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U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

Okay, I'll play. Your claim is that F&F's expansion since 1991 was 100% responsible for the housing bubble. But from 1991 to 1998, the price of homes was actually FALLING. That's seven years. Then, for the next nine years housing prices started to take off. How does your theory explain the fact that for 44% of the expansion period, home prices fell and did not rise? :popcorn2: :popcorn2:



Maybe I need to borrow a pair of wingnut goggles, because I've yet to see you post an explanation that goes beyond mere correlation ... and as noted above, even correlation doesn't line up.

Where do you see it falling? If anything, it was growth in line with inflation, as evidenced by the red line staying relatively flat, but in nominal dollars it was increasing.
 
Where do you see it falling? If anything, it was growth in line with inflation, as evidenced by the red line staying relatively flat, but in nominal dollars it was increasing.

Clearly the inflation adusted price of homes fell between 1989 and 1997/8 when, according to duece's theory, the price should have been rising. It's a little easier to see on this chart: http://www.ritholtz.com/blog/wp-content/uploads/2011/04/2011-Case-SHiller-updated.png

Pretty good summary here: http://en.wikipedia.org/wiki/Causes_of_the_United_States_housing_bubble
 
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Clearly the inflation adusted price of homes fell between 1989 and 1997/8 when, according to duece's theory, the price should have been rising. It's a little easier to see on this chart: http://www.ritholtz.com/blog/wp-content/uploads/2011/04/2011-Case-SHiller-updated.png

This chart only shows existing home prices, not new construction. It makes sense that existing home prices would be dropping, given that new home construction expanded rapidly ( see census.gov building permit index ) from 1991 through 2005. Demand for new homes increase, decreasing demand and prices for existing homes. Later in the bubble, as people "upgraded", those new homes built in the 1990s were now existing homes, thus you can see that priced in to the increase on your chart.
 
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This chart only shows existing home prices, not new construction. It makes sense that existing home prices would be dropping, given that new home construction expanded rapidly ( see census.gov building permit index ) from 1991 through 2005. Demand for new homes increase, decreasing demand and prices for existing homes. Later in the bubble, as people "upgraded", those new homes built in the 1990s were now existing homes, thus you can see that priced in to the increase on your chart.

There's no logical basis to think that the rate of change for new home prices was any different than the rate of change for existing home prices. And in fact, the trend is almost identical. http://nomoneynoworries.files.wordpress.com/2010/06/new-homes-adjusted-price.jpg
 
Okay, I'll play. Your claim is that F&F's expansion since 1991 was 100% responsible for the housing bubble. But from 1991 to 1998, the price of homes was actually FALLING. That's seven years. Then, for the next nine years housing prices started to take off. How does your theory explain the fact that for 44% of the expansion period, home prices fell and did not rise? :popcorn2: :popcorn2:



Maybe I need to borrow a pair of wingnut goggles, because I've yet to see you post an explanation that goes beyond mere correlation ... and as noted above, even correlation doesn't line up.

Look, if you want a question answered, you are going to have to be more accurate in how you restate my position, or I assume, that of others. 1998 is when I target that home prices began to increase faster than the rate of inflation, and hence the beginning of the bubble. It is on the graph that I posted.

The bubble required more than one factor to get started, and then once it got a head of steam, more accelerants were added. 1998 is when the stars started to align for this. All of that has been noted already.
 
There's no logical basis to think that the rate of change for new home prices was any different than the rate of change for existing home prices. And in fact, the trend is almost identical. http://nomoneynoworries.files.wordpress.com/2010/06/new-homes-adjusted-price.jpg

I would agree.

To add further to my prior point, my position with regard to FF is not so much that they "caused" the bubble, but that it was their exponential expansion (to approximately 50% of all the market), combined with how they were used to bring new demand into the market (sub-prime underwriting to support the HUD mandates and lawsuit settlements .... see Cuomo video), combined with excessively low interest rates (the Fed at root of that), which created the perfect storm which produced this bubble. All of those were phenomenon that most of us had never seen even one of in our lifetimes. And none were caused by the private sector, or Wall Street.

That the private sector took advantage of the profits to be had with this bubble should surprise no one. Folks building and/or buying and selling homes, whether it be someone down the street with one home, or Merrill Lynch with a bundle of 5000 homes, is what we do. Good deals, bad deals, the process is essentially nothing new. Mortgage backed securities are a fine investment in normal times. But when bought during a bubble, are no different than what folks who are currently underwater in their mortgage did on a local scale.

Now, if you want to argue bail-outs, or "too big to fail", I submit that is a different debate.
 
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I would agree.

To add further to my prior point, my position with regard to FF is not so much that they "cuased" the bubble, but that it was their exponential expansion (to approximately 50% of all the market), combined with how they were used to bring new demand into the market (sub-prime underwriting to support the HUD mandates and lawsuit settlements .... see Cuomo video), combined with excessively low interest rates (the Fed at root of that), which created the perfect storm which produced this bubble. All of those were phenomenon that most of us had never seen even one of in our lifetimes. And none were caused by the private sector, or Wall Street.

That the private sector took advantage of the profits to be had with this bubble should surprise no one.

This is what I find interesting. I doubt you'll find very many liberals on this board that in some way won't fault the Fed Reserve, Fannie and Freddie, government pushing home ownership etc for playing a part. You won't find many economists that wouldn't either. This completely absolving the private sector is ONLY found on the right wing. It's like the private sector is your mommy or daddy and you have to protect them no matter what....even when piles of evidence are contrary to that position.
 
I would agree.

To add further to my prior point, my position with regard to FF is not so much that they "caused" the bubble, but that it was their exponential expansion (to approximately 50% of all the market), combined with how they were used to bring new demand into the market (sub-prime underwriting to support the HUD mandates and lawsuit settlements .... see Cuomo video), combined with excessively low interest rates (the Fed at root of that), which created the perfect storm which produced this bubble. All of those were phenomenon that most of us had never seen even one of in our lifetimes. And none were caused by the private sector, or Wall Street.

That the private sector took advantage of the profits to be had with this bubble should surprise no one. Folks building and/or buying and selling homes, whether it be someone down the street with one home, or Merrill Lynch with a bundle of 5000 homes, is what we do. Good deals, bad deals, the process is essentially nothing new. Mortgage backed securities are a fine investment in normal times. But when bought during a bubble, are no different than what folks who are currently underwater in their mortgage did on a local scale.

Now, if you want to argue bail-outs, or "too big to fail", I submit that is a different debate.

The problem with your theory is that it doesn't hold water. Fannie & Freddie were, in fact, dragged into the subprime market by the private lenders who were sucking up all the new loans. As far as I can tell you've provided no explanation for the mechanism by which an expanding F&F led to housing inflation. Are you suggesting that home sales were depressed before that because of insufficient liquidity? Before F&F grew, people just couldn't find a lender to help them purchase a home? I don't see any support for that, if that's what you're trying to say.

Certainly you haven't addressed my point that housing prices actually fell for nearly have the period when F&F were growing so quickly.
 
This is what I find interesting. I doubt you'll find very many liberals on this board that in some way won't fault the Fed Reserve, Fannie and Freddie, government pushing home ownership etc for playing a part. You won't find many economists that wouldn't either. This completely absolving the private sector is ONLY found on the right wing. It's like the private sector is your mommy or daddy and you have to protect them no matter what....even when piles of evidence are contrary to that position.

I got your "Mommy and Daddy" right here.

The fact is that it is the Democrats and liberals who demonize the private sector, and will do all in their power to shift blame away from government, and onto the rich and Wall Street and Capitalism in general. It is a consistent theme with Obama and his class warfare reelection campaign, with moonbats like the Occutards in the Obamavilles nationwide, and with morons spokespeople for the liberals such as Wasserman Schultz.

And with the utter failure of some posters here. ;)
 
The problem with your theory is that it doesn't hold water. Fannie & Freddie were, in fact, dragged into the subprime market by the private lenders who were sucking up all the new loans. As far as I can tell you've provided no explanation for the mechanism by which an expanding F&F led to housing inflation. Are you suggesting that home sales were depressed before that because of insufficient liquidity? Before F&F grew, people just couldn't find a lender to help them purchase a home? I don't see any support for that, if that's what you're trying to say.

Certainly you haven't addressed my point that housing prices actually fell for nearly have the period when F&F were growing so quickly.

Hugely false. Again, it started in 1997. See Cuomo in the video, in his own words.

Fannie did not start to lose market share until the bubble was near to 1/3rd inflated. That is not being "sucked in". That they then chose to change their own lending practices, to erode them to the level that the private sector had, only garnered them back the marklet share they had lost. The bubble was inflating regardless. Others were going to make those loans regardless.

Your argument lacks merit.
 
The problem with your theory is that it doesn't hold water. Fannie & Freddie were, in fact, dragged into the subprime market by the private lenders who were sucking up all the new loans. As far as I can tell you've provided no explanation for the mechanism by which an expanding F&F led to housing inflation. Are you suggesting that home sales were depressed before that because of insufficient liquidity? Before F&F grew, people just couldn't find a lender to help them purchase a home? I don't see any support for that, if that's what you're trying to say.

Certainly you haven't addressed my point that housing prices actually fell for nearly have the period when F&F were growing so quickly.

Look at the graph I posted yesterday folks (a page or two back). What you see are regular cycles of housing prices moving gradually above, and then gradually below, the base inflation line. I submit that is to be expected with any such curve that is following normal market dynamic.

But with the last upswing, actually beginning as far back as about '96-97, it left the basic gyrations, and kept going. I already pointed out the three "perfect storm" factors that were present at that time that were not present in any of the other prior gyrations.

1) Expansion of Fannie and Freddie to underwriting 50% of every new loan by the late 90's. This was part of a 9-fold increase in the size of FF from '91-06. Being able to get FF to underwrite your loan creates a moral hazard.

2) The court-mandated issuance of more sub-primes, again underwritten by FF, which pumped new demand into the market. Simple supply and demand. This is evidenced by the beginnings of the bubble by 1998, and coincides exactly with government policy at the time (see Cuomo).

3) Artificially low interest rates, courtesy the Fed.

All government doing what government had not done before.
 
I got your "Mommy and Daddy" right here.
Hehe...I was giving you hard time man
The fact is that it is the Democrats and liberals who demonize the private sector, and will do all in their power to shift blame away from government, and onto the rich and Wall Street and Capitalism in general. It is a consistent theme with Obama and his class warfare reelection campaign, with moonbats like the Occutards in the Obamavilles nationwide, and with morons spokespeople for the liberals such as Wasserman Schultz.

Sure, Dems will put all the blame on the private sector and the Republicans will put all the blame on the Government. The truth is probably somewhere between those two.

At the end of the day...no one put a gun to investment firms head telling them they should hold 500% debt on whatever assets they own, nobody held a gun to AIG's head telling them to insure trillions in CDO's, no one held a gun to the head of investment banks telling them they need to buy bundled mortgages based on ridiculous loan standards. They all did that, they all basically brought us to the brink while raking in cash and rolling in inflate stock prices and they all were bailed out and are paying those that did those things massive bonuses.

So...the loser? American tax payer...winner? Wall Street.

Edit: then ask yourself this, what kind of society are we living in where we have a group of firms that hold a lot of political clout and also when they **** up can say that the economy depends on their survival.

As Thomas Jefferson said "Banking instititutions are more dangerous than standing armies".

I know you constitutionalists love to quote the founders...they were deeply distrustful of banking instititutions and did everything they could to limit their power.
 
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Look at the graph I posted yesterday folks (a page or two back). What you see are regular cycles of housing prices moving gradually above, and then gradually below, the base inflation line. I submit that is to be expected with any such curve that is following normal market dynamic.

But with the last upswing, actually beginning as far back as about '96-97, it left the basic gyrations, and kept going. I already pointed out the three "perfect storm" factors that were present at that time that were not present in any of the other prior gyrations.

1) Expansion of Fannie and Freddie to underwriting 50% of every new loan by the late 90's. This was part of a 9-fold increase in the size of FF from '91-06. Being able to get FF to underwrite your loan creates a moral hazard.

You still haven't explained why F&F taking a bigger share of the market increased home prices. And of course home prices did not increase for nearly half the time the expansion was occurring. You haven't explained that either.

2) The court-mandated issuance of more sub-primes, again underwritten by FF, which pumped new demand into the market. Simple supply and demand. This is evidenced by the beginnings of the bubble by 1998, and coincides exactly with government policy at the time (see Cuomo).

So now you're trying to make the CRA argument that you earlier said you weren't making. This has been refuted so many times it's beyond ridiculous.

3) Artificially low interest rates, courtesy the Fed.

This I will agree with wholeheartedly.

All government doing what government had not done before.

And that is nonsense. Of all the factors you list, only the loose money supply had a material impact on increased housing demand.

I could go into a lengthy recitation of what really happened, but it's well explained in the Wiki article I linked above. I'll summarize:

1. Loose money supply and tax cuts create excess liquidity;

2. Other changes to tax laws (capital gains and interest deductions) encourage home buying;

3. Bank deregulation creates opportunity for private lenders to issue huge number of loans while offloading the risk on investors, who are misled into thinking that there is little risk.
 
Hehe...I was giving you hard time man

Sure, Dems will put all the blame on the private sector and the Republicans will put all the blame on the Government. The truth is probably somewhere between those two.

At the end of the day...no one put a gun to investment firms head telling them they should hold 500% debt on whatever assets they own, nobody held a gun to AIG's head telling them to insure trillions in CDO's, no one held a gun to the head of investment banks telling them they need to buy bundled mortgages based on ridiculous loan standards. They all did that, they all basically brought us to the brink while raking in cash and rolling in inflate stock prices and they all were bailed out and are paying those that did those things massive bonuses.

So...the loser? American tax payer...winner? Wall Street.

Edit: then ask yourself this, what kind of society are we living in where we have a group of firms that hold a lot of political clout and also when they **** up can say that the economy depends on their survival.

All of the above go to "too big to fail", and other basic regulations. There are those that argue that all of them should be allowed to fail, and there rae some good merits there. However, we used TARP to bail them out, did we not ? Is not TARP now about 90% paid back ? But what institutions were not covered by TARP, but got hundreds of billions in bail-outs, are still getting tens of billions, will keep getting tens of billions, and won't be paying any of it back ? Ever ?

Fannnie and Freddie. Because in the end, it was government at the bottom of this massive moral hazard that was created. Until the bubble burst, folks made stupid loans because they were profitable, and FF then bought your risk from you. When government is underwriting 30-40-50-60% of the stupidity, you are gonna get a lot of stupidity. And we did. At every level, which is what you note.

As Thomas Jefferson said "Banking instititutions are more dangerous than standing armies".

I know you constitutionalists love to quote the founders...they were deeply distrustful of banking instititutions and did everything they could to limit their power.



The Founders said a few things about big government too, did they not ? Since you chose Mr. Jefferson ....

- I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.

- Was the government to prescribe to us our medicine and diet, our bodies would be in such keeping as our souls are now.

- I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it.

- The policy of the American government is to leave their citizens free, neither restraining nor aiding them in their pursuits.

- When the people fear their government, there is tyranny; when the government fears the people, there is liberty.

- I am not a friend to a very energetic government. It is always oppressive.

- Most bad government has grown out of too much government.

- A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor and bread it has earned. This is the sum of good government.

There are many more ;)
 
You still haven't explained why F&F taking a bigger share of the market increased home prices. And of course home prices did not increase for nearly half the time the expansion was occurring. You haven't explained that either.

I submit that FF is a moral hazard. FF underwriting sub-primes is a moral hazard, in that lenders are now doing what they would otherwise not have done based on basic risk-reward capitalism that had governed prior markets. A bigger FF meant a bigger moral hazard.

So now you're trying to make the CRA argument that you earlier said you weren't making. This has been refuted so many times it's beyond ridiculous.

No, I am not. In the end, while the Cuomo lead HUD may have used the CRA to initiate their lawsuits, the fact is that the "settlement" involved the use of FF to make everyone happy. Otherwise, I do not believe the CRA by itself, without the settlelment that the lenders agreed to, would have amounted to much. The expansion of FF ninefold, and to where it had 50% of all new loans in its portfolios, dwarfs anything remotely CRA.

And that is nonsense. Of all the factors you list, only the loose money supply had a material impact on increased housing demand.

I could go into a lengthy recitation of what really happened, but it's well explained in the Wiki article I linked above. I'll summarize:

1. Loose money supply and tax cuts create excess liquidity;

2. Other changes to tax laws (capital gains and interest deductions) encourage home buying;

3. Bank deregulation creates opportunity for private lenders to issue huge number of loans while offloading the risk on investors, who are misled into thinking that there is little risk.

Wikipedia :roll:

1. The Bush tax cuts had far less of an economic impact than the dot-com boom. Loose money was all based with the Fedregardless.

2. Lame.

3. The "bubble" was supported by folks buying houses at inflated rates. You can call them all "misled" for not renting instead, or you can realize that everyone rode the wave. At every level. "Investors" were no more misled than someone who bought a home that is now underwater.
 
I submit that FF is a moral hazard. FF underwriting sub-primes is a moral hazard, in that lenders are now doing what they would otherwise not have done based on basic risk-reward capitalism that had governed prior markets. A bigger FF meant a bigger moral hazard.

FF were no more of a moral hazard than Bank of America, Countrywide, and all of the private lenders. FF's share of the mortgage market was shrinking rapidly at the height of the bubble.


1. The Bush tax cuts had far less of an economic impact than the dot-com boom. Loose money was all based with the Fedregardless.

Nonsense. Did you forget about the dotcom bust? Large tax cuts almost always lead to asset bubbles, and this was no exception.


Well that was certainly a completely lame non-refutation. :lol:

3. The "bubble" was supported by folks buying houses at inflated rates. You can call them all "misled" for not renting instead, or you can realize that everyone rode the wave. At every level. "Investors" were no more misled than someone who bought a home that is now underwater.

I was thinking specifically of the people and institutions that purchased mortgage backed securities. In many cases the underlying assets were hugely risky, but the credit rating agencies nonetheless gave them AAA ratings -- as safe as can be. Given the fact that the derivatives market was -- by law -- unregulated, that was all invstors had to go on. Without investors willing to by all that worthless MBS, the bubble would not have occurred.

In addition, however, many unsophisticated home buyers were also misled as to the terms of their contracts. That was facilitated by the OCC which specifically preempted the states from enforcing their own consumer protection laws in the mortgage market.
 
Oh, well I wasn't aware that you were trying to help me not make mistakes...by all means then, I will immediately do the job of congressional staff so that we on a message board don't make any mistakes, fore millions of homeowners depend on this lone truckers opinion....


J-mac

Sent from my PC36100 using Tapatalk

What are you talking about?
 
From the same source: We do not find evidence that their crash was due much to government housing policy or that they had an essential role in the development of the subprime mortgage-backed securities market, which occurred outside of the normal mortgage origination channels and which was funded by non agency or “private label” securities (PLS).

Well, don't focus on that part. it doesn't support the narrative being advanced. :coffeepap
 
All of the above go to "too big to fail", and other basic regulations. There are those that argue that all of them should be allowed to fail, and there rae some good merits there. However, we used TARP to bail them out, did we not ? Is not TARP now about 90% paid back ? But what institutions were not covered by TARP, but got hundreds of billions in bail-outs, are still getting tens of billions, will keep getting tens of billions, and won't be paying any of it back ? Ever ?
Via AIG the companies that had insurance on their CDO's are getting those payments. You make it seem as if very low interests loans of billions from the government is no big deal. It's a huge deal. Having access to a bottomless treasury during an economic downturn means that you don't have to worry about insolvency. Not worrying about insolvency means that you aren't compelled to worry about the risk of over leveraging.

Let's also talk about the profits made from that free money pumped into those companies. Go figure, when they have 10's of billions in capital pumped into their coffers they come back with billions in profit. They purchased competitors. Now instead of a super bank with 6% of GDP we have banks that have 14% of GDP. What ever problems we had before (moral hazard, too big to fail ect) are magnified.

The Founders said a few things about big government too, did they not ? Since you chose Mr. Jefferson ....
Ok...that sounds rational. You worry about some government takeover while financial institutions run our political and economic system.
 
FF were no more of a moral hazard than Bank of America, Countrywide, and all of the private lenders. FF's share of the mortgage market was shrinking rapidly at the height of the bubble.

And how is a business transaction between two private companies a "moral hazard" ? If you walk into a store and pay too much for a product, what "moral hazard" do you blame ?

The "moral hazard" is when government underwrites your risk, therefore enabling you to take risk that you would not take, and such that the taxpayer is now absorbing your risk. IE: You can make a "mistake" and its not your problem. There may have been poor decisions made by many people throughout the housing bubble, from the poor sap who paid too much for a house, to such entities as Merrill Lynch who ended up holding too many MBS's. Those were not "moral hazards". Just bad business decisions. Spare me the nonsense about FF losing some market share. The bubble was well entrenched then, and they then changed their own friggin rules to then recover their share of the BS.

Nonsense. Did you forget about the dotcom bust? Large tax cuts almost always lead to asset bubbles, and this was no exception.

BS. The "dot-com" bubble was due to the creation of the internet, and folks having computers.

Well that was certainly a completely lame non-refutation. :lol:

Yup.

I was thinking specifically of the people and institutions that purchased mortgage backed securities. In many cases the underlying assets were hugely risky, but the credit rating agencies nonetheless gave them AAA ratings -- as safe as can be. Given the fact that the derivatives market was -- by law -- unregulated, that was all invstors had to go on. Without investors willing to by all that worthless MBS, the bubble would not have occurred.

In addition, however, many unsophisticated home buyers were also misled as to the terms of their contracts. That was facilitated by the OCC which specifically preempted the states from enforcing their own consumer protection laws in the mortgage market.

The oldest rule is "buyer beware". You, the buyer, are ultimately responsible. There were people saying it was gonna pop. There were investment firms that got out of MBS's in time. I have a good friend who bought a house for sale on his street in 2006 so as to rent it out for 3-4 years, then flip it, and "make a bundle". Well, he lost his shirt.

Q: Whose fault is that ?
A: His own.
 
Via AIG the companies that had insurance on their CDO's are getting those payments. You make it seem as if very low interests loans of billions from the government is no big deal. It's a huge deal. Having access to a bottomless treasury during an economic downturn means that you don't have to worry about insolvency. Not worrying about insolvency means that you aren't compelled to worry about the risk of over leveraging.

In at least two posts I have identified cheap money from the Fed as one of the three components of the "perfect storm" that enabled the bubble, so maybe you ought to read more before you say such uninformed things.

Let's also talk about the profits made from that free money pumped into those companies. Go figure, when they have 10's of billions in capital pumped into their coffers they come back with billions in profit. They purchased competitors. Now instead of a super bank with 6% of GDP we have banks that have 14% of GDP. What ever problems we had before (moral hazard, too big to fail ect) are magnified.

I am not arguing pro or con bailouts. If you ar going to consider bail outs, you have to include GM and Chrysler as well.

Ok...that sounds rational. You worry about some government takeover while financial institutions run our political and economic system.

Yes, and more government is not the solution. Big government brought us the housing mess. The bailouts. The debt. Liberalism favors big government.
 
In at least two posts I have identified cheap money from the Fed as one of the three components of the "perfect storm" that enabled the bubble, so maybe you ought to read more before you say such uninformed things.
Cheap money is different than a bailout. It's a pretty large distinction.

I am not arguing pro or con bailouts. If you ar going to consider bail outs, you have to include GM and Chrysler as well.
The car company bailouts ended up with Shareholders losing their money and the management forced out. The Wall St bailouts ended up with their management making record level bounases and their sharholders retaining their stake in the company. Very different things and very different bailouts.
Yes, and more government is not the solution. Big government brought us the housing mess. The bailouts. The debt. Liberalism favors big government.

Yes yes, evil big government representing the people....good big corporate monstrosity, evil liberal good conservative.
 
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And how is a business transaction between two private companies a "moral hazard" ? If you walk into a store and pay too much for a product, what "moral hazard" do you blame ?

The "moral hazard" is when government underwrites your risk, therefore enabling you to take risk that you would not take, and such that the taxpayer is now absorbing your risk. IE: You can make a "mistake" and its not your problem. There may have been poor decisions made by many people throughout the housing bubble, from the poor sap who paid too much for a house, to such entities as Merrill Lynch who ended up holding too many MBS's. Those were not "moral hazards". Just bad business decisions. Spare me the nonsense about FF losing some market share. The bubble was well entrenched then, and they then changed their own friggin rules to then recover their share of the BS.

First of all, I guess I should remind you that F&F WERE PRIVATE COMPANIES -- not government agencies. They received no government financing or backing. Their securities were not guaranteed by the government. Of course they were quasi-governmental and because of that people ASSUMED that the government would bail them out if necessary. That's the moral hazard you're talking about, and it was exactly the same for giant banks like Citi and BOA, as people ASSUMED that they were too big to fail. As it turns out, people were absolutely right in both instances.

And of course F&F didn't *just* lose some market share. They were getting their clocks cleaned by the private lenders who were sucking up all of the oxygen in the mortgage area.


BS. The "dot-com" bubble was due to the creation of the internet, and folks having computers.

WTF? :lol: It was a classic asset bubble.

The oldest rule is "buyer beware". You, the buyer, are ultimately responsible. There were people saying it was gonna pop. There were investment firms that got out of MBS's in time. I have a good friend who bought a house for sale on his street in 2006 so as to rent it out for 3-4 years, then flip it, and "make a bundle". Well, he lost his shirt.

Q: Whose fault is that ?
A: His own.

No, it wasn't entirely his fault. He had no reason to think that the entire mortgage/finance industry was a ticking time bomb. The expected risk was that the market might stall, or even lose some value, but even the most sophisticated investors didn't understand the true risks involved.
 
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First of all, I guess I should remind you that F&F WERE PRIVATE COMPANIES -- not government agencies. They received no government financing or backing. Their securities were not guaranteed by the government. Of course they were quasi-governmental and because of that people ASSUMED that the government would bail them out if necessary. That's the moral hazard you're talking about, and it was exactly the same for giant banks like Citi and BOA, as people ASSUMED that they were too big to fail. As it turns out, people were absolutely right in both instances. .........

Oh my. We have some learning to dish out. GSE's. Government Sponsored Enterprises. Federal backing was implicit in their charters. Such was only changed "after" the bubble burst, however, we are still bailing them out. Virtually all the other "banks", such as Citi and BOA, have paid back their TARP loans. FF have paid back nothing, and will not pay back one penny. They are still being bailed out.

They are most certainly "not the same". :roll:
 
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