Thursday, August 09, 2007
It is downright hilarious to hear so many now clamoring for the return of Fannie Mae and Freddie Mac to act as "white knights" to save a very troubled mortgage industry when they're the ones that started it all about five years ago with the first tidal wave of mortgage backed securities and derivatives.
And Fannie Mae has filed like two financial statements in the last four years?
A beleaguered President Bush makes an astonishing amount of sense on this issue, as reported earlier today:
Bush: GSEs need reform before raising mortgage investment capsThe single bit of "regulation-like" activity that Alan Greenspan accomplished all throughout the housing bubble was to shift the risk away from Washington and on to Wall Street, moving the lion's share of mortgage backed security origination far away from the OFHEO.
US President George Bush today said Fannie Mae and Freddie Mac need to be reformed to ensure they stick to their core mission of buying and securitising home mortgages before either is allowed to increase their investments in mortgage-backed securities.
'Congress needs to get them reformed, get them focused, get them streamlined, and then I will consider other options,' Bush said in a White House press conference.
Bush said his administration has put up a reform package for both institutions. The proposal came amid complaints that Fannie Mae and Freddie Mac put too much focus on investing in the market, and have strayed from their core mission.
We are now seeing the result - here's a chart to refresh your memory:
The above chart was published earlier this year as part of a Hogan's Heroes analogy:
During his term, the former Fed chairman was much like Sergeant Schultz on the 1960s hit comedy series Hogan's Heroes. Fans will recall that the good-hearted German POW camp guard would invariably look the other way after spotting all sorts of untoward behavior.For a photo of the lovable Sergeant Schultz and a chart of subprime mortgage originations from Credit Suisse, see the original post.