Fannie and Freddy were certainly lending to people who were subprime or taxpayers would not be forced to pay 200 billion in bailouts to them.
Sheesh!!! At least get the basics down! Fannie and Freddie did not lend to anyone. They are not lenders. They purchase existing mortgage notes from the original lenders. This is how those original lenders recapitalize so that they can lend again. The GSE's then sell the notes they have acquired into secondary mortgage markets made up of large, institutional investors such as central and international banks, insurance companies, pensions funds, money-market funds, charitable trusts, university endowments, and the like. They used to sell notes one at a time, but that was rather ineffficient, so they began creating bundles of say 100 mortgages and selling participation shares in those. Such shares are called mortgage-backed securities. They are sold with a GSE guaranty. It is those guarantys to institutional investors that (where now necessary) are being paid by the government. Payments have become necessary in some cases because so many original mortgage holders have not been able to make their scheduled payments on account of having lost jobs and wealth due to the Republican-created Great Bush Recession.
What happened is that they dropped lending standards with the help from the government to not lose market share.
LOL! Bush wanted nothing more than for the GSE's to lose market share, and eventually they did. Fannie Mae's market share for original purchases fell from more than 70% early in the decade to less than 25% by late 2006.
Standards for conforming loans (i.e., loans that the GSE's would actually purchase) were lowered modestly, and for the same reason that they should be today -- they were preventing large numbers of perfectly well qualified and potentially profitable borrowers from obtaining conventional credit. The Wall Street private-label shops by comparison had practically no standards at all. They would take the slop that the GSE's wouldn't take and just about anything else as well. Then they'd sell it all to somebody else. Strip off the profit and sell off the risk. What a great game until the roof caved in on them. And the rest of us.
Again as stated, it was government policy to increase home ownership. To reduce lending standards is a good way to increase home ownership, and Democrats were the main supporters of relaxation of lending standards.
Increasing home ownership has been a policy of every administration since the Great Depression. It was a national scandal when home ownership in fact declined under Reagan/Bush-41. Meanwhile, no one supported relaxation of lending standards. No law, rule, policy, or court decision has ever mandated that any lender make loans to unqualified borrowers. What did happen was that regulators charged with keeping just such things from happening stood by and allowed unscruplous private brokers to create all sorts of twisted loans that they knew full well could not be repaid through wanton abuse of particularly subprime credit markets. But that's a very different thing.
First off sub-prime mortages are not the only reason,there was plenty of prime loans that defaulted.
In the second wave, sure. Millions of people lost their jobs and their savings thanks to the Great Bush Recession. What would you have expected to happen? The first wave -- the one that actually triggered the credit crisis -- was heavily tilted toward tricked-out subprime loans that made the underwriters a lot of money and later cost the taxpayers a lot of money.
There are many things that could have prevented the crisis. For instance they could have not put interest rates at 1%. That would help a lot, as investors would just keep buying treasuries instead of gambling on houses.
Interest rates were first cut to ward off investor panic after 9/11. Then Greenspan decided to keep them there long term because the Tax Cuts for the Rich had failed to generate any uptick in economic activity. Secondary mortgage markets were meanwhile, staid, plain-vanilla markets at the time. Famous for their safety, they suddenly offered attractive yields in comparison to 1%. Taking a position there was hardly gambling at the time.
If this was set up and combined with some federal requirements for whom can get loans the financial crisis would never happen.
So you would have favored nationalizing the banking system? I thought that was only Commie statists.
Again, this was a collective failure of the GOP and Democrats. Stop blaming one side because you don't like it. Try to be less biased.
LOL!!! It was an exclusively Republican enterprise. Facbrications to the contrary are bilge.
