@okie,
okie wrote:
Cycloptichorn wrote:Nothing that Congress did with either Fannie or Freddie in 2005-6 would have prevented the financial crisis.
Cycloptichorn
Sure sure cyclops, and 2 + 2 = 3? You may have a point, that after pouring water into a car gas tank, quitting doing it might not avert big trouble, but still it is not a very good excuse not to quit the habit of pouring water into the gas tank.
I agree, and so did the Democrats - which is why they passed a very similar bill to this once they took control of Congress in 2007.
Quote:I still think refilling with authentic gasoline would not have hurt anything, and might have saved us from the worst.
The market was far too deep into CDO's and Credit Default Swaps by 2005, let alone 2007, to be saved by making changes to Fannie and Freddie. AIG it turns out simply never had the capital to back up the bets they were making - in large part because the Bush administration and Congressional Republicans believed, like you, that regulations do nothing but harm businesses and make us less competitive. When given the option to regulate this new market, the decision was consistently made not to do so.
Practically every bank was in on it, investment houses, city pensions, everyone - because the money was huge and the risk was supposedly low. The credit ratings industry allowed this farce to happen by exchanging 'AAA' ratings for big paydays from the very companies they supposedly independently analyzed (for more on that, please read this excellent summary of the current Senate investigation -
http://www.marketwatch.com/story/competition-lack-of-data-drove-flawed-ratings-2010-04-23?dist=countdown ). No matter what was done for Fannie and Freddie at that point the ratings agency and unregulated Swap market had created a time bomb that was set to go off as soon as either
A, the housing market started to flounder, or
B, people figured out that AIG didn't have near enough money to cover their Swaps, and had way more then anyone knew about (due to a lack of regulation).
Look - I prefer to put actual gas in my tank as well. We don't have to agree on everything politically to agree that we want a financial system which works well and isn't subject to huge risks that tilt the whole thing on it's side. Fannie and Freddie had and have inherent problems with their dual mission of 'encouraging home ownership' and making profits for investors. But your side blames them exclusively for the problems that occurred, when in fact what happened is that they fell prey to the same management mistakes that many of the big Wall Street firms did.
An objective examination of the situation shows that several problems lead to our crisis, which lead to a tremendous amount of uncertainty and loss of wealth for the US: Poor understanding of risk by both our government and private industry. Poor investment choices by many city and state fund managers. Too much believe in 'financial innovation' products and too little reliance on traditional banking models. Too little regulation of said products. Too much inherent risk in the Wall Street pay model. It will take a wide variety of changes to ensure that we don't find the same thing happening again soon.
Cycloptichorn
WHAT THE ****!?!?!