yes, fannie mae and freddie mac were totally separate from the subprime market: they were buying the stuff!

Ezra, please stop commenting on financial issues. people may start wondering if you know this little about health care policy.

what thomas said...

adding, of course, that Ezra's main point is still correct: McCain's contention that Fannie and Freddie are the cause of the financial meltdown is laughable. it's merely a cheap political attempt to land a punch.

COUNTRY FIRST, BITCHES!!!!

A while ago I bookmarked this post by Tanta and it comes in handy now. I think she gets it right:

I think we can give Fannie and Freddie their due share of responsibility for the mess we're in, while acknowledging that they were nowhere near the biggest culprits in the recent credit bubble. They may finance most of the home loans in America, but most of the home loans in America aren't the problem; the problem is that very substantial slice of home loans that went outside the Fannie and Freddie box. But Krugman is right to focus on the fact that it was the regulatory and charter constraints of the GSEs that kept that box closed. In the schizoid reality of the GSEs, when they had their "shareholder-owned private company" hats on they did plenty of envelope-pushing. When they had their "affordable housing" hats on, they rationalized dubious theories of credit quality--like the fervent belief that low or no down payment can be fully offset by a pretty FICO score--to beef up their affordable housing goals, often at the expense not of the poor put-upon "private sector" but of FHA, whose traditional borrower pool they pretty thoroughly cherry-picked. Nonetheless, the immovable objects of the conforming loan limits and the charter limitation of taking only loans with a maximum LTV of 80% unless a well-capitalized mortgage insurer took the first loss position, plus all their other regulatory strictures, managed fairly well against the irresistible force of "innovation." If there has ever been an argument for serious regulation of the mortgage markets, the GSEs are it.

And that last line dovetails nicely with your observation about a political crisis. Even leaving all my conspiracy theories out of it, we are at a crossroads here and Team McCain is going to push hard for the gubmint to be cast as the devil so gubmint regulation is automatically not the right thing to do. He's continuing to lay that groundwork with that awful speech, which makes it a policy mess as well as a pile of lies but a political masterstroke.

Fannie Mae, the largest provider of money for U.S. home loans, said it held $47.2 billion of securities backed by subprime mortgages at the end of June. Freddie Mac, the second-largest, held $120.8 billion of such debt as of May 31.

More here:

http://www.iht.com/articles/2007/07/30/business/bxprime-web.php

The more I read on it, the more interesting it gets. Fanie Mae and Freddie Mac did not initiate the subprime market, but they participated, and apparently at some point these GSEs were regularly revising qualifications for lendees to allow people with worse credit to be well-qualified for Fannie Mae and Freddie Mac backed loans--seemingly in order to "compete" with crappy loans other banks were already making without GSE backing.

As with much in politics, what John McCain said about Freddie and Fannie is correct, up to a point, and those institutions did have lots of problems that nobody really wanted to solve (even Bush's "oversight agency", hotly contested by Democrats as being an attempt to deny low-income folks access to affordable housing, wouldn't have really solved the problems with Freddie and Fannie, as there was no built in requirement for them to keep more cash in hand or stay out of investments not directly related to their original mandate). Still, Freddie and Fannie did not start the subprime market, but as the subprime market got "hot", they wanted a piece of it, even while acknowledging the loans being made were questionable.

The Obama/Fannie Mae connection seems tenuous at best. This was a problem long in the making, and the politicians that bear the brunt of responsibility are the ones that have been there the longest.

This was a fine post until I caught what was under the fold. Have you seen this:

http://www.opensecrets.org/news/2008/07/top-senate-recipients-of-fanni.html

The GSE's seemed to have a hankering for Obama.

thomas:people may start wondering if you know this little about health care policy.

Apparently you missed the post yesterday where Ezra sang the praises of the Wyden plan as being revenue positive when that relies on the ridiculous assumption that in 2011 and beyond health care costs will only grow with inflation. It's too late, he's already lost his credibility when it comes to health care policy.

The intertubz, where every commenter is a frigging expert. "I can googlz, I can has PhD plz?"

Today, Obama described McCain's response to this mess as "panicked". I'd say that's a pretty damaging characterization, because, let's face it, it's accurate.

Yeah, the trolls are funny. Where were these lackwits when I was digging through FRE's Ks and Qs?

Also instructive are Mr. Keating Five's bloviations and their worshipful hosannas. 'Panicked' is just about right: half McCain's career, he's been a toady for the folks who really did contribute to things, and for all of it he's been a deregulator.

We have to bail out average folks,...... shared prosperity......in it together........ McCain sounds bad but Obama just spews communist slogans. You prob. weren't alive when communism was big in the west.

I don't know into which derivative my mortgage got bundled, but when the government buys it I'd like to refinance at 3 percent, please. That's a bailout I would believe in. Otherwise, the government is really just buying my debt service for 1 or 2 percent, and charging me the same 6 percent as before. That's more like a tax.

uh, ezra?

maybe it's time the "john mccain, former bastion of integrity" narrative joined the pile of hoary political bullshit.

though your writing and analysis has been excellent of late, the constant lamentation of the fall of john mccain is like a nervous tic with you.

it's kinda hackish. it reads like boilerplate. really.

the facts show mccain was always a jerk. his post-keating 5 reinvention and 2000-era GOP apostasy show only that john mccain (POWtm) has mastered the art of public political contrition.

not since augustine's confessions has anyone been so adept at blurring the political and personal.

but it's still just bullshit. could you please stop?

What Thomas said. Obama did take the second highest amount of money from Fannie, but other Dem sticky fingers are aall over this. Bush tried to regulate in 2003, and Dodd, Frank, Pelosi, Schumer stonewalled.

Barney Frank's statement on Freddie/Fannie in 2003
Unbelievable and Barney Frank has much more power today than he did in 2003.

Link
"The more people, in my judgment, exaggerate a threat of safety and soundness (of Freddie Mac and Fannie Mae), the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disastrous scenarios. And even if there were a problem, the Federal Government doesn't bail them out. But the more pressure there is there, then the less I think we see in terms of affordable housing."
Shorter Frank:
Subprime mtgs buy Dem votes. Move along, nothing to see here.

Don't forget thieves who looted Fannie and Freddie - Johnson, Raines, Gorelick - all Dems.

Let me translate from lackwit to English:

"My party spent forty years replacing regulatory apparatus with kleenex and appointing toadies to what few regulatory positions were left.

Look, a Democrat!"

Oh gosh .. Am I the only person who believes that the current economic crisis was caused by the news media?

See, none of the "problems" in our economy were, or are, really that serious ... At least they weren't until everybody freaked out ... And the reason we freaked out was the media, which was so intent on its goal to seat a Democrat as President that it unleashed a relentless deluge of fear-provoking propaganda.

Never once, in all the coverage, did I witness a moderate telling the camera "Oh, this will pass, it's not such a big deal."

Thanks for everything, guys.