NYT Still in Denial on Fannie Freddie

One of the things you need to believe if you are a card-carrying liberal is that it was greedy bankers that caused the Crash of 2008, not government housing policy.  At The New York Times they have written nary a discouraging word on the subject.  They don't want their readers to find out that it was the Community Reinvestment Act that bullied bankers into making sub-prime loans and Fannie and Freddie that securitized them.

Lately, things have been a bit precarious, because Gretchen Morgenson, an NYT reporter, wrote Reckless Endangerment with Joshua Rosner.  It dared to point the finger at folks like former Fannie CEO James A. Johnson, former campaign manager to Fritz Mondale.

But good old faithful Joe Nocera is still plugging the Who Me? line.

Fannie and Freddie got into subprime mortgages, with great trepidation, only in 2005 and 2006, and only because they were losing so much market share to Wall Street... The reality is that Fannie and Freddie followed the private sector off the cliff instead of the other way around.

Peter J. Wallison, who wrote a dissent to the Financial Crisis Inquiry Commission, contests Nocera, arguing that Freddie mis-reported the number of its sub-prime loans for years.

Anyway, if Fannie and Freddie were late to the party, how come that they are in receivership, expecting to cost the taxpayer something like $200 billion in losses, when "Wall Street" is back up and running.  It suggests that the Fannie Freddie balance sheet was a lot worse that the average megabank.  And why would that be?

And if you want an insider look at Fannie and Freddie, this extraordinary call to the Rush Limbaugh radio program from "Laurie" might give you a clue.

You know, in the late '90s and early 2000s when real estate prices were sharply on the rise, you know, anywhere between '99 and '03 depending upon what part of the country you lived in, housing prices were on the rise dramatically, and there was a lot of pressure at Fannie and Freddie to get mortgages out the door.

We had a representative from FHA, HUD, Fannie and Freddie, all of which visited this mortgage broker's office. And when Fannie began this idea of packaging these things as securities and grouping them together, you'll find that the number of mortgage brokers for residential mortgages in the country skyrocketed because they were suddenly getting what we call wholesale lines of credits from banks. So mortgage company A or B goes to the bank and he gets a $15 million line of credit called a wholesale line. He fills that line up with mortgages and then they're guaranteed, they're bought off. Fannie and Freddie buy them up immediately, repackage them, or leave them whole and send them out to places like Lehman Brothers.

 Pressure at Fannie and Freddie?  To get mortgages out the door?

The problem with our liberal friends insisting that there is nothing to see here is that it blinds them to what is really going on in the world.  When you refuse to credit news that you don't like, there is a penalty.  One day you wake up and find that you have been totally blindsided.