@Thomas,
Thomas wrote:I could just say "read the ******* manual" and point to Amazon pages for the manual, but in general that has not proven productive.
I guess I see what I do, trying to find an article that excerpts research I am recalling, as not much difference from what you say you are doing in linking to an article summary instead of the "RTFM" book.
And it is in that spirit that I tend to avoid trying to argue in the form of "I am right because of [PDF]". I generally try to find someone excerpting it so that it is more accessible. Otherwise I
do think it would be the "denial-of-service" strategy you accused it of being.
This way the argument is excerpted so that a night of reading isn't a pre-requisite to reply to it, but anyone who wants to peruse it can.
Quote:If you catch me in any other context citing an evidence-less opinion piece for the truth of my claims, that's a foul, and you're welcome to call me on it.
Well, that is what I
was doing. I was asking you to substantiate your criticism of my post with more specificity. A sweeping rejection of the entire post simply because it contained a link to the WSJ was something I found lazy.
If I ask you for more evidence, I'll be more specific about what I am asking for, and not just make vague sweeping criticisms about the standard of evidence I allege you to adhere to and dismiss your entire post out of hand. I think that elevating the level of scholarship can be a good thing but it seemed particularly one-sided there.
Quote:Thanks. I'll read it later this evening.
If possible, I'd hope you aren't just trying to find a qualm you have with the methodology of this study, but something that actually indicts my argument in a meaningful way. But here is an example of arguments against his methodology and some of his political conclusions:
http://www.americanprogress.org/issues/2011/02/min_pinto.html
Quote:I will, as soon as I have my Firefox bookmarks back. I'm currently suffering from an Operating-System "upgrade" that messed up my filesystem and reduced me to using a Linux live distribution on a thumb drive.
Looking for this?
Fannie, Freddie and You by Paul Krugman
I kid, I kid, but it's a useful article anyway so I wanted to bring it up.
Paul Krugman wrote:Furthermore, while Fannie and Freddie are problematic institutions, they aren’t responsible for the mess we’re in.
In it, he goes on to say they had "nothing to do with it" but also agrees that they are inherently problematic due to the moral hazard I am against (he summarizes it well "profits are privatized but losses are socialized"). I don't, however, agree with his conclusions about them having
nothing to do with the crisis. And though I often agree with his economics I generally disagree with how he assigns political blame. Still, it's a worthwhile read and he agrees about the problem that exists but not on ascribing any blame to it (his position is largely a response to conservative ideologues trying to ascribe
all blame to it, and I think his absolutism is similar to theirs in that regard).
Here is another liberal-leaning read on it, denying the blame game I'm not trying to play, but also providing a lot of substantiation for it:
Pressured to Take More Risk, Fannie Reached Tipping Point
There they refute some of the political blame game, correctly pointing out that these GSEs tended to
follow the market, not
lead the market insofar as the trend towards more irresponsible lending.
NYTimes wrote:“Fannie Mae faced the danger that the market would pass us by,” he said. “We were afraid that lenders would be selling products we weren’t buying and Congress would feel like we weren’t fulfilling our mission. The market was changing, and it’s our job to buy loans, so we had to change as well.”
But it also acknowledges that they
did influence other institutions through their activities:
NYTimes wrote:Whenever competitors asked Congress to rein in the company, lawmakers were besieged with letters and phone calls from angry constituents, some orchestrated by Fannie itself. One automated phone call warned voters: “Your congressman is trying to make mortgages more expensive. Ask him why he opposes the American dream of home ownership.”
The ripple effect of Fannie’s plunge into riskier lending was profound. Fannie’s stamp of approval made shunned borrowers and complex loans more acceptable to other lenders, particularly small and less sophisticated banks.
It also details pressure on all sides, including from the government, for these GSEs to engage in more of this risk:
NYTimes wrote:On one occasion, a hedge fund manager telephoned a senior Fannie executive to complain that the company was not taking enough gambles in chasing profits.
“Are you stupid or blind?” the investor roared, according to someone who heard the call, but requested anonymity. “Your job is to make me money!”
Capitol Hill bore down on Mr. Mudd as well. The same year he took the top position, regulators sharply increased Fannie’s affordable-housing goals. Democratic lawmakers demanded that the company buy more loans that had been made to low-income and minority homebuyers.
“When homes are doubling in price in every six years and incomes are increasing by a mere one percent per year, Fannie’s mission is of paramount importance,” Senator Jack Reed, a Rhode Island Democrat, lectured Mr. Mudd at a Congressional hearing in 2006. “In fact, Fannie and Freddie can do more, a lot more.”
But Fannie’s computer systems could not fully analyze many of the risky loans that customers, investors and lawmakers wanted Mr. Mudd to buy. Many of them — like balloon-rate mortgages or mortgages that did not require paperwork — were so new that dangerous bets could not be identified, according to company executives.
Even so, Fannie began buying huge numbers of riskier loans.
In one meeting, according to two people present, Mr. Mudd told employees to “get aggressive on risk-taking, or get out of the company.”
In the interview, Mr. Mudd said he did not recall that conversation and that he always stressed taking only prudent risks.
Employees, however, say they got a different message.
“Everybody understood that we were now buying loans that we would have previously rejected, and that the models were telling us that we were charging way too little,” said a former senior Fannie executive. “But our mandate was to stay relevant and to serve low-income borrowers. So that’s what we did.”
It also talks about the sheer scale at which they operated:
NYTimes wrote:When Mr. Mudd arrived at Fannie eight years ago, it was beginning a dramatic expansion that, at its peak, had it buying 40 percent of all domestic mortgages.
And it is the source for my claim that they announced a one-trillion-dollar bet on this market.
NYTimes wrote:Fannie never actually made loans. It was essentially a mortgage insurance company, buying mortgages, keeping some but reselling most to investors and, for a fee, promising to pay off a loan if the borrower defaulted. The only real danger was that the company might guarantee questionable mortgages and lose out when large numbers of borrowers walked away from their obligations.
So Fannie constructed a vast network of computer programs and mathematical formulas that analyzed its millions of daily transactions and ranked borrowers according to their risk.
Those computer programs seemingly turned Fannie into a divining rod, capable of separating pools of similar-seeming borrowers into safe and risky bets. The riskier the loan, the more Fannie charged to handle it. In theory, those high fees would offset any losses.
With that self-assurance, the company announced in 2000 that it would buy $2 trillion in loans from low-income, minority and risky borrowers by 2010.
The central thrust of my argument isn't very polemic, and shouldn't just be dismissed out of hand because of quibbles over my scholarship. I also hope it doesn't just descend into quibbles over statistics (the scale of this is so large that a quibble in the statistics just doesn't make much difference to the argument). I'm not trying to make the ideologically absolute case that this was caused by government overregulation, just that it was fueled, incentivized by some ill-conceived national policies. I would love to hear what you have to say about that.
