On Sun, Nov 16, 2008 at 12:20 PM, Rceeberger <[EMAIL PROTECTED]> wrote: > Here are some interesting graphs: > http://www.windsofchange.net/archives/long_post_on_fannie_and_freddie_with_graphs.php
Nice link, with lots of interesting data. Here is the conclusion: "And now let me try and fit a theory to this. We had a speculative boom in housing (and commercial real estate) fed in large part by low interest rates and lax loan standards. That boom had to end sometime, and that time is now. Typically the damage would be limited to some suburban banks like Countrywide, but in this case the damage is throughout our financial institutions. Why? The collapse of the boom is much more damaging than it needed to be, I'll suggest, for two significant reasons: Because the far-and-away largest institutions in the market, Fannie and Freddie, added risky loans to their portfolio while they were immensely overleveraged - putting them significantly at risk. But their securities were still treated as something other financial institutions could use as equity, meaning that they could in turn highly leverage them. So when Fannie and Freddie were shaken, the effects on the balance of the highly leveraged financial industry were vastly amplified. This wasn't the sole cause, and there are complex enough issues here that financial historians will be studying and debating this for generations. But it's vitally important to note the roles of Fannie and Freddie because the likely policy going forward will likely continue to rely on government market-makers and sources for mortgages, and if we don't pay attention to what went wrong here, we're likely to do it again." While I agree with the first part of that last sentence, I would add this: ...and if we do pay attention to what went wrong, and try to make new regulations to prevent similar screw-ups, then we are certain to screw up again in completely different and previously unanticipated ways. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
