Paul.L

"You are faced with the evidence and you just pretend it doesn't exist. 1) Fannie Mae and Freddie Mac owned or guaranteed HALF of ALL mortgages in America. THEY were the BIGGEST players in the market."

I have already agreed they were big players in the market. My quote that 'they stand out as especially big sheep' made that abundantly clear.

"2) They were INSTRUCTED to give loans to poor people by the GOVT."

The government is not blameless in this mess, but at no time did it instruct anyone to rip people off. The banks did that without instruction from government. Lending money to low income people would not in itself have created this crisis. Low income people are not incapable of paying off a loan when the repayments are set fairly. The success of the Grameen Bank attests to this fact.

"3) Fannie Mae and Freddie Mac were among the FIRST to be affected by this crisis."

That doesn't mean they were responsible for it. As I've already stated, they quite wrongly guaranteed and bought into these subprime loans and got caught with them, but they weren't the ones out there flogging them off to vulnerable people in the first place. The banks were. Fannie Mae and Freddie Mac could well have been employing the same predatory lending practises as the banks, but I haven't come across evidence they were, not to say it doesn't exist, and I'm sure you'll produce it if it does.

"Where do you get the idea that Fannie Mae and Freddie Mac were following the crowd? I've shown you where the GOVT directed these GSE's to lend money to low income people. How do you reconcile this?"

I’m perfectly aware of what you’ve 'shown' me. There are many and varied interpretations of what has caused this crisis. No one has a clear monopoly on the truth, least of all you. I begin from a different perspective to you, read from different sources and will naturally arrive at different conclusions. Some of the sources informing my opinion are as follows:

http://www.alternet.org/workplace/102672/financial_meltdown_101/?page=entire

http://www.alternet.org/workplace/102964/the_flat_earthers_try_to_pin_financial_meltdown_on_fannie_and_freddie/

http://www.alternet.org/workplace/98076/nationalize_fannie_mae_it_worked_until_it_was_privatized/?page=entire

Thanks keith - I see you've no hard feelings about my glue-sniffing taunt; I meant none. I was really worried more generally about the large doses of toxic "liquidity" running through neolibs' veins lately.

You seem to have amended your previous description, where you located the fault with "do gooders", only this time adding to that crowd the "no –regulation laissez- faire mob". I think that proves how we do actually agree on the main argument here; maybe you just gave the impression of casting blame where you are not. Specifically, I'm sure you'd admit that many if not most "do-gooder socialists" would not have gone along with the repeal of Glass-Steagall, or with much that passed as Fed policy on Greenpsan's watch.

Furthermore, not all who claim or deserve the label "socialist" would necessarily warrant the other category "do-gooder". My point here is that some avowed socialists would have no problem spurring along the mad fakery of the derivatives bubble if, for example, they believed it just proved Marxist eschatology: "abracadabra", pop the balloon, and watch the proletarian dictatorship spring from the oven! I expect Engels himself would have found himself in that camp, all the while speculating too.

As for “do-gooder socialists” endorsing the madness: wouldn't surprise me. I read enough avowed socialist stuff expressing strange ideas like “our unprecedented prosperity”, and “the best system we could possibly have, despite its flaws”, and so on. I'm sure there was at least one such “lefty” when Clinton signed off on dumping Glass-Steagall while threatened with ignominy worse than Nixon should have earned, and all from the Lewinsky nonsense. The snake oil merchants would have said: “Now the poor can enter the property market – everyone will be middle class”, patting the woolly-headed token “lefty”.

But “capitalism has not served us well for nearly 80 years” as you say. Maybe it has served you well, but I've been serving it too well these last twenty! Capitalism stopped working properly with the end of the Cold War and the start of Sir Alan Greenspan's bubble-blowing.

Anansi “Col,you liken housing to a mere commodity, like food.”

Yes, in fact on the pecking order of things, you can go longer without shelter than you can without food.

“It is becoming incredibly boring to read the cliche ridden knee jerk reactions from some of you when there are posters who are not so bent on unquestioning guru worship and are able and willing to probe.”

I see a serious “credibility problem” for someone who comments on the use of “Clichés” and then proceeds to reflect on Marie Antoinette’s dietary habits.

As for a willingness for probing, it was either her husband or her father-in-law who was fixated on the being probed.

I suggest the matters he was being probe for is akin to the matters you are speaking.

“ridiculing and sneering”

I see no ridicule nor sneering in what either keith or myself have posted. I see a lot of self righteous ignorance in the drivel which you have presented here as an alternative to reasoning.

But you are obviously from the “excuses” side of the political spectrum and capable of no constructive contribution. I suggest you jump ship (the preferred mode of departure of the lefties, if the way they dishonour their bank loans is any guide) before you get mauled.

Bronwyn “scapegoats. . . but they were the followers not the leaders.”
Prove it.

It should be easier for you to name the ‘ring-leaders’, rather than just the ‘fallen’.

“It was the banks that initiated the predatory lending to people they knew couldn't repay the loans”

WRONG !

No bank lends on that criteria let alone the intention of the borrower defaulting.

I wrote to you “Bail them out or let them sink?” posted by me on 12 October 2008 8:35:29 AM

anyone who accepts a loan without reading the agreement and understanding their responsibility to meet the repayment schedule is defrauding the bank and the system which we all live under.

Your capacity to excuse the misconduct of the financially irresponsible, incompetent and negligent, beggars belief.

Outstanding Col!

Great that we're both reading from the same page about some "responsibility to meet the repayment schedule".

Now let us explore just who's being responsible in this maelstrom of funny money debt, and who's defrauding whom.

Owner-occupiers, negative-gearing aspirant landlords and anchovy-level speculators get swamped and have to sell, whether as formal foreclosure or - more likely in Australia lately - as a nervous and optimistic re-entry into the lard-bloated real estate market. Out they go, regardless of the massive inefficiency, other waste and disruption caused. My family and I recently moved because the idiot landlord couldn't meet his own repayments and insurance costs, so out we went, even though the mortgage was not our responsibility and we nearly always paid our rent far in advance. Time off from work, kids' schooling disturbed, major logistical effort. OK, we're used to paying for others' incompetency anyway; just think of all the tax we've wasted.

So you can sleep easy Col: thousands are continually being uprooted like this, including many others much worse than my case, like those rendered homeless yet owing enormous sums.

However, when the CDOs and CDS get called in according to a "repayment schedule" at the level of investment banks, we see a very different process. There is a supposed "government intervention" (a nasty misnomer), as bizarre welfare mechanisms take over, all at public expense. Yes, it does seem strange, but these institutions take in many billions; some, like Goldman Sachs, are allowed to avoid much of their more immediate risk by being made into commercial banks!

Therefore, if we apply that notion of contractual responsibility, they should be out on the street too, and declared formally BANKRUPT. After all, we and they know that they are bankrupt in fact.

Why not declare them bankrupt? Neither the people nor the state had any contractual obligation to bail these clowns out. And please don't repeat the mindless media drivel: "well, they had to do SOMETHING", and "they have to keep the system functioning". It is clearly very dysfunctional, as the looming derivatives eruption will remind us further.

Bronwyn,

You say >> “The government is not blameless in this mess, but at no time did it instruct anyone to rip people off. The banks did that without instruction from government”

This crisis has not been caused by the banks RIPPING people off. This crisis originated in the failure of subprime mortgages and the real estate bust. The economy doesn’t almost collapse because some poor people lost some money.

“Subprime” lending is lending to people who are otherwise not good candidates for a loan. Loaning poor people hundreds of thousands of dollars meets the subprime definition.

Secondly, you clearly don’t understand the function of Freddie Mac and Fannie Mae. They are secondary mortgage market players. That is their focus is on buying loans from banks, packaging them up as securities and selling them on. They aren’t involved in the retail side of lending. They rely upon the banks for that. When Freddie Mae and Fannie Mac were instructed to make loans to poor people, the way they did this is by buying loans banks had already made to poor people, thus freeing up the banks capital, so they could make more such loans. Many of the so-called predatory loans, the ARMS for example, were bought by Fannie Mae and Freddie Mac.

>> “ In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending. Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more "affordable" loans made to these borrowers.” http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626.html

I'm not suggesting I have a monopoly on the truth. I’m asking you to accept what I’m saying, or show me where I’m wrong. I stay well away from Alternet. The bias there is SO strong it makes my eyes water.

I'm not saying the banks are blame free either, just that the situation is complex and easy solutions are a mirage.

Paul.L

"Secondly, you clearly don’t understand the function of Freddie Mac and Fannie Mae. They are secondary mortgage market players."

I do understand that and can do without your patronizing and repetitive accusations to the contrary. The following statement in my last post to you made this quite clear, "As I've already stated, they quite wrongly guaranteed and bought into these subprime loans and got caught with them, but they weren't the ones out there flogging them off to vulnerable people in the first place."

"I stay well away from Alternet. The bias there is SO strong it makes my eyes water."

I don't think you're in a good position to lecture me on sources. The sources you quoted me, Wikipedia and a commercial mortgage advice site, hardly give you cause to jump up on your superiority pedestal. The only reason I posted those links in the first place is because I'm tired of going over the same old material with you. If you'd actually read them, you'd better understand where I'm coming from, but no you've written them off without a look I would guess. All of those writers are well-known and respected commentators on economic matters and write for many other publications besides Alternet.

I wouldn't bother wasting any more words on this circular argument if I were you because I certainly don't intend to.