I think this quote from Sullivan's piece illustrates the opposite of Sullivan's conclusions stated less than a paragraph later (and highlights Elmo's point):
Quote:
I have been originating loans for private lenders since 2003. More than 95% of all of my loans have ultimately been insured by Fannie or Freddie. So I have had a front-row seat as to how they have operated over the years. The Media Matters piece misses the mark. Here is an excerpt of your "money quote":
[Bloomberg] claims Fannie Mae and Freddie Mac 'made a bunch of loans' even though they (1) do not make loans, and (2) were backing out of insuring subprime loans as private, unregulated firms rushed into the derivatives casino.
While it is true the GSEs do not make loans, they establish the underwriting rules. Lenders underwrite to these standards. This is an important point that is glossed over. From 2003 until 2008, the GSEs relaxed their underwriting standards. They increased acceptable debt-to-income ratios, reduced minimum down payments and credit scores, and almost eliminated the need for documentation for some loans. By 2007, the GSEs were insuring "alt-A" loans, or loans with low- or no-documentation, but with average to above-average credit scores. They were NOT backing out of insuring subprime loans. Just the opposite was occurring - they were backing in, as they watched their market shares slip.
If an entity is told by the Gov't what rules to make, and they do so, then they insure the vast majority of the loans (with Federal backing) what incentive is there to do other than follow those rules? The Gov't essentially made the rules and insured the results what's the worry for me?
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"Dress cops up as soldiers, give them military equipment, train them in military tactics, tell them they’re fighting a ‘war,’ and the consequences are predictable." —Radley Balko
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