Who Caused the Economic Crisis?

[tongodeon]

The economic collapse is on everyone's mind and a major factor in the presidential election, and there are a lot of mistakes and distortions flying around especially with regard to how Fannie Mae and Freddie Mac were involved in the problems. The planetmoneymp3 podcast covered a lot of this ground this week. Here's my summary.

1. If the collapse is the fault of

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[norabombay]

Sorry.

(and to introduce my self- long time lurker, first time commenter).

To try to do this and spell correctly. My employer was the large trade group. I was in the education department, helping people earn certifications such as the "Certified Mortgage Banker" or the "Certified Residential Underwriter". We had a large stable of online courses that the students took to earn continuing education hours, and credits towards the professional designations.

I also worked to have our courses accredited to meet the state education requirements for the few states that had them. We worked to oppose any sort of regulation on mortgage brokers and loan officers. At the time only 40 something states required registration. The vast majority required you to submit to fingerprinting, not be an obvious felon, purchase a $25,000 bond (or have the employer have $25,000 in assets- this differed a lot), and maybe take an ethics class. Ethics class could be summed up as "please stop screwing your customers, ie, make sure they are using their own SSN, or that the W-2 is not completely fake. You could do it in an hour, and it was open book. Yet people failed. This was starting to get stricter by the time I left in mid-2006, and we or our state affiliates were fighting it every step of the way.

A lot of customer service and contact. The courses were fairly easy. And I got complaint after complaint about the fact that the individuals were forced to take valuable time away from making money to *gasp* learn things.

We did have members who were committed to the industry and to sensible finance. But we also had a whole lot of people who were not.

IndyMac & Countrywide were a pair of our major supporters.

I was exposed to Fannie & Freddie in two formats: one, I worked on the underwriter program, took the courses, and could spout about confirming loans.

But two: I got to listen to our members, the company lobbyists, the executives all talk. And Fannie & Freddie had the strictest requirements- one of the reasons a Jumbo loan cost more was that it was not eligible for purchase by them.