So the other day NYC mayor Bloomberg spread the meme that the government and Fannie Mae and Freddie Mac caused the economic crisis, not the banks. Mike Konczal provides the debunking, Bloomberg’s Awful Comment; What Can We Say For Certain Regarding the GSEs?.
"But from 2002-2005, [GSEs] saw a fairly precipitous drop in market share, going from about 50% to just under 30% of all mortgage originations. Conversely, private label securitization [PLS] shot up from about 10% to about 40% over the same period."
"More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions….Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.”
"The [Community Reinvestment Act] wasn’t big enough to remotely cause these problems." and "subprime was only 5% of the GSEs losses and the GSEs bought the highly-rated tranches of mortgage bonds for which there was already a ton of demand."
"For fun, we should mention that the conservative think tanks spent the 2000s saying the exact opposite of what they are saying now, and the opposite of what Bloomberg said above. They argued that the CRA and the GSEs were getting in the way of getting risky subprime mortgages to risky subprime borrowers."
"There’s an argument that the GSEs had huge subprime exposure if you create a new category that supposedly represents the risks of subprime more accurately. This new “high-risk” category is associated with a consultant to AEI named Ed Pinto, and his analysis deliberately blurs the wording on “high-risk” and subprime in much of his writings. " In fact, the Financial Crisis Inquiry Commission, including three of the four Republicans on it, completely rejected it.
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