http://www.ritholtz.com/blog/2008/12/more-cra-idiocy/

http://www.ritholtz.com/blog/2009/01/karl-roves-revisionism/

http://www.ritholtz.com/blog/2008/06/financial-sector-beware-leh-cit/

http://www.ritholtz.com/blog/2008/10/misunderstanding-credit-and-housing-crises-blaming-the-cra-gses/

http://www.ritholtz.com/blog/2008/10/federal-reserve-director-on-the-cra/

http://www.ritholtz.com/blog/2008/10/how-lending-standard-changes-led-to-the-housing-boombust/

http://www.ritholtz.com/blog/2008/07/why-barrons-housing-cover-is-so-terribly-wrong/

I find the idealogues completely ignore the data — as you did.

My advice to you is to give all these folks all of your money to manage . . .”

I am surprised that your research did not show you the problems at Fannie and Freddie or that astute observers predicted their demise some time before the end. [BR: We very publicly announced we were short Fannie in November 2007]

You might want to look at Doug Noland’s work on the subject because he saw it all coming and was documenting events as they were unfolding. You could look at Ron Paul’s comments on the GSE problems when Republicans but mostly Democrats were happy to defend the GSEs in order to get some campaign donations flowing their way. You could get on the Mises.org site and read the commentary about HUD, Fannie, Freddie and the folly of expanding balance sheets to insane levels.

You could look at this (http://www.city-journal.org/html/10_1_the_trillion_dollar.html) commentary from 2000 and see that the author got it very right. Or this (http://online.wsj.com/article/SB122298982558700341.html) great piece by Russ Roberts, who I have a great deal of time for. He had a fairly good interview in which Arnold Kling covered the problems with Fannie and Freddie that you might want to take a look at. Arnold is another person that I have a great deal of respect for.

And I have no need to give people my money to invest because I understand reality well enough to do a decent job myself. The way I see it, the US is bankrupt and has very few options going forward. If I were to make a guess, I would say that the US cannot meet all of its obligations and pay off its debts with a currency of the same purchasing power as when the borrowing took place. I would rather be out of USDs over the long term and have exposure to quality gold and energy producers that have reserves in safe areas in the world. I would certainly be looking to get rid of any US exposure and would look to safer jurisdictions. Sadly given the valuations, even places like Kosovo, Haiti, and Africa are looking better than the US. In my case I have far more invested in each of Canada, Turkey, Haiti, DRC, Kazakhstan, China, Argentina, Peru, Romania, Mongolia, Brazil, Chile, Australia, PNG, Ireland, Spain, Portugal, than I do in the US. Not long ago, the US would have been my second largest investment destination.

What gets to me is why most of the analysts can’t see the trouble ahead and are so content to play short term bounces that they take on substantially more risk than is prudent. But that is not my concern because without the overconfident incompetents I would have a much tougher time to make a good living.

~~~

BR: As noted, we were short Fannie Mae before its collapse.

See:
Fannie Mae Looks Like Hell
http://www.ritholtz.com/blog/2007/11/fannie-mae-looks-like-hell/

Fannie Mae: Ouch!
http://www.ritholtz.com/blog/2007/11/fannie-mae-ouch/

Fannie Mae is Fantastic !
http://www.ritholtz.com/blog/2008/05/fannie-mae-is-fantastic/

I’m just trying to fill in for MEH who decided to take a vacation. Good for him.

They are just trying to earn a living. As are we all. It’s just that they chose the ivory tower for whatever reasons. Or they did the graduate thingie to get a PhD in the hopes an IB like GS would give them a chance at megabucks. Ooops. Gigabucks.

@ Mannwich: Like the thoughts.

Were you there to see Tiger fold? There goes the sentiment index. He did the best he could but his putter betrayed him again. No one wins a golf tournament shooting bogie golf.

@Vangel IV: Correct me if I’m wrong, but Canada wasn’t unable to leverage up 40:1 like our wonderful banks on Wall Street? Good old Hanky Panky was able to get our leverage rules waived for his firm and others on Wall Street. To me, it was this leverage (along with low interest rates for too long and a daisy/gravy train that encouraged fraud on a grand scale because everyone was skimming some moola along the way), that were the main drivers of this mess.

Bottom line is the SEC and the Fed and all of our regulatory agencies looked the other way (and even aided/abetted these crimes against the country) because of their free market ideology, but go ahead and cling to your theory that Fannie/Freddie/CRA were the biggest drivers of this fiasco. Gramlich even warned Greenspan personally about the mess that was brewing back in the early 2000’s, I believe, but go ahead, it’s fine to create your own reality in BananAmerica.”

First, a great deal of the damage done to the Fannie and Freddie balance sheets began while Clinton was still in office. Second, Raines was a Clinton cabinet member. He cooked the books and had Fannie lend far more than was prudent even before Clinton was replaced by his idiot successor. Second, you seem to forget how the Democrats came to the defense of the GSEs and stated that there was nothing wrong while some Republicans were calling for greater regulation. And it was the Democrats who attacked the regulators for finding improper conduct at the GSEs. (http://www.youtube.com/watch?v=hN31-nKndg8)

The bottom line is that the troubles at Fannie and Freddie and the bubble in housing were well documented and were discussed by a number of commentators, including the Austrian School economists that Barry seems to have trouble with because they prefer free markets to incompetent and intrusive regulators.

Raines stated in front of Congress that Fannie and Freddie should only have 2% capital because he felt that the assets were riskless. This was said even though he knew that the books were being cooked and he knew that, HUD had required that more than 20% of GSE mortgage purchases be “special affordable” loans that went to borrowers that had incomes that were less than 60% of their area’s median. Those goals were put in place by the Clinton Administration and were adopted by Bush after he came to office.

As for Canada, it had rules that destroyed the walls between the investment banking side of the business and the retail brokerage side, just as was done in the US. It regulators were certainly no smarter than those in Europe or the US so you cannot blame the excessive leverage taken by the GSEs and the American and European banks on a lack of regulations or on free market ideology. (The last time I looked the French, Germans and English governments and regulators were not exactly pro free markets.)

You have to stop imagining that there is a difference between the corruption of the Republicans and that of the Democrats or that things would be better if different parties appointed the regulators. That is not the way human nature works and if you have a huge concentration of power that allows money to be transferred from one group to another, you will always have the corrupt rent seekers stepping in to take their cut. The solution is not a greater concentration of power but the removal of power to dictate terms to parties carrying on voluntary transactions. Let government stick to its legitimate functions and the problem of corruption will get much smaller.

The folly of man is immeasurable. Man, that which is the only being able to convince himself of his own supremacy and intellect. Might I profer to you all, that throughout history, mankind has been subject to a seductive proclivity toward hubris and self interested belief systems reflecting his own ideals. After all, the world revolves around man, according to history. (that much, a product of man and man alone).

We are all mere actors in a world of cosmic hilarity; a maelstrom in which chaos and order compete at all times in a timeless struggle. Do not delude yourself into thinking the insignificant details and theories you espouse are the most important due to the inherent biases you have come to adopt via your own experiences. All details are important, yet must be taken in context of the whole.

“Knowing others is intelligence; knowing yourself is true wisdom. Mastering others is strength; mastering yourself is true power. If you realize that you have enough, you are truly rich.”

“Pragmatism” has its flaws too. Its a collection of ideas and interests that don’t necessarily work together well. At least an ideological framework must reconcile its concepts within a logical framework (any good ideology anyway). Pragmatism, at least as I see it applied in modern political context, means the way of least resistance.

As a simple example I’m sure most of the major bailouts in the last decade seemed like a pragmatic approaches to policy makers trying to avoid what they felt were unnecessary recessions, but in aggregate they simply stoked one big debt bubble and built up moral hazard. We can argue till the cows come home that they could have imposed new reforms after said bailouts (the pragmatist version of “if we only had true pragmatism”), but the political reality of the matter is that once the fire is put out there would be no demand for such action. Even the Great Recession seems to have failed t0 provide significant financial system reform, at least so far. In America pragmatism without guiding principles means a conglomeration of special interests shoving pushing their own agenda and Congress passing bills that make the most political interests happy without solving fundamental problems.

Well, I guess you could say that’s a very pragmatic course of action for individual Congressmen’s well being.