Fannie Mae and Freddie Mac were scapegoated to cover for Chris Dodd and Barney Frank forcing FNMA to buy the worst of the worst mortgages in the name of affordable housing. That Mudd was singled out and none of the real players who perpetuated the housing fraud were put in jail is just one of the travesties of this story of middle class destruction.
To be even more specific - Barney Frank as Chair of the Banking Reform sub-committee and his boyfriend, Harold Raines as the owner of GSE, Freddie Mac.
The mechanism was F&F taking the crappy loans off the hands of the WS lenders by buying up "Collateralized Debt Obligation" (CDO) investment instruments. Thus, both relieving said WS banks of their (post-Enron, Sarbanes-Oxley reforms) obligation to maintain liquidity - assets in proportion to their outstanding loan portfolio - as a safety feature, as well as baking into the government GSE's Fannie & Freddie "cake", the bulk of the risky loans now being made by the banks, All in the name of "equity", as redefined by the ever-morphing rules governing the "Community Reinvestment Act" loans.
Thus, these WS banks, now unconstrained by outstanding loans, nor any practical lending standards, were effectively made into perpetual mortgage funding machines by government, and one whose lending standards now to be left in the hands of the politicians,
Mortgage lending now continues unabated and at exponential levels. What most people don't appreciate was the extent to which mortgages were made available to retail home builders. These home builders were some of the very first to throw the keys for half-completed homes, back to the banks...
Housing cost now going through the roof and only the most "deep-pocketed" (aka the banks) able to afford to be equity owners. Perfect, eh? An entire nation of renters is born and one that stacks up debt on the banks own credit cards as well. What could possibly go wrong?
Maybe "family formation" and all that inadequate birth rates hold for a future of childless elderly with no appreciable means of sustaining their own eldercare costs, or loved ones to intercede on their behalf to ensure proper care? Homes, too big for empty-nesters and not nearly big enough (at affordable rental rates) to contemplate raising and housing kids.
Yep, if You want government In Your life , You will pay for this endlessly for all Your time on this earth. The famous words-more or less, I am from the government and I am here to help You.
Unfortunately, Don, in America and the West (frankly to a great extend worldwide) unless you live on a mountain, government will be in your life. The question begs then - which government does one want in its life? Most can't escape the coming crumbling of America and the West. Just ugly..........
A government that is just and stays out of Your life. I know, I know a dream , but at least dreams are free thus far! As far as crumbling , I see this world wide. Think cop 30 in Brazil to day You know that We the people of this earth are going to get the shaft, but no gold mine LOL.
There are other countries that don't have the integrated surveillance system supported by the media and industrial military complex. Plus they don't have the current exorbitant privilege of printing unlimited about of money and being able to spread it worldwide. While all governments want more power (and the money that comes along) the vast majority still have huge impairments to being like America. One ol' man's opinion.......and, yes Don, it is ugly and we peons are going to get the shaft - just the way of human nature.
But human nature includes an innate desire to be free. Most people aren't desirous of government's siren song of "taking care of them from cradle to grave". Only when the cycle arrives at the place where the human spirit is stifled into defeat do socialist/communist salesmen get traction.
"Free" you say. Hmmm.........sounds wonderful until reality strikes. People in NYC voted for "free stuff" - not to be free. To be truly free is self-reliance and in today's world that doesn't happen. People want pensions, people want free healthcare, people want free housing........it is nice in retrospect but in reality it goes again human nature. That is why way back when there were chiefs and medicine men. People want leaders and be part of a culture. So "free" in human terms has to take a context. Truly "free" is a myth. Just an ol' man's lament.
Good points and well said Ol' One, and we don't always agree. (Credit where credit is due.) As dearly departed Janice Joplin famously sang, "Freedom's just another word for nothing left to lose".
A good friend of mine liked to ask when someone would say something like "I want my pension . . . I want my medicine" etc. "How does it feel to want?"
What is startling to me is the raw comments that just a few years ago would have caused outrage. For example, Mamdani stated he was going to punish white people by making them pay for all the "free" stuff he was promising. Actually said that outloud. Why because of the changing demographics in NYC - doesn't need the white votes. You see Trump and other politicians saying similar things. Just horrific....it is the 4th Turning and this Turning is going to be particularly ugly worldwide. And, we are going to get to see it..........ugh!
Same in Australia - the median house price where I live (Brisbane, Qld) is now AUD$1,087,183 (USD$706,000; nationally it’s AUD$1,091,134), which is now higher than Melbourne. As a professional woman, I can no longer get into the market, even with a decent deposit. My rent has gone up by about 32%, and electricity by 30% in the last two years. Along with 47% income tax, it’s hard to get ahead despite working hard - all by design. I missed the opportunity to take part in your recent poll, but an expert in privacy and cybersecurity would be good, particularly now that the Australian government is looking at perverse ways to introduce a digital ID. Our “eSafety Commissioner”, Julia Inman Grant, is truly frightening. https://www.dailymail.co.uk/news/article-15244855/esafety-commissioner-investigation-canavan.html
Yep! Just another example of why this ancient old man is, has and will be in gold/silver (in some form) until I die or the forthcoming gold revaluation (in whatever form) occurs. The government (elites) "always" come to help us, withou question. That's why Americans have the straightest backs in the world, from the inevitable shaft received from the government, the elitest and the military/industrial complex. Oh, when does it change, as soon as future congresses and administrations vote for balanced budgets, a "sound" plan to greatly pay down our debt and appointment of "unbiased" federal judges. While waiting, this old man will stick with his gold.silver investments and coins. Stay solvent, youngsters.
If anyone is interested in the seeds of what has been partially described here - essentially from the midpoint of 2008, they should read “The Housing Boom and Bust” by Dr. Thomas Sowell.
Simply absorbing this description of the Fannie Mae aim of providing affordability at all times for all aspiring homeowners, I can see the failure inherent in that mission. It’s a failure common to Marxist inspiration. One that seeks a utopia.
In the old marketplace for home builders (full disclosure, I was one), an aspiring speculative home builder would anticipate a supportive market and buy land, build a home or two and use the profits to buy more land. However, the landholders, also seeing a supportive market would ask a higher price. Eventually, the cost of land, materials and labor would make the entire proposition untenable. This was generally accompanied by over-priced housing and new housing activity would stop. Late speculators would be burned from a lack of buyers and prices would correct. This was known as "the free market". It had affordability ups and downs yet was self-correcting.
It’s been replaced by corporatism aided by DC politicians. Read Sowell and you’ll learn about the role played by Barney Frank, his lover, Harold Raines. The WS invention of the Gaussian-Coppola formula used to sell off bad mortgages around the world, and a lot more. For those who appreciate unfettered markets, you’ll learn who worked Wall Street and our DC government to kill off “Blue-collar” capitalism, while gambling with taxpayers' money and today, ruining our children’s lives, as well.
Throughout their history, Marxist/Communist revolutionaries have made it clear that a thriving middle class perpetuates capitalism (which they seek to destroy) and is therefore the greatest impediment to their revolutionary goals.
As Withrow's missive illustrates here, the middle class is being systematically destroyed, and it is no accident.
I believe there will come a day when we will all be truly astonished at how thoroughly infested our governments and other institutions are, and have been, with these Marxist cockroaches.
The (a?) theory with the 30 year fixed mortgage was that your home would be paid off by the time you retired, meaning a comfortable life when you collected your then defined benefit pension (lower than your earned income) upon retirement. Without addressing all the assumptions that have changed, what does 50 years get you??? And what usually happens if things become more affordable? In any event given any reasonable yield curve what % of people can afford, let alone qualify for a 50 year mortgage? How many people will opt for the lower cost 3-year ARM. So, who is the 50 year mortgage for? Asset rich borrowers for whom this is way cheaper than margin debt..laissez les bons temps rouler
It’s actually and cynically financial engineering. Kicking a tin down the road. The premise is letting inflation and capital gain bathe any wounds while ignoring depreciation. In Australia it is fuelled by tax free status on the family home ( up to $3m Aud.) and the ability to carry forward depreciation on property and tax deductibility on negative gearing. The practice of having property trading and ownership losses off set against personal and company tax.
Price increases - typical in some big markets of 40% in 3 years.
In my view - ( my industry) - their Redeemer Not Cometh !
Thanks Dan for a great summary of how 2008 Q3 was created and where it looks like we may be headed again. I would bet very few of the BPR readers would ever be able to connect the dots in Joe's report. It is very sad that we (the country) have been led down this path.
Geez.................and one wonders why the push for AI and depopulation. Middle class isn't needed anymore - well, accept for the mundane tasks the elites do not want to do. This - if one was a cynic - looks like a return to serfdom except fewer serfs are needed today. Fortunately, or unfortunately, depending upon one's view, the coming credit bubble collapse accelerated by the rise of the East (China, Russia, BRICS, India, Iran, etc.) are chartering another path and without the "exorbitant privilege" the West dominance falls and with it the American hegemony. This is unstoppable (meaning no way in hell to fix or avert) and the question begs - how do we peons prepare? ¿Quien sabe? as they mutter down Mexico way.
Well, while we'll have 350mm people to find employment for - China has 1.3bn.
Not sure who those Chinese factory workers, or their robot replacements, will be selling their stuff to. I see problems all around the world. Might be a good time for the CCP and Xi to ramp up their own domestic consumer market.
Donnie criticizes socialism and communism but has no problem with the Feds controlling the housing market and the stock market. Sounds like Trump is a socialist or at least a rich man's socialist. We got to keep those bubbles inflated!
Let’s see, a 50 year mortgage on a 500k dollar house at 6% lowers my payment by 91$ a month. The best thing I get to pay 1,000,000$ in interest to the banks who by the way will be guaranteed the loan by you guessed it Fannie or Freddie. This is just too good to be true! The average age of a first time buyer is now 40 yrs old. Whoo hoo , I’ll be 90 yrs old when my house is paid off. Geez, thought I had seen it all!😂
Great article but attempting to place the issues with men and women not getting married and not starting families with the ability to afford a home is suspect. It is much more of a spiritual, moral problem where the most important person in life is myself. I don't want to be burdened with a spouse and children. What they fail to realize is that it is one of the life's greatest joys.
That 50 year mortgage is not so crazy for first time buyers as long as it is on a fixed rate. Buy a few ounces of gold at the same time as you take out your mortgage. Wait for the hyper-inflation, then sell what gold you need to to get a few wheelbarrows of virtually worthless dollars with which you pay off your mortgage. Maybe this is the Trump Bessent plan to save the young middle classes, then again. Maybe not.
Quite a plausible article until Withrow tells me I get paid to go on "antifa" rallies. Maybe it's because I am not young and not in the "know" on how to get paid by the billionaires. It is interesting watching the US empire begin the collapse. Having the big picture viewpoint and applying it to the minutiae of daily living such as buying groceries remains fascinating.
Author Joe Withrow says "Prior to 2008, Fannie Mae’s backstop enabled Americans to obtain conventional mortgages with a down payment of just 5-10%. And this was true prior to the housing bubble as well – before underwriting standards went out the window." But dear author fails to mention WHY the underwriting standards went out the proverbial window. I believe that answer is the real story Joe missed (or at least didn't want to mention).
Fannie Mae and Freddie Mac were scapegoated to cover for Chris Dodd and Barney Frank forcing FNMA to buy the worst of the worst mortgages in the name of affordable housing. That Mudd was singled out and none of the real players who perpetuated the housing fraud were put in jail is just one of the travesties of this story of middle class destruction.
To be even more specific - Barney Frank as Chair of the Banking Reform sub-committee and his boyfriend, Harold Raines as the owner of GSE, Freddie Mac.
The mechanism was F&F taking the crappy loans off the hands of the WS lenders by buying up "Collateralized Debt Obligation" (CDO) investment instruments. Thus, both relieving said WS banks of their (post-Enron, Sarbanes-Oxley reforms) obligation to maintain liquidity - assets in proportion to their outstanding loan portfolio - as a safety feature, as well as baking into the government GSE's Fannie & Freddie "cake", the bulk of the risky loans now being made by the banks, All in the name of "equity", as redefined by the ever-morphing rules governing the "Community Reinvestment Act" loans.
Thus, these WS banks, now unconstrained by outstanding loans, nor any practical lending standards, were effectively made into perpetual mortgage funding machines by government, and one whose lending standards now to be left in the hands of the politicians,
Mortgage lending now continues unabated and at exponential levels. What most people don't appreciate was the extent to which mortgages were made available to retail home builders. These home builders were some of the very first to throw the keys for half-completed homes, back to the banks...
Housing cost now going through the roof and only the most "deep-pocketed" (aka the banks) able to afford to be equity owners. Perfect, eh? An entire nation of renters is born and one that stacks up debt on the banks own credit cards as well. What could possibly go wrong?
Maybe "family formation" and all that inadequate birth rates hold for a future of childless elderly with no appreciable means of sustaining their own eldercare costs, or loved ones to intercede on their behalf to ensure proper care? Homes, too big for empty-nesters and not nearly big enough (at affordable rental rates) to contemplate raising and housing kids.
Wow. What's the way out of this mess?
Yep, if You want government In Your life , You will pay for this endlessly for all Your time on this earth. The famous words-more or less, I am from the government and I am here to help You.
Unfortunately, Don, in America and the West (frankly to a great extend worldwide) unless you live on a mountain, government will be in your life. The question begs then - which government does one want in its life? Most can't escape the coming crumbling of America and the West. Just ugly..........
A government that is just and stays out of Your life. I know, I know a dream , but at least dreams are free thus far! As far as crumbling , I see this world wide. Think cop 30 in Brazil to day You know that We the people of this earth are going to get the shaft, but no gold mine LOL.
There are other countries that don't have the integrated surveillance system supported by the media and industrial military complex. Plus they don't have the current exorbitant privilege of printing unlimited about of money and being able to spread it worldwide. While all governments want more power (and the money that comes along) the vast majority still have huge impairments to being like America. One ol' man's opinion.......and, yes Don, it is ugly and we peons are going to get the shaft - just the way of human nature.
But human nature includes an innate desire to be free. Most people aren't desirous of government's siren song of "taking care of them from cradle to grave". Only when the cycle arrives at the place where the human spirit is stifled into defeat do socialist/communist salesmen get traction.
"Free" you say. Hmmm.........sounds wonderful until reality strikes. People in NYC voted for "free stuff" - not to be free. To be truly free is self-reliance and in today's world that doesn't happen. People want pensions, people want free healthcare, people want free housing........it is nice in retrospect but in reality it goes again human nature. That is why way back when there were chiefs and medicine men. People want leaders and be part of a culture. So "free" in human terms has to take a context. Truly "free" is a myth. Just an ol' man's lament.
Good points and well said Ol' One, and we don't always agree. (Credit where credit is due.) As dearly departed Janice Joplin famously sang, "Freedom's just another word for nothing left to lose".
A good friend of mine liked to ask when someone would say something like "I want my pension . . . I want my medicine" etc. "How does it feel to want?"
Yes human nature , that evil side appears to stand out more and more as each day passes!
What is startling to me is the raw comments that just a few years ago would have caused outrage. For example, Mamdani stated he was going to punish white people by making them pay for all the "free" stuff he was promising. Actually said that outloud. Why because of the changing demographics in NYC - doesn't need the white votes. You see Trump and other politicians saying similar things. Just horrific....it is the 4th Turning and this Turning is going to be particularly ugly worldwide. And, we are going to get to see it..........ugh!
Yep, in true live caption. No getting away from the destruction. As You say "ugh".
Same in Australia - the median house price where I live (Brisbane, Qld) is now AUD$1,087,183 (USD$706,000; nationally it’s AUD$1,091,134), which is now higher than Melbourne. As a professional woman, I can no longer get into the market, even with a decent deposit. My rent has gone up by about 32%, and electricity by 30% in the last two years. Along with 47% income tax, it’s hard to get ahead despite working hard - all by design. I missed the opportunity to take part in your recent poll, but an expert in privacy and cybersecurity would be good, particularly now that the Australian government is looking at perverse ways to introduce a digital ID. Our “eSafety Commissioner”, Julia Inman Grant, is truly frightening. https://www.dailymail.co.uk/news/article-15244855/esafety-commissioner-investigation-canavan.html
Yep! Just another example of why this ancient old man is, has and will be in gold/silver (in some form) until I die or the forthcoming gold revaluation (in whatever form) occurs. The government (elites) "always" come to help us, withou question. That's why Americans have the straightest backs in the world, from the inevitable shaft received from the government, the elitest and the military/industrial complex. Oh, when does it change, as soon as future congresses and administrations vote for balanced budgets, a "sound" plan to greatly pay down our debt and appointment of "unbiased" federal judges. While waiting, this old man will stick with his gold.silver investments and coins. Stay solvent, youngsters.
If anyone is interested in the seeds of what has been partially described here - essentially from the midpoint of 2008, they should read “The Housing Boom and Bust” by Dr. Thomas Sowell.
Simply absorbing this description of the Fannie Mae aim of providing affordability at all times for all aspiring homeowners, I can see the failure inherent in that mission. It’s a failure common to Marxist inspiration. One that seeks a utopia.
In the old marketplace for home builders (full disclosure, I was one), an aspiring speculative home builder would anticipate a supportive market and buy land, build a home or two and use the profits to buy more land. However, the landholders, also seeing a supportive market would ask a higher price. Eventually, the cost of land, materials and labor would make the entire proposition untenable. This was generally accompanied by over-priced housing and new housing activity would stop. Late speculators would be burned from a lack of buyers and prices would correct. This was known as "the free market". It had affordability ups and downs yet was self-correcting.
It’s been replaced by corporatism aided by DC politicians. Read Sowell and you’ll learn about the role played by Barney Frank, his lover, Harold Raines. The WS invention of the Gaussian-Coppola formula used to sell off bad mortgages around the world, and a lot more. For those who appreciate unfettered markets, you’ll learn who worked Wall Street and our DC government to kill off “Blue-collar” capitalism, while gambling with taxpayers' money and today, ruining our children’s lives, as well.
Throughout their history, Marxist/Communist revolutionaries have made it clear that a thriving middle class perpetuates capitalism (which they seek to destroy) and is therefore the greatest impediment to their revolutionary goals.
As Withrow's missive illustrates here, the middle class is being systematically destroyed, and it is no accident.
I believe there will come a day when we will all be truly astonished at how thoroughly infested our governments and other institutions are, and have been, with these Marxist cockroaches.
The (a?) theory with the 30 year fixed mortgage was that your home would be paid off by the time you retired, meaning a comfortable life when you collected your then defined benefit pension (lower than your earned income) upon retirement. Without addressing all the assumptions that have changed, what does 50 years get you??? And what usually happens if things become more affordable? In any event given any reasonable yield curve what % of people can afford, let alone qualify for a 50 year mortgage? How many people will opt for the lower cost 3-year ARM. So, who is the 50 year mortgage for? Asset rich borrowers for whom this is way cheaper than margin debt..laissez les bons temps rouler
It’s actually and cynically financial engineering. Kicking a tin down the road. The premise is letting inflation and capital gain bathe any wounds while ignoring depreciation. In Australia it is fuelled by tax free status on the family home ( up to $3m Aud.) and the ability to carry forward depreciation on property and tax deductibility on negative gearing. The practice of having property trading and ownership losses off set against personal and company tax.
Price increases - typical in some big markets of 40% in 3 years.
In my view - ( my industry) - their Redeemer Not Cometh !
Thanks Dan for a great summary of how 2008 Q3 was created and where it looks like we may be headed again. I would bet very few of the BPR readers would ever be able to connect the dots in Joe's report. It is very sad that we (the country) have been led down this path.
DON'T EVER SELL OUR GOLD!
Jim Marshall
Geez.................and one wonders why the push for AI and depopulation. Middle class isn't needed anymore - well, accept for the mundane tasks the elites do not want to do. This - if one was a cynic - looks like a return to serfdom except fewer serfs are needed today. Fortunately, or unfortunately, depending upon one's view, the coming credit bubble collapse accelerated by the rise of the East (China, Russia, BRICS, India, Iran, etc.) are chartering another path and without the "exorbitant privilege" the West dominance falls and with it the American hegemony. This is unstoppable (meaning no way in hell to fix or avert) and the question begs - how do we peons prepare? ¿Quien sabe? as they mutter down Mexico way.
Well, while we'll have 350mm people to find employment for - China has 1.3bn.
Not sure who those Chinese factory workers, or their robot replacements, will be selling their stuff to. I see problems all around the world. Might be a good time for the CCP and Xi to ramp up their own domestic consumer market.
Donnie criticizes socialism and communism but has no problem with the Feds controlling the housing market and the stock market. Sounds like Trump is a socialist or at least a rich man's socialist. We got to keep those bubbles inflated!
PS the allusion to Eliot is not lost… but that “…world ends not with a bang but a whimper”.
Let’s see, a 50 year mortgage on a 500k dollar house at 6% lowers my payment by 91$ a month. The best thing I get to pay 1,000,000$ in interest to the banks who by the way will be guaranteed the loan by you guessed it Fannie or Freddie. This is just too good to be true! The average age of a first time buyer is now 40 yrs old. Whoo hoo , I’ll be 90 yrs old when my house is paid off. Geez, thought I had seen it all!😂
Great article but attempting to place the issues with men and women not getting married and not starting families with the ability to afford a home is suspect. It is much more of a spiritual, moral problem where the most important person in life is myself. I don't want to be burdened with a spouse and children. What they fail to realize is that it is one of the life's greatest joys.
That 50 year mortgage is not so crazy for first time buyers as long as it is on a fixed rate. Buy a few ounces of gold at the same time as you take out your mortgage. Wait for the hyper-inflation, then sell what gold you need to to get a few wheelbarrows of virtually worthless dollars with which you pay off your mortgage. Maybe this is the Trump Bessent plan to save the young middle classes, then again. Maybe not.
Quite a plausible article until Withrow tells me I get paid to go on "antifa" rallies. Maybe it's because I am not young and not in the "know" on how to get paid by the billionaires. It is interesting watching the US empire begin the collapse. Having the big picture viewpoint and applying it to the minutiae of daily living such as buying groceries remains fascinating.
Author Joe Withrow says "Prior to 2008, Fannie Mae’s backstop enabled Americans to obtain conventional mortgages with a down payment of just 5-10%. And this was true prior to the housing bubble as well – before underwriting standards went out the window." But dear author fails to mention WHY the underwriting standards went out the proverbial window. I believe that answer is the real story Joe missed (or at least didn't want to mention).