What part of Fannie Mae and Freddie Mac don't you understand?

[1144]

Some people are pretty incredulous at the causality cited in this chart. This I find very amusing. What part of it do you deny? That these things happened, or that they had any effect on the market?

Heavy lobbying by Fannie Mae and Freddie Mac congress critters and power-lusting bureaucrats:

( Video link.)

More on what's happening to our

Comments

[madbard]

(Links in this post are messed up.)

[1144]

(Thank you very much.)

[stanleylieber]

I think people want to blame the free market system for not being able to defend itself. It's always being encroached upon by other, non- free market activity. As the thinking goes, capitalism thus fails on the same basis as communism -- it may look good on paper, but in practice it collapses into a mishmash of unearned power inequities.

Naturally this sidesteps the question of which system, historically, has tended to increase human freedom and raise the standard of living of the entire human population. The poorest humans alive today are in better overall health than most of the monarchs of the age of Enlightenment.

Private property is the modern experiment. We've suffered centuries of desultory experience with the alternatives.

[1144]

Last two paragraphs - I couldn't have said it better.

Good point, and one I certainly owe you for, that people expect capitalism to be able to duke it out with the government, maybe by giving enough kickbacks to make everyone happy ... but who in our massive welfare government ever has enough kickbacks, or enough power over business, the voters, and the citizenry at large?

He who collects the taxes at their decision and discretion is not the party that usually loses in a clash for power.

[anonymous]

The causality of 70's regulations lying dormant until 2 or 3 years ago, to suddenly cause a crisis, seems suspect. Furthermore, sub-prime mortgages are a subset of mortgages, which themselves are a further smaller subset of the global credit market. To argue that these government regulations, practically alone, caused the current crisis, which is primarily a crisis of inter-corporate liquidity, requires more proof than ASCII art.

[1144]

True, that more proof is required, but I'm making the contributions I have time to

[anonymous]

Your understanding is that the regulations were beefed up, and lenders were persecuted? What is your understanding based on?

Do you believe this quote, for example, is an example of said persecution?

"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. . . . With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . .

Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending . . . fostering constructive innovation that is both responsive to market demand and beneficial to consumers."--Alan Greenspan, 4/8/2005

[1144]

On my reading in the Wall Street Journal and other sources such as this.

By persecution I mean that they applied the law. It's just more forced wealth redistribution, only in a particularly malignant form for the market this time.

Good quotes. If lenders have found a way to assess the risk for, as Greenspan puts it, more-marginal applicants, then good for everybody. If they are forced to go beyond that and give loans that are bad for business, and the risk is constantly passed up to supposed miracle-workers Fannie and Freddie, well, bad for everybody.

I'm sorry I dropped the ball, but I missed this comment somehow.