Program Alert
CNBC is currently running a documentary entitled House of Cards on how we got into the economic mess we currently face. So far, it’s quite good. If you’ve missed it, it’s repeating at midnight Eastern time (11 PM Central). I’ve set the TiVo to catch the repeat.
UPDATE: Another review here.
February 12th, 2009 at 10:52 pm
I read the synopsis. What a crock! They don’t even seem to care or consider the roll that government and Fannie/Freddie played in the whole fiasco. Liberal journalism at its best. Nothing is ever the government’s fault, and the government can always be counted on to spend our money and restrict our freedoms to fix these messes. Arrrrgh!
February 12th, 2009 at 11:08 pm
Awfully quick to rush to judgment, don’t you think?
February 12th, 2009 at 11:19 pm
So you tell us, do they mention the Community Reinvestment Act? Fanny/Freddy?
Because, judging by CNBC’s own press release, they seem to have picked their villain. Capitalism and George W. Bush *.
* a hint, this has been building for a lot longer than since 2001
February 12th, 2009 at 11:48 pm
So you tell us, do they mention the Community Reinvestment Act? Fanny/Freddy?
I haven’t watched the whole thing yet (I’ve only seen a few minutes so far), so I can’t tell you. Then again, with fewer than 1 in 5 bad mortgages tied to CRA and Fannie/Freddie, it’s hard to pin the whole thing on them.
And I agree that it’s been building for a lot longer than since 2001. Depending on how you look at it, you can put it back to 1999 or 1982.
February 13th, 2009 at 12:31 am
While most of the populous is completely ignorant about economics and stupidly convinced themselves to take it in the ass to the tune of -40% the past year, I am gleeful that a liberal and his money are soon parted. Tgirch – have you heard what a conforming mortgage is? What do you think it’s conforming to? It’s conforming to government regulations so that FNMA and FHLMC can purchase them, make a mortgage backed security, and get it AAA rated because they have the explicit backing of the Federal government of over $6,000,000,000,000. But your right, it wasn’t the fault of this government intervention, nor the fact that they buy over 90% of all mortgages – it was bush. Just like the soviet union failed because of a few bad apples at the top. Your pathetic incompetent leader now is twisting in the wind, go fuck yourselfs you statist motherfuckers you destroyed this country.
February 13th, 2009 at 2:21 am
HardCorps:
I don’t suppose you’d care to provide any evidence that you’ve gotten those numbers from somewhere other than your ass, would you? 90% of all mortgages? Really? I’m from Missouri.
In any case, the lion’s share of the problem is non-conforming mortgages, AKA “subprime” mortgages, i.e. the ones that FNMA and FHLMC won’t buy. But apparently that’s only 10% of all mortgages according to you (and, it would seem, you alone).
go fuck yourselfs
Jesus Christ, that’s the third time today somebody on this blog has told me to do that, although I’m pretty sure the other guy knew what the plural of “self” is. Must be the ODS, I guess…
February 13th, 2009 at 10:01 am
tgirsch,
For quite some time, the sub-prime market has led the prime market in overall delinquincies. It’s one of the costs of doing business in sub-prime mortgages.
I’d been told that both the sub-prime market and the prime-market saw an increase in default at the same time. Can you get me some hard numbers? Did the mortgage foreclosure rate rise first in sub-prime, or did it rise in both sub-prime and prime?
I’ve been under the impression that a combination of house devaluation and other economic stress hurt both prime and sub-prime mortgage markets the same way. I’ll admit to being wrong if shown otherwise; but you’ll need pretty good evidence to convince me that you have shown it to be otherwise.
I know for a fact that house prices began rising faster than inflation in the mid-1990’s. With my assumption that the bursting of this bubble is the driver of the foreclosure surge, I feel that blaming any particular President is a little hard to do.
However, the evidence that the Community Re-Investment Act had a role in weakening lending standards isn’t too hard to find. Heck, the publications of committees who were trying to increase minority home-ownership by loosening lending standards aren’t too hard to find.
How does the loosening of lending standards at the bottom of the market (and the loosening of lending standards in general) play into the housing mess?
February 13th, 2009 at 10:12 am
One addition: I’ll admit that lower interest rates (under Fed. Reserve Chairmen Greenspan and Bernanke) was part of the mess. Perhaps our previous President had something to do with that…though as others have said, the problem began long before that.
As a memory, I can remember when refinancing first became popular. My parents were happy to cut a 9-ish percent rate to 8.125 in the year 1992. At the time, those were good rates.
According to the Primary Mortgage Market Survey, rates on 30-year Fixed-rate Mortgages in general were in decline from the late 1980’s until 1993, and then from 1995 to 2000, and again from 2001 until 2005. Which of these rate-declines was enough to cause the mortgage mess?
What about current declines in both the Fed Prime and general Mortgage rates? The PMMS has been hovering around 5% (for 30-year-fixed) for nearly a year. Will this help cause another mini-bubble? Or are other forces at work now?
If your points are valid, use them to predict what the mortgage market and the housing market is going to do next year. Then we’ll have a better idea of who’s right.
February 13th, 2009 at 11:20 am
ben/dave:
So far I’m about half-way through the special, and Fannie and Freddie do get attention there. But if you go in expecting to see the whole mess blamed on them, you’re going to be disappointed. Watch with an open mind, though I do suggest skipping the first five minutes or so, where they play a bunch of crappy tug-at-the-heartstrings type clips to try to show the “human impact.” Once they set that aside and get into the nuts and bolts, it gets considerably better.
karrde:
You’re right, the blame can’t all be put on any one president. A combination of a boom mentality with historically low interest rates and lax or nonexistent regulation all factored in. And refinancing was a huge issue. In the advent of super-low-teaser ARMs (early/mid-1990’s), as the bubble mentality drove home prices ever higher, people started effectively using their homes as ATMs, figuring they could always refinance again before the teaser expired. And that ATM mentality, which focused largely on the middle- and upper-middle class, accounts for the lion’s share of the problem.
I’ll have to dig around for hard numbers, but I’ve pretty consistently read that Fannie/Freddie mortgages account for fewer than 1 in 5 foreclosures, and that CRA mortgages make up a small portion of those (and, indeed, they’re among the least likely to foreclose). But I certainly understand your skepticism on that count; I wouldn’t believe me on just my say-so, either. 🙂 Good numbers are pretty hard to come by, but I’ll see what I can dig up.
February 13th, 2009 at 11:38 am
tgirsch – I’ve been rockclimbing a lot and my fingers kind of hurt so i try to type as fast as I can. Anyway, you’re completely wrong on one point: conforming loans were granted to subprime borrowers because fannie/freddies rules encouraged it. Oh, I guess I was slightly off of their complete dominance of the mortgage market – “Together, their market share of all new mortgages reached more than 80% earlier this year, but is now falling.” – http://www.usatoday.com/money/economy/housing/2008-09-07-fannie-freddie-plan_N.htm. Gee I wonder what percentage of market share they have for CONFORMING mortgages. Probably closer to 100%.
February 13th, 2009 at 4:46 pm
HardCorps:
I think that “new” is a very important word there. Because Bloomberg has contradictory stats:
Anyway, I found the better numbers I was looking for here:
February 13th, 2009 at 4:50 pm
See also here:
As has been repeatedly pointed out, most of the bad loans came from the private sector, and Fannie and Freddie had little to do with it. The CRA may be a whipping boy for the right, but it had virtually nothing to do with the crisis, as the overwhelming majority of the entities that made the bad loans were not subject to the CRA.