examples of outright fuckery that we, the taxpayers, paid for.
Actually the CRA was passed under another Democrat, Jimmy Carter. But everyone had the good sense to ignore it until Clinton.
I had a ringside seat (my ex was in the business). Here's a primer: The crisis is complicated. Truth often is. A combination of de-regulatory decisions made by a coalition of the willing on both sides of the aisle (many such decisions were in fact made by an unholy alliance between "Democrats" Larry Summers/Robert Rubin: and "Republican" Alan Greenspan with unwitting assistance from then Fed chair Paul Volcker) and called by Clinton the Third Way—i.e., the Republican way in Democrat clothing (just as neoconservatism became neoliberalism under Clinton and NAFTA replaced fair global trade not to mention unions).
The first BIG decision that no one ever mentions was to take mortgage banking away from local banks who's formerly held onto the loans for their duration, thus had skin in the game. The business was handed to Wall Street. The mortgage industry became a branch of the investment banking industry. Key to this was the decision to tear down the wall between the investment banks and the consumer banks (i.e., a Goldman Sachs/Lehman/Bear-Sterns type bank and a Wells Fargo). The insurance behemoth AIG was recruited to backstop any risk here, which is why when it went down the jig was up. The big-picture objective was ALWAYS to enable Wall Street to profit from the biggest asset Americas have, their own homes. Which is why we were also told at the time to get into the stock market. That was a warning to hedge our bets, because our homes were suddenly at risk in the same way stocks were, though not for the same reason. Stock prices depend on how a company is performing. Homes are not businesses. Their value should not be subject to extreme ups and downs. And their value wasn't in the era of 30-year fixed-rate mortgages serviced by our friendly local banker.
How about not loaning money to unqualified borrowers?
solutions are usually very simple.
As always, great work Matt. Wall St sits around thinking how to screw the average schmo out of his last buck and disguising their work as good for the common man. We are due for another banker's crash, so why not.
I love the way you write like a Marine speaks. Thanks.
The byline is Eric Salzman
Good catch, Kurt. Although Bob is somewhat correct simce Matt is the owner and founder of Racket News.
"Those who blame it on things like affordable housing initiatives and the Community Reinvestment Act don’t know what they are talking about."
Were it not for the goals set by housing initiatives and the CRA, the relaxed mtg requirements would not have been necessary. These relaxed requirements and loan terms were virtually paying people like bus boys and gardeners to buy $500K homes, creating a risk that created the CDS industry that was the real cause of the crash in 08. This of course, has led to a crisis in the insurance industry (re-insurance) that is spreading across all insurances from life to health to property/casualty.
Omitting this reality, and suggesting that said initiatives and the CRA suggests an agenda intellectually dishonest, and much more partisan than thorough.
tsk tsk tsk
Trump talked about doing this during his first term. Long before Lutnick and Bessent were in his orbit. Are we supposed to have an indefinite ownership stake in these companies?
Indeed.
obama wanted out too, actually but there was no solution at that time
There is a good history of the GSEs here: https://furmancenter.org/thestoop/entry/when-will-government-control-of-freddie-mac-and-fannie-mae-end
It seems like any arrangement that fairly apportions risk to Fannie and Freddie equity owners would also make mortgages more expensive. The implication is that there is currently a hidden subsidy to home buyers. There is not going to be any popular way to square this circle.
There is a home buyer subsidy and a price subsidy (higher). Both of which need to return to reality.
Exactly right. I vote for potentially higher rates in a free market.
Wonderful. Those who fail to read history are doomed to follow it. This will end the same way as it did in 2008/9 and we will see an even worse recession because of it. Jeezus, WTF is going on here? Again, we the tax payer have zero input on this. It goes to show it matters not the party in power the screw is in for the commoners. The rich get richer and the middle class gets smaller. We need change and fast and I don’t mean democrats. More libertarian fiscally conservative that follows the constitution as it really reads. Term limits in congress should help a bit and senators chosen instead of elected. We are on a dangerous track here.
Term limits for bureaucrats. They run the country and seem to control the Congress people, at least those not paid off by China, big pharma etc.
That would be great but how does that work? Shift them around from agency to agency? Which doesn’t allow them to get comfortable and have real decision making power? Something needs to be done about it for sure.
I dk, honestly. I just know they right now, have no fear of disobeying new appointees directives. They can't be fired. So yes,perhaps sending them to gar flung agency outposts would help.
Prefer we outlaw federal unions as who are they negotiating their contracts with? Certainly not the people who are paying (taxpayers), to me, it's more like collusion between union and democrats.
That should be done for sure. Why they need a union makes zero sense. Who do they negotiate with? What agency gets shut down with a strike? It’s BS
Only if we allow liar loans. Which were very politically popular.
Very true. I believe they changed some rules when it comes to getting a mortgage and maybe it’ll be enough but I get concerned when the govt backs financial things. Check out student loans. That’s gonna hurt for decades for sure.
It’s why the guillotine was used the way it was.
Generally speaking--the cash cartel thugdom isn't concerned with history--in fact its "woke" arm is tasked with severing the connection and erasing access to history altogether. The thugdom is only interested in getting away with the grift. We live --( and thank you RACKET and Eric for the light)--in a pretty much artificial reality. Term limits absolutely--is there a conscious effort underway to destroy the middle class--without doubt--does the grift operate independently of voter/citizen concern--obviously. The "bottom line" evil is the stolen lives and labor of We the People. Our tax dollars used to sharpen the blade that cuts our throats.
Selling the belief that We the People are powerless and the managerial/surveillance elite serving the ascending totalitarianism is competent is what the psyop does. Look at shadow side drug addled homeless encamped gutted industrial car jacked ain't got a future ain't got a job ain't got an education young America. Weaponized class hatred/divison and forced migration/"great replacement" chaos is one tactic. The real issue--the reason WE are staring at this screen--is the capture and subversion (hooray for Walter and Matt) of the human truth/fact based national conversation our Republic must have to survive. Corny as it may sound: Truth is a kind of light. As the boys in Procol Harumph used to say--"Shine on Brightly."
(They can kill us and eat us but they can't beat us. Depart the psyop and live.)
Well said.
Why sell Fannie and Freddie?
Because a free society government should not have a federal mortgage lending company.
Because a broke government should not have a federal mortgage lending company.
Because a broke government should sell assets that are not part of its core mission.
And once sold, a free and broke government should declare that it no longer provides any (ANY!) financial backing.
F&F have done a great job insuring US citizens have an opportunity at home ownership since the mid-1930s. They did not cause the mortgage crisis. F&F does not originate mortgages; they bundle mortgages and resell them as investments to recycle mortgage money. F&F insures mortgages; they do not originate mortgages or qualify borrowers. The Countrywide's; Wells Fargo's; and greedy bankersters pushed no income check verification and deliberately submitted applications to unqualified borrowers. That's not the fault of F&F.
Your recitation of facts is incomplete. For example, you leave out the fact that F&F became gigantic scale purchasers/holders of third party subprime MBS and MBS "squared" crap-sandwich "products" - all of which were improperly sliced and diced to produces traunches of MBS as "AAA rated." They bought/held all of that garbage and didn't even have the common sense to buy cheap "credit default swap" insurance on those shitty "portfolios." F&F's whole raison d'etre was to engage in strict underwiting not only for what they resold but also what they purchased to "hold for their own account." They clearly didn't do that, and their good friend Barney Frank supported them and especially supported Harold Raines all the way until the bomb detonated.
Good point, Valerie. And F&F were regulated by Congress. Still, the equity/incentive structure encouraged risk taking by F&F CEO’s and boards that should have behaved like fiduciaries.
My proposal would be to cancel all primary home residential mortgages and return the properties to the actual owners rather than the money manipulators. Banks would die (great), scum's influence over government would decrease (also great), individual Americans would get a return on their forced investment via bailouts (super great), and housing prices would come down-down-down, thereby making them reflect something like the real value of labor in the US, and placing property ownership again within reach of Americans. No longer an "investment" but instead a home. This collapse in pumped up value would also plunge banks into insolvency as they create fake money based on the value of wildly exaggerated assets. This fake money is used to "buy" and then liquidate functioning companies in the US. Thus (hopefully) destroying these rapacious criminal gangs to the betterment of all humanity.
Before you cancel the mortgages let me go out and get a whopper of one.
Banks don’t write mortgages. They get paid to service them.
You, the taxpayer, write mortgages, and guarantee all the MBS that fund the mortgages.
Sounds like you just want to seize the banks. Of course then you would be the dirty banker, in addition to a dirty commie! 😊. That’s the way things always seem to roll when the means of production are seized
You’ll find that most of the bank’s value is actually as a going concern and that their book value capital really isn’t a massive amount of money relative to their loans and deposits, Also your checking account has been invested in their loans (corporate loans, CRE, MBS, treasuries, credit cards). Are you going to cancel those loans, too, and wipe out depositors? Nope- you’ll just be the dirty banker.
Sorry, terrible idea.