First Take: Bush throws GSEs under the bus
By: PAUL JACKSON
September 24, 2008
Forget everything else about how the current financial mess could hurt everyday Americans, which it could. My jaw fell to the floor when I heard the President, attempting to explain the current mortgage/financial debacle to everyday Americans on Wednesday night, throw both Fannie Mae and Freddie Mac under the proverbial bus.
“Fannie Mac and Freddie Mac … fueled the market for questionable investments,” Bush said.
Read that again. And then remember that this mess started with a private-party securitization party that left the GSEs gasping for air, and market share. Either we’re witnessing political agenda-setting at its worst, or simple ignorance by an administration that has seemingly consistently failed to understand the nature and reach of this crisis. Neither is what should be fueling a desire to provide Treasury with $700 billion to buy assets nobody can price.
If you want to know who fueled this mess, look no further than the carnage of independent investment banks like Bear Stearns, Lehman Bros., and others like them. Those still standing (namely, Goldman and Morgan Stanley) are now, conveniently, commercial banks — or have merged with one — and they will benefit enormously from this bailout program. Or look at our own government all the way back to 1992; pushing housing has been a favorite political pet since Bill Clinton first ran for office, and Republicans only furthered the theme since that time; noteably, the current Bush administration’s own push for “the Ownership Society” comes to mind.
I’m convinced that the credit markets stared into the deep last week, and the sort of financial ruin that can topple economies was just over the horizon, but it’s time we questioned more directly how we got here. Why nobody saw AIG coming. Why the plug was yanked on Fannie and Freddie despite both verifiably being a going concern. Why Lehman was allowed to plunge markets into chaos, while Goldman and Morgan Stanley cruised into a commercial bank charter just a few days later.
I will tell HW readers this: at this point, regardless of whether this bailout package passes or not, both we and our children — and possibly our children’s children — will be paying for this mess. And the price tag is anything but the $700 billion being bandied about inside the Beltway.
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September 24th, 2008 7:10 pm by Mike Kazell
I agree with your interpreation of Bush’s address. As I was watching I was wondering if he even understood exactly what he was trying to explain, one can only hope! How much of this mess do you believe is the fault of the Commodity Futures Modernization Act passed in 2000? From what i understand, this bill allowed mortgage backed securities to be treated as commodities and leveraged against different investments within the market. As the value of the mortgage backed securities fell, so did the strength of the secondary investments that were supported by the original asset. Is much of this to be blamed on the fact that the SEC and the CFTC were not allowed to examine the financial companies guaranteeing these loans by proving they had the assets to cover any potential losses? I know there are a number of factors which led us the current financial crisis we face, but this bill seems like it opened the doors for Investment Banks to gamble with loans they knew were unsafe.
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September 24th, 2008 7:38 pm by Bush says GSEs to blame : HousingWire
[...] By: PAUL JACKSONSeptember 24, 2008 Advertisements Saying the economy is “in great danger,” Bush also inexplicably managed to suggest that Fannie and Freddie “fueled” the mortgage mess. Our first take is here. [...]
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September 24th, 2008 9:43 pm by Dave Narby
Huh?
Last I checked, Bush, McCain and *Greenspan* warned about this YEARS ago, saying that Fannie and Freddie needed reining in, and Barny Frank and Charles Schumer argued against it (and the Democrats subsequently blocked it).
You need to get your facts straight - That is, if you care about them…
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September 24th, 2008 11:49 pm by Becky
Mike is on point
and so is the “easy money” everyone own a house solution that
the current administration and others have thrown at their
economic malaise (9/11 aftermath etc).Let’s stop pretending and let the players fall.
It’s not simple, it’s simplistic.
If you give away money like free candy
to people who don’t understand economics
and rack up huge profits on the front endAt the same time deregulating investment firms who can now
“play” along in the game…well, you know where it’s headed.
It’s not like this isn’t a dance we
can see in front of us.Why does everyone keep asking “how it happened?”
It’s simple enough to see.
They jacked up the easy money.
They fed it to everyone to help them ignore
the larger issues no one wants to see anyway…They leveraged it up until they could all take their front end bonuses…
Then they were “surprised” when the bubble hit its
natural ceiling?And now there is nothing even close to
“easy money” to be found…Go figure.
He is good at playing dumb.
It doesn’t matter if he IS dumb or not.
What matters is he plays it well.
and everyone dumb enough will go along with him.This is a no brainer.
The only real question is
what brains are running it and to what end? (Other than their own, that is obvious)and the answer to that is to follow the money.
and it’s bigger than you think…I remember people telling me years ago that the problem with Africa was that it was so corrupt. I thought to myself “only because you don’t realize that Africa is not alone in this regard.” and also:
“The advantage in Africa is that everyone already knows it is this way.”
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September 25th, 2008 4:47 am by Bush throws GSEs under the bus : HousingWire « Straight Talk about Mortgages and Real Estate
[...] First Take: Bush throws GSEs under the bus : HousingWire. [...]
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September 25th, 2008 4:59 am by PAUL JACKSON
***shaking my head at Dave’s comments***
This wasn’t a partisan post, but I guess some people will always see the world through whatever party-colored glasses they’ve got on. For HW readers that care to know, my stance is that there’s enough blame to go around both major political parties many times over when it comes to the current crisis, even if supporters of each party focus just on the half that suits their own world view.
And, Dave, the “facts” are pretty clear: regardless of any larger issues surrounding the role of the GSEs in mortgage banking — that sort of ideological holy war has a much longer history than Greenspan or Bush — Fannie and Freddie did not lead us into this mess.
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September 25th, 2008 7:30 am by cas127
No FanFred didn’t get us into the subprime mess - but they are responsible for the absurd over-investment in SFH that made subprime possible (because FanFred’s uneconomic backstopping of the “traditional” mortgage market enabled/encouraged risk taking at the riskier subprime margin/fringe).
And FanFred had one of the top 5 most powerful lobbying/kickback/payoff organizations of all time going - to ensure that the Feds used our tax dollars to eternally increase the funding/backstopping of uneconomic SFH investment.
The housing rot runs deep and has a very long history.
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September 25th, 2008 10:44 am by Bush throws GSEs under the bus : HousingWire at tvanderwell on SmartHippo.com
[...] First Take: Bush throws GSEs under the bus : HousingWire. [...]
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October 3rd, 2008 8:42 am by Fannie Mae Shelves Delivery Charge Hike : HousingWire
[...] the strings are attached to such a move, especially with President George W. Bush’s recent comments on Fannie and Freddie’s role in Wall Street corruption. Print This [...]
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