In My Uncle's House

With Fannie Mae and Freddie Mac in a shaky state, The New York Times reports that the Bush administration is mulling "a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen," or possibly "an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies." Philip Klein comments:

When [Freddie Mac was] created in 1970, Fannie and Freddie were granted a relatively modest $2.25 billion line of credit from the government. Though they have never dipped into it, the implicit government backing has allowed them to finance bond purchases at cheap rates. The whole idea was to boost home ownership by spreading risk around so that mortgage lenders were more comfortable issuing loans knowing they would be backed by Fannie and Freddie. Of course, what this translated into was companies issuing loans to people who weren't credit worthy enough, and instead of risk getting spread out, it actually became heavily concentrated into these two companies.

While neither of these mortgage financiers loan money directly to consumers, they hold the bundled mortgages from the companies that do, and as a result own or back more than half of the nation's $12 trillion in mortgage debt. Nationalizing their debt, on top of the tremendous potential costs involved, would mean the federal government ultimately owning a massive portion of American homes.

John McCain, sadly, has already come out in favor of some kind of bailout for Fannie and Freddie.

Obama, meanwhile, is staying vague. Fannie and Freddie insist that there's no crisis. And -- oh, yeah -- the feds just took over a teetering Pasadena-based bank.

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  • ||

    So McCain is in favor of doing something incredibly stupid, and Obama is either unsure (or is testing whether it is politically expedient) about acting incredibly stupid.

    Remind me again why people here are supporting either of these clowns?

  • Colin||

    We learned absolutely nothing from the S&L scandal. Nothing.

    Santayana couldn't have been more right.

  • Douglas Gray||

    The already overburdened an beat-up U.S. Taxpayers can hardly begin to pay off the existing debt, so why not just pile on an additional 5 trillion?

  • SIV||

    "an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies."

    The above choice will clinch Bush surpassing James Earl Carter on the "worst Presidents of all time" list. Future historians, huddled in their mud and plastic huts, may push him all the way to the top.

  • ||

    # Colin | July 12, 2008, 6:18pm | #

    # We learned absolutely nothing from the
    # S&L scandal. Nothing.

    Not too long after the dust settled from that scandal, I encountered a remarkable book, called "The Creature from Jekyll Island." It purports to lay bare the nature and danger of the Federal Reserve. It has its bad points, including a sensational, bizarre theory of who REALLY runs things in the world, which many have criticized as being positively anti-Semetic. But it also has its good points, including an examination of how money gets created, and especially an explanation of the "game" of "Bailout" (i.e., nationalization of private commercial loss), which is illustrated by several case studies. For those who wish to learn from history, rather than repeat it, "Creature's" description of Bailout empowers the reader to recognize and watch the development of bailout situations while they are still gestating and not yet on the radar of mainstream media. What you do with that information is up to you: Perhaps some readers will be in a position to prevent future bailouts if they recognize them early enough.

    I long ago learned that wisdom is where you find it: Take the good with the bad, learn how to sort the wheat from the chaffe, and keep the wheat. With that in mind, feel free to ignore the sensational aspects of "The Creature from Jekyll Island" and concentrate instead on its excellent descriptions of how the government plays with money and debt via the Federal Reserve, and you will learn a lot. Maybe that knowledge will help you or someone else, someday.

  • ||

    As an anarchist (peaceful), I've been crying in the wilderness for years that everything government touches turns to shit.
    My reward will probably be to have my head served on a silver platter.

    By the way, I tried home ownership in the early '70's. Hated it.

    SIV,
    Check your timeline. Don't pile on Dubya for Fannie and Freddie.

    Ruthless

  • The Lounsbury||

    A bail out of your core mortgage refinancing institutions is not incredibly stupid. Incredibly stupid is being ideological with respect to issues pragmatic - such as core financial stability, and confusing theoretical moral posturing with thinking and understanding.

    On the other hand, if the US wanted to have a redo on the Great Depression, the collapse of the financial system would be a good way to get to the huts.

  • ||

    If the Bushpigs don't protect FRE and FNM it will crater the already weak dollar - sending oil well over $200 per barrel and crushing a tottering economy.

    Why?

    China and Japan by themselves own over $300 billion of MBS guaranteed by this system - essentially the faith that the Fed will back FRE/FNM. The risk is spread everywhere else in the world too.

    Why not just default? That's essentially what letting these two plummet will be. Its not just the bondholders who get the shaft but anyone holding US dollars.

    IndyMac will soak up 1/3 of the FDIC fund by themself.

    This crisis has the potential to drive a stake into the heart of the US economy.

    The US taxpayer is butt-fricked either way.

  • ||

    Check your timeline. Don't pile on Dubya for Fannie and Freddie.

    I hold Dumbya responsible for that OTHER little $5 trillion in 21st Century debt.

    When the system collapses the wingnuts will conveniently forget that.

  • ||

    A bail out of your core mortgage refinancing institutions is not incredibly stupid. Incredibly stupid is being ideological with respect to issues pragmatic - such as core financial stability, and confusing theoretical moral posturing with thinking and understanding.

    Simply saying, "But ... but ... they're too big to fail" would have more succintly expressed your bad ideas. If you can't be right, be brief.

  • SIV||

    SIV,
    Check your timeline. Don't pile on Dubya for Fannie and Freddie.



    I'm well aware of the creation and history of the GSEs.
    I'm going to blame him for all of it if he signs off an an explicit guarantee of the debt.

  • ||

    SIV,
    Existence is a gas.
    We have Christians who are pro-Israel because they think it will hasten the Rapture or some such weird shit.
    Then you have peaceful anarchist me who is tempted to want government to increase the angle of the slippery slope we are obviously on. (Come to think of it, government will always increase the angle. Be patient. Don't just do something. Stand by.)
    Is it only when we hit bottom that we can renounce government and begin to define what living normal, peaceful, productive lives means?
    Of course not. Not even then! Forgive my senility for thinking happy thoughts.

  • Bruce Majors||

    Fannie Mae and Freddie Mac are Congressionally chartered government "corporations" already.

    The housing bubble is a classic Hayekian business cycle caused by governmental control of the money supply. The government created a huge amount of money under Clinton and shoveled it into low interest rates mortgages. It made sure people with marginal credit ratings would be given loans under all kinds of "target money" loan programs where people with shaky credit, minority group status, or low incomes could not easily be legally denied any loan, even if they did not have adeuqate documentation or a downpayment. Then Clintonistas created on new tax break, the $500,000 capital gains exlcusion for selling an owner occupied residence. A housing bubble was created.

    But when all the new fiat credit and money bid up prices in the economy (like oil prices) inflation resulted and interest rates rose to include the inflation premium. All the easy money ARMS began to ratchet up.

    The only real solution to this problem is to begin executing congresscritters and regulators (and denationalizing money.) We should start with Chris Dodd, who Obama may pick to be VP, since he (and Donna Shalala and a bunch of other ruling class lackeys) took bribe loans to protect bad bankers on the Snetae Banking Committee.

    To that end I have created a petition to throw Dodd out of Congress:

    http://www.facebook.com/group.php?gid=16005244699&ref=ts

  • Ska||

    So which are you, the Incredible Hulk or the Six Million Dollar Man?

  • ||

    Bruce Majors, are you fucking retarded?

    The Fed funds rate never went below 5% in Clinton's second term - BUT went down to 1% in 2003 (thus the Cheap Money bubble) yet you blame the housing bubble of 2002-2006 on "Clintonistas" - while criticizing his TAX BREAK on owner occupied homes?

    Have you met TallDave - does Bush's asshole ever get crowded?

  • ||

    Ah another KKKlinton felcher willing to spin all the way down the toilet boil to protect the First Beard's "legacy."

    Yea yea shrike wipe. Housing prices didn't begin booming in 1996 did they. DC and San Francisco and every other coastal city didn't see multiple offers on every house for sale from 1997-2002. It all happened much much later.

    Rofl. I would be careful using the word retard. People might notice you and put you in the home where you belong.

  • ||

    DC and San Francisco and every other coastal city didn't see multiple offers on every house for sale from 1997-2002

    Must have been those busy "Clintonistas" engineering those "multiple offers".... and dammit, rising wages might have been Clinton's fault too.

    Yet you state - "The government created a huge amount of money under Clinton and shoveled it into low interest rates mortgages"

    Interest rates were hovering around 7% between 1996-1999 - so how did KKKlinton create this cheap money?

    Yet all the rifi's on the 1% fed funds rate (add 100 bps for the spread) had no effect?

    You need to write this shit up and send it to Wingnut.com for immediate publication.

    They don't check facts either.

  • Travis||

    "A bail out of your core mortgage refinancing institutions is not incredibly stupid. Incredibly stupid is being ideological with respect to issues pragmatic - such as core financial stability, and confusing theoretical moral posturing with thinking and understanding.

    On the other hand, if the US wanted to have a redo on the Great Depression, the collapse of the financial system would be a good way to get to the huts."

    Or maybe some of us realize that our grandchildren will half to pay off our debt. Why? So we can prop up our financial system now.How fair is that to Americas future generations? Shouldn't this generation be trying to pay off its own debt instead of passing off on America's future.

    Voting for McCain or Obama is like wishing proverty on your children.

  • ||

    LOL, the Bush Regime at its finest and Dictator Bushes "mini-me" McBush has to chime in as well with his two cents worth. LOL

    JT
    www.FireMe.To/udi

  • Junter Klops||

    Why is it that the government is always so eager to prop up failing enterprises? Sports arenas, tacky museums, bridges to nowhere, mass-transit that won't ever make a profit... And yet it has the nerve to regulate loan sharks!

  • SIV||

    Protecting failed business models and perpetuating a metastasizing bureaucracy is
    the raison d'etre of the psuedo-capitalist State.

  • Travis||

    Fannie Mae the new Dutch East India Company.

  • ||

    Reward failure.

    Punish success.

    That's how government works.

  • ||

    I encountered a remarkable book, called "The Creature from Jekyll Island."



    If by "remarkable", you mean "remarkably evil", then I will agree. Griffin has done more to set back the cause of liberty than most people inside the Fed could ever have dreamed. He has succeeded in associating the idea of sound money with the delusional whacknut fringe.

    It's futile to criticize the Federal Reserve anymore, because people will automatically dismiss you as some sort of conspiracist. Did you know that he was the guy behind the Laetrile "cure" for cancer? That he was trying to find Noah's Ark? Did you know that Griffin is a Troofer and believes in chemtrails?

    There is a LOT of good information out there on the Federal Reserve. Griffin's book is not one of them.

  • ||

    Hmmm...all this and the government doesn't want you to do drugs?

  • ||

    Fucking worthless paper dollars.
    Hell, they aren't even paper, just blips in electronic accounting spreadsheets. And you can always trust accountants.

  • ||

    Poor lil shrike evaded the bit of history I offered her/him/it. Attempting to locate the genesis of the housing crisis in post-2002, so he can use the moron mantra that government intervention is not bad, only Bush's interventions, so shrike's favorite fuehrer would do it better.

    Not only is shrike unable to deal with the fact that the housing bubble began in 1996, when DC, for example, began to see 25% annual appreciation, he/her/ho also seems unaware of the dot com bubble and stock bubbles, which boomed and popped even earlier than the housing bubble.

    Shrike you might want to familiarize yourself with the fact that all forms of money supply expansion are not even counted anymore. No one even keeps statistics. You also seem to assume that only "rates" going up and down means something (and up and down from what? up and down from where they would be in a market, in a Bastiatian sense? I think you are unimaginatively bound to up and down from where they were historically). I doubt you had any experience with mortgages or the housing market in 1995-2002. If you had you would know that going from a period of 6% rates where you have to put down 5-10% downpayments and have lots of documentation to get a loan to a period where the rate may or may not be lower but the loan is 100% and requires little documentation of income etc, does mean a lot more money is being pumped into mortgages, as many people are getting them who did not get them before, and for a lot more purchases (investment and vacation homes, refinancing etc.)

    The fact that you seem to be unaware that there was a boom from late 1995 on and do not realize that the decline in appreciation rates started in late 2003 and then became a flattening in 2005 tells me you have no idea what you are talking about.

  • The Lounsbury||

    Comments like this thread remind me why American libertarianism must never be lumped in with real classic liberalism, it is too shot through with irrational paranoia and virtually communist levels of ideological group think.

    Your financial system of course, but quite simply as the two institutions make up around 50 percent of mortgage lending and are substantial cores of standard securitised mortgages (not to be confused in willy-nilly ignorance with sub-prime, which these two institutions did not do), if they simply fail, your financial system will indeed collapse. Vast swaths of securities they issued would be in question, securities held by popular mutual funds and making up a significant portion of fixed income retirement funds portfolios - this leaving aside the knock on impact of having 50 percent of your housing financing disappear overnight. It might be amusing to watch from afar, but it would hardly do the "future generations" any good. Emotional hostility to Bush, or to Clinton or "the system" as evidenced above if fundamentally irrational lashing out.

    Genuine classic liberals - the rational version of paranioac American libertarianism - could rather insist that a proper work-out be taken. Just as a lead investor would not simply allow a generally viable business to simply collapse due to an episode of mismanagement (and the mismanagement is clear).

    First one stabilises the business with added capital and guarantees, orderly transitioning the management (that is kick them out, but not letting the emotion of the moment damage the business), then restructures.

    But what do I know, I merely am a rational venture investor, not a howling ideologue.

    Oh, ps: all money is fiat money, leaving aside primitive emotionalist pining for the fetish of a certain commodity.

  • Elemenope||

    Shrike, while shrill, is still smarter than most of his opponents.
    Brian Majors majored in...what, exactly?
    The Lounsbury is better than us mere humans.

    News at 11.

    Also, I nominate:

    "Hmmm...all this and the government doesn't want you to do drugs?"

    as threadwinner.

  • The Lounsbury||

    As an added PS:
    (i) The failed bank, IndyMac exposure for FDIC, net is ~10% of FDIC insurance funds, not 33% odd, as some panicked fearmongerer claimed supra,
    (ii) Presently Fannie and Freddie represent 75 percent of current mortgage lending for the total of the US, a rather larger percentage than even last year,
    (iii) Outstanding portfolio on Fannie and Freddie represent roughly 40-45 percent of current US GDP, a non-trivial bit of value to throw away over ideologically driven hysteria.

    A line of liquidity to cushion against temporary liquidity issues as the two institutions provision for increasing underlying mortgage defaults is a very good use of public capital (although as noted, has to come with major strings; the management must be cleaned out), and very good value for the money as once the panic passes - and this is a panic - the value will recover.

    Nor would one wish to image the entire homebuilding portion of American economy shutting down in a pointless liquidity crisis.

    Good bloody thing none of your types are anywhere near the levers of power. Bloody lot of Libby Bolsheviks you are.

  • Elemenope||

    FWIW, Lounsbury, and this has nothing to do with ideology, I don't think it is particularly *possible* to execute an effective bailout of the FM & FM without borrowing ourselves into the hot place.

    It's a damned if we do and damned if we don't sort of situation.

  • ||

    Imagine that, Lounsbury defending the system that he relies on for his livelihood.

  • ||

    It is time for heads to start rolling over this. We can start with my former representitive, Richard Baker, who for a while chaired the subcommitee that was supposed to oversee F&F. One of his aids got into some trouble during the last bubble up. Baker bailed out and is back at the trough lobbying for Hedge funds. F&F have been slush funds for congress for decades. Politicians on both sides are guilty of protecting their piece of the money machine.

  • ||

    Sorry, I should have used a phrase other than "bailed out".

  • robc||

    all money is fiat money, leaving aside primitive emotionalist pining for the fetish of a certain commodity.

    Dont discount primitive emotionalist pinings. They are what make real money real. Understanding them is the most pragmatic course (since you are pushing pragmatism).


    The pragmatic course is to make peace with england, not fight a futile revolution.


    Ideology is always pragmatic, if your goal is your ideology. It is very unpragmatic to sell out your ideology.

    From some points of view, it was highly unpragmatic to charge up a Normandy beach. From another point of view, those men realized that freedom was more important than their lives, which makes what they did very pragmatic. If we have to suffer thru a great depression to make the world more free, thats a very pragmatic sacrifice Im willing to make.

  • robc||

    Sigh. I attempted to put sarcasm tags around my england comment, but I made the tags too realistic, so they got interpreted as html tags.

  • Elemenope||

    If we have to suffer thru a great depression to make the world more free, thats a very pragmatic sacrifice Im willing to make.

    Huh. I'm glad *you're* ready to starve. Me, I like my foods. They make me less hungry.

    Between you being racist against apostrophes and wanting to cleanse the world in a ritual economic sacrifice, I don't know what to make of you, sir.

  • robc||

    lmnop,

    I dont want to cleanse the world in a ritual economic sacrifice - I just want to maximize freedom. As I argued in the thread that became "what is libertarianism?", as long as we follow "good" means, I will accept the ends that result.

    I personally dont think that letting Fannie and Freddie crash will send us into another great depression, but a lot of the guys on Omaha Beach probably thought they would get to come home. In other words, lets do whats right and see what happens.

    As far as apostrophes, Im pretty sure Im sexist against apostrophes, not racist.

  • The Lounsbury||

    Actually mate, what I do has absolutely nothing at all to do with the US financial system, nor mortgage securities. I work in MENA in venture and my capital sources have zero American exposure, and the businesses I work with nothing to do with the said system.

    Just giving you an education.

    And no, it's not damned if you do, damned if you don't:
    If you don't you are truly fucked.
    If you do, and it is well managed, losses are likely to be small in the short run, and outweighed by future gains as the panic driven asset price depreciation will be alleviated. Panics are by their nature irrational and tend to over-correct.

    Fannie and Freddie are not insolvent as such - they may have a short term liquidity issue as they have to roll out higher-than-expected provisions for potential bad mortgages (standard prudential provisioning rules require advance set-asides for potentially bad debt - most of which never actually becomes utterly unrecoverable, that is one provisions say illustratively for 90% losses, but only really gets 30-40%, so at 50 odd % comes back). Given the debt markets are pricing narrower spreads for Fannie & Freddie securities issuances, the guys who hold the paper are fairly confident defaults are not going to be crippling. However, the equity holders are rightly scared that their dividends are going to get redirected to provisions and that capital injections - a cram down as we say in the business - are going to blow them away.

    The key for you all to be worried about is not a "rescue" that probably will not cost that much if done right (and early before panic sets in), but rather to be worried that the equity holders and the management are not let off the hook. They should be rightly fucked, if they hold 10% and walk out with 1%, good, teaches a lesson but keeps the business viable, saves the US from losing a huge chunk of its economy to a senseless panic, and demonstrates a rare bit of good sense.

  • Elemenope||

    Damn you and your sarcasm. I was making a point! ;)

  • The Lounsbury||

    A small clarification, to avoid the appearance of contradiction (should anyone read the blog), my exposure to your mortgage crisis is purely via the sad fact my employment contract is dollar denominated (pity really, seemed like a good thing at the time, should have tried for Euro). I do have a structure and an active aversion, thusly, to the US blowing off its own foot.

  • robc||

    And if your foot causes you to sin, cut it off. It is better for you to enter life crippled than to have two feet and be thrown into hell.--- Mark 9:45 (NIV)

  • robc||

    BTW, I believe the passage from Mark would be considered a pragmatic argument.

  • Episiarch||

    Lighten up. As much as it's all a load of utter crazy bullshit manipulation by the government, we will most likely muddle through as we normally do, maybe with a recession of varying intensity. How long can the government keep this stuff up? I don't know, but I would guess it's quite a while.

    I'm not saying I like it. But it's not shotgun-and-bottled-water time.

  • Elemenope||

    Just giving you an education.

    Wow, the homilies of a disinterested hack. Gee, thanks.

    robc --

    I am concerned about the human consequences of ends as well as the moral rectitude of the means.

  • Elemenope||

    And on the whole "hack it off/pluck it out if it makes you think naughty thoughts" thing, Jesus gets a big fat 'F' in Ethics.

    There are other portions of his programme that are solid 'B' work. I don't want to sell him short. Just one bad test; shouldn't drag the whole final grade down!

  • robc||

    lmnop,

    Feel free to choose amongst the morally proper means to get the human consequences you want. Just dont think about using any immoral means. If the only available moral means lead to sucky human ends, such is life. This usually isnt the case, however.

  • Episiarch||

    Lounsbury sounds like a limey. A long-winded, patronizing ass of one at that.

  • Elemenope||

    Lighten up. As much as it's all a load of utter crazy bullshit manipulation by the government, we will most likely muddle through as we normally do, maybe with a recession of varying intensity. How long can the government keep this stuff up? I don't know, but I would guess it's quite a while.

    This point-of-view is always right, until it's wrong (and by then nobody's around to say I told you so, because, you know, shotguns).

    Not saying you're wrong necessarily, but it is definitely, as far as prognostications go, the safest way to go.

  • Garth||

    The core problem with the FMs is that the financial market always assumed they were money good and backed by the government. This led to a reckless situation in which mortgage bundles were sold off banks books and then banks could buy them back with a guarantee....it was really a kind of money laundering.

    Here's one proposal to fix the whole mortgage mess:

    A mandated forced tender of all mortgages and mortgage securities for cash (or maybe a 10-year inflation indexed Treasury bond) at a 30% discount of face, and the renegotiation of all mortgages with homedebtors providing a 20% haircut and a fixed 30-year rate of 5% but with a promise to pay back any and all part of that 20% when and if the home sells for between the discounted price and the mortgage value today. (that latter part only available to those who pay 30% or more of their income on housing payments - a means test).

    Of course a second part of this intervention should include an elimination of the semi-governmental agencies (i.e. Fannie Mae) and a reduction or elimination of the tax benefits provided for home ownership. This would go a long way to rationalizing the market. If a new secondary securitized mortgage security market did redevelop, it would be smaller and much better scrutinized by the participants since they would be performing without a safety net.

    Too one-sided and bad for the investors and banks? Not at all. When taking into account the present value of the mortgage securities compared with the value of cash, a 30% discount is actually fairly generous to the bankc - especially when taking into account the underlying and unknown risky bits in the mortgage pool as well as the poor liquidity in them vis-a-vis cash.

    Through this intervention, innocent taxpayers come out ahead (on paper), the industry is appropriately chastised and homeowners are on the hook to repay the government's largess thus being unable to profit very much from this action.

    This is not what I would really want, but almost anything is better than an inflationary cycle of bailouts that simply rewards schemers, crooks and idiots.

  • robc||

    lmnop,

    You do realize Jesus was being allegorical, right?

    1. No Christian sect (of any size) has ever practiced cutting off body parts in this manner.

    2. Feet dont cause sin anyway. Only the brain does.

    The ethics of "if something causes you to sin, best not do it" seems pretty solid. "If you are an asshole alcoholic who tends to get in fights/commit crimes while drunk, maybe you should just not drink" seems like a pretty reasonable ethical position to me. Especially when combines with "If you can drink responsibly, go for it".

  • Episiarch||

    Not saying you're wrong necessarily, but it is definitely, as far as prognostications go, the safest way to go.

    Since basically no one benefits from a meltdown, everyone everywhere will be doing what they can to avoid it. It's just plain sense that there most likely won't be a meltdown.

    I have plenty of shotguns, so I will go around and off the people who want to say "I told you so".

    Johnny Caspar: You can't say, "I told you so."

    Tom Reagan: I don't say that and I don't like people who do.

  • robc||

    I have plenty of shotguns

    Its always the people with plenty of shotguns and water who say "its not time to stock up on shuguns and water". I wonder why. :)

  • Elemenope||

    You do realize Jesus was being allegorical, right?

    Actually, it's not clear that he was, but playing along with the "well, no church has done it, so *obviously* Jesus didn't mean [X]" (because clearly, watching how Christians act is the best way to figure out what Jesus meant), it is not clear that psychologically that is the best advice.

    After all, *allegorically following the advice*, Puritans went to great lengths to expurgate all manner of things, like rum and breasts, that might tempt a man to act like an ass. They were not very successful.

    And as far as it goes, sin sometimes is quite harmless fun; it all depends on the sin. And so avoiding it leads people to lead, cranky, joyless lives (sometimes).

  • Episiarch||

    Well, some people prefer handguns, robc.

  • robc||

    some people prefer handguns

    Myself, for example.

  • robc||

    Puritans went to great lengths to expurgate all manner of things, like rum and breasts, that might tempt a man to act like an ass.

    As my example above showed, the passage is not about things that TEMPT you to act like an ass but things that CAUSE you to act like an ass. And there is nothing in there about cutting off someone elses hand - this is personal advice. The fact that the puritans cant read is not my problem.

    sin sometimes is quite harmless fun

    I disagree. If its harmless fun, it isnt a sin.

  • Elemenope||

    robc --

    If there is an external stimulus that, ipso facto, *causes* sin, then we can forget about the whole free-will thing (which, once removed, makes the *sin* thing somewhere between silly and idiotic). Temptation is the whole point to the moral calculus of sin.

    I disagree. If its harmless fun, it isnt a sin.

    I suppose that all depends on whether:

    a. You have an immortal soul

    b. God designed it so poorly that it is fragile beyond all belief

    c. God is douchey enough to make a fuss about your soul getting dinged up (or powerless enough to not be able to fix it)

  • The Lounsbury||

    This led to a reckless situation in which mortgage bundles were sold off banks books and then banks could buy them back with a guarantee....it was really a kind of money laundering.

    No, in fact not. If you don't bloody well understand the system, it might behoove you to actually learn something about it.

    Mortgage securitisation bundles portfolios of loans from regional banks - small and medium sized banks, largely - whose asset base (deposits in general) is limited. The securitised portfolios were sold on to 'qualified investors' - in general the large institutional investors such as (i) Mutual Funds offering fixed income (debt rather than listed equity) products to near retirees, (ii) Insurance funds looks for long-term placements with horizons similar to their liabilities (life insurance, e.g.), (iii) investment funds, some of which yes are run by banks, but the large money centre investment banks, not the majority of deposit taking commercial lending banks. Just because the word bank is in there doesn't mean the same entity.

    This system, which one can find in other countries, worked really quite well until - well, just now. Your massive housing bubble is the cause, not the particular structure of Freddie and Fannie as such. In fact they are more stable than the pure commercial (private) mortgage lenders in the sub-Prime area.

    You bloody idiots don't even understand which part of the bloody elephant you're talking about.

  • Episiarch||

    Lounsbury: an ass, or the ass?

  • Elemenope||

    Lounsbury: The Platonic Form of the Ass.

    The fact that it isn't called 'Ass' is a mystery for the neo-Platonists to mull.

    Seriously, a limey, an ass, and a hack. A didactic hack, at that. It's amazing *anyone* pays him.

  • Mr. Chartreuse||

    I was going to start a drinking game based on how many times he says "bloody", but alcohol poisoning doesn't seem a good way to go.

  • robc||

    I would ask Lounsbury about all the pre-bubble Fannie/Freddie articles I read and the predictions of their eventual collapse, but I dont think he gets it. F&F were going to crash and burn eventually, the current housing bubble was just the final push. It was probably going to take a bubble/burst cycle before it happened, this just happens to be the one that did it. Fannie and Freddie are inherently destabilizing forces.

  • Kolohe||

    most of the time, when i read, the words are still in my own voice in my head, even from disparate characters that would never sound remotely like i would. Ol' Louny has a remarkable ability: he seems to be able to write with a british accent. So in my head, i'm hearing myself tightening my vocal cords and issuing forth with the received pronunciation. it's the darnedest thing.

  • ||

    ...expurgate all manner of things, like rum and breasts, that might tempt a man to act like an ass.

    Well breasts do have a tendency to make a boob out of a man - ask any woman who has them. Better yet - ask the envious ones who don't have them. ;-)

  • Elemenope||

    It's good that, despite our differences, we can all get together to kick the limey.

  • robc||

    http://www.house.gov/paul/congrec/congrec2002/cr071602.htm

    Like most of his proposals, Paul's Free Housing Market Enhancement Act went nowhere (AFAIK). I have seen things from as far back as the 90s (when I first started reading about these kinds of things) saying much the same.

  • robc||

    we can all get together to kick the limey

    Its the oldest and greatest American tradition. Who says libertarians arent traditionalists?

  • Elemenope||

    most of the time, when i read, the words are still in my own voice in my head, even from disparate characters that would never sound remotely like i would. Ol' Louny has a remarkable ability: he seems to be able to write with a british accent.

    Funny you mention it, because I had never really stopped to think about it, but when I read it doesn't sound like my voice in my head when I read. It doesn't sound like I think the voice ought to sound, either. It's sort of an oddly flat male mid-western pronunciation, like the kind you'd hear news anchors use.

  • robc||

    Lounsbury,

    The important thing to note from the Paul speech I linked is that in 2002 (and, actually, much earlier) that Paul is blaming the housing crash (in part) on F&F, not F&Fs problems on the housing crash.

  • Kolohe||

    also, i warning bell goes off in my head when a person
    1) is posting for the first time ever
    2) is posting repeatedly to a thread
    3) has a very specific biography.
    4) is styling himself as an antidote to libertarian groupthink both here and in general
    5) despite (1), seems to be familiar with the tenor of this board.

    I love the smell of sockpuppetry in the morning.

  • Episiarch||

    It's good that, despite our differences, we can all get together to kick the limey.

    Lounsbury is a uniter, not a divider. Besides, who doesn't like kicking a limey?

    Now, off to the pool with my latest copy of reason. I must tan.

  • ||

    Lounsbury are you based in Dubai? I work at a small I-Bank in the DIFC. Just wondering because I wasn't aware of anyone doing serious VC work over here.

  • Honestly||

    I admit The Lounsbury seems pretty cocky, however, he also seems pretty educated about the subject. I'd take his opinion over the opinion of someone that seems like he/she is posting here while playing Gears of War on another screen.

    But of course, it is much more fun to gang up and try to win the "Snark-O- the-Day" award than to really try and get your head around an extremely complicated issue such as this.

  • Elemenope||

    Oh for the love of...

    Honesty's back! All you people who clearly know nothing because you're snarky better hide!

  • The Lounsbury||

    Ahem mate
    is posting for the first time ever:
    Hardly the first time ever. Do a fucking search, I've read Reason for years and have commented now and again for years, if infrequently. Save your idiotic "sock puppet accusations.

    And for the Dubai question, nope, used to be in Dubai area but moved Westward before the housing prices went nutso. And no, no one in Dubai is doing real VC in my opinion. Nor do I particularly feel that even the folks claiming do to PrivEq are really doing it. Too many PE outfits are disguised RE Investment Trusts.

    As for Ron Paul... what can one say? He's a loon. Fannie and Freddie were symptoms, not causes. A well-functioning syndicator and securitisation scheme does not ipso facto cause these issues, as evidenced by their long history of prudent securitisation. However, the Greenspan Put talk of the post 2001 period and the subsequent bubble in RE from too low for too long rates.... And probably weak controls over a new management group that got more aggressive. But again, blaming the bubble and in particular the credit crisis on Freddie and Fannie is stupid, calling them inherently destablising forces is real idiocy bordering on lunacy. Quite the contrary, they are - when run properly - stabilising forces. Your Libby-Bolshy ideological group think notwithtanding - you people give good classic liberal thought a bad name by being such bloody extremist loons. Goddamit, I sympathise with your bloody ideas, you're just goddamned Boslhies though.

    The predictions re mortgage, everyone with a bit of market sense and not directly involved in the bubble was calling that. On my own damned blog I was wringing my hands about the US mortgage bubble way back to 04-05. The clear problem originated in a break down in the origination process, poor regulatory oversight (the worst lending one finds originating in the least regulated areas, mate, rather contra your simplistic theses), and abusive use of securitisation. This was not the Fannie and Freddie vehicles, but rather purely private plays using the same conceptual framework, but pushed to the frontier, using models that worked fine for stable homeowner types that were core to the Fannie and Freddie business,but broke down when applied to high risk speculators working on flipping properties and high risk / low income buyers - both getting their loans via the non-bank, non or barely regulated channels.

    The problem is simply the classic agency problem - making short term gain on long term risk, and if you don't hold the risk, well fuck it, not your bloody problem. That's why there's regulation since the game theory lessons say this is going to go wrong or fall to the bad money chasing out good phenomena (or the Lemon phenomena as economists sometimes put it).

  • Elemenope||

    Lounsbury --

    You certainly seem to have put a great deal of effort into that last one. Bold tags and italic tags, all closed neat & proper. 1, 2, 3, 4, count 'em, 5 paragraphs! Though a few of them a re wimpy journalist-style paragraphs.

    Of course, as soon as you claimed that you wouldn't be affected by the US market's collapse and are simply a disinterested observer I knew you were full of fucking shit. If the US market tanks, nowhere will there be a market untouched. Any expert in the field would know that. I guess that makes you a pretend expert blowhard.

    Thanks for playing.

  • The Lounsbury||

    One would think, except I suppose in the cases of perhaps mental retardation or partisan looniness, that it is self-evident that if the world's largest economy goes south in a Depression sort of way, that no one is going to be utterly uneffected. And I already noted my dollar exposure.

    The point, again evident if you'd stop your wounded frothing and flailing about (I suppose I am dimly sorry to have hurt the Bolshy Lib Community feelings by injecting some fact and reason), my note re not being effected by a US financial market collapse was in response to the implication I make my money off of it.

    I don't, and what I do work on is in fact reasonably (ex the whole annoying getting paid in dollars thing, highlighted by myself rather earlier) insulated from direct blow back.

    Now, I suppose we'll have yet more messages whinging on about my diction, or cretinously shrieking on about a supposed contradiction here or there. Feel free. It amuses me. sort of like primates in a viewing centre.

  • Honestly||

    EMINEMOPE, I've missed you so.

  • Elemenope||

    Lounsbury --

    If you really were the lurker you claimed to be, and pad attention at all ever, you'd know that this so called happy family circle-jerk of libertarians doesn't exist. You'd rarely see me agree with many others here on the merits of any issue (except, generally, on drug policy and cops-gone-wild) because I don't come from the standard right-leaning brand of libertarianism. Many others here are heterodox in other, different ways.

    And honestly, it's not your points that I'm making fun of. It's your attitude. "Let me learn up the chillens, they've gone astray". At that point being right takes second place to being the epitome of douchebaggery. If you hadn't been so condescending you might have found that a few people even agree with you. But now it's all down to "kick the limey", and damn I'd forgotten how fun that could be.

    And given your level of sanguinity about the US economy imploding, I'd say you're at best a shitty little player in a shitty little market, and not the badass trader you wish to portray here.

  • Honestly||

    For the record, I would like to change my initial post from "seems pretty cocky," to "is very cocky."

  • Elemenope||

    That's the sort of honesty I've come to expect only from you.

  • ||

    Genuine classic liberals - the rational version of paranioac American libertarianism - could rather insist that a proper work-out be taken.

    This site is stuffed with the latter, Lounsbury, as you have obviously noted. Witness the fixation on gun chatter and the accumulation of shiny matter. And they continuously prattle about a 2% "win" in some future election.

    The fact is - the world is closing in on us. Climate, trade, markets, currencies, and terrorism dictate MORE government than ever - but as a classic liberal who voted LP until 2004 this reality was late dawning. Do I admire the nanny state? Fuck no, I am a Darwinist. Is capitalism the best yardstick to measure maximum resource utilization? Hell YES. But the mantra among the underinformed is that ALL government is bad and in a hyperlinked world that type of thinking is naive and destructive.

  • Episiarch||

    Oh yay, the manic street squealer shrike is here. Now we get condescending limey and raving paranoid. Did you not take your Seroquel today, shriek?

  • The Lounsbury||

    Now don't be so very sensitive. You need only search Hit & Run for Lounsbury or collounsbury and you will see I have been here for ages. Not my fault you all leave the impression of wingnuttery you do, even to sympathetic readers.

    But regardless, I am not a trader my dear. Not a trader at all. Nor even a badass trader. Merely a humble long-term equity (non-public, high risk) investor on the frontiers of capitalism. I like frontiers, more interesting, nice pieces of value to uncover despite the vampire states and all that.

    Although thinking of that, perhaps you should be investing in, how did you say it, these "shitty little markets?", since they earned a positive 35% return year-on-year, and not from North American markets. Of course that's not actual advice, since I suspect the markets have peaked for the time being - and I also suspect the US market is nowhere near as bad as the current panicking about would have it (although very bad relatively).

  • The Lounsbury||

    Yes, I see. I used the term Bolshy Libby for a reason. Too much party line thinking, not enough pragmatism.

    And I see I am being accused of being a sockpuppet again. Odd bit of paranoia that.

  • Elemenope||

    And now he's calling me "my dear". Oh my, a limey fruit! And sour like a lime.

    And damn, that shrike post was shriller than usual.

  • ||

    "You bloody idiots don't even understand which part of the bloody elephant you're talking about."

    This thread is about global warming?

  • Elemenope||

    Not paranoia...just fun and annoying insult.

    As in, you suck so much you wouldn't even post under your own nick, that's how embarrassingly obnoxious you're being right now.

    Also because it's hard to believe that people like you actually exist, you know, in the real world. Thus, calling someone performance art covers all the bases; if it is, you've called it. If it isn't, and the person is simply ridiculous enough to be confused with performance art, it is an appropriate insult nonetheless.

  • ||

    Lounsbury
    I had subscribed to Reason for years. Approvingly read Hayek and Mises. I'm big on the 2nd amendment, oppose the drug war with a vengance, oppose censorship and think markets can do amazing things. I thought I leaned libertarian.

    Then I started to read and participate here at H&R. I quickly found out that I am an unqualified liberalsocialistuberstatist.

    For some here (I'd say a significant but vocal minority) purity is a must. It's probably this sort of thing that kills the LP in elections (you are against the war on drugs? Great. And for gun rights? Great. What you are for a minimum wage and the 1964 Civil Rights Act? Get outta here uberstatist!)

    However, I think you'll overall find a wider range of opinion here than in many other places, and there are a ton of thoughtful folks here with impressive amounts of knowledge on a variety of subjects.

  • ||

    Oh, and there's also Guy Montag.

  • The Lounsbury||

    Niceguy,

    Quite right, one of my colleagues brought me to "Reason" (kha, amusing), and the posting is often interesting. Oddly anything related to monetary economics or guns seems to bring out a certain class of lunatic.

  • ||

    Many others here are heterodox in other, different ways.

    Which angers LewRockwellites. Rockwell SMASH!

  • ||

    It really is amusing - the fragmentation on a site that supposedly possesses a unifying theme.

    And LPers laugh at disorder in parties that get 60 million votes? That is irony gold!

  • ||

    brought me to "Reason" (kha, amusing),

    (drink!)What are ya, some kind of condescending alcoholic?*

    *There is a chance you don't know our drinking games, of course.

  • ||

    And LPers laugh at disorder in parties that get 60 million votes?

    Holy strawman, Batman! I thought we laughed at the dogma of the two-party system, not the inevitable intraparty divisions that resulted. This site doesn't pride itself on being an echo chamber either.

  • Episiarch||

    Too much party line thinking, not enough pragmatism.

    Yes, insulting people while tossing out vague and unsupportable financial theories is very pragmatic.

  • Bingo||

    I'm only libertarian for the chicks.

  • The Lounsbury||

    Afraid the ref escapes me, I thought I was merely making a not-very-funny joke (brought me to reason.... well by accident and then rereading it almost seemed vaguely amusing).

  • Minion of URKOBOLD||

    FOOLS. YOU BECOME LIBERTARIAN BECAUSE YOU FEAR FOR YOUR TAINTS.

  • Episiarch||

    Then I started to read and participate here at H&R. I quickly found out that I am an unqualified liberalsocialistuberstatist.

    No, you just need a hysterectomy and to eat more veal. Just kidding :-)

    I figured out who Lounsbury is.

  • ||

    I graduated from college when Reagan was president - right in the Yuppie sweetspot. I then went to work for a Big 8 consulting firm and spent all my time with others square in my demographic working in the Bauhaus towers spread across the USA.

    We were ALL "fiscally conservative, socially liberal" back then. I really thought that would be the dominant political persuasion by now..... I still hear it today but not nearly so much.

    WTF happened?

  • Guy Montag||

    prolefeed,

    Where are you finding McCain supporters here? Plenty of anti-McCain, like me and plenty of Obama fanboys, like our Leftie trolls who seem to want to live here, but anybody who actually likes McCain is staying pretty well hidden.

    BTW, correcting media inaccuracies about various candidates does not constute fan status.

  • ||

    Of course, what this translated into was companies issuing loans to people who weren't credit worthy enough, and instead of risk getting spread out, it actually became heavily concentrated into these two companies.

    I disagree. Risk has been spread out. To 300 million of us. The rewards have never been spread out, only the risk. Of course this just proves that we require more, betterer intervention in the lending industry. Maybe the feds should just say we'll (read taxpayers) guarantee every gooddam debt incurred by every goddam entity.

  • ||

    The above choice will clinch Bush surpassing James Earl Carter on the "worst Presidents of all time" list.

    Shit, he passed Jimmy a long time ago. The only question is has he passed Buchanan to become the worst.

  • robc||

    Any chance of Zombie Calvin Coolidge being on the ballot this fall?

  • robc||

    Too much party line thinking, not enough pragmatism.

    I make a series of posts related to "pragmatism" this morning (I was itching for a good "what is truly pragmatic?" flamewar) and he doesnt respond to any of them. Instead he denies that a market manipulating force like Fannie and Freddie caused a misallocation of resources leading (in part) to the housing bubble. What a limey goober.

  • Bingo||

    Oh well, I just donated $100 to the Barr campaign. Hopefully he can get into a debate or two with the clowns from the major parties.

  • ||

    Shit, he passed Jimmy a long time ago. The only question is has he passed Buchanan to become the worst.

    (cough) Woodrow Wilson.

  • Elemenope||

    (cough) Woodrow Wilson.

    Word.

  • Elemenope||

    Though, I'd also throw out Andrew Jackson. Or Andrew Johnson, for that matter.

  • ||

    All good (bad?) choices, LMNOP.

  • ||

    >Shit, he passed Jimmy a long time ago. The only question is has he passed Buchanan to become the worst.

    (cough) Woodrow Wilson.


    A nominee that certainly deserves consideration for the Marianas Trench dwelling president.

  • ||

    What's up with the Woodrow Wilson hate?

  • ||

    Though, I'd also throw out Andrew Jackson. Or Andrew Johnson, for that matter.

    And Richard Milhous has his passionate detracrors as well. Ignore watergate, the War on Drugs Human Nature and wage/price controls are big time fuckups.

  • ||

    What's up with the Woodrow Wilson hate?

    Damned readers.

  • ||

    I'd say William McKinley.

    Lover of tariffs.
    Resister of civil service reform.
    War-mongering imperialist.

  • ||

    I hope the hate is not over the federal reserve or something equally loony.

  • ||

    MNG, check out Woodrow Wilson's record on segregation.

  • ||

    He resegregated DC I've read. It's also reported that he was a big fan of Birth of a Nation.

    Wilson was surely a bigot. But so were most of the Presidents before and I'd bet some after him. I don't think he can get "worst" for that.

  • ||

    One way to look at a President is to say, when they left office was the nation in worse or better shape? When Wilson left office the US had become a major world player. And he was pretty statesmanlike at the end of WWI. And I don't think any of his domestic policies were that different than T.R's which I think implies that those policies "time had come" and were going to be enacted with or without him as Prez.

    Don't get me wrong, I'm aware of his cracking down on war opponents and his nutty propaganda machine for the war as well as his flip flop on getting into war. He has some serious blemishes...

  • ||

    Also, check the Harrison Narcotics Tax Act. Seems tame by comparison to today's War on Drugs, but can't help but feel it was the start of something horrible.

    I can keep going.

  • robc||

    MNG,

    Wilsonian foreign policy. The same thing the neo-cons favor.

  • Elemenope||

    One way to look at a President is to say, when they left office was the nation in worse or better shape?

    Point.

    When Wilson left office the US had become a major world player. And he was pretty statesmanlike at the end of WWI.

    I have always thought that we made two mistakes there. One for selling arms and then getting dragged into WII, thus making us by default the people to bother about other people's business. Two, for invading Russia during their Civil War, achieving nothing impressive but handing the Reds a massive propaganda victory on a silver platter.

    And I don't think any of his domestic policies were that different than T.R's

    Way wrong. The federal integration that Wilson ended was begun by TR. Drug War technically started under him (though it wouldn not receive that name until much later), as well as the federal willful ignorance of the KKK and their murderous resurgence.

    ...which I think implies that those policies "time had come" and were going to be enacted with or without him as Prez.

    Nothing is inevitable.

  • VM||

    What's up with the Woodrow Wilson hate?

    WTF?

    are you fucking kidding? Art nails one of the major reasons... and there are others.

    FDR and his antisemitic ass can get rolled down a driveway onto a gravel road, too.

  • Elemenope||

    and by "dragged into WWII" I meant "dragged into WWI". Clearly.

    {Slaps own face)

  • Robert||

    Let's not get too upset over mere paper. The actual houses are still there. The only thing missing is what someone thought they'd get paid for.

  • chuckpony||

    Worst ... Presidents ... EVER.

    Buchanan
    McKinley
    Wilson
    FDR
    LBJ
    Nixon
    Carter
    G.W. Bush

  • ||

    Let's not get too upset over mere paper. The actual houses are still there. The only thing missing is what someone thought they'd get paid for.

    Absolutely. Some folks are going to get butt fucked over the housing bubble. It will be, for most of them, their own goddam fault. Other folks, (first time home buyers) are going to do quite well with lower prices and payments for the same house, thank you.

    What is wrong with the price of homes going down, making them more affordable? I mean, you bought a place to live in, not as a speculative investment. Right?

    Oh, you bought it as an investment? You borrowed money to speculate (or lent money to a speculator) and now want others to pony up and cover your irresponsible gambling ass.

    In the first case, no problem. In the second, you can kiss my ...

  • ||

    As the unflinching support for the drug was by both sides of the ideological aisle since the Harrison Act demonstrates that idea was going to happen Wilson or no. SCOTUS for example in Webb v. US handed down a ruling that was a big bonus to drug warriors and it was populated with many GOP nominees at the time.

  • ||

    Bipartisan support* or no, MNG, Wilson could have taken a strong stance against the drug war.** Did they have enough votes to overcome a veto?


    *BTW, what is it with the bipartisan support for the drug war? Is it because of bureaucratic entanglements? What?
    **Ha ha ha

  • Alex Trebek||

    Some newspapers later claimed cocaine use caused blacks to rape white women and was improving their pistol marksmanship.

    This political party was more concerned with over-sexed, straight-shooting Negroes in 1914?


    "What are the Democrats?"

  • Colin||

    I just read how one incredibly stupid senator single-handedly caused a run on Indymac. Utterly amazing.

    What's even funnier is that I've lived in LA for years and I never heard of this bank until now.

  • Episiarch||

    I just read how one incredibly stupid senator single-handedly caused a run on Indymac. Utterly amazing.

    That would be Chuck "most dangerous place in DC is between a camera and me" Schumer.

  • ||

    As the unflinching support for the drug was by both sides of the ideological aisle since the Harrison Act demonstrates that idea was going to happen Wilson or no.

    MNG, there was long bipartisan support for segregation. That did not make the policy any less odious or the supporters from both parties any more moral.

  • ||

    That would be Chuck "most dangerous place in DC is between a camera and me" Schumer.

    Linky-link please.

    In advance, Gracias.

  • ||

    "You'd rarely see me agree with many others here on the merits of any issue (except, generally, on drug policy and cops-gone-wild) because I don't come from the standard right-leaning brand of libertarianism." - Elemenope

    And I thought you were just being a dick...

    (that was a joke)
    (fer real)

  • Paul||

    But all those NPR segments were brought to me by...Fannie Mae. Say it ain't so.

  • Episiarch||

    Here you go, Jsub. 5th paragraph down.

  • Kolohe||

    well louny i see you probably are 'real,' i apologize. i blame walker(?) (welch?). after he revealed the freedom swatch, i now almost always attribute good trollery to an inside job; sighting cesar mckinley behind every post like napoleon blamed snowball. don't get me wrong, i love, honor, and respect good trollery (and fwiw, am not actually that far distant from your position)

    but man, looking through the archives, you definitely love to get on your high horse -
    Well, glad to see that "libertarians" (that amusing US term for supposed laissez faire liberalism) are not unacquainted with vulgar bigotry and provincialism.

    however, i like how you went from 'loundsbury' in '05 to 'The Loundsbury' in '06. it definitely agrees with you.

  • Kolohe||

    J sub D-
    Link-link

    The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMac's viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.

  • Paul||

    I personally dont think that letting Fannie and Freddie crash will send us into another great depression,

    Au contraire, not letting them crash may send us into a great depression.

    When the government keeps refusing to let any air out of over-inflated economic balloons, the obvious result is something beginning with *pop* and ending in *crash*

  • Kolohe||

    Links to the news sites the day after Schumer released the letter.

    "I am concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers," Schumer wrote. The bank "could face a failure if prescriptive measures are not taken quickly."

  • ||

    Correction -

    Shumer gat BLAMED for IndyMac's failure by the head of the agency whose responsibility it was to oversee financial malfeasance.

    By the time of Shumer's letter, IndyMac's stock price had gone from $60 a share to .40 cents ps and bonds were selling for a fraction of their coupon.

    But Wingnut.com has taken this finger-pointing and run with it - it vindicates their irrational hatred of Shumer.

  • ||

    "Let's not get too upset over mere paper. The actual houses are still there. The only thing missing is what someone thought they'd get paid for."

    Actually, in many cases, if the bank owns the property long enough, much of the built value of the house (and the neighborhood, if enough houses are REO) does physically disappear. Squatters move in and trash the house, or rip out the plumbing and wiring and other fixtures. Or, the property suffers from general lack of maintenance, for example all the landscaping dies because no one keeps it watered. It takes a long time to grow mature landscaping, but only one season of no water to kill it, here in the southwest.

    One or a couple foreclosures in a neighborhood, that get resold pretty quickly, don't cause physical damage. But increasingly there are places where entire neighborhoods or subdivisions suffer high levels of abandonment, which can cause physical destruction of the housing stock. Houses need to be occupied to hold their value.

  • ||

    J sub D
    I don't pretend that because some policy has long time bipartisan support it is a good thing, far from it. I just maintain that when a politician supports something with such support they can't be "credited" with that policy.

    And yes, there are rare politicans who have the courage to fight something that has long time bipartisan support. They are the "great" ones.

    I think the Drug "War" (quotes because you can't coherently talk about a "war" on drugs) is a moral disaster.

  • ||

    In addition to being a moral disaster, the drug "war" is also a practical disaster, as was Prohibition in the 1920s. It's why gangs are so powerful in our cities these days: they are funded by the black market drug trade, and are fighting over distribution territories, just like Capone and his competitors.

  • ||

    "But increasingly there are places where entire neighborhoods or subdivisions suffer high levels of abandonment, which can cause physical destruction of the housing stock."

    The problem is we need natural disasters to hit several parts of the country and do much more destruction than what you speak of. If you look at future demographic trends, immigration trends, gas price forecasts, etc one must conclude we have too many single family homes in this country. Hurricane Katrina was a mixed blessing for the Gulf Coast, as it is one of the few areas in the country that does not have a huge excess supply of housing.

  • Colin||

    Schmuck Schumer's very public letter directly caused the billion-dollar run, and ensuing liquidity crisis at the bank.

    He is to blame.

    They weren't even on the list of the top 90 banks likely to fail.

  • Dwayne Mayor||

    Mr. Lounsbury, I would be very interested in your comments on Denninger's recent article 'Fannie, Freddie, Banks and Government Debt' at http://market-ticker.denninger.net/
    Does solution #6 sound as sane and rational to you as it does to me? You seem to have a very competent grasp of these issues which I am trying to understand.

  • highnumber||

    They weren't even on the list of the top 90 banks likely to fail.

    Heh. You sound like the IndyMac AE I worked with. He would stop by with news of other lenders failing, then he would brag about how secure IndyMac was. I always had the urge to whisper in his ear, "Hey man, you guys are selling more of those risky products than anybody. How big do those letters have to be before you can see the writing on the wall?"

  • JMR||

    And not-being on that list of the 90 ultra-crappiest means "IndyMac" MUST have been a safe bank. If only Schumer (who is a horse's ass, but that's beside the point) hadn't stated the blatantly obvious. Sheesh.
    JMR

  • ||

    "Schmuck Schumer's very public letter directly caused the billion-dollar run, and ensuing liquidity crisis at the bank.

    He is to blame."

    I guess he said it best arguing that you shouldn't blame the fire on the guy calling 911. If anything the goal should be to have MORE transparency in government not a bunch of yahoos hiding what they know. As stated earlier...Schumer, who is probably one of the biggest whiners in congress, didn't really enlighten anyone who has even a mild interest in the bank.

  • Russ 2000||

    Waitaminnit! I don't think Klein has it right at all.

    As far as my limited knowledge of F&F are concerned, I don't think they hold much of the un-creditworthy mortgages he's referring to. I thought they were restricted to typical fixed loans with low LTV. With prices falling over 20%, some of their conventional mortgages are now in bad shape, but they weren't buying much questionable stuff. Congress recently allowed them to buy jumbo loans, but whether F&F bought much of them I don't know.

  • The Lounsbury||

    Of course I am real, compadres (and the The is an inside joke).

    Re the note supra re my ignoring the "pragmatic comments" - rambling about Omaha beach isn't rational commentary, it's loony whanker. Now as to the other item there, re Freddie and Fannie roles, I believe I was fairly precise about locating my analysis of the origin (and in reaction specifically to the overwrought 'oh no, government intervention' squealing -for all that I share a deep scepticism re the same) of lending to specific issues arising in the past ... well 8 years. Again my US markets is not my thing, and I am not hesitant to allow that my read on Freddie and Fannie might be marginally off.

    I would refer readers rationally interested in the issue to Krugman's NYT column and Tanta of the Calculated Risk blog (http://calculatedrisk.blogspot.com/2008/07/krugman-on-gses.html) contrasting comments. Tanta is likely closer to the more rational critiques here, but both are rather closer to my comments than the irrational squealing.

    The underlying observation is ideological knee-jerking rather than real (never mind incoherent rambling re D-Day beaches) pragmatism is the best approach.

  • The Lounsbury||

    By the way, Tanta is an (ex) actual mortgage lender and while I disagree (without direct American market experience) with some items, the commentary is actual live, non-ideological insight.

    It may not of course fit the lunatics, but it is literate.

  • The Lounsbury||

    Re 'Fannie, Freddie, Banks and Government Debt': That was hard to read.

    Overall it reads like an equity market trader who's in the wrong position and shrieking.

    Mark to market, for example, is not a great idea for regulatory analysis - and has issues with being pro-cyclical, or more plainly, can tend to exagerate the down trends and the uptrends as the "marking" (revaluation) to a bubble market will inflate lender balance sheets to lend more, and overshrink on the downside. Anyone calling for more mark to market is being irrational (or has trader agendas).

    Not that mark to market is bad, it just is not a panacea.

  • Dwayne Mayor||

    Interesting. Thanks for the link to the NYT article too, Mr. Lounsbury.

  • Dwayne Mayor||

    One thing though, Mr. Lounsbury. The article in question is now located: http://market-ticker.denninger.net/archives/P2.html

    It is dated July 12, 2008 just so you know. I have a feeling you may have read denninger's most recent post by mistake. I agree THAT is a hard read. If you do get a chance do read 'Fannie, Freddie, Banks and Government Debt' as I am particularly curious if you see the same cataclysmic results of the government transferring losses of private companies to the US taxpayer. This article I assure you does not read "like an equity market trader who's in the wrong position and shrieking." Sorry if I wasn't clear that it was a July 12th post. Thanks.

  • The Lounsbury||

    No, I read that one.

    However, I have more sympathy after seeing more info. I can only point you to the FT comment (http://blogs.ft.com/maverecon/2008/07/the-rescue-of-fannie-and-freddie-by-hankie-and-feddie/)

    The bail-out of Fannie Mae and Freddie Mac by the combined forces of the US Treasury and the Federal Reserve Board is the ugliest exercise of its kind I have ever observed outside early transition economies and mature banana republics.

    I rather agree. It is not the government intervention. It's a half-assed incompetent intervention, that is neither here nor there, trying to pretend to play to the no-intervention ideologues, but actually lining up the ratepayers for a worse hit.

    The worst of both worlds.

    The current American Administration is literally the most incompetent you've (re) elected in decades. It's really jaw dropping how bad they are. You're on the way to becoming an Argentina if you're not careful.

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