The New Republic

The Romney camp, and 1/2 of the American electorate, is in denial about the effects of the George W. Bush economic collapse, and how long it will take to recover from it in a mere 4 years. They're completely distorting that record, and the amazing record of the Obama administration in preventing unemployment from going higher, and in fact reducing unemployment for the last 30 months. Even so, the Romney campaign is within a whisker of winning this election, and then repeating the very policies that destroyed our economy in the first place. And given all that, you want to raise the issue of "Global Warming", a sure winner for Romney? I mean, if they can distort the economic record of a mere 4 years ago, making "Global Warming" look like an extremist nut-job Liberal issue would be child's-play for them. Here's an idea -- let's just table that discussion for a day when the American economy has recovered further, and 1/2 of America isn't following a lunatic.

- AllanL5

October 24, 2012 at 11:58am

Well, the question asked by the headline isn't very hard to answer. Less than a quarter of the voting population gives a rat's ass about climate change. Probably well over a third willfully deny the science, and there's another big bunch who if pressed would admit to believing the science, but then either allow that we're allready f***ed so why inconvenience ourselves trying to control our emissions, or near-sightedly parrot the notion that we shouldn't take any responsibility until the Chinese, Indians and all those other developing nations step up. And, nearly everyone not in the top 10% of income is more concerned about a $.50 rise in the price of gasoline or heating fuel than they are about anything remotely related to human induced climate change. Who cares about handing the kids and grandkids a rotten climate mess down the road, when the real problem is not losing your house, or paying for those kids' braces? Given the obstinate idiocy of the electorate, in other words, what candidate in a close race is going to go out on a limb to be courageous and point out that we need to make some hard choices about our future damned soon, before it is too late to even ameliorate the problems? I happen to strongly prefer Obama over Romney, for a number of reasons, but Obama is about as courageous as a blind mouse on this topic, and if he weren't, and actually made this something he campaigns on, he'd have a snowball's chance in hell of winning re-election.

- IowaBeauty

October 24, 2012 at 12:02pm

A correction: "Natural Gas" is itself a fossil fuel. Burning more natural gas and less coal, while reducing pollutants like mercury and sulphur, will still increase the amount of CO2 in the atmosphere. I'm surprised to read your opinion that burning more natural gas would help the situation, if only we didn't sell all that coal to China.

- AllanL5

October 24, 2012 at 12:03pm

Allen, Well, to be fair, burning more natural gas would "help." Methane emits only about 2/3 the CO2 per unit of energy produced as does coal. It's not where we need to be, but it's a move in the right direction.

- IowaBeauty

October 24, 2012 at 12:09pm

Fair enough, I did not know that. Thank you for the correction.

- AllanL5

October 24, 2012 at 12:15pm

From the article: "The subject did not come up in any of 2012’s presidential or vice presidential debates for the first time since 1988, when, months after climate scientist James Hansen first testified before Congress about the dangers of greenhouse gases" Of course, when Hansen testified, he indicated that if we did nothing about global warming, it'd be a whole lot warmer than it is today. His more generous scenario, scenario B (linear emissions increase) pegged us at 1.2 degrees of warming today versus 1994. He also had a scenario C, which assumed we went through herculean efforts to reduce emissions. And if we did, that, he indicated we'd cap temp rise at about 0.6 degree C. So, how we'd do? Well, as of 2011, our temps are tracking we'll below Hansen's scenario C. In other words, Hansen told congress if we dramatically curtailed CO2 emissions by 2000, then we'd expect global temp rise to be only 0.6 degree C by 2012. And hooray, we're below that without even trying! So, you want to know why nobody brought up climate change? Because the data is too embarrassing for anyone to bring up. Most all of the dire predictions from 30, or even 20 years ago, have failed to materialize.

- seattleeng

October 24, 2012 at 1:16pm

Allan writes: "The Romney camp, and 1/2 of the American electorate, is in denial about the effects of the George W. Bush economic collapse, and how long it will take to recover from it in a mere 4 years. They're completely distorting that record, and the amazing record of the Obama administration in preventing unemployment from going higher, and in fact reducing unemployment for the last 30 months." Nobody is able to tell me what specific policies of the bush admin caused this to happen. Do tell.

- seattleeng

October 24, 2012 at 1:17pm

Oh, that's easy. Enforced deregulation of mortgage-based "CDO" financial vehicles, enabled a ponzi scheme where poorer and poorer "No-Income-No-Asset" (NINA) Mortgage loans were made by Mortgage Origination companies, financed by the CDO slice-and-dice valuation on the stock market. I say "Enforced" because even when a state, like Louisiana, saw the fraud emerging and tried to regulate them, the Bush administration stepped in and said "No. We said these were going to be unregulated, so even the states are not allowed to regulate them". All this culminated in Fall 2008, when the inflated values of these commodities collapsed, vanishing 15 trillion dollars of expected value from banks, financial institutions, and the stock-market. The result of this was the collapse of Lehman-Brothers, and threatened collapse of many other financial institutions. The TARP program was put in place (by the Bush administration and Ben Bernanke. And the Democratic Congress) to stop the hemorraging. But it was a direct result of Bush administration policies that made the collapse possible.

- AllanL5

October 24, 2012 at 1:35pm

"Most all of the dire predictions from 30, or even 20 years ago, have failed to materialize." Where are these dire predictions? The only ones I remember were about the Ozone layer, but there were steps taken to correct that.

- Nusholtz

October 24, 2012 at 1:38pm

"Nobody is able to tell me what specific policies of the bush admin caused this to happen. Do tell." Does anyone need to? Isn't "You Own It" -- full stop -- the conservative mantra when it comes to economics? (I recognize this is just gobbledygook used to avoid having to engage with actual macroeconomic ideas, but hey, live by the sword, die by the sword.)

- Fishpeddler

October 24, 2012 at 1:43pm

Allan5, CDOs have been around a long time. The CDO's were rated AAA because they were backed by the government via fannie and freddie. Do you expect a mortage purchased by the Fannie that was backed by the government to be anything other than AAA? NINJA loans were forced by Fannie and Freddi in response to redlining charges. If banks had to loan their own money, I can promise you they wouldn't make a NINJA loan. To force banks to make NINJA loans, instead of holding the banks accountable to 20% of bad loans (as they did historically), the government held banks accountable for 0% of bad loans. Yes, a recipe for disaster. What made all of this possible was Fannie and Freddie shifting risk to tax payers, but keeping profits at the banks. The moment risks were shifted, banks went into overdrive writing as many loans as possible since they no longer had to worry about consequences. If Fan and Fred weren't enabling this, none of this would have happened. F&F are the poster child for dem policies run amok. And indeed, F&F executive ranks are filled overwhelmingly with dem ex-civil servants.

- seattleeng

October 24, 2012 at 2:03pm

Seattle, Sorry, but I've got to call BS on your explanation of CDOs, Fannie and Freddie. I worked in the software industry specifically with mortgage broker and origination companies throughout the period leading up to the 2008 crisis, and with investment banks as well. I know exactly what was going on in the industry, and while Freddie and Fannie are hardly blameless, absent a completely unregulated and deeply ethically challenged collection of brokers and investment bank buyers, the problem would never have become what it was. (If I gained a pound for every time I was told by someone in a loan originating company that they would never write those mortgages if they had to be responsible for them, and that the big banks 'made the market' sufficiently liquid to sell anything, I'd need bariatric surgery) Fannie and Freddie loosened rules more than they ought to have. The brokers through them out the window, and the loan buyers and packagers in the banking industry knowingly packaged garbage and hid details of what they were doing. Their culpability is manifest, and it flows directly from deregulation and a cowboy attitude toward financialization. Anyone honest will admit that Clinton started that ball rolling, but that Bush was the guy on whose watch it became the fundamental guiding principle of policy, and on whose watch it blew up.

- IowaBeauty

October 24, 2012 at 2:15pm

Seattle, Hansen went off the reservation, with exactly the result predicted by less vocal scientists at the time - that his predictions would be wrong, because almost all predictions are, and that this would give ammunition to science deniers. At least you've managed to make that prediction true. So, yes, he was overly pessimistic. The system responds more slowly than he predicted in some ways. We got lucky, and blew a chance to take advantage of our fortune. Next time the error bars may not be so serendipitous.

- IowaBeauty

October 24, 2012 at 2:25pm

Nutz writes: "Where are these dire predictions? The only ones I remember were about the Ozone layer, but there were steps taken to correct that." As I noted: In 1988, climate big wig Jim Hansen went before congress and said if we did nothing about CO2, we'd be much hotter today than we actually are. He showed lots of graphs, and we can now compare the graphs to reality and see he dramatically over estimated how much warming would occur. He also overestimated sea level rise. And of course, we have all the IPCC papers, beginning in the late 1990's, that also dramatically overestimated the rise due to AGW. We know this, because they update their predictions, and the predictions made in the late 1990's are higher than the predictions made in later years. Go back to the 70's, of course, and the meme was we're all going to freeze. Watch the In Search Of segment below (hosted by Leonard Nimoy) and you'll see some scientists telling us we're all going to freeze. 15 years later, they were all trying to tell us we're going to roast. Many of these scientists are just anti-growth types looking for a cause. www.youtube.com/watch?v=5ndHwW8psR8 don't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the link

- seattleeng

October 24, 2012 at 2:50pm

Iowa writes: "If I gained a pound for every time I was told by someone in a loan originating company that they would never write those mortgages if they had to be responsible for them" Yes! And What enabled all these people to write loans that they knew were going bad? Fannie said "We'll buy 100% of the risk" starting in the late 1990's. That was the magic moment. At that point, banks only concerned themselves with meeting Fannie's rule for a borrower. And with every loan, they pushed it a little harder. That is called a moral hazard. You want to avoid moral hazards because humans have a very tough time behaving correctly in those situations. In the early 1990's, a bank always had to carry 20% of a loan, and they could sell 80% to Fannie. They were VERY careful to make only good loans with that rule in place. That changed in the late 1990's. See the problem?

- seattleeng

October 24, 2012 at 3:09pm

Iowa writes: "that his predictions would be wrong, because almost all predictions are, and that this would give ammunition to science deniers. At least you've managed to make that prediction true." His predictions were a barn door. They ranged from "we're screwed" (scenario A) to business as usual (scenario B) to "we fixed everything by coming together as a world community to capped (and reduced) CO2" (scenario C). Now, with that wide range of predictions in place, our actual temperature rise was less than scenario C. Think about that: We warmed less than Hansen predicted IF we had capped CO2 growth. Why did we not follow his Scenario B (business as usual) path?

- seattleeng

October 24, 2012 at 3:24pm

Seattle, The problem is that your facts on Fannie and Freddie are wrong. Both bought mortgages that shouldn't have been written, but their rules were tighter by law than those the big banks were using to acquire mortgages to package. At no time did Fannie's and Freddie's portfolio contain even 20% subprime loans; I now for a fact that the big banks were holding far more of these, and they got them by direct acquisition from brokers (often brokers they owned as subsidiaries), as well as repurchases from Fannie and Freddie. And, the reason Fannie and Freddie pushed the rules as hard as they did is because they could not compete with the banks in this business without tilting their portfolio more toward subprime loans. Absent the investment bank market, the country's exposure to subprime loans would have been radically smaller, and the crisis that froze credit in 2008 would have been less likely and smaller if it did occur. What is true, to Democrats' shame, is that Democrats blocked efforts in 2005 to limit Fannie's and Freddie's ability to hold CDOs -essentially to stop them from speculating in risky mortgage backed securities and limit the government's risk. But anyone who thinks that absent unrelated investment banking and the free-for-all market in complex, opaque financialized mortgages outside the GSEs is simply wrong on the facts.

- IowaBeauty

October 24, 2012 at 3:44pm

Seattle says " Think about that: We warmed less than Hansen predicted IF we had capped CO2 growth." I'm not defending Hansen's predictions, and I didn't defend them 20 years ago. The heat budget of the atmosphere and lithosphere were simply not well enough understood to make those kind of predictions. They are much better understood now, but I'd still not bet any specific predictions. That's beside the point. No competent scientist denies that increasing greenhouse gases are increasing the fraction of solar radiation that the combined atmosphere and lithosphere retain as heat and chemical energy, or that a significant fraction of that retention is heat. The results are already apparent, and denying this is a bet that while you continue to pump in that additional heat and increase the retention over time, that there will be mechanisms in the system that will make it not cause long term, significant warming and change. Unless you can identify those mechanisms and their efficiency with a high degree of certainty, the bet against significant global climate change is a crappy bet. You basically have to bet that what we don't understand will ultimately and uniformly work to our benefit, rather than not. This is basically a Ghost Dancer's bet - the prairie is wide, the bullets won't hit you.

- IowaBeauty

October 24, 2012 at 3:56pm

iowa writes: "Both bought mortgages that shouldn't have been written, but their rules were tighter by law than those the big banks were using to acquire mortgages to package. At no time did Fannie's and Freddie's portfolio contain even 20% subprime loans;" No. F&F dramatically lessened underwriting standards through the 90's and beyond. Most of this was facilitated via automated underwriting. And it was this automated system that made it so easy for brokers to game the system. And F&F were at the forefront of automated approval. Nothing was reviewed in person. HUD alone required that 55% of all loans purchased by F&F were made to low-income borrowers. No matter how you slice it, a low income borrower wont' have the cash needed to meet conventional lending standards. Thus, rules get relaxed. Wrong on the second point too. The GSE's held almost 60% of subprime and altA loans in 2008. The big banks held just 5.3%. See online.wsj.com/article/SB10001424052748703278604574624681873427574.html don't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the linkdon't eat the link

- seattleeng

October 24, 2012 at 4:18pm

Iowa, thanks for trying to fight the good fight with Seattle's foolishness about the mortgage crisis. I work in the industry and am too exhausted from 4 years of beating back the hordes of political partisans trying to exploit this issue to advance their 'smaller government' agenda. While I have no reservations about giving Seattle grief, I almost feel sorry for him -- as well as my many conservative friends -- because there is SO MUCH bad information (read 'propaganda') being pushed by various think tanks et al that a person even sincerely trying to educate themselves about the issue could be easily and hopelessly misled. By the time I got to Seattle's sentence about NINJA loans resulting from fear of redlining I knew he was one of the victims. I'm being pretty generous with the term 'victim' of course -- I'm pretty sure Seattle has the wherewithal to better inform himself, if only his intellectual curiosity didn't always dry up once he finds what seems to him to be a satisfying talking point.

- Fishpeddler

October 24, 2012 at 4:20pm

IowaBeauty is 100% right on the political calculations at work here. But I'd go further to say that his we're-already-fucked-so-why-bother camp is basically right. The right may be in denial about climate science, but the environmentalist left is in denial about 1) the colossal magnitude of the social and economic and/or technological changes required to alter meaningfully the climate change trajectory and 2) the great weight of history, philosophy, and social/behavioral science supporting the conclusion that global collective action to make the required social and economic and/or technological changes is effectively impossible. It's called the Tragedy of the Commons, and it applies to equally well to private individuals, presidents and nation-states. In a case where the best overall outcome will be achieved if most but not necessarily all members of the community make sacrifices, the rational choice for the individual actor is always not to sacrifice. If the majority commits to collective sacrifice, the individual reaps the overall rewards without having made any sacrifices himself, whereas if nobody else sacrifices either, while there won't be any general rewards of which to take advantage, at least the individual in question won't have disadvantaged himself unnecessarily by being the one credulous schlemiel who gave up his car or steak dinners or whatever sacrifice it might be. Proposed: The USA should engage in a total mobilization to cut energy usage and rapidly transition to a totally non-fossil-fuel based economy. The sacrifices required will be enormous, but America will serve as an example to the rest of the world. Q: If America enacted such a radical scheme, would China follow suit? A: Almost certainly not. Q: If America enacted such a radial scheme and China did not follow suit, would climate change be significantly delayed? A: Almost certainly not. Concluded: America should not enact such radical change.

- AaronW

October 24, 2012 at 4:21pm

Iowa writes: " The heat budget of the atmosphere and lithosphere were simply not well enough understood to make those kind of predictions. " Well, then, don't go before congress and state these things with 90% certainty. Iowa writes: "No competent scientist denies that increasing greenhouse gases are increasing the fraction of solar radiation that the combined atmosphere and lithosphere retain as heat and chemical energy, or that a significant fraction of that retention is heat. " And no competent scientist claims anything with certainty when so little is known. That is the problem: The entire science community OVERSOLD what they knew. They acted as evangelists for a cause instead of scientists. At every step, the climate scientist tell something will happen with great certainty. And then it doesn't. And then they tell us again, slightly less scary will happen, but with the same certainty. And we end up where we are today. Where nobody wants to talk about it because those with an anti-growth axe to grind have poisoned the well. No question things are warming--they have been since the last ice age. They are just warming much more slowly than anyone predicted, and it's not at all clear what % of this is due to man and what % is natural variation.

- seattleeng

October 24, 2012 at 4:23pm

Aaron writes: "Proposed: The USA should engage in a total mobilization to cut energy usage and rapidly transition to a totally non-fossil-fuel based economy. The sacrifices required will be enormous, but America will serve as an example to the rest of the world." Of course! But let those that have the most lead by example. In other words, hollywood stop taking private planes to promote a movie. Gore stop building mansions. Scientists stop flying to conventions in exotic locals. If this is so serious, how come nobody is willing to do without? They all expect the other guy is the one who will sacrifice.

- seattleeng

October 24, 2012 at 4:28pm

Too funny. I hit refresh on my computer and there is, of course, a fresh post from Seattle with links (evidence, by God!) allegedly supporting his point. Before even looking at it I knew, just knew, that it would be something by the clueless wonder Peter Wallison. Note that the editorial is from late 2009, so perhaps Wallison has finally figured this out, but the Pinto study has been entirely debunked. I've never seen him print any sort of retraction for this piece, though, so maybe he still doesn't get it. You gotta pity poor Seattle. Everytime he appeals to authority, it turns out the authority he is appealing to are either a fool or charlatan. Uncritical heroworship is never a good idea, it seems.

- Fishpeddler

October 24, 2012 at 4:29pm

Hmmm. I just remembered that this was a post about global-warming, not the financial crisis. My bad for contributing to the digression.

- Fishpeddler

October 24, 2012 at 4:32pm

"Well, then, don't go before congress and state these things with 90% certainty." We've already agreed that Hansen went off prematurely. "And no competent scientist claims anything with certainty when so little is known. That is the problem: The entire science community OVERSOLD what they knew. They acted as evangelists for a cause instead of scientists." This is a problem of risk mitigation and calculation, and you're right, those who speak in certainties about risks, risk looking foolish. So, I get it, you're pissed because some scientists made claims that didn't pan out, and sounded a bit too certain when they did so. So pissed, in fact, that you'll happily conclude that science knows nothing, the world will always look out for our interests, no matter how consistently we ignore what we know, because by God, if we actually took the risks seriously and tried to mitigate them, it might cost something - like our god-given right to drive gas guzzlers, burn dirty coal, and burn every last barrel of oil we can coax out of the ground, before looking for a more sustainable energy system. Yup, I get it. I, on the other hand, actually care about the world my grandchildren will have to inhabit.

- IowaBeauty

October 24, 2012 at 5:25pm

I'm not going to give much weight to TNR's "incredulous indignation" at the lack of talk about climate change or the environment from the two POTUS candidates when TNR itself has been lacking in that department for some time. Consider that TNR's most recent post on climate change was January 3, 2012. As to the lack of political back bone among these two candidates in addressing climate change (even tangentially) with regards to energy policy, well what do you folks expect? There is too much at stake when it comes to corporations and industries maintaining the near zero cost of polluting the public realm and passing off the real cost of business to the tax payers who ultimately have to pay the costs of toxic spills, polluted water ways, soil erosions, water resource shortages, fishery collapses, etc., etc. ,etc. And that we keep insisting that the immediate costs of self-satisfaction and instant gratification outweigh the long term moral and ethical responsibility of leaving our children and grandchildren a planet in better condition than what we found it in. Sure our rivers don't catch on fire as often any more, but thanks to outsized energy consumption and population explosions and exportation of the wasteful "western" lifestyle to every corner of the earth, the negative human impacts on the environment have never been greater. People who insist that there's "nothing to see here" are simply in denial about reality. Then we have commenters here like Seattle that pull fact-less statements from the black holes of 'skepticism' to make the claim that because CO2 omissions have dropped the last few years (primarily due to the global financial and economic slowdown/collapse which lead to an immediate drop in energy demand and consumption across multiple industries) as reason for "us" to do nothing. We have a higher portion of the population that believe in angels than the actual hard facts of science like evolution and biology. We like to think of ourselves as clever creatures, but our greatest gift has been screwing things up in a bigger way when we try to "fix" things by making them better. Ideas like geo-engineering are the results of lazy thinking and lazy people. Addressing climate change is much like trying to get a chain smoking, alcoholic with heart issues to make life-style changes. The patient comes in for some tests, they show his lungs are damaged but still functional from 20 years of smoking, his liver still manages to work despite 20 years of hard drinking and his heart is on the verge of shutdown. The doctor can't predict when it will happen, but he is 90% certain that IF the patient doesn't make some difficult life-style changes soon the problems will get worse if he does nothing. The patient goes home and his wife the "skeptic" says there is no reason to stop smoking, drinking or eating and exercising because the doctor didn't say there was 100% chance of him dying next year or the year after that. In fact, the wife says he should just do nothing because his 'insurance' will cover a heart transplant and having the lungs replaced with bionic lungs is a possibility. Plus it's just too expensive right now to eat healthy fruits and vegetables, and buy a gym membership and way to dangerous to ride a bike to work. Heck you might have to stop smoking too. So we find ourselves in a situation where the vast amount of the American populace laments how much things suck and why we aren't number one at everything anymore. But God forbid, we ask ourselves to make some hard choices and sacrifices to make the US the leader in addressing human affecting climate change. We can barely muster the political courage to lead in the low-hanging fruit of energy efficiency and renewable energy production because the Right thinks it's a "god given" right to fuck the planet up. And don't expect things to change over the next 5 to 8 years because thanks to the energy industry trying it's hardest to maintain the status quo of fossil fuel dependency, the US is expected to surpass Saudia Arabia as the largest producer of oil. Which will only give folks here in the US more reason to continue doing what they do best - stuff their faces full of snack foods, get fat and watch football.

- singlspeed

October 24, 2012 at 5:57pm

"NINJA loans were forced by Fannie and Freddi in response to redlining charges." Fishpeddler - I know I and a number of other people have discussed this with Seattle but he just doesn't seem to care about facts. The market is always right and the government is always at fault, facts be damned. I like how because CDOs "have been around for a long time", even though their mode of use changed dramatically in that time, they cannot be the cause of any problems. Yet the CRA, which predates the likey first CDO by a decade and has only functionally changed *in ways the industry lobbied for* (apart from not going away completely) - yep, that's the ticket. Logic just doesn't enter into it.

- Nari224

October 24, 2012 at 6:30pm

Iowa writes: "So pissed, in fact, that you'll happily conclude that science knows nothing, the world will always look out for our interests, no matter how consistently we ignore what we know, because by God, if we actually took the risks seriously and tried to mitigate them, it might cost something - like our god-given right to drive gas guzzlers, burn dirty coal, and burn every last barrel of oil we can coax out of the ground, before looking for a more sustainable energy system." Gimme a break. I get paid because I'm good with numbers. And yes, I respect science and the process behind it. My job exists because the scientists and engineers ahead of me made the right bets. The enviro wackos don't quite understand how harmful their campaign has been to getting off oil. Fact 1: CO2 is a problem. We can debate how much, but most all, even the heartland folks, will agree it's a problem to some degree. Fact 2: Alt energy (wind, wave, solar, etc) will not come close to meeting world demands for a long, long time. If ever. Fact 3: Nuclear is the only fuel that doesn't produce CO2 that can meet world demands for energy. Fact 4: Oil has enormous momentum. It's here, it's easy, it's cheap. I don't think any of the above are the least bit contentious. There is broad agreement among experts on all 4 points. Obama's energy guy, Dr. Chu, would agree with each without hesitating, I suspect based on his previous writings and talks. Now, if you KNOW #3 is true, and if you KNOW #2 is true, the pretending they aren't true only strengthens the status quo (oil). We can debate the danger of #3 and how to mitigate the risks. But anyone that fights nuclear in hopes that wind will solve the problem is only prolonging our dependence on oil. And thus, the entire global warming movement has simply strengthened the oil industry in ways they'll never know or imagine. Hope is not a strategy.

- seattleeng

October 24, 2012 at 8:20pm

Fish writes: "Note that the editorial is from late 2009, so perhaps Wallison has finally figured this out, but the Pinto study has been entirely debunked. I've never seen him print any sort of retraction for this piece, though, so maybe he still doesn't get it." And as usual, just words. No link. Tell me, Fish, what % of subprime loans DID the government hold in 2008? If you don't believe the number I provide, then please clarify them for us all. Your usual silence is what I am anticipating.

- seattleeng

October 24, 2012 at 8:26pm

Nari writes: "Logic just doesn't enter into it." Before logic can be applied, we need to agree to the facts. You guys can't seem to get over the facts: 1) GSE's dramatically reduced lending requirements during the 90's. 2) GSEs approved all these bad loans 3) Since banks wouldnt' loan to bad risks, GSE's had to assume 100% of the risk, where they used to require banks to keep 20%. 4) GSEs purchased all these bad loans, while certifying they were backed by the faith and credit of the US 5) #4 allowed these crappy loans to be rated AAA, even though they were of very low quality 6) With AAA rating, the loans readily melted into the financial system, where investors didn't care what they were buying, they just wanted AAA So, go ahead and refute any of these Nari. Pick any one. But let's see sources.

- seattleeng

October 24, 2012 at 8:38pm

Seattle, I have no idea how far we can go in reducing or eliminating anthropogenic carbon with non-nuclear alternative energy. I do know we're not trying very hard, and in particular not trying at all hard to find energy storage technologies that could make solar and wind a much more viable part of our energy system than they are. Nor are we trying very hard to do a lot of other things that would make a huge difference - such as insisting on energy efficient transportation and housing. I wouldn't be surprised that if we were really serious, we'd still need nuclear, and I wouldn't have a big problem with that. What I do know is that your posts pretty much read to me as "why worry, warming is just a pet cause of some anti-growth scientists, and it's not happening as fast as Hansen said, so there's nothing to worry about." If you're only point is that Hansen was wrong, we agree. If you really believe that's why we're basically doing squat about CO2 and methane emissions, you're both optimistic about what the electorate knows (I instant messaged 4 colleagues who happened to be online right now, only 1 knew who Hansen was, and he did could not say whether Hansen's predictions were high, low or on the money - and I work in a company with a well educated, technically literate workforce), and naive about what is really driving our indifference. And, if my last post was over the top, feel free to line up and say "global climate change is a big risk that we ought to mitigate with a major push to revamp our energy system to be more nearly carbon neutral and to minimize incidental release of methane and other greenhouse gases." I'm sure your co-posters here would love to hear it. I'll happily withdraw my last statement in response.

- IowaBeauty

October 24, 2012 at 8:44pm

Seattle says: "Gimme a break. I get paid because I'm good with numbers." The one thing that seattle certainly is not is good with numbers, unless by that he means falsifying numbers or misunderstanding what they mean and making unsupportable claims about them. I spent a lot of time for a while tracking down his numerical claims and identifying his falsehoods in the belief that he was well-intentioned but ignorant. After a while, it became clear that he may be ignorant, but he is not well-intentioned. Whenever the evidence contradicts his claims, he simply denies that it exists or claims it means the opposite of what it clearly does mean. (The example that pops immediately to mind is his claim that Medicare costs have reason faster than private health care costs. This is plainly false. Then there is his claim that taxes are not less progressive than in 1980, and on and on.) A lot of what he says must be classified as outright lying, and this extends to claims beyond the strictly numerical. Seattle is a regular Mitt Romney whose rhetoric of perpetual bullshit is quite reminiscent of seattle. Basically, he makes whatever false claim he thinks will bolster his ideological argument.

- roidubouloi

October 24, 2012 at 9:49pm

Seattle's claims about the origins of the mortgage-debt crisis are almost entirely untrue. Pure invention (although he copies his crap from right wing-nut websites). Typical. The vast bulk of the loans were privately securitized in the private market without any GSE participation. Toward the end, the GSE's acquired some in the open market that the were prohibited from originating. The very meaning of "sub-prime" is ineligible for GSE financing.

- roidubouloi

October 24, 2012 at 9:53pm

I went through the exercise once of refuting, with evidence, seattle's lies about the mortgage-backed security crisis. Didn't slow him down one whit. Same lies, different day.

- roidubouloi

October 24, 2012 at 9:55pm

Iowa writes: " I do know we're not trying very hard, and in particular not trying at all hard to find energy storage technologies that could make solar and wind a much more viable part of our energy system than they are. " Actually, people ARE trying very hard at this. And there is enormous incentive to do so. Consider the lowly lithium battery, ubiquitous in cellphones today. If someone could figure a way to double the amount of energy held by one of these batteries, it would be worth tens of billions of dollars. Why? Because every mobile phone makers, laptop maker and electric car maker would beat a path to do their door. And there are, literally, dozens of west coast (and east coast) university spin offs trying just this. Consider this battery could mean a Tesla coudl drive twice as far. Or, better yet, the Tesla battery could have half as large. And half as expensive. Suddenly, the electric car economics get really, really good. So good, in fact, that ICE engines start to not look so good. Consider companies like Qualcomm and Apple will acquire other small technology companies for $1B for technology you have never even heard of. In some cases, that is $1B they'll pay for a company of just 15 or 30 people. Something like a high capacity battery that was safe and viable would sell for 10's of billions. EASY. The same goes for energy storage. If you could find a way to cheaply and safely store enormous quantities of energy, it'd be worth hundreds of billions of dollars to power companies. And thus could sell half a trillion dollars easily. The fact is, these are hard problem. Really hard problems. It's not because we aren't investing enough to solve them. It's because they cannot be readily solved. So, assume for a moment I'm right and that alt energy won't play a substantial role in energy for the next 30-40 years. The question is: How do you want to fill the void: With nuclear or with fossil? If your aim is to scare people about nuclear, then congrats, you just voted for fossil indirectly.

- seattleeng

October 24, 2012 at 10:02pm

Roid writes: "The very meaning of "sub-prime" is ineligible for GSE financing." And nary a cite. Again. Lots of bluster, lots of steam. Par for the course. That's just Roid being Roid. Here's a washpo story highlighting Fannies decline into subprime. www.washingtonpost.com/wp-dyn/content/article/2008/08/18/AR2008081802111.html Notice the second paragraph: "Discussing the company's successes, Mudd said one of Fannie Mae's achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step "toward optimizing our business."" That is the CEO talking about increasing share of subprime. That you would assert sub-prime is ineligible for GSE financing shows how clueless you are about this topic. The Financial Crises report on the topic mentions on page 2 (PAGE 2!): "They [GSEs] relaxed their underwriting standards to purchase or guarantee riskier loans and related securities in order to meet stock market analysts’ and investors’ expectations for growth, to regain market share, and to ensure generous compensation for their executives and employees—justifying their activities on the broad and sustained public policy support for homeownership. To assert that such easily verified facts aren't at all facts is silly. Next time, try to cite something. It'll save you some embarrassment :)

- seattleeng

October 24, 2012 at 10:21pm

You're full of shit, seattle. I documented your lies about the mortgage meltdown once before, copiously. Makes no difference. You just repeat the same lies. Note that the article you quote from says nothing about the relative holdings by GSEs of sub-prime. As I pointed out above, the did toward the end acquire some in the secondary market. That is not the "descent into subprime" that you claim because the amounts were but a fraction of what the private market created and held. Allow me then to embarrass you (except that you cannot be embarrassed which is why you lie shamelessly -- more or less every time you open your mouth). It is trivially easy to find articles, dozens of them, debunking the claim that the GSEs were materially responsible. Here is but one -- consider it a citation -- after that go do your own work and, if you are going to cite something, at least find something on point as you did not do here: http://www.ritholtz.com/blog/2011/11/hey-bloomberg-the-data-shows-gses-did-not-cause-financial-meltdown/ Debunking these claims, such as 1. Private markets caused the shady mortgage boom: The first thing to point out is that the both the subprime mortgage boom and the subsequent crash are very much concentrated in the private market, especially the private label securitization channel (PLS) market. The Government-Sponsored Entities (GSEs, or Fannie and Freddie) were not behind them. The fly-by-night lending boom, slicing and dicing mortgage bonds, derivatives and CDOs, and all the other shadiness of the mortgage market in the 2000s were Wall Street creations, and they drove all those risky mortgages. Here’s some data to back that up: “More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions… Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.” As Center For American Progress’s David Min pointed out to me, the timing doesn’t work at all: “But from 2002-2005, [GSEs] saw a fairly precipitous drop in market share, going from about 50% to just under 30% of all mortgage originations. Conversely, private label securitization [PLS] shot up from about 10% to about 40% over the same period. This is, to state the obvious, a very radical shift in mortgage originations that overlapped neatly with the origination of the most toxic home loans.” 3. There is a lot of research to back this up and little against it: This is not exactly an obscure corner of the wonk world — it is one of the most studied capital markets in the world. What has other research found on this matter? From Min: Did Fannie and Freddie buy high-risk mortgage-backed securities? Yes. But they did not buy enough of them to be blamed for the mortgage crisis. Highly respected analysts who have looked at these data in much greater detail than Wallison, Pinto, or myself, including the nonpartisan Government Accountability Office, the Harvard Joint Center for Housing Studies, the Financial Crisis Inquiry Commission majority, the Federal Housing Finance Agency, and virtually all academics, including the University of North Carolina, Glaeser et al at Harvard, and the St. Louis Federal Reserve, have all rejected the Wallison/Pinto argument that federal affordable housing policies were responsible for the proliferation of actual high-risk mortgages over the past decade." ___________________________ Another debunking paper by the Federal Reserve: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2045725 "Although the goals may have spurred the GSEs to purchase more multi-family mortgages and REMICs than they otherwise would have, my analyses suggest that the GSEs’ purchases of whole single-family mortgages to satisfy the goals did not drive the subprime lending boom of 2002-2006." __________________ And more: http://www.bloomberg.com/news/2011-08-04/fannie-freddie-role-in-the-financial-crisis-commentary-by-phil-angelides.html "The primary cause of the crisis? No. And here’s why. First of all, the GSEs participated in the expansion of subprime and other hazardous loans, but they followed, rather than led, Wall Street in the rush for fool’s gold. Their market share shrank to 37 percent in 2006 from 57 percent in 2003, as increasingly perilous lending permeated the market. In search of profits, they also purchased the highest-rated portions of “private label” mortgage securities produced by Wall Street. While such purchases added helium to the housing balloon, they represented just 10.5 percent of “private label” subprime- mortgage-backed securities in 2001, then rose to 40 percent in 2004, and fell back to 28 percent in 2008. Private investors gobbled up the lion’s share of those securities, including the riskier portions. Second, the FCIC analyzed the performance of roughly 25 million mortgages outstanding at the end of each year from 2006 to 2009, and found that delinquency rates for the loans that Fannie Mae and Freddie Mac purchased or guaranteed were substantially lower than for mortgages securitized by other financial firms. This holds true even for loans to borrowers with similar credit scores or down payments. For example, data compiled by the FCIC for a subset of borrowers with scores below 660 shows that by the end of 2008, far fewer GSE mortgages were seriously delinquent than non-GSE securitized mortgages: 6.2 percent versus 28.3 percent. Finally, there is this simple fact: Fannie Mae and Freddie Mac mortgage securities didn’t cause the losses that cascaded through the financial system in 2007 and 2008, and that brought down firms such as Merrill Lynch, Bear Stearns Cos., American International Group Inc. and Lehman Brothers Holdings Inc. It just didn’t happen. GSE mortgage securities essentially maintained their value throughout the crisis largely due to the implicit government backstop, while those created by other financial firms crashed. Taxpayers have had to bear significant costs, but GSE securities didn’t cause the big bank losses that shook the system." ___________________________ Stop wasting everyone's time with your wacko libertarian lies, seattle. It is tedious in the extreme.

- roidubouloi

October 24, 2012 at 11:16pm

After Roid's impressive response, Seattle, my 'usual silence' seems appropriate (though I'm not sure what you mean by this. If you have been having lonely one-sided arguments on stale threads, my condolences.)

- Fishpeddler

October 25, 2012 at 1:54am

Seattle: I'll note that you didn't bother to provide any sources, but as usual just built a house of cards where even your first few statements don't support the conclusion  1. So what if they reduced lending requirements? Did they reduce them sufficiently to cause the problem? The FCIC and other analysis says no ( http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1924831 ). Note the " (“GSEs”), remained more successful than other mortgage securitizers at maintaining prudent underwriting." 2. Completely false. Low doc / subprime loans, by definition, were not the fully qualified loans a GSE required (http://www.frbsf.org/economics/conferences/1007/blackburn_vermilyea.pdf). What sources support that assertion? 3. Thats a complete fantasy. Again, sources?  Banks were reselling the loans as quick as they could. 4. No, they didn't (see FCIC findings) 5. The GSEs don't rate financial instruments 6. Here we have some agreement, although since the statement doesn't support your position at all it's somewhat irrelevant. Let me recommend the FCIC report to you. Note how CDOs feature prominently.  And let me pose two questions in return: 1. If your assertions are true, why did the FCIC and later independent studies find that the GSEs "bought or guaranteed too few highly risky loans, and did so too late in the 2000s, to cause the crisis" (http://www.nybooks.com/articles/archives/2011/oct/27/did-fannie-cause-disaster/?pagination=false) & the FCIC 2. If it was redlining that caused all the bad loans to be written, where is any analysis of the loan data (it's all reported to the government and is in the public record, that being the point of the CRA) that shows redlined loans to have been disproportionally represented in the loans that first started to go bad? If you can't find it, it's probably because it didn't happen.  If redlined loans are not a proximate cause or are not over represented in the loans that first went bad, your argument would appear to be unsupported by the evidence

- Nari224

October 25, 2012 at 8:22am

Gah! Lets try that again (seriously TNR, what gives with the crappy feedback forms?) Seattle: I'll note that you didn't bother to provide any sources, but as usual just built a house of cards where even your first few statements don't support the conclusion 1. So what if they reduced lending requirements? Did they reduce them sufficiently to cause the problem? The FCIC and other analysis says no ([a] ). Note the " (“GSEs”), remained more successful than other mortgage securitizers at maintaining prudent underwriting." 2. Completely false. Low doc / subprime loans, by definition, were not the fully qualified loans a GSE required ([b]). What sources support that assertion? 3. Thats a complete fantasy. Again, sources? Banks were reselling the loans as quick as they could. 4. No, they didn't (see FCIC findings) 5. The GSEs don't rate financial instruments 6. Here we have some agreement, although since the statement doesn't support your position at all it's somewhat irrelevant. Let me recommend the FCIC report to you. Note how CDOs feature prominently. And let me pose two questions in return: 1. If your assertions are true, why did the FCIC and later independent studies find that the GSEs "bought or guaranteed too few highly risky loans, and did so too late in the 2000s, to cause the crisis" ([c]) & the FCIC 2. If it was redlining that caused all the bad loans to be written, where is any analysis of the loan data (it's all reported to the government and is in the public record, that being the point of the CRA) that shows redlined loans to have been disproportionally represented in the loans that first started to go bad? If you can't find it, it's probably because it didn't happen. If redlined loans are not a proximate cause, your argument would appear to be unsupported by the evidence [a] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1924831 [b] http://www.frbsf.org/economics/conferences/1007/blackburn_vermilyea.pdf [c] http://www.nybooks.com/articles/archives/2011/oct/27/did-fannie-cause-disaster/?pagination=false Let the links live, let the links live, let the links live. Let the links live, let the links live, let the links live. Let the links live, let the links live, let the links live.

- Nari224

October 25, 2012 at 8:29am

Ah, should have read up. Roid has already been here, done that.

- Nari224

October 25, 2012 at 8:54am

Roid, I'll let some key excerpts from the SEC lawsuit against Fannie's CEO speak for themselves. By the way, what big banks have been sued by the SEC over the crises? Is it just fannie? Is Fannie the first lawsuit the SEC filed here? I kinow the SEC has sued BoA, but that is because BoA (stupidly) bought Countrywide, and thus to sue countrywide they have to sue BoA. But this really means the SEC has only sued Countrywide and Fannie so far. Is that correct? Why would the SEC go after Fannie FIRST if their role was so small? Hmmm.... From the SEC lawsuit against Fannie: ==== This action arises out of a series of materially false and misleading public disclosures by the Federal National Mortgage Association ("Fannie Mae" or the "Company") and certain of its former senior executives concerning the Company's exposure to subprime mortgage and reduced documentation Alt-A loans. Eager to promote the impression that Fannie Mae had limited exposure to· subprime and Alt-A loans during a period of heightened investor interest in the credit risks associated with these loans, Fannie Mae and its executives misled investors into believing that the Company had far less exposure to these riskier mortgages than in fact existed. Similarly, Fannie Mae misled investors concerning its exposure to Alt-A loans with reduced or alternative documentation requirements. Fannie Mae did not disclose the total percentage of its Single Family mortgage guarantee business consisting of reduced documentation loans as reflected in its own internal reporting, which Defendants routinely received throughout the Relevant Period Fannie Mae's push to increase its reduced documentation loans was dramatic. At the end of 2004, reduced documentation loans constituted 17.8% of Fannie Mae's Single Family loan acquisitions: by year-end 2005 that number was 20.2%, and by year-end 2006, 27.8% of Fannie Mae's Single Family loan acquisitions were reduced documentation loans. This represented a nearly 40% increase from 2005 and a greater than 50% increase from 2004. Mudd was well aware of the Company's increased acquisition of reduced documentation loans-indeed, Mudd himself directed the company to pursue that market. For instance, in an April 2?, 2006, Credit Risk meeting following a presentation on reduced documentation loans and their risks by the Single Family credit officer (who noted low documentation loans were riskier), Mudd stated that "the market is moving to low documentation and we need to actively pursue the keys to this market." Mudd oversaw Fannie Mae's 2006 market share increase during which the Single Family business grew its market share from 20% of total mortgage loan originations to 5% by acquiring more subprime and reduced documentation loans. In part as a result of Fannie Mae's successful market share growth and timely filing of the company's periodic reports, Mudd's taxable compensation grew from $6.16 million in 2006 to $10.64 million in 2007. ===== www.sec.gov/litigation/complaints/2011/comp-pr2011-267-fanniemae.pdf You have it spelled out clearly that the GSE's reduced doc requirements, made a concerted effort to increase their market share by buying more of these bad loans (many came from countrywide). And this is the SEC. Roid writes: ". Private markets caused the shady mortgage boom: " The boom was not possible until GSEs got involved. Private business no question participated early on. But it achieved scale and legitimacy only after GSEs got involved. Roid writes: "But from 2002-2005, [GSEs] saw a fairly precipitous drop in market share, going from about 50% to just under 30% of all mortgage originations. Conversely, private label securitization [PLS] shot up from about 10% to about 40% over the same period. This is, to state the obvious, a very radical shift in mortgage originations that overlapped neatly with the origination of the most toxic home loans.” But it was 2005 where GSE's got really serious about re-gaining lost market share. So this observation is moot. In fact, knowing the fatal runup occured from 2005 to 2008, citing this is disingenuous. Roid writes: "Did Fannie and Freddie buy high-risk mortgage-backed securities? Yes. But they did not buy enough of them to be blamed for the mortgage crisis." Again, when the music stopped, GSE's were holding 60% of bad mortgages. And the big banks were holding 5%.

- seattleeng

October 25, 2012 at 2:27pm

Nari, the FCIC has some interesting facts, but the conclusions are so broad they are useless. As the dissent noted, if everything was a problem, then nothing was a problem. You note the FCIC found the GSE "bought or guaranteed too few highly risky loans...to cause the crises" That is directly contradicted by the SEC in their lawsuit against Fannie, and by the words of Fannie's senior execs. And thus, the FCIC is...largely a circle jerk. 1) yes, lending requirements were sufficiently reduced to cause the problem. In 2004 GSE argued to congress to allow them to go after nodoc/lowdoc loans and to also allow outside inspectors to be used (thus overinflating appraisals). GSE won this battle. online.wsj.com/article/SB10001424053111903927204576574433454435452.html 2) See above 3) A subprime loan is risky. A risky loan has a FICO score around 650. That score means a 50% default rate if the economy goes south. A bank would not write a risky loan if they were on the hook for 20%. Thus, to make a risky loan happen, GSE had to take full risk. See the mid-90's Boston Fed lending guidelines "Closing the Gap: A Guide to Equal Opportunity Lending." Ask yourself this: Why would banks not make loans in "bad areas" in the mid 90's, but they would in 2005? What changed? The banks aversion to risk? Hardly. The risk was offloaded to the taxpayer through government programs. And banks responded as you think they would. 4) As noted, when the music stopped, GSE was holding 60% of subprime, and big banks 5%. FCIC doesn't dispute this. online.wsj.com/article/SB10001424052748703278604574624681873427574.html?mod=rss_Today's_Most_Popular 5) No, but they pay someone to rate (ratings houses) and package them (investment houses). And when they pay someone to rate them, they remind the rater that "we are backed by the full faith and credit of the US government", and thus a AAA is easy to get. Nari writes: " If it was redlining that caused all the bad loans to be written, where is any analysis of the loan data (it's all reported to the government and is in the public record, that being the point of the CRA) that shows redlined loans to have been disproportionally represented in the loans that first started to go bad?" Make no mistake, it wasn't loans to the poor that caused this to happen. Loans to the poor were the guise the GSEs played up to congress to get standards relaxed. With the standards relaxed, the crank was turned as fast as possible on the full spectrum of borrowers. Poor people were not responsible for this. But make no mistake, the famous (and famously wrong) "redlining" report by the Boston Fed in the 90's set the groundwork for all this.

- seattleeng

October 25, 2012 at 3:18pm

"As noted, when the music stopped, GSE was holding 60% of subprime, and big banks 5%. FCIC doesn't dispute this. online.wsj.com/article/SB10001424052748703278604574624681873427574.html?mod=rss_Today's_Most_Popular" For god's sake, Seattle, how often are you going to keep citing that one article? I can't find anything in your lengthy discussions showing you have even entertained the possibility that your primary source was a hack job. Let me give you the gist of Wallison's problem in relation to your point, then you can do the homework: Wallison relie's on Pinto, and Pinto fabricated the level of GSE subprime holdings by redefining the term subprime from its industry norm just for the sake of giving a false impression in his study. Everything Wallison/Pinto have to say on the subject, in other words, is founded on a deliberate lie. You need to address this problem in your posts in order for them to even be worthy of further consideration or discussion.

- Fishpeddler

October 25, 2012 at 3:42pm

My head hurts, my feet stink and my eyes are brown from all Seatle's BS.

- rhorst

October 25, 2012 at 4:55pm

Fish writes: "Let me give you the gist of Wallison's problem in relation to your point, then you can do the homework: Wallison relie's on Pinto, and Pinto fabricated the level of GSE subprime holdings by redefining the term subprime from its industry norm just for the sake of giving a false impression in his study" There is no clear definition of subprime. It's not just a fico score. A heavily leveraged buyer in Manhattan that has pulled out a bunch of cash in his first house and plunked it down for a second house on the cape could indeed be subprime, even if he did have a good fico score. And this is wallison's point. if someone doesn't qualify for a normal loan (prime loan), then that alone indicates if the economy goes south they will have serious trouble paying the loan back. And he was right: When the economy went south, a lot of people in risky products (negative amortization, crazy arm terms, nothing down, etc) failed to pay. That is, by definition, subprime. Nobody wanted to call it subprime when the loan was made, but it was. Those loans would not have been made in 1990. The judge in the case has said this: ""They must have known that Fannie Mae's disclosed subprime and Alt-A exposure calculations were materially misleading," You really need to ask yourself why the SEC picked Fan as their flagship case. www.huffingtonpost.com/2012/08/10/sec-probe-executives-fannie-mae_n_1765538.html blogs.wsj.com/developments/2011/03/21/defining-subprime-easier-said-than-done/

- seattleeng

October 25, 2012 at 5:02pm

"Actually, people ARE trying very hard at this. And there is enormous incentive to do so. Consider the lowly lithium battery, ubiquitous in cellphones today. If someone could figure a way to double the amount of energy held by one of these batteries, it would be worth tens of billions of dollars." A nice example, but battery research is focused almost entirely on small scale, high value storage (a motor vehicle being about the biggest thing most programs are targeting). And they've made enormous progress. Spending on utility scale storage is a drop in the bucket compared to, say, our spending over and above our "standard" military budget to fight the war in Iraq. Energy storage R & D obviously can't meanifully use $1T, but they could use a lot of $B if we cared to fund it. "So, assume for a moment I'm right and that alt energy won't play a substantial role in energy for the next 30-40 years. The question is: How do you want to fill the void: With nuclear or with fossil? If your aim is to scare people about nuclear, then congrats, you just voted for fossil indirectly." Really, where the hell did this nuclear thing come from? Somewhere along the line you decide our argument required you to go after anti-nuclear arguments as THE critical part of the global warming debate. I can only conclude that this is another of those areas where you're a bit pissed off at the world, so it had to be brought in. I'm not arguing against nuclear. But the risks with nuclear are pretty clear, and replacing all of our fossil fuel burning with nuclear is at least as unrealistic as replacing it with alternative energy. If you factor in disposal and long term management of nuclear waste and retired facilities, and proliferation and terrorism risk, it's also no less expensive than alternative energy. About it's only real virtue is that it is excellent baseline power for the grid.

- IowaBeauty

October 25, 2012 at 5:03pm

It just occurred to me that Pinto is somewhat sophisticated in his deception, Seattle, so I'll make an analogy to help you out. Here's the scenario: There are 3 kinds of apples: Red, Pink, and Green. There are 2 grocers: Gino and Olav Gino sells lots and lots of Red and Pink apples, but avoids the Green ones because they make people sick. Olav sells a few Red and Pink apples. Olav wanst a bigger piece of the apple market, so he starts selling the Green ones. Olav's business goes wild and he sells lots and lots of Green apples. Gino begins to worry that the market has become all about Green apples, so he begins to sell a few himself. The Green apple sickness finally kicks in, and lots of people are made terribly ill. In the aftermath, people assess the source of the sickness and discover that Olav, and then Gino, negligently sold a bunch of Green apples. In an effort to stop this from happening ever again, it is decided that Olav and Gino should not be alllowed to sell things that make people sick. Seemingly the end of the story. Olav, however, upset that this may prevent his exploitation of other lucrative markets, puts out an alternative explanation: "I hardly sold any of the bad apples. Look at these statistics: Gino: 1 million red apples, 1 million pink apples, 100 thousand green apples. Olav: 100 thousand red apples, 100 thousand pink apples, 1/2 million green apples. Everyone knows that red apples don't make you sick. It is the non-red apples that make you sick. Well, Gino sold 1.1 million non-green apples, and I sold only .6 million non-red apples, so Gino is the far worse offender here. Gino should be put out of business, and we shouldn't put in place any new regulations that would unfairly hurt my future business" Can you tell me, Seattle, what slight-of-hand Olav pulled in this story? That's right -- he cleverly substituted "non-red apples" for "green apples" in order to give the false impression that Gino sold more bad apples than he did. It's a neat little trick, but fortunately people who aren't willing to accept Olav's story uncritically can see through the ruse. Now you just need to apply your critical thinking skills to the analogous Wallison/Pinto story. [Sorry for any blatant typos -- no time for a read-through. Oh, and my numbers were random, i.e., they are not meant to reflect the ratios in the real-world mortgage markets]

- Fishpeddler

October 25, 2012 at 5:20pm

The candidates aren't talking about climate change because doing something serious about climate change will cost lots of jobs, especially in certain electorally significant parts of the country (like Ohio). Yes, there is likely to be some sort of net offset in creating new jobs in the low-carbon footprint utility industry, but at the end of the day it's safe to say that there are going to be quite a few economic losers from climate change legislation. Given all that Americans have gone through in the last 10 years, no serious Presidential candidate is going to talk about serious short-term steps to arrest carbon emissions and slow down the rate of climate change. Climate change today is like civil rights were in the 20th century -- something that a prosperous and secure America can indulge in but something that an anxious and stressed America cannot or will not.

- wildboy

October 25, 2012 at 5:21pm

Ah, I see you posted anew while I was typing Seattle. Gotta catch my train, but consider this: there is a standard definition of subprime -- it is called non-conforming. 'Non-conforming' as in 'not conforming with Fannie Freddie guidelines. Chew on that for a while. That tells pretty much the whole story.

- Fishpeddler

October 25, 2012 at 5:24pm

Fish, I don't have time for your puzzle. But you must really wonder why the SEC went after Fannie in all this. If Fannie really did have such a small % of the bad loans, as you and Roid assert, then the SEC is on drugs for pursuing this. Or, perhaps, a couple of anonymous blowhards on a political forum are wrong. Wouldn't be the first time.

- seattleeng

October 25, 2012 at 6:20pm

" When the economy went south, a lot of people in risky products (negative amortization, crazy arm terms, nothing down, etc) failed to pay. That is, by definition, subprime. Nobody wanted to call it subprime when the loan was made, but it was. " Actually, that is not the definition of subprime. That's how an English major might use the term, but not someone in the lending industry. It is not called subprime after it fails to perform, but rather at the time of origination. Granted it is not a precisely defined term like, say, pi, but it is not, on the other hand, used loosely in the way a lay person such as yourself is inclined to use it. This is the genius of Pinto and Wallison's method -- they deliberately misuse industry-standard terms in ways that sound perfectly reasonable to people outside the industry. I don't hold that against you, but I am admittedly aggravated that you can spend so much time repeating their arguments here without ever investigating their validity. Anyone who has made a legitimate attempt to understand these issues could not have failed to encounter the copious documentation of Pinto's deception. The fact that you display no familiarity with the objections to his 'study' suggests that you are not approaching this issue in the spirit of honest inquiry, but instead in the spirit of prosthelytizing for right-wing fantasies.

- Fishpeddler

October 25, 2012 at 6:24pm

A couple of blowhards? Wait, are there two of you? That makes sense -- no one person could make this many stupid comments.

- Fishpeddler

October 25, 2012 at 6:26pm

Fish writes: "Ah, I see you posted anew while I was typing Seattle. Gotta catch my train, but consider this: there is a standard definition of subprime -- it is called non-conforming. 'Non-conforming' as in 'not conforming with Fannie Freddie guidelines. Chew on that for a while. That tells pretty much the whole story." See the WSJ I linked. Note that in some cases subprime refers to a loan, in other cases it refers to a borrower. In some cases it refers to a fico score (or two) and in other cases it refers to whether or not the loan was prime. They write: "Some analysts have argued for a much broader definition of “subprime” to include these loans. Here’s an example: nearly 15% of loans bought by Fannie in 2007 were “interest only.” If those loans went to borrowers with great credit, it would be hard to argue that they were subprime loans. But if they went to borrowers who made minimal down payments, it would similarly be hard to argue that these were traditional “prime” loans. These definitions were the subject of some intense debate by members of the Financial Crisis Inquiry Commission." So, no matter how you slice it, you have me, the WSJ, the SEC and the FCIC telling you this isn't cut and dried.

- seattleeng

October 25, 2012 at 6:26pm

Iowa writes: "A nice example, but battery research is focused almost entirely on small scale, high value storage (a motor vehicle being about the biggest thing most programs are targeting). And they've made enormous progress. Spending on utility scale storage is a drop in the bucket compared to, say, our spending over and above our "standard" military budget to fight the war in Iraq. Energy storage R & D obviously can't meanifully use $1T, but they could use a lot of $B if we cared to fund it." Once you get to vehicle scale, scaling to utility is just a matter of turning the crank. VArious companies are now showing cars working with houses to balance loads. A houses uses 12,000 KWH in a year, or 33 KW in a day. A Tesla has 53 KWH battery. Therefore, a car could indeed be an energy storage element for a utility if the penetration gets to a reasonable point. In the future, it's reasonable new houses could have a 25 KWH built in to help balance the utility load, charging at night, depleting during the day. Perhaps these are batteries removed for cars just before they are recycle. R&D funding is fine right now for most all this stuff, because the incentives to innovate are already in place. Iowa writes: "Really, where the hell did this nuclear thing come from? Somewhere along the line you decide our argument required you to go after anti-nuclear arguments as THE critical part of the global warming debate. I can only conclude that this is another of those areas where you're a bit pissed off at the world, so it had to be brought in. I'm not arguing against nuclear. But the risks with nuclear are pretty clear, and replacing all of our fossil fuel burning with nuclear is at least as unrealistic as replacing it with alternative energy. If you factor in disposal and long term management of nuclear waste and retired facilities, and proliferation and terrorism risk, it's also no less expensive than alternative energy. About it's only real virtue is that it is excellent baseline power for the grid." I'm just saying once you understand alt energy isn't going to solve the CO2 problem, then you need to ask "what can?" And if you aren't willing to entertain that alternative, then congrats, you just kept fossils as the status quo. Because asking people to cut back isn't a viable option. Countries have tried that, and they've failed at conservation (Japan most notably). The issues you bring up wrt nuclear safety have been solved long ago. Again, don't listen to what I say. Look for proof points around the world. No credible government is thinking alt energy is more than 30% long term. Most are dialing back alt energy plans. China just resumed their nuclear efforts paused after Fukushima. They have looked at both, and their national strategy is heavily nuclear.

- seattleeng

October 25, 2012 at 6:46pm

What is striking me as funny in all this, Seattle, is this issue does not hinge at all on a precise definition of 'subprime'. The core question (at least for the purposes of this conversation) is this: what percentage of mortgages held by Fannie experienced high failure rates? Pinto tries to make the reader think the rate of failure is higher than it is by essentially saying, "Subprime failure rates were high. Gosh, Fannie held lots of subprime mortgages." It doesn't matter the slightest bit HOW you define subprime, as long as you consistently use the same definition throughout. For example, one might say, "Loans in which the borrowers had credit score below x failed at disastrously high rate y. We will call these subprime. Fannie held z amount of those loans." That would be a reasonable approach. What Pinto does, though, is essentially say, "Loans in which the borrower had a credit score below x failed at the disastrously high rate y. We will call these subprime. Fannie held a lot of loans which we will also call subprime, by dint of another criteria. Thus, Fannie is to blame, as evinced by their holdings of 'subprime' mortgages. See the problem?

- Fishpeddler

October 25, 2012 at 6:55pm

Fish, the key question here is whether or not the GSEs enabled the market to behave as they did. The market would not have made these loans if it was their money. That much is certain. These were crap loans no matter what you want to call them.

- seattleeng

October 25, 2012 at 9:30pm

This is typical misdirection from seattle: Roid, I'll let some key excerpts from the SEC lawsuit against Fannie's CEO speak for themselves. By the way, what big banks have been sued by the SEC over the crises? Is it just fannie? Is Fannie the first lawsuit the SEC filed here? I kinow the SEC has sued BoA, but that is because BoA (stupidly) bought Countrywide, and thus to sue countrywide they have to sue BoA. But this really means the SEC has only sued Countrywide and Fannie so far. Is that correct? Why would the SEC go after Fannie FIRST if their role was so small? Hmmm.... _____________________ The false claim by seattle and the wingnut libertarians was that the GSE's were the primary drivers of the mortgage loan crisis. This is simply untrue. The data on the bad loans, where and how they were originated, the portions that were originated by the GSEs and the portions that were originated by the private sector and securitized (and therefore no longer in the portfolios of banks as the banks held only a tiny fraction of what they securitized and sold off and even that was enough to sink them) demonstrate clearly that the private market, private securitization of these loans, was the primary cause of the mortgage crisis. The GSEs were an afterthought, coming in late in the game because their market share was being eroded by the inroads of private securitization. The SEC lawsuit has absolutely nothing to do with this. Nothing. Nothing. Nothing. The reality that the private sector caused the crisis does not mean that nothing or indeed anything that the GSEs were doing was beyond reproach or was not actionable. But the SEC does not choose its cases based on macroeconomic effects, nor does it introduce evidence of macroeconomic effects to make its case as these are irrelevant to securities law violations. The two questions, what caused the economic crisis and whether particular acts were in violation of securities law, are completely different. It is classic wingnut conspiracy theory mongering to substitute sly winks and speculation, "Why would the SEC do this if . . . " for actual data, particularly when the data are available and prove that the wingnut claim is wrong. Seattle is prodigious in his lies and bullshit. As i said, I used to track them down. But after a while it becomes so clear that he is always lying, and the effort involved in refuting the endless stream of crap so great, I no longer bother. There is not time enough in the day. Seattle is full of shit, today and every day. But the sheer amount of crap he can copy from right-wingnut websites is boundless.

- roidubouloi

October 25, 2012 at 9:55pm

By the way, the reason the libertarian crackpots make this claim is because they are ideologically committed to the view that unfettered markets do no harm. Here we have a clear case of an epic disaster caused by the private market in the absence of effective government oversight. This fundamentally undermines to core claim of libertarian wingnut economics. Hence, they have to lie, to claim that, contrary to all of the evidence before our eyes, the crisis was actually caused by government intervention in markets. It is complete, utter, fucking nonsense, the equivalent of telling Galileo that the earth is really carried through the heavens on the back of a giant turtle and that this is actually proven by Galileo's observations of planetary orbits, because this is exactly how the giant turtles behave. Libertarian economics is utterly wrong, but also utterly unfalsifiable, like creationism, because in the face of evidence, the libertarians will always simply invent new evidence more to their liking. All lies.

- roidubouloi

October 25, 2012 at 9:59pm

One more thing. The burden of this is that it takes very little effort to fabricate claims with no requirement that they be related meaningfully to facts. Fashioning claims that meaningfully organize the data is hard work. Inventing claims is easy and requires no work. The more bizarre and heavily embroidered, the easier it is. It then requires a prodigious amount of effort to unravel these false claims. And, as we see with Romney, following Reagan, there is very little price to be paid for uttering preposterous lies, even lies that flatly contradict the lies you told yesterday that flatly contradict the lies you told the day before that.

- roidubouloi

October 25, 2012 at 10:02pm

The GSEs did not enable or allow the private market to generate sub-prime mortgage loans (by definition ineligible for GSE financing) and securitize them. They didn't guarantee them, they didn't originate them, they had nothing to do with them. And these private loans were the major cause of the mortgage loan crisis. It is that simple. The data are clear.

- roidubouloi

October 25, 2012 at 10:16pm

"Fish, I don't have time for your puzzle. " Well, I assumed that. In four years you've apparently only found time to read one item relating to the financial crisis. Wallison must feel honored that it was his op-ed you chose. Lot of great points by roid. Especially the one about the SEC's suit being irrelevant to the core question. The biggest problem was not what all the culpable parties did that was illegal, but what they did that was LEGAL. Well, not that illegal acts aren't a problem, but they contribute little to our understanding of the origins of the crisis.

- Fishpeddler

October 26, 2012 at 12:36am

Roid, if your argument were true, then it'd be an easy matter for the SEC to sue those that did the most wrong first. The paper trail would be clear. And yet, the SEC has only gone after Countrywide and Fannie. And those two were thick as thieves in the meltdown. Country the biggest seller of no-doc/lo-doc mortgages. Fannie was the biggest buyer of countrywide loans. As the SEC notes, at the end of 2006, 35% of Fannie's single family loan biz was AltA (low-doc/no doc). The SEC doc also explains how Fannie had subprime loans, but they also had a category of loans called EA and MCM that were even more risky (higher delinquency rates). But these were never reported as subprime (see 74 and 76). The exposure (87) to these unreported loans was 10X greater than the exposure they claimed were subprime. And in spite of repeated internal warnings about the exposure of these risky loans (106) they failed to report them. So, the conclusion here is that what Fannie has reported as subprime means nothing. And thus, all the analysis you point to that regurgitates Fannies claims of almost zero exposure means nothing. Fannie had a massive collection of loans that were even poorer performers than their subprime, and they never revealed those investors or regulators. Bluster and steam doesn't trump the SEC, buddy. You need do a bit better here.

- seattleeng

October 26, 2012 at 12:56am

Fish writes: " The biggest problem was not what all the culpable parties did that was illegal, but what they did that was LEGAL. Well, not that illegal acts aren't a problem, but they contribute little to our understanding of the origins of the crisis." Why don't you outline for the class how private banks would have loaned their own money to these suspect borrowers if the GSE weren't there? Hint: They would not have.

- seattleeng

October 26, 2012 at 12:58am

roid writes "The GSEs did not enable or allow the private market to generate sub-prime mortgage loans (by definition ineligible for GSE financing) and securitize them. They didn't guarantee them, they didn't originate them, they had nothing to do with them. And these private loans were the major cause of the mortgage loan crisis. It is that simple. The data are clear." Here's a great summary from the SEC. As of 2008, F&F had disclosed that they held $14B in subprime. But they actually held $360B in subprime. Staggering. Just staggering. www.sec.gov/news/press/2011/2011-267-chart-subprime-exposure.pdf You thus have multiple errors in every sentence you wrote above. The GSE DID purchase subprime loans. And as the SEC indicates, it was by the truckload. True, they didn't originate them. But they were originated by those (countrywide et al) that KNEW that the GSE's would purchase them. Because that was the GSE's policy. The GSE's and outfits like Countrywide worked hand in hand developing more and more aggressive products, each time eroding the lending standards that served this country for decades.

- seattleeng

October 26, 2012 at 2:42am

Now you are doing the stupidity defense, seattle, that you are simply too stupid to understand the point. The investment banks and other dealers in mortgage-backed securities made their money on the flow, on fees and on spreads in the buying and the selling. The didn't hold such securities for investment. What they held was purely an inventory, in precisely the manner that a grocery store has inventory. Inventory is an expense and a risk. A vendor does not want to hold inventory, but it is impossible to do business without it. A prudent business tries to minimize its inventory without reducing its transactions, because the money is made on the transactions. Accordingly, comparing the holdings of mortgage-backed securities of the private banks, who's business model was to hold them for as little time as possible before laying them off, with the holdings of the GSEs, that were buying them for investment, to keep them, makes exactly zero sense. A trading inventory is going to be but a small fraction of the volume of business done on that inventory. And, in fact, the volume of bad mortgage-backed securities originated by the private sector was vastly larger than the volume bought and held by the GSEs for their own investment. Plus, those bought by the GSEs were of much higher quality on average. So, no, the total balance held by the GSEs is not staggering compared to the volume of bad securities created. Plus, the ability of the GSEs to hold for investment was and is much greater than the capacity of the banks to hold their bad inventory. The volume originated and sold-off by the private sector was in fact so huge that even the small portion in trading inventory was enough to crush institutions such as Lehman and Merrill. Your point that private banks would not do this, loaning money to suspect borrowers, because of your absolute faith in private markets, is therefore utterly misplaced. The banks were not lending money for investment and looking to make investment returns. They were housing inventory, for as short a time as possible, to earn spreads and fees. Your point amounts to saying that no one would commit securities fraud if they had to risk any money to do it. That is patently untrue. As long as the crook manages to rid himself of the fraudulent securities before they hit the fan, there is a lot of money to be made in fraud. There was a fortune to be made by the banks in selling phony securities, and they did. Your oblique point that the SEC has not gone after private malefactors is well taken. But this is hardly evidence of their purity. Rather, it is evidence of the political power of Wall Street and the reluctance of the Obama administration (to my regret) to go after these people at the risk of creating more financial instability in the midst of an already profound economic crisis. In other words, you don't know what you are talking about. Further, this idea that the private market was taking instruction from the GSEs in developing its phony products is completely anachronistic. The private market had already created the bulk of the mess before the GSEs got into the game -- because they were losing market share to private securitization. Enough of your crap, seattle. The data and history are quite clear that the claim that the GSEs were the moving parties behind the mortgage crisis is untenable on the facts. Not rescued by your various surmises and exlamations ("staggering"). Just wrong.

- roidubouloi

October 26, 2012 at 8:44am

Roid writes: "The investment banks and other dealers in mortgage-backed securities made their money on the flow, on fees and on spreads in the buying and the selling." Yes, but prior to CRA, a bank couldn't just participate in the "flow." A bank had to hold a portion of the actual loan AFTER the transaction was complete. So, they were motivated to ensure the LONG TERM health of the loan was solid. AFter CRA, banks were allowed to almost completely dump the risk (for non prime loans) onto the lap of the GSE (and taxpayer). Big difference. Roid writes: "Further, this idea that the private market was taking instruction from the GSEs in developing its phony products is completely anachronistic." Oh? The SEC notes a HUD paper that says "The agencies are increasing their presence in the subprime market by rolling-out new subprime mortgage products through updated versions of their automated underwriting systems. . Fannie Mae sellerl/servicers now offer loan products to· three groups of credit-impaired borrowers under two new programs. Fannie Mae's Expanded Approval program allows lenders to approve borrowers who would have been formerly classified as 'Refer with Caution' ... by Fannie Mae's Desktop Underwriter (DU) .... The Expanded Approval products are recent innovations..." Roid, it was this automated approach to risky loan approval that the GSEs pioneered that the rest of the industry then followed. And each turn of the crank allowed another historic lending benchmark to be ignored. Bad LTV? No problem. Can't document your income? No problem. Not enough for a downpayment? No problem. GSE's had a program to solve all of those. The HUD paper wrote in 2002: "In fact, Fannie Mae and Freddie Mac recently expanded their product line to serve credit-impaired borrowers. " And notice that the GSE's spoke of these ever-increasing products as "innovations." And sadly, while they told congress they were helping those that needed the most help, in fact these new products weren't always being used to help those that needed it most. Roid writes: " The data and history are quite clear that the claim that the GSEs were the moving parties behind the mortgage crisis is untenable on the facts. " And yet, the SEC still goes after the GSEs. Hmmm. And the big banks remain unscathed. Odd. Just odd. You say A, but the government oversight groups say B. Who should I believe? Hmm.

- seattleeng

October 26, 2012 at 12:22pm

Seattle said: "Yes, but prior to CRA, a bank couldn't just participate in the "flow." A bank had to hold a portion of the actual loan AFTER the transaction was complete. So, they were motivated to ensure the LONG TERM health of the loan was solid. AFter CRA, banks were allowed to almost completely dump the risk (for non prime loans) onto the lap of the GSE (and taxpayer)." I'm having trouble making sense of this remark. The CRA has a long, complex history dating back over 30 years, and I'm no expert, but I have never found anything in the law itself that would support the above comment. Can you refer us to a provision of the law that actually created this dynamic? This is not one of those citation demands made just for the sake of being a pain in the ass; I sincerely would like to know if I'm missing something. It seems unlikely, because the purpose of the bill wasn't to provide a pipeline for bad loans, but merely to ensure that good loans were being made to all neighborhoods. But hey, I'm open to being shown the error of my ways (that makes one of us). Here's another one I can't make sense of: "Why don't you outline for the class how private banks would have loaned their own money to these suspect borrowers if the GSE weren't there? Hint: They would not have." Sure they would have, because they didn't need a specifically government agency as a buyer, they just needed any buyer. How do you explain all the sophisticated repackaging of these loans if they had a guaranteed governmental buyer? (Read up on tranching, for example, if you don't know what I mean by 'sophisticated repackaging'.) Here's a hint: if a seller is going to extraordinary lengths to make their product more appealing to potential buyers, they probably don't already have a guaranteed sale.

- Fishpeddler

October 26, 2012 at 4:03pm

More nonsense from seattle. No other word for it. The CRA has absolutely nothing to do with the ability of banks to securitize mortgage loans and sell them off. Banks have been originating selling loans for decades, but the technique of securitization allowed them to sell much smaller tranches to a much wider market and the CDOs allowed them to make false claims about the security of what they were selling. None of this has anything at all to do with GSEs or the government. The government and the GSEs did not design it, specifically authorize it, invent it, lead it, or do it until long after the private market had created and sold trillions. Those are the facts. All the conspiratorial Hmmming does not change the simple fact that the bulk of the subprime mortgage debt was securitized by the private market before the GSEs got into the act. They did not lead, they followed. This is well documented. Get this simple part of the story straigh, seattle: The vast bulk of mortgage crap was generated by the private market and most of that occurred before the GSEs got in the game. The GSEs did not travel backwards in time to teach the private market how to securitize these loans, slice them up, back the with dubious credit default swaps, and sell them off to the market. That is simply not what occurred, unless you believe in time travel. All the rest about the bad things the GSEs did do or the reasons for SEC lawsuits is completely irrelevant to the fundamentals -- the private market created securitized sub-prime mortgages and sold trillions of them, the vast majority of the total bad debt generated, with no help, guidance, or inspiration from the GSEs.

- roidubouloi

October 26, 2012 at 4:19pm

Roid writes: " The vast bulk of mortgage crap was generated by the private market and most of that occurred before the GSEs got in the game. " You mean it was originated by the private markets via the sleaze merchants Countrywide et al. They then sold them to the GSE, after fudging whatever docs were needed to meet the GSEs dwindling requirements. The GSE's bundled them, asked the raters to rate them (AAA, 'natch) and sold them to investors. Fish writes: " The CRA has a long, complex history dating back over 30 years, and I'm no expert, but I have never found anything in the law itself that would support the above comment." Then consider DoddFrank has language for "risk retention" in nonconforming mortgages and ask yourself if it wasn't needed in 1990, and why is it needed now? Hint: It was there in 1990. Just as we used to only write loans where LTV was strong, the common sense seemed to have leaked out of the system over the last 20 years. You can also look and F&F LTV ratios today versus 5-15 years ago versus 20 years ago and see a similar pattern. 1990 and today: Strong LTV required. 5 to 15 years ago? Not so much.

- seattleeng

October 26, 2012 at 6:41pm

Seattle, you are out of your friggin' mind. NOOOOOOOO. The securitized loans generated by the prviate market were NOOOOOOT sold to GSEs. The were sold to the PRIVATE MARKET. The GSE's only began to buy some of this debt in the secondary market, and still only some of it, about four years into the game IN RESPONSE TO THEIR LOSS OF MORTGAGE MARKET SHARE TO PRIVATE SECURITIZATION. Are you daft? It is a fabrication, a lie, to claim that the GSE's were the buyers of the bulk of securitized sub-prime mortgages. In the early years they bought none, in the later years, a piece, and even then the higher quality debt. NOT SOLD TO THE GSEs. NOT SOLD TO THE GSEs. NOT SOLD TO THE GSEs. What part of that very simple concept do you not understand? NOT SOLD TO THE GSEs. They did not originate this debt nor did they start buying any of it until well into the cycle, and then only a portion. Get it? Also, the GSEs do not re-sell their mortgages. The are not syndicators. They hold their mortgages and issue their own securities to finance their portfolios. The GSE bonds were NOT THE SOURCE OF PRIVATE MARKET LOSSES, because they were paid. The private market losses came FROM THE SUB-PRIME DEBT SECURITIZED BY THE PRIVATE MARKET -- ORIGINATED BY THE PRIVATE MARKET, SECURITIZED BY THE PRIVATE MARKET, AND SOLD INTO THE PRIVATE MARKET WITHOUT ANY PARTICIPATION BY GSEs. Are you really this baffled, or are you deliberately lying? I vote for the latter.

- roidubouloi

October 26, 2012 at 9:12pm

"Are you really this baffled, or are you deliberately lying? I vote for the latter." In Seattle's defense, none of this was mentioned in the op-ed by Wallison, and there is no way a person could be expected to know something that isn't covered in a WSJ op-ed. If only there were alternative sources of information. Some day there will be buildings that house vast inventories of books, and maybe there will even be a way to access information over some sort of electronic web connecting the world, but until that day... sigh.

- Fishpeddler

October 27, 2012 at 1:55am

Roid, read what I wrote: You mean it was originated by the private markets via the sleaze merchants Countrywide et al. They then sold them to the GSE, after fudging whatever docs were needed to meet the GSEs dwindling requirements. The GSE's bundled them, asked the raters to rate them (AAA, 'natch) and sold them to investors. This does not say the GSE's bought securitized packages. It says the GSE's bought mortgages (just as they always have) and then worked with Wall Street to securitize them themselves and offer those products to investors.

- seattleeng

October 27, 2012 at 12:39pm

Instead of repeating the same lies, seattle, go read at least something that you don't copy off of some right-wingnut libertarian crackpot website. Even wikipedia. Below is from its article on Fanni Mae. It is the private market, not the GSEs, that created the sub-prime market and undermined the underwriting standards of the GSEs in the process. The resultant over-built condition of the housing market then caused a crash. The GSEs were not blameless, but they were the tail, not the dog, late in the game and but a fraction of the total of lousy debt. The crisis was created by uncontrolled private banks syndicating what amounted to fraudulent loans -- with NO participation by the GSEs in origination, credit guarantees, or distribution -- to the tune of at least $1 trillion. No matter how many times you repeat your invented history, it is still invented history. Nor does the fact that you repeat it incessantly retrieve it from being a lie. Try to read and understand. It is not really very complicated. Nor is the narrative very controversial as to its major elements. Wikipedia merely repeats what is now well understood and thoroughly documented by a multitude of studies. _______________________________________________________ 2000s In 2000, because of a re-assessment of the housing market by HUD, anti-predatory lending rules were put into place that disallowed risky, high-cost loans from being credited toward affordable housing goals. In 2004, these rules were dropped and high-risk loans were again counted toward affordable housing goals.[25] The intent was that Fannie Mae's enforcement of the underwriting standards they maintained for standard conforming mortgages would also provide safe and stable means of lending to buyers who did not have prime credit. As Daniel Mudd, then President and CEO of Fannie Mae, testified in 2007, instead the agency's underwriting requirements drove business into the arms of the private mortgage industry who marketed aggressive products without regard to future consequences: "We also set conservative underwriting standards for loans we finance to ensure the homebuyers can afford their loans over the long term. We sought to bring the standards we apply to the prime space to the subprime market with our industry partners primarily to expand our services to underserved families. "Unfortunately, Fannie Mae-quality, safe loans in the subprime market did not become the standard, and the lending market moved away from us. Borrowers were offered a range of loans that layered teaser rates, interest-only, negative amortization and payment options and low-documentation requirements on top of floating-rate loans. In early 2005 we began sounding our concerns about this "layered-risk" lending. For example, Tom Lund, the head of our single-family mortgage business, publicly stated, "One of the things we don't feel good about right now as we look into this marketplace is more homebuyers being put into programs that have more risk. Those products are for more sophisticated buyers. Does it make sense for borrowers to take on risk they may not be aware of? Are we setting them up for failure? As a result, we gave up significant market share to our competitors."[26] On January 26, 2005, the Federal Housing Enterprise Regulatory Reform Act of 2005 (S.190) was first introduced in the Senate by Sen. Chuck Hagel.[27] The Senate legislation was an effort to reform the existing GSE regulatory structure in light of the recent accounting problems and questionable management actions leading to considerable income restatements by the GSE's. After being reported favorably by the Senate's Committee on Banking, Housing, and Urban Affairs in July 2005, the bill was never considered by the full Senate for a vote.[28] Sen. John McCain's decision to become a cosponsor of S.190 almost a year later in 2006 was the last action taken regarding Sen. Hagel's bill in spite of developments since clearing the Senate Committee. Sen. McCain pointed out that Fannie Mae's regulator reported that profits were "illusions deliberately and systematically created by the company's senior management" in his floor statement giving support to S.190.[29][30] At the same time, the House also introduced similar legislation, the Federal Housing Finance Reform Act of 2005 (H.R. 1461), in the Spring of 2005. The House Financial Services Committee had crafted changes and produced a Committee Report by July 2005 to the legislation. It was passed by the House in October in spite of President Bush's statement of policy opposed to the House version.[31] The legislation met with opposition from both Democrats and Republicans at that point and the Senate never took up the House passed version for consideration after that.[32] [edit]The mortgage crisis from late 2007 Following their mission to meet federal Housing and Urban Development (HUD) housing goals, GSEs such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have striven to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment... and the continuous availability of mortgage credit under a wide range of economic conditions." (HUD 2002 Annual Housing Activities Report) Then in 2003-2004, the subprime mortgage crisis began.[33] The market shifted away from regulated GSE's and radically toward Mortgage Backed Securities (MBS) issued by unregulated private-label securitization conduits, typically operated by investment banks. As mortgage originators began to distribute more and more of their loans through private label MBS's, GSE's lost the ability to monitor and control mortgage originators. Competition between the GSEs and private securitizers for loans further undermined GSEs power and strengthened mortgage originators. This contributed to a decline in underwriting standards and was a major cause of the financial crisis.[34] Investment bank securitizers were more willing to securitize risky loans because they generally retained minimal risk. Whereas the GSE's guaranteed the performance of their MBS's, private securitizers generally did not, and might only retain a thin slice of risk.[34] Often, banks would offload this risk to insurance companies or other counterparties through credit default swaps, making their actual risk exposures extremely difficult for investors and creditors to discern.[35] The shift toward riskier mortgages and private label MBS distribution occurred as financial institutions sought to maintain earnings levels that had been elevated during 2001-2003 by an unprecedented refinancing boom due to historically low interest rates. Earnings depended on volume, so maintaining elevated earnings levels necessitated expanding the borrower pool using lower underwriting standards and new products that the GSE's would not (initially) securitize. Thus, the shift away from GSE securitization to private-label securitization (PLS) also corresponded with a shift in mortgage product type, from traditional, amortizing, fixed-rate mortgages (FRM's) to nontraditional, structurally riskier, nonamortizing, adjustable-rate mortgages (ARM's), and in the start of a sharp deterioration in mortgage underwriting standards.[33] The growth of PLS, however, forced the GSEs to lower their underwriting standards in an attempt to reclaim lost market share to please their private shareholders. Shareholder pressure pushed the GSEs into competition with PLS for market share, and the GSEs loosened their guarantee business underwriting standards in order to compete. In contrast, the wholly public FHA/Ginnie Mae maintained their underwriting standards and instead ceded market share.[33] The growth of private-label securitization and lack of regulation in this part of the market resulted in the oversupply of underpriced housing finance[33] that led, in 2006, to an increasing number of borrowers, often with poor credit, who were unable to pay their mortgages - particularly with adjustable rate mortgages (ARM), caused a precipitous increase in home foreclosures. As a result, home prices declined as increasing foreclosures added to the already large inventory of homes and stricter lending standards made it more and more difficult for borrowers to get mortgages. This depreciation in home prices led to growing losses for the GSEs, which back the majority of US mortgages. In July 2008, the government attempted to ease market fears by reiterating their view that "Fannie Mae and Freddie Mac play a central role in the US housing finance system". The US Treasury Department and the Federal Reserve took steps to bolster confidence in the corporations, including granting both corporations access to Federal Reserve low-interest loans (at similar rates as commercial banks) and removing the prohibition on the Treasury Department to purchase the GSEs' stock. Despite these efforts, by August 2008, shares of both Fannie Mae and Freddie Mac had tumbled more than 90% from their one-year prior levels. On Oct 21, 2010 FHFA estimates revealed that the bailout of Freddie Mac and Fannie Mae will likely cost taxpayers $224–360 billion in total, with over $150 billion already provided.[36

- roidubouloi

October 27, 2012 at 3:49pm

It was an obvious lie by Romney, notwithstanding all the huffing and puffing by Nicomachus to justify it. And that is how it is understood. The objections of whatever his name is up there that there was no bankruptcy according to law are frankly ridiculous. No court violated any law. Lenders into a bankruptcy get to make demands on the interested parties that the latter can either accept or reject, suffering the consequences either way. If they don't like it, they can put up the money themselves. Of course, this the creditors were certainly not willing to do. Hence, they chose to accept the terms offered to them by the Federal government. That is no different than any other work-out. What is most important about this incident is that the Times is now reporting a backlash against Romney's disgraceful ad. With that, Romney has likely killed any slender chance he had in Ohio. That is all I really care about. Nicomachus can argue his points in defense of Romney, the failed Republican candidate, until November 2013 for all anyone should care. The consequences of Romney's lie are what matter, and they are all to the good.

- roidubouloi

October 29, 2012 at 9:37pm