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This talking point has been debunked for years. It's a special favorite of Barry Ritholtz at 'The Big Picture' blog. He observes, empirically, that most sub-pri
by pjmorris 8y ago
This talking point has been debunked for years. It's a special favorite of Barry Ritholtz at 'The Big Picture' blog. He observes, empirically, that most sub-prime lending during the crisis was done by banks that weren't required to do so.
EDIT: To substantiate and cite, "Nearly $3 of every $4 in subprime loans made from 2004 through 2007 came from lenders who were exempt from the law (CRA)." [0]
[0] http://ritholtz.com/2009/06/most-subprime-lenders-werent-covered-by-cra/ http://ritholtz.com/2009/06/most-subprime-lenders-werent-cov...
- Isamu 8y agoThis was a vast potential market and Fannie Mae proved you could get away with serving it, the sky didn't fall for a number of years. So other banks jumped on board. Are you saying they would have taken on this risk if the federal government hadn't moved first? I think there is a clear cause and affect.
- pjmorris 8y agoIf they'd taken the same risks that Fannie and Freddie took, they'd have had similar results, and the market may well have gone on functioning as it had before. "Similarly, the total credit losses incurred by the GSEs are about one-fourth those incurred about by private label mortgage securitizations, which are packaged and sold by Wall Street." [0] The private banks took greater risks and wound up with worse performance. [0] http://ritholtz.com/2013/03/the-big-lie-annotated-an-aei-history-of-the-financial-crisis/ http://ritholtz.com/2013/03/the-big-lie-annotated-an-aei-his...