Re: Demand that US presidential electors investigate Obama's eligibility

Rich Webb wrote:
On Fri, 05 Dec 2008 20:05:34 GMT, James Arthur <bogusabdsqy@xxxxxxxxxxx>
wrote:

bill.sloman@xxxxxxxx wrote:
On 4 dec, 20:15, Richard The Dreaded Libertarian <n...@xxxxxxxxxxx>
wrote:
On Thu, 04 Dec 2008 11:16:47 +0000, Pomegranate *** wrote:
Some of you septics are just unbelievable.
"septics?" ;-)
Cockney rhyming slang - septic = septic tank = Yank

...

The Bush administration has done untold damage to the USA and the rest
world. Anti American feeling has increased dramatically over the past 8
years and with it global terrorism. To cap it all their policies of
financial de-regulation...
WRONG! It has been excessive regulation and socialism, perpetrated by
lunatics, that caused the mess.
I suspose a Liberation could believe that.

Back in the real world, the banks made home loans to people who
couldn't pay them back - which is stupid - then packaged up these
loans and sold them on to other financial instituions as if they were
the kind of home loan that will eventually be paid off - which is
fraud.
You have almost no understanding of the matter, that's clear.

Freddie and Fannie, government-sponsored enterprises, CREATED and
SOLD such cheesy investments as you complain about, covering about
half of the total mortgages in the country. All under the
direction of your beloved central-planning committee.

(That's why people bought them--because Freddie and Fannie
guaranteed them, and that's why F&F are in the dirt.)

This is so silly that it almost defies description. The *definition* of
a subprime loan is precisely a loan that doesn’t meet the requirement,
imposed by law, that Fannie and Freddie buy only mortgages issued to
borrowers who made substantial down payments and carefully documented
their income.

Please do your homework. Start with Krugman (whose blog supplied the
definition above) and Calculated Risk, which provides the insight below.

Well the first obvious question would be: "If Freddie and Fannie
only dealt in 1rst quality financial instruments, how could they
possibly suffer such losses, and why were they the first institutions to
fail?"

Several reasons, actually.

But, if you don't believe Freddie and Fannie participated in the
meltdown, you don't have to wonder...

Here, read it directly, in Freddie's 2007 Annual Report:
http://www.freddiemac.com/investors/infostat/pdf/info2008.pdf

"Freddie Mac is a stockholder-owned company chartered by Congress
in 1970 to stabilize the nation's residential mortgage markets
and expand opportunities for homeownership and affordable
rental housing. Our mission is to provide liquidity, stability
and affordability to the U.S. housing market.

"We fulfill our mission by PURCHASING residential mortgages
and MORTGAGE-RELATED SECURITIES in the secondary mortgage
market AND SECURITIZING THEM INTO MORTGAGE-RELATED SECURITIES
THAT CAN BE SOLD TO INVESTORS. We are one of the largest
purchasers of mortgage loans in the U.S.

"Our purchases of mortgage assets provide lenders with a steady
flow of low-cost mortgage fundings. We purchase single-family
and multifamily MORTGAGE-RELATED SECURITIES for our investments
portfolio. We also purchase multifamily residential mortgages in
the secondary mortgage market and hold those loans for investment.
We finance our purchases for our investments portfolio and our
multifamily mortgage loan portfolio, and manage interest-rate
and other market risks, primarily by issuing a variety of
debt instruments and ENTERING INTO DERIVATIVE CONTRACTS in
the capital markets." (emphasis added.)

For those who don't read code, Freddie sold derivatives and
securitized bundles. They're barred from buying sub-prime
directly, so they bought insured/hedged/gamed sub-primes ("mortgage-related securities"), stamped them with their
guarantee, then re-sold them.

"In our Single-family Guarantee segment, WE GUARANTEE THE
PAYMENT of principal and interest on single-family MORTGAGE-
RELATED SECURITIES, including those held in our retained
portfolio, in exchange for guarantee fees."
--ibid, emphasis added


They supplied these "products" to Wall Street ("investors").

They're in trouble because the stuff they guaranteed was crap.
And it's worse because they're hyper-leveraged, living 40x their
means, with Congress' assent.*

(*) Their statutory minimum capitalization ratio is 2.5%--i.e.
40:1 leverage--on assests held, 0.45%(!) on assets guaranteed.

"Because credit risk is now the front and center concern in everyone's
minds, here in this bust of the bubble, I think it's very difficult for
people to grasp the primary liquidity function of the GSEs. They have
always been about recycling lending capital and taking long-term fixed
interest rate risk off depository (and eventually non-depository)
lenders much more than about merely absorbing credit risk."

The GSEs function was to push and inflate the housing
bubble beyond what the market could've naturally supported.

Read the first few pages of this, esp. their mission statement,
and you'll understand (same link as above, repeated for convenience):

http://www.freddiemac.com/investors/infostat/pdf/info2008.pdf

Since they get funds at 1% below market rate from the Treasury,
are exempt from taxes, have 1/4th the capitalization ratio
requirement of private lenders, and have a number of other
advantages, the government-sponsored enterprises can make loans
available at cheaper-than-market rates.

Which they do, and did.

So, the GSEs spurred demand for sub-prime, and even "prime"
loans for bubble-priced houses, supporting and driving the
bubble.

Cheers,
James Arthur
.

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