[SK in CV]

[quote=markmax33]The $250,000 tax credit was certainly part of it, but if the private market had to own the mortgages and didn’t have the GOV to compete with and lead the way on MBS and encourage MBS’s through the GSEs, this wouldn’t have happened on this scale if at all. If interest rates could have floated up, instead of the FED slashing them and encouraging bad investing the $250,000 credit would have been a non-issue. I believe the second the $250,000 tax credit was issued that a flood of investors would have been trying to get credit and rates would have adjusted upward, thus stabalizing the market and balancing out the risk with the tax credit.[/quote]

Just to clarify, there was never a $250,000 tax credit. It’s a $250,000 exclusion. ($500,000 for a married couple.) And it replaced an unlimited exclusion for move-up sellers. And it happened way back in 1997. And it doesn’t and never did apply to investment property, only to primary residences. And beginning in june of 2004 and the end of 2006, the federal funds rate and the discount rate were raised 17 times.

[SK in CV]

[quote=markmax33]
Fine explain the simple theory that they set the tone for the market by buying risky assets that weren’t subprime and started a trend. They certainly perpetuated the idea that mortgages could be sold in bundles to them in a faulty manner and gave the market confidence in the MBS model. They ABSOLUTELY STARTED THE TREND whether they actually bought subprime or not. [/quote]

You know markmax, you’re very right on one part here. They certainly were the first to issue mortgage backed securities. From well before this most recent bubble/bust. And before the bubble/bust of the early 90’s. And before the bubble/bust of around 1980. And before the little bubble/bust of the mid-70’s. Ginnie Mae started issuing mortgage backed securities in 1968. Freddie Mac in 1971. They did it for more than 30 years before this most recent bubble/bust. But Wall Street? They just got involved after November of 1999. Took em a few years to get ramped up, but when they did, all hell broke loose.

[SK in CV]

For one aldante, my comment wasn’t directed at you, it was directed at markmax. I don’t think you’ve expressed the same kind of faulty logic that he has.

I don’t think my research is any better than his. I haven’t dismissed any evidence. I don’t throw evidence out because it doesn’t support my conclusion. To the contrary, I’d welcome evidence that makes me change my opinion. But I think the evidence that I’ve seen, including all that’s been presented here on the points we’re discussing, leads to a logical conclusion. And that opinion is that the GSE’s had no more than a minor role in the housing bubble and bust.

[SK in CV]

[quote=aldante]

http://www.cbo.gov/doc.cfm?index=2839&type=0

Sk this is a report by CBO in 2001.

Here is an exerpt

Fannie Mae asserts that intense competition forces the housing GSEs to pass through all subsidies. As evidence, it cites its estimate that, as of December 31, 2000, Fannie Mae and Freddie Mac together held only 22.7 percent of the fixed-rate single-family mortgages outstanding in the United States. However, adjusting for other government mortgage guarantees, GSE-guaranteed mortgage-backed securities, and jumbo mortgages, CBO estimates that Fannie Mae and Freddie Mac have at least a 71 percent share of the market. That share is growing, which suggests that they have significant market power.[/quote]

What does that have to do with the housing bubble that began and burst years later?

Subsequent to 2002, the bubble began to grow in ernest, the absolute size of the GSE portfolios were basically stagnant, and their share of the entire mortgage market shrank, until after the bubble burst, prices began to fall, and the GSE’s entered the sub-prime market. The mortgage market changed so drastically between the time of that statement and 2004 that it renders it’s usefulness in identifying the cause of the bubble/bust nil. It was not the same market in 2001 as 2004, different again by 2007, and yet different again today.

The clearest evidence is seen in the first chart at this link:

http://blogs.wsj.com/marketbeat/2011/02/11/fannie-and-freddie-the-saga-in-charts/

The Fannie/Freddie share of the market spiked downward at the exact same time the private lender share spiked upwards, and then after the bubble began to burst, the trends reversed. Nothing that happened between 2000 and the end of 2003 is really relevant.

[SK in CV]

[quote=markmax33]
No you are just being ignorant, if you agreed with the conclusion you wouldn’t have attacked in that manner earlier and been so condescending. I make very logical arguments. It is Ron Paul’s bill 100% he’s been trying to pass for 30 years:

http://www.ronpaul.com/congress/legislation/111th-congress-200910/audit-the-federal-reserve-hr-1207/

You attack because you don’t have a logical counter-argument and you are the only one on the blog that thinks that way.

“First they ignore you, then they laugh at you, then they fight you, then you win.”[/quote]

You really need to take a class in logic. My response only became condescending when I pointed out the errors in your arguments and you continued to make the same mistakes. Only then did my absolute disdain for your stupid arguments lead to my condescension.

Go hunt for the congressional record that shows that Ron Paul sponsored the amendment that resulted in the fed audit. Or easier, go read the link YOU provided, to Paul’s own site where he acknowledges “The altered Sanders amendment passed the Senate on May 11, 2010 by a unanimous 96-0 vote” and not the Grayson-Paul version he co-sponsored in the house. (He gives a good excuse, but bottom line it was NOT his version that passed.)

Markmax, here’s the difference between you and me. You’re an idealogue with a manichean thought process. You’re a believer, and any evidence in conflict with the belief, you reject, dismiss or ignore. And worse, you treat all criticism as the enemy of your truth, regardless of how benign.

My world is not so black and white. I have no emotional ties to my opinions. I don’t see absolutism, purity or consistency as virtues. I’m not bound by ideologies. I don’t believe or believe in anything. I research and evidence leads to conclusions, not beliefs. End of story. If you have evidence that is better than mine, I win. Because I end up smarter. Unfortunately, I doubt that’s going to happen in this conversation.

[SK in CV]

[quote=aldante][quote=SK in CV][quote=aldante]SK,
I notice that you did not address that GSE graph that Markmax asked you about. That seems to take your arguement down like hard.[/quote]

No I didn’t. Which graph?[/quote]

This one:

http://1.bp.blogspot.com/_gsLSecmB4no/TA%5B/quote%5D

No, not in the least. It’s unlabeled. I don’t even know what it is supposed to represent. If I did, and I knew which argument it’s supposed to take down, I would be glad to address it.

[SK in CV]

[quote=markmax33]
The international loan program was never audited before Ron Paul’s audit which was 1/3 of the $15T. None of the emergency loan programs were ever audited either. This article explains it better:

http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

How about the fact that several people on the federal reserve board held large sums of shares or even positions in the companies they were bailing out secretly? Not an issue?

Can I get my discount window?[/quote]

I think you mean Bernie Sanders’ audit. (One of my heros, go Bernie!) And if the audit was done, how can you say it was never audited?

And since you cite that particular article, please note that it says it was a “top-to-bottom audit of the Federal Reserve”.

And stop with the bullshit that I don’t think there are problems with the Fed. I just think your arguments are crappy. If you make a crappy argument, just because I point it out, doesn’t mean that I even disagree with your conclusion.

[SK in CV]

[quote=markmax33]
Dude,
There are COMPLETE multi-trillion dollar programs that the FED does not have audited. Do you see a problem with that as an auditing expert? You don’t have a problem with the FED funding bombs used against our troops? I do, and I bet everyone else reading this blog does other than possibly you.[/quote]

Name one.

And no need to follow it up with another straw man argument.

I’ve never said I was an auditing expert. Only that I know what an audit is. You don’t. You don’t have a clue. An audit would NEVER prevent anything that’s happened in the past. Audit’s are historical in nature.

I’ve never said I don’t see any problems with the Fed. Only that I don’t see your imaginary problems. Or your imaginary cures.

[SK in CV]

[quote=aldante]SK,
I notice that you did not address that GSE graph that Markmax asked you about. That seems to take your arguement down like hard.[/quote]

No I didn’t. Which graph?

[SK in CV]

Dude, seriously. More than 30 years ago I got my license as an auditor. Thankfully, I’ve never done any auditing since them, but I’ve reviewed hundreds, if not thousands of audited financial statements.

My soon-to-be wonderful ex-wife is subject to semi-annual medicare and medi-cal audits, in addition to occasional audits by the state board of medical quality assurance. I just got copied on an email to my payroll administrator that my workers comp company wants to do an audit. I audit every single sales proposal that my sales department sends to customers to insure margin targets are being met. My director of technology audits his staff’s work to make sure that they maintain best practices. As does my delivery director.

There is no such thing as a complete audit. It is a practical impossibility. You provide a “complete” list and I’ll point out what you missed in a matter of moments. Audits test compliance. That’s all they do. Were rules followed. Which is why I asked you what the scope of the audit is that you want.

Some of those loans pissed me off to. I have no idea which of them (if any) were in violation of regulations. I highly doubt any of them were random.

I proved none of your points. Other than Ron Paul is perfect, and the Fed is never right, I’m not even sure you have any.

[SK in CV]

[quote=markmax33]
How about the Federal reserve artificially lowering interest rates after the .com bubble? Explain that one away. The money flowed straight out of the stock market and into the housing market to create the next bubble instead of letting the tech bubble completely fail.[/quote]

How about it?

How about the repeal of glass-steagall that allowed Wall Street unfettered access to product to fill an insatiable demand in order to collect billions of dollars in fees for creating mortgage backed securities? How about the virtual disappearance of underwriting standards? How about loan brokers and agents who knowingly and willfully prepared loan applications for their clients to sign which they knew contained lies? How about mortgage lenders who paid more to those that brokered bad loans than those who brokered good loans? How about real estate agents who encouraged buyers to buy property that they knew their clients couldn’t afford and told them not to worry because they could always refinance when the teaser rates expired? How about buyers who knowing lied on their loan applications? How about the debt rating agencies who collected huge fees to grant their seal of approval on debt instruments they either knew, or should have known were of low quality. How about investment advisors who collected commissions and fees for telling their investor clients to buy crappy mortgage backed securities? How about clients who did no due diligence on the investments they were making?

In the current economic model there is no such thing as “real” interest rates. The Fed has control of some interest rates. The open market controls some. The financial markets control others. If you think the Fed was the driving force behind the bubble, you’re sadly mistaken. They were a piece of a puzzle. Nobody was blameless.

[SK in CV]

It is pure shit. Or at least the article about the report is. It claims that the GSE’s bought subprime loans. They didn’t, until after the bubble already started bursting in 2006, and that was mainly in the form of purchases of MBS’s. (A stupid move, cost the taxpayers billions, but had nothing to do with creating the bubble.)

It also cites Countrywide as one of the main offenders. Indeed. But Countrywide, as a piece of their total business, did very little with the GSE’s. They were the Wall Street darlings for providing inventory to package and resell in the private MBS market.

It also mentions the CRA again, which wasn’t (and still isn’t) an issue for mortgage banks, only commercial banks. Hence, lenders like Countrywide were under no obligation to meet CRA standards. They did voluntarily agree to meet HUD standards, which are often the target of criticism. The problem with that line of criticism is that they didn’t meet those standards. A report just issued about a month ago showed that Countrywide failed to meet HUD underwriting standards on half of the loans tested. Remember, Countrywide was the go-to subprime lender. Was the go-to lender for product for Wall Street. And they sold products which were ineligible for the GSE to purchase.

This horse has been dead for years. It should stay that way.

[SK in CV]

[quote=markmax33][quote=SK in CV][quote=markmax33]You could fix the current dollar to the current value of gold and audit the fed properly and reestablish a gold standard over night. It’s not that hard. The price of gold might go up though![/quote]

I figured this would eventually come up, because it always seems to. The fed gets audited every year. It’s a financial audit, and something I actually look at when it comes out. Pretty interesting. So when I hear screams to audit the fed, and claims that the fed has never been audited, it seems funny, stupid and uninformed.

So when given the opportunity, I ask these questions. If you have issues with the current audit, exactly what are those issues, and what is the basis for the argument? If you would like an audit with a different scope, what precisely is the scope of the audit you’d want? And most importantly, how is an audit going to fix anything going forward?

And in advance of your possible claim that by asking these questions, I’m presuming that everything the fed has ever done has been good, clean, and appropriate, I’ve made no such presumption. This is focused solely on your assertion that auditing the fed will provide solutions. I think that assertion is silly and misguided, and driven by conspiracy nuts who ignore reality because it’s not near as interesting as fantasy.[/quote]

I’m glad you asked! The federal reserve is not audited on a regular basis as you suggest like EVERY OTHER GOV OFFICE. They have NEVER been fully audited by the GOV’s internal auditor, the GAO. Why are they the only “GOV agency” to never get an audit?

During the first partial audit of the FED it was revealed to the American public the FED loaned out $16T. Did you know that beforehand? Did you have access to that? Did you know they loaned money to Libya’s Khadafi? I’m sure he bought bullets with that money to fire at us. I sure didn’t know and of that and I challenge you to find an audit before Ron Paul’s audit that shows it! There are certain programs inside the fed which are not allowed to be audited, IRONICALLY they are the largest and most powerful programs!

http://www.businessweek.com/news/2011-10-19/gao-says-fed-banks-can-improve-conflicts-policy-diversity.html%5B/quote%5D

The federal reserve system has been the subject of 574 reports by the GAO over the last 45 years. (I looked that up.) More than 10 a year. 93 of them specifically related to federal reserve banks. I suspect there is some operational or financial system that has not undergone a GAO exam. I don’t know what that system is. But your claim that it was the first partial audit of the fed is easily disproved. Just go to the GAO website and you can see yourself. (The fact that you haven’t read the reports doesn’t mean they weren’t done.)

The $16 trillion that they loaned is a total number. They never had anywhere near that amount outstanding at any one time. At the end of 2010, less than 10% of that was outstanding.

They have been audited annually by external auditors related to their financial reporting and those audit reports are available to the public.

So you didn’t answer my question. Do you know what an audit is? What exactly is the scope of the audit you want? And precisely how will an audit fix things as you claimed?

[SK in CV]

[quote=markmax33]You could fix the current dollar to the current value of gold and audit the fed properly and reestablish a gold standard over night. It’s not that hard. The price of gold might go up though![/quote]

I figured this would eventually come up, because it always seems to. The fed gets audited every year. It’s a financial audit, and something I actually look at when it comes out. Pretty interesting. So when I hear screams to audit the fed, and claims that the fed has never been audited, it seems funny, stupid and uninformed.

So when given the opportunity, I ask these questions. If you have issues with the current audit, exactly what are those issues, and what is the basis for the argument? If you would like an audit with a different scope, what precisely is the scope of the audit you’d want? And most importantly, how is an audit going to fix anything going forward?

And in advance of your possible claim that by asking these questions, I’m presuming that everything the fed has ever done has been good, clean, and appropriate, I’ve made no such presumption. This is focused solely on your assertion that auditing the fed will provide solutions. I think that assertion is silly and misguided, and driven by conspiracy nuts who ignore reality because it’s not near as interesting as fantasy.

[SK in CV]

[quote=markmax33]
He has said that he didn’t approve of all of the things MLK stood for. I haven’t researched them all but he was far from a God as the media would have you believe. He does stand for repealing slavery.[/quote]

That’s good about the slavery thing. Because he was born 70 years after the Civil War ended. And if he had waffled on slavery I might have to look at him a little differently.

[Author]

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