Fannie and Freddie were at heart of crisis
The following editorial appeared in the Kansas City Star on Friday, Dec. 23:
Much of the analysis of the housing crash and ensuing credit panic has focused on the manic activities of Wall Street, where most of the headlines of the debacle were made.
That's a critical part of the story, but the recent lawsuit against six former top executives of Fannie Mae and Freddie Mac rightly moves the spotlight toward the government's role in generating the crisis.
In the suit, the Securities and Exchange Commission accuses the executives - including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron - of misleading the markets about their companies' exposure to high-risk loans. As SEC Enforcement Director Robert Khuzami put it, "Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," giving analysts and rating agencies a skewed picture of the level of risk in the market.
Fannie and Freddie, odd hybrids, were at the heart of the crisis. Supposedly, they were private, stock-issuing corporations. But their government charter let them borrow at rates lower than competitors because markets assumed, rightly as it turned out, that if they failed the taxpayers would back them up. The "subprime exposure" mentioned by Khuzami was also taxpayer risk.
A bailout is exactly what happened in 2008. The government seized control of Fannie and Freddie and bailed them out at a cost, so far, of $150 billion.
Fannie and Freddie don't make loans. They buy loans from those who do, and then keep them on their books or package them into bonds for sale to investors. This was a great way to raise money to finance housing, but politicians pushed it too far. As Gretchen Morgenson of The New York Times and Joshua Rosner wrote in "Reckless Endangerment," the Fannie-and-Freddie debacle shows what happens "when Washington decides, in its infinite wisdom, that every living breathing citizen should own a home.
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In the suit, the Securities and Exchange Commission accuses the executives - including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron - of misleading the markets about their companies' exposure to high-risk loans.
The site is reporting a marked increase in high risk long term loan demand from 2010 levels as consumers seek access to money online. "Bad credit loans are really important today, because the average consumer is reeling from the combined punches of
As public sector banks, which extend credit support to women borrowers through SHGbank linkage route, begin to rely on the data of the credit bureaus, nearly 10 million AP women borrowers could be denied personal loans, he said.
The high level reflects ongoing distrust in inter-bank lending markets, where banks prefer using the low-risk ECB facility for excess funds rather than lending them to other banks. It further underlines the abundance of liquidity in the euro-zone
Americans are still laden with historically high household debt. While they have whittled it somewhat, it remains at 119 percent of their disposable personal income, far in excess of the period prior to the 1990s, when it was below 80 percent.
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