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05 February 2009

Comments

Russ Steele

I always thought it was up to the Board of Directors, with support from the Stock Holders, to decide what executive pay should be. They should also be responsible for removing the executive empty suits when they fail to preform. Once the government sets the pay scales for executive are they now also responsible for deciding executive performance? How do we identify and remover the under performers? The ultra liberal rock apes who never made a payroll, would like nothing better than to punish those mean capitalist, making sure they get what's coming to them for making money and sharing it with the stock holders. Let's see first it was carbon caps, now it is pay caps. It is time for some dunce caps.

Wade

So according to the video, two GSEs responsible for buying and holding roughly 15% of the total securitized subprime mortgages, which were originated by other companies such as Countrywide, are responsible for the financial crisis? The other 85%, hedged and extended 30 fold with CDSs played what? A minor role? I do not understand. Had Bush, the obviously prescient and prudent economist, imposed whatever "regulations" he had in mind for Fannie and Freddie, we wouldn't be in this mess? I am not convinced... That the GSEs were politically cozier with Democrats is really the only impetus behind Republican calls to "reign them in."

And, uh, Russ, those "mean capitalist… making money and sharing it with stockholders."??? Are we talking about the guys with record-smashing losses on their balance sheets? The guys lining up for socialist corporate welfare? The guys who ran venerable, 150 year old Wall Street institutions into the ground with 10s of trillions of leveraged bets on credit default swaps based on securitized subprime mortgages, CDSs they loved so much simply because they were completely unregulated, because the Bush admin gave them all waivers from the sensible 12-1 leverage ratio allowance, because interest rates were held disastrously low for the entire Bush administration? The guys giving themselves performance bonuses out of said taxpayer welfare? The guys desperately trying to disguise their insolvency as a "liquidity crisis" in order to keep the public dole open? Yeah, those guys can take a pay cut. If they don't like it they can always go work for Lehman...

Wade

Nixon, the "rock ape."

http://www.econreview.com/events/wageprice1971b.htm

Mikey McD

The best possible investment for 2008 would have been a sizable contribution to a winning political candidates campaign. Just weeks into the term of the winning politicians and POOF! $900 billion in pork and pet projects have already been legislated. What I would have given to be the head of a union PAC in 2008. Talk about a great return on investment!

George Rebane

One of the problems that the Left/Right debate has is their respective disagreement on the facts. Fannie and Freddie's involvement in the mortgage markets was much larger than the 15% claimed above. Here is a quote from a typical report on the matter (by Henry Paulson, Sec Treasury as reported on TheHill.com)

"Together, Fannie and Freddie’s market share has grown substantially from 46 percent of all new mortgages in the second quarter of 2007 to nearly 70 percent in the first quarter of 2008. Because of the GSE guarantee, mortgage securities are more attractive to investors around the world, investors who are then more willing to purchase mortgage securities and finance new mortgages. It has never been more critical that markets have confidence in how Fannie Mae and Freddie Mac are overseen and regulated."

But in the final analysis it doesn't matter if the percentage was 15% or 70%. If a giant GSE gorilla starts making the market at a deeply discounted rate, the rest of the players have to follow or lose market share. Free markets work that way - at least they used to.

Wade

I stand by my statement: "15% of the total securitized subprime mortgages" which is not to say "mortgage markets." There's a big difference. Fannie and Freddie have regulations requiring them to stick to "conforming" loans as opposed to "subprime." These they buy from the mortgage originators, securitize and guarantee, then resell. They are allowed to purchase "subprime" securities for their own portfolios which they did, but as I pointed out, they were minor players in this market.

The problem stems from a shadow financial system that was guaranteed to fail with just a small percentage of failed mortgages. 10s of trillions of CDSs loosely based on subprime mortgages. Fannie and Freddie are by no means blameless, but they are hardly the central or only culprits in this story...

Wade

Whoops. Got confused between "subprime" "jumbo" and "conforming." The latter two have to do with home price while the first has to do with mortgage conditions. Consider that sentence retracted with admonishment...

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