kf stops the bleeding!

A mostly political Weblog.
Oct. 5 2008 7:10 AM

Kf Stops the Bleeding!

Plus: No time for Dems to unpanic.

(Continued from Page 79)

Is there any doubt that by purchasing bonds backed by subprime mortgages Fannie Mae helped enable the "explosion of high-risk lending"? I wouldn't think so. Indeed, expanding subprime lending seems to have been the goal.  But then why doesn't Calculated Risk emphasize that aspect of Fannie's culpability? If anyone wants to explain this to me, I'll repackage it and sell it to my readers. ...

Answers! a) Yes, the explanation seems to be that Fannie Mae bought securities backed by subprime loans, not the loans themselves; b) Even Tantu says  these securities purchases were "supposed to be about supplying some 'needed' capital to the subprime market." If you're providing "needed" capital aren't you thereby enabling the "explosion of high risk lending," as Conn Carroll charges? Doesn't that leave Krugman--"Fannie and Freddie had nothing to do with the explosion"--looking like he's drunk some kind of Fannie Mae Kool Aid?  ...[Thanks to readers R and S11:57 P.M. link

___________________________

Curious passage in Paul Krugman's half-defense of Fannie Mae today:

But here's the thing: Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.& L. fiasco. In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble.

Partly that's because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn't do any subprime lending, because they can't.

Advertisement

Huh? Does Krugman not know that Fannie Mae was a huge buyer of subprime mortgages, including mortgages from Angelo Mozilo's Countrywide? David Smith's eerily prescient AHI blog noted  that Fannie Mae and Freddie Mac reportedly bought $35 billion in subprimes in the first quarter of 2007 alone.

What you need to know here is that the right — the WSJ editorial page, Heritage, etc. — hates, hates, hates Fannie and Freddie. Why? Because they don't want quasi-public entities competing with Angelo Mozilo.

"Huh?" again. Conn Carroll responds:

The problem is that Fannie was Countrywide's No. 1 enabler. ... When he was CEO of Fannie, former Barack Obama campaign adviser Jim Johnson worked personally with Mozilo to streamline the two companies' business relationship.

Could Mozilo have done his subprime thing without Johnson and Fannie Mae as a backup to purchase his junky mortgages?

TODAY IN SLATE

Politics

Smash and Grab

Will competitive Senate contests in Kansas and South Dakota lead to more late-breaking races in future elections?

Stop Panicking. America Is Now in Very Good Shape to Respond to the Ebola Crisis.

The 2014 Kansas City Royals Show the Value of Building a Mediocre Baseball Team

The GOP Won’t Win Any Black Votes With Its New “Willie Horton” Ad

Sleater-Kinney Was Once America’s Best Rock Band

Can it be again?

Technocracy

Forget Oculus Rift

This $25 cardboard box turns your phone into an incredibly fun virtual reality experience.

One of Putin’s Favorite Oligarchs Wants to Start an Orthodox Christian Fox News

These Companies in Japan Are More Than 1,000 Years Old

Trending News Channel
Oct. 20 2014 6:17 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Politics
Oct. 20 2014 8:14 PM You Should Be Optimistic About Ebola Don’t panic. Here are all the signs that the U.S. is containing the disease.
  Business
Moneybox
Oct. 20 2014 7:23 PM Chipotle’s Magical Burrito Empire Keeps Growing, Might Be Slowing
  Life
Outward
Oct. 20 2014 3:16 PM The Catholic Church Is Changing, and Celibate Gays Are Leading the Way
  Double X
The XX Factor
Oct. 20 2014 6:17 PM I Am 25. I Don't Work at Facebook. My Doctors Want Me to Freeze My Eggs.
  Slate Plus
Tv Club
Oct. 20 2014 7:15 AM The Slate Doctor Who Podcast: Episode 9 A spoiler-filled discussion of "Flatline."
  Arts
Brow Beat
Oct. 20 2014 9:13 PM The Smart, Talented, and Utterly Hilarious Leslie Jones Is SNL’s Newest Cast Member
  Technology
Technology
Oct. 21 2014 8:38 AM An Implanted Wearable Gadget Isn’t as Crazy as You’d Think Products like New Deal Design’s UnderSkin may be the future.
  Health & Science
Bad Astronomy
Oct. 21 2014 7:00 AM Watch the Moon Eat the Sun: The Partial Solar Eclipse on Thursday, Oct. 23
  Sports
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.