YOU CAN'T BLAME FANNIE & FREDDIE FOR THIS MESS

Although the wingnuts have been trying to sell this piece of agit-prop. Barry Ritholtz found a nice article by Daniel Gross in NEWSWEEK that has some good points:

Subprime Suspects
The right blames the credit crisis on poor minority homeowners. This is not merely offensive, but entirely wrong.
By Daniel Gross Newsweek Web Exclusive
Oct 7, 2008 Updated: 12:58 p.m. ET Oct 7, 2008


The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren't regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn't apply. ... Nor did the CRA force the credit-rating agencies to slap high-grade ratings on subprime debt.

I await the Krauthammer column in which he points out the specific provision of the Community Reinvestment Act that forced Bear Stearns to run with an absurd leverage ratio of 33:1, that instructed Bear Stearns hedge-fund managers to blow up hundreds of millions of their clients money, and that required its septuagenarian CEO to play bridge while his company ran into trouble.

Did AIG plunge into the credit-default swaps business with abandon because ACORN members picketed its offices?

Lending money to poor people doesn't make you poor. Lending money poorly to rich people does.

Gross also mentioned that the CEO of Lehman Brothers was asked by a Congressional wingnut if Lehman's exposure to Fannie & Freddie bad paper had a part in Lehman's collapse. Here's the exchange¹:

REP. MICA: What was Lehman Brothers' exposure to the debt of Fannie Mae and Freddie Mac? And what role did their collapse play in precipitating some of your financial troubles?

MR. FULD: Our --

REP. MICA: Did it matter?

MR. FULD: Our exposure to both Fannie Mae and Freddie Mac was de minimis, sir.

¹Federal News Service

October 6, 2008 Monday

PANEL II OF HEARING OF THE HOUSE OVERSIGHT AND GOVERNMENT REFORM COMMITTEE;
SUBJECT: THE CAUSES AND EFFECTS OF THE LEHMAN BROTHERS BANKRUPTCY;
CHAIRED BY: REPRESENTATIVE HENRY WAXMAN (D-CA) WITNESS RICHARD FULD, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER, LEHMAN BROTHERS HOLDINGS

SECTION: PRESS CONFERENCE OR SPEECH

LENGTH: 16936 words

PANEL II OF HEARING OF THE HOUSE OVERSIGHT AND GOVERNMENT REFORM COMMITTEE SUBJECT: THE CAUSES AND EFFECTS OF THE LEHMAN BROTHERS
BANKRUPTCY CHAIRED BY: REPRESENTATIVE HENRY WAXMAN (D-CA) WITNESS RICHARD FULD, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER, LEHMAN BROTHERS HOLDINGS TIME: 12:37 P.M. EDT DATE: MONDAY, OCTOBER 6, 2008