Removing the restrictions in 1999 which allowed financial institutions to package the mortgages into these backed mortgage security investments was a much bigger problem. It created a hyper demand for bad mortgages with no rules. Mortgage companies would lie and these financial instituions did not care because they peddled them off to unknowing investors. Fannie and Freddie were bad.
“It is completely unclear why the government needs to or should bailout insurance companies, investment banks, hedge funds and foreign companies.”
Because...just because. Because their minions are rife in the Treasury Dept., the Administration. Because they give millions in political contributions and promises of high paying sinecures after leaving office.
I like your point about the restrictions. But there are those that would say if you only deregulated more and allowed these people to invent more mysterious paper value we would all get rich Rich RICH! The same people who claimed we could “grow out of the deficit”.
Freddie Mac and Fannie Mae are the primary cause of the mortgage crisis.
Not true. These comprise a small fraction, the makority are credit derivative swaps.
From what I understand, they are basically bets/insurance that rates will or won’t go up or down.
So the banks and institutions made a humongous amount of bad bets. And now the S is HTF.
See my post 65.
http://www.freerepublic.com/focus/f-news/2089498/posts