Home › Forums › Financial Markets/Economics › Fed claims $13B profit on lending facilities
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davelj.
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February 17, 2011 at 4:01 PM #668748February 17, 2011 at 4:03 PM #667601
Diego Mamani
Participant[quote=briansd1]The GSEs hardly CAUSED the crisis. The privately issued mortgages CAUSED the crisis.[/quote] I agree that the GSEs’ share of the market dropped during the peak of the bubble, so the GSEs can’t be said to be the sole cause of the crisis. I never said they were the sole cause; but they were part of a system with perverse incentives that ultimately created the housing bubble and subsequent financial crisis.
In any case, a drop in market share from 70% to 40% meant that still $0.40 out of each $1.00 of MBS were issued by the GSEs (at the peak). So, while not the sole cause of the crisis, they had a hand in it. Also, note that house prices started to inflate since at least 2001, if not earlier (the GSEs share of MBS issuance had been increasing since the housing market last bottomed in 1997).
That’s why I wrote earlier that there were two sides: the GSEs, and the privately issued MBSs. The latter needed the rating agencies to give A+ ratings to the senior tranches of bundles of subprime loans. The former only needed Uncle Sam’s implicit guarantee.
February 17, 2011 at 4:03 PM #667663Participant[quote=briansd1]The GSEs hardly CAUSED the crisis. The privately issued mortgages CAUSED the crisis.[/quote] I agree that the GSEs’ share of the market dropped during the peak of the bubble, so the GSEs can’t be said to be the sole cause of the crisis. I never said they were the sole cause; but they were part of a system with perverse incentives that ultimately created the housing bubble and subsequent financial crisis.
In any case, a drop in market share from 70% to 40% meant that still $0.40 out of each $1.00 of MBS were issued by the GSEs (at the peak). So, while not the sole cause of the crisis, they had a hand in it. Also, note that house prices started to inflate since at least 2001, if not earlier (the GSEs share of MBS issuance had been increasing since the housing market last bottomed in 1997).
That’s why I wrote earlier that there were two sides: the GSEs, and the privately issued MBSs. The latter needed the rating agencies to give A+ ratings to the senior tranches of bundles of subprime loans. The former only needed Uncle Sam’s implicit guarantee.
February 17, 2011 at 4:03 PM #668272Participant[quote=briansd1]The GSEs hardly CAUSED the crisis. The privately issued mortgages CAUSED the crisis.[/quote] I agree that the GSEs’ share of the market dropped during the peak of the bubble, so the GSEs can’t be said to be the sole cause of the crisis. I never said they were the sole cause; but they were part of a system with perverse incentives that ultimately created the housing bubble and subsequent financial crisis.
In any case, a drop in market share from 70% to 40% meant that still $0.40 out of each $1.00 of MBS were issued by the GSEs (at the peak). So, while not the sole cause of the crisis, they had a hand in it. Also, note that house prices started to inflate since at least 2001, if not earlier (the GSEs share of MBS issuance had been increasing since the housing market last bottomed in 1997).
That’s why I wrote earlier that there were two sides: the GSEs, and the privately issued MBSs. The latter needed the rating agencies to give A+ ratings to the senior tranches of bundles of subprime loans. The former only needed Uncle Sam’s implicit guarantee.
February 17, 2011 at 4:03 PM #668410Participant[quote=briansd1]The GSEs hardly CAUSED the crisis. The privately issued mortgages CAUSED the crisis.[/quote] I agree that the GSEs’ share of the market dropped during the peak of the bubble, so the GSEs can’t be said to be the sole cause of the crisis. I never said they were the sole cause; but they were part of a system with perverse incentives that ultimately created the housing bubble and subsequent financial crisis.
In any case, a drop in market share from 70% to 40% meant that still $0.40 out of each $1.00 of MBS were issued by the GSEs (at the peak). So, while not the sole cause of the crisis, they had a hand in it. Also, note that house prices started to inflate since at least 2001, if not earlier (the GSEs share of MBS issuance had been increasing since the housing market last bottomed in 1997).
That’s why I wrote earlier that there were two sides: the GSEs, and the privately issued MBSs. The latter needed the rating agencies to give A+ ratings to the senior tranches of bundles of subprime loans. The former only needed Uncle Sam’s implicit guarantee.
February 17, 2011 at 4:03 PM #668753Participant[quote=briansd1]The GSEs hardly CAUSED the crisis. The privately issued mortgages CAUSED the crisis.[/quote] I agree that the GSEs’ share of the market dropped during the peak of the bubble, so the GSEs can’t be said to be the sole cause of the crisis. I never said they were the sole cause; but they were part of a system with perverse incentives that ultimately created the housing bubble and subsequent financial crisis.
In any case, a drop in market share from 70% to 40% meant that still $0.40 out of each $1.00 of MBS were issued by the GSEs (at the peak). So, while not the sole cause of the crisis, they had a hand in it. Also, note that house prices started to inflate since at least 2001, if not earlier (the GSEs share of MBS issuance had been increasing since the housing market last bottomed in 1997).
That’s why I wrote earlier that there were two sides: the GSEs, and the privately issued MBSs. The latter needed the rating agencies to give A+ ratings to the senior tranches of bundles of subprime loans. The former only needed Uncle Sam’s implicit guarantee.
February 17, 2011 at 4:31 PM #667616briansd1
GuestA large portion of the GSE securities were bought by China and sovereign wealth funds which did not sell their holdings.
The 2008 financial crisis, or run on the bank, as it were, was caused by the precipitous drop in the value of the privately issued mortgage backed securities. Liquidity dried up overnight necessiting the government and Federal Reserve to step it.
February 17, 2011 at 4:31 PM #667678GuestA large portion of the GSE securities were bought by China and sovereign wealth funds which did not sell their holdings.
The 2008 financial crisis, or run on the bank, as it were, was caused by the precipitous drop in the value of the privately issued mortgage backed securities. Liquidity dried up overnight necessiting the government and Federal Reserve to step it.
February 17, 2011 at 4:31 PM #668287GuestA large portion of the GSE securities were bought by China and sovereign wealth funds which did not sell their holdings.
The 2008 financial crisis, or run on the bank, as it were, was caused by the precipitous drop in the value of the privately issued mortgage backed securities. Liquidity dried up overnight necessiting the government and Federal Reserve to step it.
February 17, 2011 at 4:31 PM #668425GuestA large portion of the GSE securities were bought by China and sovereign wealth funds which did not sell their holdings.
The 2008 financial crisis, or run on the bank, as it were, was caused by the precipitous drop in the value of the privately issued mortgage backed securities. Liquidity dried up overnight necessiting the government and Federal Reserve to step it.
February 17, 2011 at 4:31 PM #668768GuestA large portion of the GSE securities were bought by China and sovereign wealth funds which did not sell their holdings.
The 2008 financial crisis, or run on the bank, as it were, was caused by the precipitous drop in the value of the privately issued mortgage backed securities. Liquidity dried up overnight necessiting the government and Federal Reserve to step it.
February 17, 2011 at 4:32 PM #667611Eugene
Participant[quote]And where, pray tell, do you think Frannie and Freddie will get the money to pay the principal back, plus 10% interest? They are bleeding every month![/quote]
They are not bleeding. They are cash flow positive. Fannie in particular could pay back every penny they borrowed tomorrow, with interest, if only they stopped worrying about mark-to-market net worth. They have $260 billion in cash and securities on hand.
February 17, 2011 at 4:32 PM #667673Participant[quote]And where, pray tell, do you think Frannie and Freddie will get the money to pay the principal back, plus 10% interest? They are bleeding every month![/quote]
They are not bleeding. They are cash flow positive. Fannie in particular could pay back every penny they borrowed tomorrow, with interest, if only they stopped worrying about mark-to-market net worth. They have $260 billion in cash and securities on hand.
February 17, 2011 at 4:32 PM #668282Participant[quote]And where, pray tell, do you think Frannie and Freddie will get the money to pay the principal back, plus 10% interest? They are bleeding every month![/quote]
They are not bleeding. They are cash flow positive. Fannie in particular could pay back every penny they borrowed tomorrow, with interest, if only they stopped worrying about mark-to-market net worth. They have $260 billion in cash and securities on hand.
February 17, 2011 at 4:32 PM #668420Participant[quote]And where, pray tell, do you think Frannie and Freddie will get the money to pay the principal back, plus 10% interest? They are bleeding every month![/quote]
They are not bleeding. They are cash flow positive. Fannie in particular could pay back every penny they borrowed tomorrow, with interest, if only they stopped worrying about mark-to-market net worth. They have $260 billion in cash and securities on hand.
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