Federal Reserve Raises Interest Rates By 25 Basis Points

[Toddsterpatriot]

Wall Street began moving into the subprime business in a large way in the early Oughts. This really bit into Fanny and Freddy's business, because the GSEs were restricted to making prime loans while Wall Street was going gangbusters with derivatives and subprime loans.

So then the GSEs started moving into the subprime business and buying CDS. They were the followers, not the leaders.

Nevertheless, the GSEs lost their domination of the secondary mortgage market. By 2005, their market share had shrunk to something like 30 percent.

Suddenly, the secondary mortgage market wasn't boring any more. It was flashy. It was the shit. It was hookers and blow for everyone!

In order to steal more market share from the GSEs, there had to be a transfer of ownership of our politicians. The GSEs had totally owned them for decades, but then Wall Street began donating large sums to EVERY politician. Not just Republicans. After all, Chuck Schumer is the Senior Senator from New York, which is where Wall Street is, and so he raked in YUGE sums from the broker-dealers, too.

Wall Street gave our politicians a narrative. A narrative that, if you were paying attention, made our politicians look schizophrenic.

The narrative we were suddenly given around 2004 or so was that the GSE portfolios were getting too big. They were making too many loans. Our Republican President at the time said their portfolio posed a "systemic risk", and they needed to slow down. The Democrats, whose turn it was to wear the Party of No hat, disagreed.

In some circles, this Republican President is portrayed as a hero. "He tried to stop the runaway train, but that fag Barney Frank got in his way!"

It's a tidy story, but it is total bullshit.

The part about Frank wanting the train to keep going is true, but the part about the President trying to stop the train is total bullshit.

You see, that Republican President had never been owned by the GSEs. And while he was trying to rein them in, he was very busy greasing the wheels of that train for Wall Street.


The Republican President did everything he could to relax the underwriting laws of the Universe so Wall Street could keep on building their CDOs and reaping their fees.

Here's one of the worst deregulations:
Final Rule Alternative Net Capital Requirements for Broker-Dealers That Are Part of Consolidated Supervised Entities Rel. No. 34-49830 June 8 2004




Bush's SEC voted unanimously in 2004 to waive the net capital rule for the 5 biggest broker-dealers. That waiver led directly to the demise of those broker-dealers.

All five of the broker-dealers who were given that extra special treatment by the SEC no longer exist as independent companies or converted into bank holding companies so they could be bailed out.

Bear Stearns was the first to go under. Then Lehman Brothers went under. Then Merrill Lynch went under.

Goldman Sachs and Morgan Stanley converted to bank holding companies so they could receive bailout money. Goldman was also bailed out by former Goldman Sachs CEO, Hank Paulson, who was Bush's Secretary of Treasury. Goldman Sachs received 100 cents on the dollar for their CDS's from AIG.

Wall Street began moving into the subprime business in a large way in the early Oughts. This really bit into Fanny and Freddy's business, because the GSEs were restricted to making prime loans while Wall Street was going gangbusters with derivatives and subprime loans.

That's awful!

Starting in the 90s, how many crappy mortgages did HUD force Fannie and Freddie to buy?

In some circles, this Republican President is portrayed as a hero.

He was awful! He made Fannie and Freddie buy 55% subprimes up from 50% under Clinton.