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Friday, July 24, 2015

"Fannie & Freddie Are Back; Bigger & Badder Than Ever" - NYTimes Warns

Just in case you still harbored any doubt that absolutely zero lessons were learned from the cataclysmic financial collapse of 2008/09. We learn from the New York Times [10]that:
AFTER the financial crisis of 2008, there was one thing that almost everyone agreed on. The government-sponsored mortgage giants, Fannie Mae[11] and Freddie Mac [12], had to go. While shareholders and executives reaped the profits from Fannie and Freddie in good times, taxpayers were stuck with the bill in a crisis. President Obama described their dysfunctional business model as “Heads we win, tails you lose.” But here we are, seven years after the crisis, and nothing has changed.

In the 2008 crisis, when it looked as if Fannie and Freddie might go bankrupt, Henry M. Paulson Jr. [13], then the Treasury [14] secretary, argued that their fall would cause economic catastrophe. Foreign investors, stuck with their securities, would panic, and the mortgage market would shut down. So Fannie and Freddie were put into something called conservatorship, and are now government controlled, supported by a line of credit from the Treasury.

Conservatorship was supposed to be temporary — a “time out,” according to Mr. Paulson. We were going to stabilize the companies’ finances, reduce their importance to the mortgage market, and figure out a better system. But nothing happened. In fact, the situation has gotten even more precarious. In the years since the crisis, private lenders, for the most part, have been willing to make mortgages if they can immediately sell them to government agencies, mainly Fannie and Freddie. In other words, without Fannie and Freddie, there wouldn’t be much of a mortgage market.

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2 comments:

Anonymous said...

hey, why doesnt everyone do some research on PENNYMAC.

Bank of America (who purchased Countrywide - the first mortgage company to fall in the bubble created by Barry Frank and Bill Clinton)

sold my loan to PennyMAC. guess who owns pennyMAC the same people who made up Countrywide -

same people, same game, BoA just sold it back to the same boys. just give it a few years and "we" will put you back

Anonymous said...

can anybody tell me why Fannie Mae is on the list of Planned Parenthood sponsors?