Quote:
Originally Posted by flacaltenn
MerryLander:
You are correct about who originates the writing. However, the banks only write them largely because they have a guaranteed buyer in Fanny/Freddy. As long as they follow the conforming rules SET BY the Feds, Fanny/Freddy will buy it. THUS -- Fanny/Freddy are the launderers of all the bad paper. They repackage it and sell it in bundles so that banks can keep pumping them out. The standards for this laundering (sp?) are all set by the FEDs.
My info says -- the junk is still getting written... Because Congress hasn't addressed the Fanny/Freddy problem or the 100sBill of $ to keep them afloat.. Leftists want to claim that Fanny/Freddy were just victims of the evil banks. If they were competent to do their job -- that would be impossible..
A lot of what Wells Fargo did to damage themselves was to write 2nd mortgages for 100% of value. That's not a conforming loan under the Fanny/Freddy guidelines. And that's just stupid. But I don't think there's a strong secondary market for this kind of junk. So it didn't infect the whole system as much as the bundles that came thru F/F.
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Well if junk is being written then obviously the rules are NOT being followed. Since the broker and the originating bank take their points and run, they don't give a tinker's dam about the rules - what you folks like to call a "Moral hazard" - and that assumes these bastards have morals.
It was the big boys on Wall Street that screwed-up with their derivatives, first in assembling them and then betting against them. Note that Goldman Sachs reputation is currently circling the bowl.
But of course admitting where the blame really lies would deprive the righties of their favourite whipping boys.
Face it, if you want lessons in how to screw-up a financial system, just ask America.