There is a long investigative piece in the Washington Post on Ginnie Mae, titled Mortgage agency’s growth gives fuel to risky lenders.

“More than a dozen lenders with Ginnie’s endorsement have made loans that are now delinquent at rates far in excess of what regulators consider acceptable. And some of these lenders have been accused of misleading both borrowers and the government about these loans.

Created more than four decades ago to help expand homeownership, Ginnie Mae works in the guts of the financial system, offering a secondary layer of government insurance that helps make it easier for mortgage lenders to provide financing for home buyers. The first layer of government backing comes primarily from the Federal Housing Administration, which principally seeks to help first-time home buyers who have impaired credit or little money for down payments. The FHA insures the mortgages made to these borrowers, promising that the lender will ultimately be repaid if the borrower defaults. The FHA has the primary responsibility for monitoring the lenders.

Then Ginnie Mae enters the picture. Mortgage lenders often want to bundle the loans they’ve made into securities and sell them to investors. Ginnie Mae guarantees those securities, ensuring that investors continue to get their principal and interest without interruption if any of the loans go bad or lenders are otherwise unable to make payments to investors. This additional insurance makes the securities easy to sell, generating new cash for lending.”

Ginnie Mae has evolved into a monsterously large portion of the otherwise nonfunctioning mortgage securitization market. In 2009, Ginnie Mae guaranteed “nearly one in five new mortgages” that were securitized.

Note that there are huges differences between the current issues at Ginnie Mae, and the erroneous blame heaped upon Freddie and Fannie for the credit crisis and the subsequent collapse of the economy. Do not conflate the two: By the time Fannie was involved in sub-prime securitization, it was all over but the crying.

The Ginnie Mae issues discussed are new, and are part of the misguided Fed/Treasury attempt to get the Housing market moving again . . .

>

Source:
Mortgage agency’s growth gives fuel to risky lenders
Brian Grow and Zachary A. Goldfarb
Washington Post, December 10, 2009

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/09/AR2009120904635.html

Category: Credit, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

43 Responses to “Ginnie Mae’s Delinquent Loan Rates”

  1. wunsacon says:

    Like the war on drugs, we could barely create a more pathetic subsidized housing program if we tried.

    - An increase in empty homes.
    - An increase in homelessness.
    - If I can believe my lying eyes, I thought I read an article that said Habitat for Humanity actually helps “de-construct” homes in an area of Detroit that could no longer be maintained by the city. Why were the foreclosing banks not held to account? Money from charitable donors picks up the banks’ rightful tab?

  2. Marcus Aurelius says:

    I’m not surprised that a government entity is backing mortgages, but I’m shocked that they’re still securitizing the underlying debt. Who is buying this crap? Who is rating it?

  3. Mannwich says:

    @MA: Main Street pensions, perhaps? Might as well stick the bill to J6P AGAIN. He didn’t seem to notice/care all that much the first time around anyway.

  4. Anon says:

    Symptoms of groupthink (from wiki)

    To make groupthink testable, Irving Janis devised eight symptoms indicative of groupthink (1977).

    1. Illusions of invulnerability creating excessive optimism and encouraging risk taking.
    2. Rationalizing warnings that might challenge the group’s assumptions.
    3. Unquestioned belief in the morality of the group, causing members to ignore the consequences of their actions.
    4. Stereotyping those who are opposed to the group as weak, evil, biased, spiteful, disfigured, impotent, or stupid.
    5. Direct pressure to conform placed on any member who questions the group, couched in terms of “disloyalty”.
    6. Self censorship of ideas that deviate from the apparent group consensus.
    7. Illusions of unanimity among group members, silence is viewed as agreement .
    8. Mind guards — self-appointed members who shield the group from dissenting information.

  5. jc says:

    While the MSM trumpets marginal monthly home sales increases (juiced by gov programs) the housing crisis is still in mid innings.

    Mr Mort update of 20MM potential foreclosures and the reasons why (borrowers way underwater and overextended with monthly payments = strategic default waves coming)

    http://mhanson.com/archives/349?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+MarkHansonAdvisers+%28Mark+Hanson+Advisors%29&utm_content=Yahoo!+Mail

  6. slyng1 says:

    “The Ginnie Mae issues discussed are new, and are part of the misguided Fed/Treasury attempt to get the Housing market moving again . . .”

    No, these issues are not new. GNMA (and by extension, the FHA) were the original sub-prime lender. They’ve been doing this a long time, they just got crowded out of the market by private-label sub-prime issuers (Think: Ameriquest, New Century, Countrywide, et al) during the boom years. This is not new, it’s just that since all the private guys went belly-up they are now the de-facto subprime provider.

    Whether they *ought* to be doing it is a separate issue, but lets not pretend they haven’t been doing this for a long long time. The Folks over at RateLab (BA-ML publication) can help you out if you need some background on the issues.

    ~~~

    BR: Are you suggesting that the Treasury department previously guaranteed securitized mortgages?

    That is simply not true — and its the issue here.

    You are misunderstanding the issue I am raising: It is the Taxpayer guarantees of Securitized mortgages that are new (and dangerous)

  7. call me ahab says:

    FHA is what it is- a governmental program to help people w/ little down payment and marginal credit get loans-

    the big difference between FHA and subprime- is that w/ FHA the ability to pay is the most important factor- and requires documentation of income and assets-

    because the private mortgage market collapsed- FHA stepped in w/ much larger maximum loan amounts- to $729,750 in larger metro atreas- so lending was available-

    the problem is that FHA is now a HUGE part of the home loan market- where previously it was 5% or so but now 50%- rough estimates but proabably close enough-

    so . . .what can be discerned from this is that the USG through FHA, Fannie Mae and Freddie Mac IS the mortgage market

    keep in mind as well- that through Fed purchases of MBS- slated to end in March- mortgage rates have been driven to all time lows-

    so . . the USG is artificially supporting home prices-

    Thanks Uncle Sam- you’re the best

  8. bernandoo says:

    Fannie and Freddie have accumulated over $150 billion in losses, yet the blame is erroneous. LOL.

    ~~~

    BR: Merely stating a loss number, without discussing the timing or context of the losses — what they were and when they occurred — informs us nothing as to a) the cause of those losses; 2) the subsequent damage those losses caused.

    You should do some homework, and understand this issue. You have a single number, but you clearly do not know what it means.

    I prefer more informed comments than discredited talking points . . .

  9. Andy T says:

    Barry, you’re refusal to understand how Fannie and Freddie contributed to the larger credit/housing bubble is AMAZING.

    You are a “GSE Denialist.”

  10. To the contrary, I have researched and commented on it extensively.

    My analysis has found that it was NOT a significant causal factor to the crisis or collapse. FNM/FRE were accounting and fraud debacles, but they were not a significant cause of the problems. They sure as hell did not help, but they were not the primary cause of what occurred

    And, I have found that the people who trot out the Fannie Mae/CRA argument often are hard core idealogues who refuse to acknowledge the actual issues, and how the problems occurred.

    Can you explain to me how Fannie or Freddie caused: Ultra low rates; a collapse in lending standards; excess securitization of those loans; a massive ratings fraud of those same securities; increased leverage of investment houses who bought them ?

    If not, then you have the wrong culprit.

  11. Joe B says:

    Andy T, were you being sarcastic?

  12. “I’ve always wondered what happened in the early 1980′s when debt and debt/GDP started to explode in the U.S. The following chart may provide some context. This is a graph taken from this article. It represents the “book of business” of the GSEs as a fraction of all mortgages and as a fraction of GDP. Between 1971 and 2003, the GSE “book of business” grew from 1.6% of the annual GDP to 33% of annual GDP. The growth really took off in the early 1980s. In 1985, the GSEs found a whole new stream of debt/financing with the repeal of the 30% Foreign Investment Withholding Tax. And with that, the credit pushing machines went into overdrive until the accounting scandals of the early 2000′s stalled the growth….”
    “…The “GSE Denialists” point to the blip down after 2003, when the private sub-prime mortgage companies got into the game in a big way. However, would these firms have ever considered entering this business if home price appreciation wasn’t a “sure thing.” Probably not. Why was home price appreciation so “assured?” I think the chart above illustrates the case nicely. The GSEs, with implicit backing by the United States Government, were a multi-TRILLION dollar BID to the home mortgage market for decades. With that sort of money flow, and plenty of other Congressionally mandated incentives to promote a “homeownership society,” the appreciation in home values took on the look of real ‘secular’ trend instead of the credit bubble it had actually become.

    The reckless sub-prime lending certainly helped “blow off” this mania. As with any other bubble peak, it’s the dumb money that comes in at the end and puts in the top. However, it’s very difficult to imagine this bubble ever being created without the involvement of the GSEs, Fannie Mae and Freddy Mac.”

    BR,

    these, above, are someone else’s words. I post them b/c I agree with the POV that was outlined, and think it correct.

    also, I don’t find to be of the “hard core idealogues who refuse to acknowledge the actual issues, and how the problems occurred.”- mindset/ilk.

    but, rather, an erudite understanding that ‘high prices’ need to be afforded. and, in this ‘market’, the GSEs provided the ‘purchasing power’ to catapult the price level..

    how ’bout it? what do you think?

  13. slyng1 says:

    BR said: Are you suggesting that the Treasury department previously guaranteed securitized mortgages?

    That is simply not true — and its the issue here.

    You are misunderstanding the issue I am raising: It is the Taxpayer guarantees of Securitized mortgages that are new (and dangerous)

    —————————————————

    GNMA (a government entity) guarantees all the mortgages they issue for timely interest and ultimate principal. They have always been backed by the full-faith-and-credit of the US Government (hence why the usually trade at a premium to FN/FR mortgages which do not carry the FF&C of the US Govt). I made no mention of the treasury department (if that was your quarrel with my statements above). If you’d like to see a history of the number/notional value of home loans they have guaranteed, you can see it here:
    http://www.ginniemae.gov/about/history.asp?Section=About

    Or you can type IMBS on your bloomberg, page down to the next page and see their issuance stats over the last several years (pardon the formatting):
    ….2009…..2008…..2007…..2006…..2005
    GN1: 268…..146…..46…..45……43
    GN2: 146…..125…..53…..38……44
    Total: 414…..271…..99…..83…..87

    As you can see from above, during 2005-7 their issuance stagnated because it was cheaper/easier for bad borrowers to go thru the likes of ameriquest/new century/fly-by-night subprime/alt-a issuer. Unfortunately Bloomberg doesn’t have the data prior to 2005.

    Like it or not, securities issued by GNMA (i.e. GNMA MBS) has always been full faith and credit of the US Government (and hence if there are losses, they are borne by the taxpayer), whereas FN/FR were only “implicitly” guaranteed by the government. I don’t think I’m saying anything controversial here.

    The larger issue though (that is probably touched on by that article) is how this sleepy little government agency is now such a huge issuer that probably doesn’t have the resources/technology to handle all the increased volume which no doubt is leading to these frauds slipping through the cracks.

    I’m not making an ideological argument here, just stating the facts.

  14. Andy T says:

    BR: I made no mention of the CRA and have NEVER mentioned the CRA, EVER. It’s a red herring and easy argument for the GSE Denialists to harp on: “Are you telling me this little tiny CRA had anything to do with…blah…blah..blah.” The whole CRA/Acorn crap argument is something that a different set of ideologues like to trot out.

    My point is that the government policy that created and encouraged these GSEs to pump TRILLIONs upon TRILLIONs upon TRILLIONs of dollars into the home mortgage market was the huge base of the pyramid scheme that was the total U.S. Real Estate market. FNM/FRE and the policies centered on a “homeownership” society was the ROOT of many of the problems we face today.

    If you take the ‘next step’, you’ll see that a lot of the other issues you flung out there were manifested in the central idea that “home prices haven’t gone down in decades…and that it’s a safe investment.”

  15. Andy T says:

    And we know, we know, we know Barry…you have researched this subject extensively and you a wrote a book on the subject and you know everything and it’s inconceivable that you could be even a little bit wrong.

    Thanks for humoring us all the same….

  16. “…all the increased volume which no doubt is leading to these frauds slipping through the cracks.”

    is, another, good point. this ‘problem’/these problems go way beyond simple ‘bad underwriting’, there’s a lot of, outright, Fraudulent paper in all these stacks that have been sliced ‘n diced..

    you know, we should start wondering: “Why were this org.s ‘bailed out’? why weren’t they put through the BK-process?”

    …when you create Zombies, you don’t have to worry about ‘where the bodies are buried’…

    “it’s a safe investment”, yes, of course, it is!~ and, hey, if there’s a problem, we’ll Tax your son, to pay you back..flippin’ Barnum, how readily We forget, how right he was..

  17. DeDude says:

    Andy T; you seem to be the one in denial and building your opinions on preconsieved conclusions rather than facts. The only argument I can see on your blog (repeated by Mark EH) is that because the GSE “book of business” grew so strongly up until 2003 (when the bubble took off), they “helped create the biggest real estate bubble of all time”. That is about as lame an argument as I have seen amongst those whose ideological BS intice them to blame government for any and all ills.

    The reason that the GSE’s grew until 2003 was that they provided the most cost effective conduit for huge sums of available money to reach people who wanted to borrow that money to purchase a house. Without the GSE’s that money would have found it’s way from the same pockets to the same borrowers via some less efficient private enterprise (although with an extra xx bp of cost/interest tagged on). Other private enterprises were not really interested in competing with the GSE’s because the potential profit margin (sucking consumers dry potential) was not high enough. That changed around 2003 when banksters found a great way to suck huge profits out of unqualified byers (and unsuspecting investors in AAA rated securities), without having to suffer the natural consequences of giving a loan to someone that could not pay it back. That thing called sub-prime was the one and only driver of the bubble, and it would have happened even if the GSE had not existed and some other private enterprise had been responsible for conforming loans up until subprime as the “standard loan” was invented. The only difference is that if the GSE’s had not been there and been nationalized last year, the housing crash would have been much more severe and we would have been in the midst of a great depression not on the way out of a great ressesion.

    Remember when you deflate a balloon, it survives; when you poop it, it’s gone. There is nothing wrong with what Ginnie Mae is doing except that they should not double their loans without doubling the number of people in their agency. No wonder that to much crap makes it through their system when they only have 60 employees (there is efficiency and then there is pure stupidity).

  18. DeDude,

    would you know how Price is constructed in a Marketplace?

  19. DeDude says:

    MEH if it has anything to do with available credit then it is total BS to blame the GSE’s for increased prices. There is no reason to think that the available and willing money would not have found the available and willing borrowers just because the private enterprise conduits of the GSE’s did not exist. Whenever there is a need for a business someone creates it, so another handful of similar entities would simply have been created by enterprising individuals who saw the chance to make a quick buck.

  20. DeDude says:

    Now I will agree that the repeal of the 30% foreign investment withholding tax made a lot more (foreign) money available for anybody (government, companies, individuals) who wanted to borrow. But that was a law created by congress (not by the GSE’s) it made money available for everybody and would have made money available for those private companies taking the GSE’s business over, if those entities had not existed. However, after Reagan began running those huge government deficits he had no other choice in order to finance his taxcuts for the rich and spending on the military. I will agree that ultimately that old bastards screwed us all, and he is the gif-wrapped turd that keeps on giving.

  21. Andy T says:

    DeDude. Geez….

    “The reason that the GSE’s grew until 2003 was that they provided the most cost effective conduit for huge sums of available money to reach people who wanted to borrow that money to purchase a house.”

    Duh!! Wonder why their funds were so cheap and cost effective? Investors dumped the money the GSEs cheaply because they knew they were getting something close to Treasury risk with a little extra juice.

    “Without the GSE’s that money would have found it’s way from the same pockets to the same borrowers via some less efficient private enterprise (although with an extra xx bp of cost/interest tagged on). Other private enterprises were not really interested in competing with the GSE’s because the potential profit margin (sucking consumers dry potential) was not high enough.”

    The private money would have found the its way into the pockets of borrowers at an actual market rate that would have been HIGHER than the GSEs. The GSE’s were underpricing the value of money for decades.

    You’re statement there suggests that the government crowding out private industry was somehow a good thing. Because of this, it’s going to be difficult to even carry on a debate.

  22. call me ahab says:

    well not to jump into the middle of a debate- but we must also look at the explosion of credit in general- and using it as a means to purchase now and pay later-

    credit was being funnelled to more and more consumers as eligibilty standards were loosened to the point where the “want of credit” was the only criteria-

    so mortgage loans and secondary mortgage markets were only a part of an ever-expanding credit pie and were not an outlier in an otherwise balanced market for credit

  23. DeDude says:

    Andy; You seem to have way to little faith in private enterprise and financial innovation. Remember that the reason those GSE’s in the end lost market share was that their other privately owned (but less restricted) competitiors found a way to turn sh*t into gold (or BBB into AAA). As long as all that free investment money was there someone would have found a way to funnel it into the real estate market. I mean what other place could have soaked up trillions of dollars desperately trying to find a place to live. Would not the market forces have funneled all those trillions into residential real estate with or without the existence of GSE’s.

    We the people’s government is crowding out private enterprises by providing cheeper and better products in areas where private profitteers cannot or will not provide a good product for a good price. And yes that is a good thing. The main argument for private enterprise and against government is that the former is presumed to be more efficient than the later – well let them prove it or die trying. There is no moral or practical arguments that the rich MUST be allowed to suck and extra pint of blood out of the poor.

    This country has been attacked by Kapitalists using their market forces to destroy the wealth and income of regular people. This country spend almost a trillion dollar every year on protecting rich peoples assets and income (military, police, jails etc.); and that’s before we start talking about Wall Street bailouts. Spending a few hundred billions or even a trillion to save the biggest asset the little guys own is the least government can do if it is to be called “for the people”.

  24. call me ahab says:

    dedude-

    you must admit that the GSE’s were able to borrow at lower costs due to the implicit government guarantee- and were able to attract money because everyone knew the USG would NOT let them collapse-

    so let’s quit kidding ourselves- the USG subsidises and promotes home purchases through many mechanisms- currently the Fed is buying MBS to lower mortgage rates- also- let’s not forget the huge mortgage interest deduction allowed when filing taxes-

    the USG should not make a stand one way or the other as far as rent vs own but they do so by susidizing homeownership

  25. DeDude says:

    Ahab, the 20-30 bp advantage that GSE’s had over AIG would have made no real difference for the price of housing. And yes the implicit guarantee of the government might have given the GSE’s MBS a 15-20 bp advantage over what another private company could get for their private company MBS’s. But it takes a lot more than that to start making a noticeable bend in development of residential real estate prices. The trillions of dollars of excess liquidity that we are talking about would have ended up in housing one way or another because there is no other place that it realistically could have gone. Treasuries will only soak up the exact amount of money that our government has buildt up in debt. Try to push more money into treasuries and the only result is lower interest rates on treasuries (without soaking up one extra dime of those trillions of excess cash). That way you get a bigger spread between government and private debt without increasing rates on the private debt. Residential real estate has always been the second choice for money that is unhappy with yield on treasuries, because it is asset backed to a degree no other corporate or private debt is. So that is where the “conservative” money ends up if it wants more than treasuries have to offer.

    The bubble had nothing to do with the marginal effect of “implicit government guarantee” on interest rates for residential real estate. It had everything to do with the huge effects on interest rates of excess liquidity created by: 1) boomers saving for retirement, 2) foreigners putting money into US, and last but not least, 3) The Fed providing huge amounts of free money to ensure the banksters favorite president and his party could be re-elected.

  26. US has been subsidizing mortgages for a century — ever since interest payments were deductible in the first income tax almost 100 years ago in 1913.

    Fannie Mae has been around since 1938; Freddie Mac since 1968.

    So pre-crisis, you have 90 years of mortgage interest deductions; 65 years of Fannie May, and 35 years of Freddie Mac.

    How is it that for decades, nothing of remotely close to this magnitude occurred? What took place from 2001 to 2007 to blow up housing, credit, finance?

    And, whatever your answer is has best account for the boom and bust in Housing/Credit in Great Britain, Spain, Korea, South Africa, Australia, etc. Last i looked, there was no Fannie Mae in those countries.

    Given these small facts — you know, just time and space — how do you still blame the GSEs ?

  27. call me ahab says:

    Obama? yeah- i know what you mean-

    lol

  28. DeDude says:

    ahab, well it remains to be seen whether the Fed will keep interest rates way to low for way to long so that Obama can be re-elected (the way they did to get Bush II re-elected). I would not hold my breath for that one though ;-)

  29. call me ahab says:

    last comment was for the “dedude”

    BR-

    my only point is that the USG subsidizes homeownership- i would prefer a neutral stance-

    Fannie Mae was a government agency pre- 1968 and was the secondary market- so you point is understood- with me anyway-

    Andy/MEH- well they have their own ideas which they have shared

  30. DeDude says:

    Actually, my guess is that as soon as big Ben has been confirmed and the financial reform talks have been neutered, they will make sure to dump us into a double dip, to ensure that the GOPsters can get enough seats to block any and all legislation for the rest of Obama’s first term.

  31. call me ahab says:

    they will make sure to dump us into a double dip

    who is this “they” you are talking about?

  32. DeDude says:

    ahab; I completely agree that the US government is subsidizing housing. However, the subsidy by interest deduction and (currently) by Fed purchase of MBS is way beyond anything that the implicit guarantee of the GSE’s was doing.

  33. DeDude says:

    “who is this “they” you are talking about?”

    The banksters that are running the Fed – and currently hold a low profile because they need to control the rage and keep it from spilling out of the webpages and into the streets. They know that we are currently only a Joe Liberman and a few blue dog “democrats” away from some serious action to stop them.

  34. Thor says:

    BR actually raises some very salient points here . . . . I’m curious as to anyone’s response . . .

  35. Thor says:

    Dedude -

    “They know that we are currently only a Joe Liberman and a few blue dog “democrats” away from some serious action to stop them.”

    Seriously? You really think Barney Frank would do anything meaningful?

    Most importantly – what you’re saying is that you honestly believe that there is a shred of difference between either party when it comes to Wall Street. That’s a bit naive me thinks . . .

  36. Andy T says:

    Barry,

    I’m not blaming the GSEs for “everything,” just as I’m not letting Greenspan off the hook for ‘flinching’ in the face of difficulties like the LTCM debacle and betraying real free market principles. The FedRes and other regulators also failed to regulate properly, no doubt. These were certainly some of the primary factors that contributed to the reckless behavior that “‘blew off’ the credit bubble. What I would suggest, though, is the blowoff would have occurred whether or not these ‘bad actors’ entered the scene or not. It would have just been delayed. And let’s face it, the ‘dumb money’ always gets in at the end of the trend.

    Can you not understand how the GSE’s growing their book of business from <2% of GDP in the 1970s, to 33% of GDP by 2003 "might" be a factor in the mirage that was "home price appreciation" over these decades? Can we agree that they, along with government policies that favored ownership over renting, at least distorted the natural market for homes (prices)? Certainly you, as a trader/investor, can understand the effect of a large/sustained 'bid' to a marketplace. (Please see commodities for an example of what happens when a large player [pension/mutual funds] decides to expand their presence in a market. )

    If you cannot admit that the GSEs had a role in creating a home mortgage market, much bigger and more pronounced than it otherwise would be, in a 'free' marketplace, then I'll just move on from here completely and assume that a debate cannot never be entertained.

    To your question asking me to explain the Real Estate mess in other countries….

    Honestly, I'm not familiar with those markets or how much of a role those governments did, or did not play there. What I can suggest, though, is that sometime in the last few decades central banks began to 'lose control' over the monetary system. Financial institutions took up the role of "money creator" through their entrusted role as credit creators. The more credit created, the more money these financial institutions earned. They expanded credit first and looked for the cash after the fact. This why there was/is such a big disconnect between Debt and the M1/M2 numbers.

    So, it was a credit cycle that would endure until it reached an extreme. Perhaps the larger macro/money phenomenon you're alluding to are the "cavaliers of credit" finally finding the very last person that wanted to borrow, whether they be in Spain, Korea, South Africa, or Australia. At that point, the only way to go was a credit contraction, which is what we're enduring now….

    I'm an ideologue for sure, but I do see the "shades of gray" and can appreciate and understand the validity of your point of view. Can you see mine?

    Best. Andy.

  37. DeDude says:

    Sorry Thor but the naive are those who buy into the right wing BS that there is NO difference between the two parties (-so why not vote for those who will lower your taxes, wink wink). Even the worst dimble-brain can look at the legislation passed or proposed by each party and see who is better at serving the people and who is better at serving those who try to suck dry the people. Are any of them perfect – no, this is a 2 party system in a democracy, you are supposed to be in disagreement with both parties at regular intervals if you care to look at the compromises they make internally and externally. Are they “all the same” – you gotta be insane to think that. No Barney ain’t perfect, but he is a heck of a lot better than any republican that I know.

  38. call me ahab says:

    dedude-

    you lose all credibility when you say things like-

    No Barney ain’t perfect, but he is a heck of a lot better than any republican that I know

    who has been petitioning to audit the Fed for years- none other than Ron Paul- is he a follower or a leader?

    being a partisan is easy- because you already know the answer- no thought required

  39. Andy T says:

    Ahab. Agreed there. Once you utter the lines “Barney ain’t perfect, but he is….”

    That’s pretty much a conversation-ender.

  40. Thor says:

    What Ahab and Andy said . . .

  41. grashopa says:

    Leverage caused the problem. When you go from 10 times to 20 times (40 in the case of European banks) you have doubled the amount of credit outstanding. Bankers had to find a way to loan out all that money. Rates went down, DD went out the window in the rush. Agency debt was just one place they put money – there were a lot more. How about Dubai? How about all the governments that will be going under soon? China? Any commodity related investments? etc.. All of this malinvestment will collapse as it cannot pay off its cost. Don’t forget we haven’t delevered the banks yet, we’ve just thrown money away.

    Don’t wander off track. Depressionary deflation is and always was about deleveraging credit.

  42. grashopa says:

    Let me add that in as much as GNMA is causing more bad loans and defaults to be made now on top of what is in the pipeline – this increases the risks that the deleveraging process gets out of control. When everyone understands leverage is coming down they can feel comfortable knowing what to expect in a deflationary environment. When they are surprised at all the defaults and become scared – that is when you have volatility which is very damaging to the economy.

  43. DeDude says:

    Sorry folks, I live in the real world where nobody is perfect and your choices are between different levels of imperfections. Maybe I need to go back and enroll in high school again ;-) And Ron Paul is a popular lunatic who is absolutely not better than Frank, but I understand why some people have been enamored with his simplistic BS of no government and Nirvana shall materialize.