and I don’t mean that they just go through a few half-hearted announcements and hold a brief meeting.

How much SUBprime did Fannie actually purchase from lenders? Not alt doc programs – like stated income or those approved through their DU programs, actual SUBprime with low FICO scores, sketchy employment etc.

Grossly bent by Freddie and Fannie? Well, what other conduits should the market be investing in? When a large lender, who has a piece of the market share can negotiate commitments with Freddie or Fannie based on their loan production levels (retail, wholesale, correspondent), that partnership with one of these GSEs DOES receive better pricing. My company would commit, e.g., $300 million in fixed rate mortgages over a period of “x” amount of time. Yes, we would receive a better price for these loans delivered than a much smaller Fannie or Freddie lender.

IF there is “unfair competition” and IF there is fraud, yes, go get em. But let me assure you from 26 years in this business, there is more government regulation than is imagined or understood.

mimi1220 on June 16, 2008 at 10:43 AM

Of course Fannie gave price breaks to big customers, and still does. But they took it to a new level with Countrywide, or at least that is what its competitors believe. It’s possible that this was all just the market at work. But when you layer on top of this the Friends of Angelo deals, you see a much more sinister operation at work. Mozilo figured out a way to play off of Fannie Mae’s political agenda to help his company gain market share and to get rich.

Bank of America stopped making subprime loans in 2001. Countrywide didn’t even start making them until after that, and eventually controlled about 35% of the market. They were able to do that because of their special relationship with Fannie Mae and their lack of federal regulation.

Well, if the first exclusive deal was made in 2002, the pubbies had 4 years of Congressional majority to do some investigating or at least hold some hearings, if they didn’t like it. Why didn’t they?

a capella on June 16, 2008 at 10:37 AM

Nobody had the vision in 2002 to see what was coming from these exclusive deals. Other big lenders simply tried to make their own deals with Fannie or Freddie to compete and get similar pricing. But Fannie Mae is like the Kremlin with information – nobody really knows what kind of deal they made with Countrywide, and their regulation is so slim that they never had to disclose it even to a regulator. But it was at that moment that Countrywide’s business really started growing exponentially. And Countrywide became Fannie’s biggest cheerleader and surrogate lobbyist.

A few Republicans in Congress did try to go after Fannie -most notably Jim Leach when he chaired the House Banking Committee, and later Richard Baker, wh chair the GSE subcommittee. Fannie then organized the Realtors, Homebuilders, and mortgage bankers’ lobbying arms to fight them. Those groups are traditionally Republican and they fought all regulation of Fannie and Freddie as “a tax on homeownership.” They hired all the top GOP lobbyists as well. I once worked for a small industry group and we wanted to hire a lobbyist but could not find one that was not already conflicted by working for Fannie or Freddie.

They used the traditional levers to beat on Republicans. But they used money and outright bribes on the Democrats.

Congress should call a halt to legislating bailouts. Taxpayers deserve no less

A HALT???? Congress shouldn’t be contemplating bailouts in the first place!

Political fallout and questionable practices aside, nobody put a gun to those people’s heads and made them sign those mortgage agreements. It is not the place of the federal government to bail out stupid greedy people. That’s what taxpayers deserve.

Think cattle futures times 1000.

It’s not just the Middle East oil countries (where we’re off-shoring our nations wealth) who were serving as the politicians’ post-government piggy bank.

IF there is “unfair competition” and IF there is fraud, yes, go get em. But let me assure you from 26 years in this business, there is more government regulation than is imagined or understood.

Countrywide made the first “exclusive” deal with Fannie Mae in 2002 and started sending 100% of its loans there. Countrywide until recently was a non-federally-regulated mortgage bank, meaning it did not have to undergo the rigorous examination or capital requirements that the big banks have to and that it could offer almost any kind of risky mortgage it wanted to. Fannie Mae’s price break to Countrywide allowed it to undercut the banks and gain massive market share with very little regulation.

As other lenders saw Countrywide gobbling up a bigger and bigger share of the market courtesy of Fannie Mae, they were effectively forced to start selling more and more subprime loans to make money. The banks were constrained in offering these products because of the federal banking laws. Countrywide then moved into the subprime market in a big way and started muscling the smaller “monoline” subprime lenders out of that market too. And it was all enabled by Fannie Mae.

What I am saying is that this entire subprime mortgage crisis can be traced directly back to that sweetheart deal between Countrywide and Fannie Mae, and their mutual use of the Countrywide PAC and Fannie Mae’s lobbying muscle to keep the federal government from regulating them. And this political machine was aimed almost 100% at Democrats.

rockmom on June 16, 2008 at 9:53 AM

Well, if the first exclusive deal was made in 2002, the pubbies had 4 years of Congressional majority to do some investigating or at least hold some hearings, if they didn’t like it. Why didn’t they?

rockmom

Good analysis.

Anita

It may be too early for McCain to bring up BO’s most damaging issues. Be patient. October’s coming.

It was not “simply the way the market went.” This mortgage market has been grossly “bent” by Fannie Mae and Freddie Mac for the last 15 years. It’s not a true free market when a government subsidized, unregulated player has over half the market and favors another large, unregulated lender over others. The Wall Street Journal has been screaming about this for years – as have a lot of Republicans in Congress and in the Bush Administration.

rockmom on June 16, 2008 at 9:53 AM

Thanks for explaining.

I was struck by two questions:

Why would Clinton feel the need to say that? And
why was that line not an applause line?

So I have to ask, does smoking pot really destroy your memory, or does it just make you not care?