These mortgage giants went under because they were somehow unable to recognise the housing bubble and to adjust their lending to protect themselves against the inevitable crash. Fannie and Freddie are very far from innocent victims. It is their job to know the housing market and to recognise a bubble. Furthermore, if Fannie and Freddie had begun to tighten credit five or six years ago, when house prices were already clearly out of line, they could have stopped the growth of the bubble before it reached such dangerous proportions.
Thursday, September 11, 2008
Why Fannie and Freddie Failed
Dean Baker on why Fannie Mae and Freddie Mac failed:
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Fanny and Freddy failed, because our politicians tried to use social engineering to make loans to people who had no money for a down payment, had no money for the closing costs and couldn't afford to make the monthly payment. Only the US Government would make loans like this. These are the same guys who brought you the Social Security is broke, Medicare is broke, Medicaide is broke, AMTRAK is always broke, US Postal Service is broke, even the Senate's own private government run restaurant is now broke and going to be privatized. NOW FOR THE SCARY PART - the Federal Government has just taken over 1/6th of the US economy and that's called Healthcare. Get ready for a disaster of massive consequences that will sink us all into a gulag of wage slavery. What is a wage slave? A person who is working to pay for the mistakes of our incompetent politicians who keep adding more and more debt to our children and grandchildren.
ReplyDeleteHow does it feel putting chains on your children's and grandchildren's wrists and ankles? Vote for only those who are going to stop spending money we don't have and stop the borrowing from China. This is now a national security issue as well. Thank you to all of you arrogant, incompetent Soviet-like Central Planner politicians, who think we need to be saved from ourselves. Leave us alone. Take your hand out of our pockets and just go home!