Nothing To Fear But Fearlessness Itself? 660
theodp writes "In a post last August, Robert X. Cringely voiced fears that Goldman Sachs and others were not so much evil as 'clueless about the implications of their work,' leaving it up to the government to fix any mess they leave behind. 'But what if government runs out of options,' worried Cringely. 'Our economic policy doesn't imagine it, nor does our foreign policy, because superpowers don't acknowledge weakness.' And now his fears are echoed in a WSJ opinion piece by Peggy Noonan titled 'We're Governed by Callous Children.' She writes, 'We are governed at all levels by America's luckiest children, sons and daughters of the abundance, and they call themselves optimists but they're not optimists — they're unimaginative. They don't have faith, they've just never been foreclosed on. They are stupid and they are callous, and they don't mind it when people become disheartened. They don't even notice.' With apologies to FDR, do we have nothing to fear but fearlessness itself?"
Re:California (Score:5, Informative)
I've recently read on another forum that California is also hampered by a large negative balance of payment [calinst.org] between it and the federal government
"Last year, Californians sent nearly $20 billion more to Washington in federal taxes than the state received back in federal spending. The state’s 1998 deficit of $19.4 billion marked the largest such imbalance for any single state in the history of the nation, eclipsing the previous record of $14.3 billion, set also by California in 1997"
So it seems California is bankrolling the federal level even while going bankrupt itself.
Re:Threaten to stop the wheel of the world? (Score:3, Informative)
Sibling poster is fairly accurate. John Gault is an idiotic caricature created by someone with zero understanding of economics or human nature.
Re:Cringley !Economics (Score:3, Informative)
Some trading is parasitic on investing. There are those who have higher rate market access than you and just profit take on every transaction you try to make. That's not really serving anyone.
But a lot of trading activity is not so impressively unhelpful.
Re:It's not fearlessness that's the problem (Score:1, Informative)
Uh, Reagan was. That's how the system works: the President sends Congress a budget. There's negotiation from there, but it starts with the President.
Re:Why should we be surprised (Score:2, Informative)
It's ridiculous when GM assembly line workers expect health care in perpetuity.
Well, no. When it is part of a signed contract negotiated by GM management and part of the total compensation offered to the workers, it is perfectly reasonable to expect GM to live up to the obligations GM agreed to.
The problems of GM have been long in the making. The fundamental problem for GM is that they aren't making much money selling cars.
GM needs to improve its margins, get costs under control, and make their cars more desirable to the customer. Government assistance isn't going to magically make that happen.
Re:Come to California... (Score:5, Informative)
It's funny how that didn't happen in the 1800s. We had all kinds of parties in Congress, like the Anti Masonic, Nullifier, Whig, Conservative, Law and Order, American, Free Soil, Greenback, Labor, Populist, Liberal Republican, and so on.
Today's Congress has none of them. Not one. What's changed? The Lie. "Don't vote third party," is the lie. Third parties won seats in Congress in the past and most-certainly can win seats today.
Re:She's without hope, so we must be? (Score:2, Informative)
Well then relax, because government isn't nearly in control of everything. Big business prevails.
Look at the numbers. ExxonMobil reported 2008 revenues of nearly $373 billion and a profit of almost $41 billion [cnn.com]. The EPA's 2010 budget is $10.5 billion [gpoaccess.gov].
If the EPA devoted itself entirely to policing this one oil company, ExxonMobil could outspend it three to one -- and still turn a profit!
It's not just multi-nationals. United Health projects profit of $5 billion this year [unitedhealthgroup.com]. Four states total budget is less than this. [statehealthfacts.org]
Re:atlas yawned (Score:3, Informative)
Another interesting article [miamiherald.com] today about Goldman Sach's role in the subprime mortgage fiasco. A former Goldman exec has a tell all book out coming out "The 88 Biggest Lies on Wall Street". You have to take him with a grain of salt because he is probably a scumbag and has just turned to profiteering through his tell all book but I like this money quote:
"It's not just unethical," Talbott said of the chain of profiting subprime players extending from real estate appraisers to Wall Street. "It's totally criminal."
It is entertaining to see one of Goldman's own turn on them, it doesn't happen often.
From mortgage brokers, to appraisers, rating agencies and the big Wall Street banks that securitized all that sub prime garbage as AAA rated bonds, chances are EVERY one involved knew exactly what they were doing, that it was criminal, and it would eventually collapse. They were just pocketing as much money as they could as quickly as they could so they could cash out before the house of cards fell. It was massive organized crime and it was basically the largest Ponzi scheme in histroy, much bigger than Madoff and noone seems to be going to jail for it. Maybe EVERY is a little harsh, it appears some people at Merril Lynch, Citigroup and AIG had absolutely no idea the hole they were digging for themselves and their company though chances are they all still cashed out rich before their companies imploded. I wager Goldman knew exactly what they were doing, and in particular had billions in hedges through AIG to cover them if those bonds went to crap. Unfortunately AIG had hundreds of billions of those derivative contracts and absolutely no capital to cover them so if the government hadn't bailed out AIG, and funneled billions to Goldman Sachs through AIG with no strings attached Goldman would have ended in bankruptcy. Fortunately for Goldman a former Goldman CEO was treasury secretary when the shit hit the fan so he could steer billions to Goldman at tax payer expense to keep them afloat.
Re:Money for Something (Score:2, Informative)
Only in the same sense that anyone who walks in an "athlete".
We live in a society where a small class of aristocrats -- the top of the L-curve [lcurve.org] -- control the economic resources.
Re:Threaten to stop the wheel of the world? (Score:3, Informative)
I was going to reply with something along the lines of "You could not have read _Atlas Shrugged_ if you are willing to make that statement publicly -- or if you did read it, it was with a passion to NOT understand it."...
...but then you misspelled his name ('Galt'), and so I knew you were talking out of your ass. May the next life you lead be a slightly less dishonest one.
(Oh, and *plonk*)
Re:It's not fearlessness that's the problem (Score:4, Informative)
As the context is discussion of the Republican Party, I mean the American definition of "social conservative". Mostly the "religious nuts" you mention: anti-feminist, pro-death-penalty, against the teaching of evolution, against sex education in the schools, against legal recognition of same-sex marriages, supporting censorship of "indecent" material, and usually in favor of state establishment of religion as long as it's Christianity. The old "Moral Majority" and the "Christian Coalition" would be the exemplars.
Re:Come to California... (Score:5, Informative)
America is a Republic. So No to the first question.
In the second question you seem to miss the Electoral College in both fact and concept. The President is elected by a group that may vote as they please (not necessarily as they were expected to vote by those that elected them). This non direct coupling applies to all levels of government --once elected they may chose to do things much differently then you believed they would when you voted for them. So a yes as to vote, but at best a maybe on 'does who I voted for actually do as I expected him/her to, once in office' --the implied part of the second question.
These sort of yes/no questions are rarely productive, except to frame the answer in a way the questioner wants.
Example: "Have you stopped beating your wife? Answer yes or no. --either way you answer you confess to being a wife beater.
For most people political issues ARE emotional issues. This is possibly regrettable, but one should learn to deal with reality, if you want to change that reality into your own personal version.
If Sarah Palin is both a nitwit, and smarter then most people, then is she not of above average intelligence and therefore as qualified as anyone (and apparently more qualified then most) to have an opine? Just asking --it's rhetorical --and intentionally side steps Palin's actual value or lack thereof.
Re:Threaten to stop the wheel of the world? (Score:2, Informative)
No, we are not, not in constant dollars per capita. I suggest you stop getting your tax information from the teabaggers.
Federal income tax burden is near its lowest level in three decades [washingtonpost.com]: the average American family pays about 9% of its income in income taxes. The peak was 12% in 1981. [washingtonpost.com] Meanwhile state and local tax burden per capita hasn't changed much, and is now slightly lower then its peak [taxfoundation.org].
And Americans are, compared to almost every other industrialized nation, under-taxed. [forbes.com] The only countries with comparable standards of living with lower tax burdens are Japan and Switzerland. (Nations with low defense spending that don't try to run empires...)
Because conservatives have created the myth that taxes are too high, and so we cut taxes on the aristocracy -- shifting the burden to those who work for a living. Restore those taxes, end the pointless wars in Iraq and Afghanistan, and we can start climbing out of the hole that decades of Republican borrow-and-spend policies have given us.
Re:It's not fearlessness that's the problem (Score:2, Informative)
>>>Actually almost all the spending of the last 30 years was done by the idiots reagan and bush jr.
I don't accept your premise. First-off why only limit the last 30 years? Because you know we only had one Democrat during that time (Clinton) and he inherited a booming economy. Let's look at the last 100 years, so we can include the big spenders like Woodrow Wilson who forced us into a war the American people did not want, FDR who spent money like crazy (and imprisoned farmers who were simply trying to grow corn/feed their families), plus Kenndery and LBJ and Carter.
And finally Barak Obama who is going to increase our national debt from $130,000 per home to $200,000 by the end of second term (2016). Even Reagan never spent like that.
Re:Come to California... (Score:4, Informative)
And here is the 1999 New York Times article [nytimes.com] matter-of-factly reporting on Fannie Mae easing credit to aid mortgage lending:
Re:/facepalm (Score:3, Informative)
The first and foremost such "investors" were Fannie Mae and Freddi Mac — then-quasi (and now fully) government owned corporations, pressured by the government [nytimes.com] to lower the requirements on the mortgages that could be off-loaded to them by the private banks.
That pressure to buy ever-riskier loans was what caused these "investors" to allow the banks sell ever-riskier mortgages. The Democrats were doing it "help the poor" of course — in their attempts to make the poor richer, they made the rich poorer...
What we blame — with figures, dates, and names — are the misguided attempts by the government to "do good" (such as "kickstarting" something for the "low income"). It never works, and it always makes things worse. That it is also anti-Constitutional bothers some of as as well...
Re:Come to California... (Score:4, Informative)
And who controlled congress during the Bush spending spree before the Democrats took over congress? Who controlled congress during the reductions in deficit in the 50s-80s? It's right here [about.com]. The Democrats controlled both branches of congress right up until Reagan took the presidency and the Republicans took the senate. You can't have it both ways: you can't blame the president when it was Bush in the white house and then blame the Republicans in congress when it was Clinton who was president.
But, since you trotted out the same argument you always hear, here [bev.net] is the data that shows that on average, the deficit is reduced under democratic control of congress as well as under democratic presidents. The correlation just isn't as strong. The bottom line is that, statistically, Democratic party governments do a better job at reducing the deficit!
Re:Come to California... (Score:4, Informative)
Not to mention policies in place which coddle and encourage incompetent business practices to flourish without the need to worry about failing.
Or in other words, if you look at all those things, it's not really too hard to see where business was having it's say. I'm not sure how anybody could seriously suggest that it's anybody else but leaders of industry that were pushing the hardest for those ill conceived ideas to be put into practice and throwing a hissy fit if the Fed even hinted that interest rates might go back where they belong.
Re:Come to California... (Score:5, Informative)
"How is it that, with such easy access to information, people still think the crash had anything to do with business? "
More right wing lies.
As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.
Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.
Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height vrom 2004 to 2006.
Federal Reserve Board data show that:
_ More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
_ Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
_ Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.
In Slate, Daniel Gross, senior editor of Newsweek, lays out the right wing mantra on the financial crisis:
http://www.slate.com/id/2201641 [slate.com]
On the Republican side of Congress, in the right-wing financial media (which is to say the financial media), and in certain parts of the op-ed-o-sphere, there's a consensus emerging that the whole mess should be laid at the feet of Fannie Mae and Freddie Mac, the failed mortgage giants, and the Community Reinvestment Act, a law passed during the Carter administration. The CRA, which was amended in the 1990s and this decade, requires banks—which had a long, distinguished history of not making loans to minorities—to make more efforts to do so.
The thesis is laid out almost daily on the Wall Street Journal editorial page, in the National Review, and on the campaign trail. John McCain said yesterday, "Bad mortgages were being backed by Fannie Mae and Freddie Mac, and it was only a matter of time before a contagion of unsustainable debt began to spread." Washington Post columnist Charles Krauthammer provides an excellent example, writing that "much of this crisis was brought upon us by the good intentions of good people." He continues: "For decades, starting with Jimmy Carter's Community Reinvestment Act of 1977, there has been bipartisan agreement to use government power to expand homeownership to people who had been shut out for economic reasons or, sometimes, because of racial and ethnic discrimination. What could be a more worthy cause? But it led to tremendous pressure on Fannie Mae and Freddie Mac—which in turn pressured banks and other lenders—to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity." The subtext: If only Congress didn't force banks to lend money to poor minorities, the Dow would be well on its way to 36,000. Or, as Fox Business Channel's Neil Cavuto put it, "I don't remember a clarion call that said: Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster."
* * * * * * * *
The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren't regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glo
Re:California (Score:2, Informative)
That's how it always is with the Blue states. The biggest anti-government Red states always get the most money back from the federal government, Red states can't function without federal spending. [typepad.com]
Oh and do I need to mention Alaska's "Communist Wealth Reallocation Scheme" [wikipedia.org]?
Re:It's not fearlessness that's the problem (Score:3, Informative)
I'm afraid you're mistaken. Congress writes a budget, the President approves or vetoes it.
Google confirms it - "Who writes the Federal budget?" is a good query.
Re:/facepalm (Score:5, Informative)
This crisis could have been prevented in 2005, via Republican-led
If only Republicans had controlled Congress and the White House in 2005.
Re:Why should we be surprised (Score:3, Informative)
Indeed. We should extend this to all people who are unable to financially contribute to society. Let's start with the mentally disabled. I seem to recall that there was a plan to do this some time ago [wikipedia.org].
Try to think these things through, fascist. Libertarianism seems attractive when you are relatively self sufficient. That state may change through no fault of your own.
Re:California (Score:3, Informative)
No sir, it was given away by unions and legislated pay levels that priced US workers out of employment that was affordable by the companies in an environment where outsourcing was inexpensive and easily developed. People can pretend forever that an assembly line job is worth $20/hour, but it simply isn't and all that happened by that insistence of excessive worth is that folks in other countries now have a chance to prove it isn't so, which they are happily doing.
The only unions left that continue to extort provide local services such as electrical wiring, plumbing and so forth, because these jobs physically cannot be outsourced. There are only two ways we can get the lost jobs back.
First, we can take lower wages, lose the expectation that we are owed "a good living" because... well, just because. That will make all kinds of employees from line workers to tech support script followers hirable again, though it's a long road uphill to rebuild industry even so. It still leaves room for new value creators such as engineers of all kinds, techs who can actually do more than follow a script, programmers, architects, doctors and so on. If the companies can operate in-country and make as good a living at it as they can out-country, they will operate in-country. If they can't - and this is what the idiot unions can't seem to wrap their heads around - they won't.
Alternatively, we can go the protectionist route, close our borders to products manufactured and services provided from outside them, and earn the (further) ill will of the entire world - but this would rebuild our manufacturing base is record time. Nasty, but effective. All kinds of international repercussions await, but then again, this is the country that went to war with both Afghanistan and Iraq for no reason, continues to meddle in the middle east to extremes, particularly with regard to Israel and oil resources... and the enmity that earns us doesn't seem to bother anyone in Washington, so... it's a politically viable path.
The second way, your trip to Wham-a-lart or the car dealer will cost you a lot more. The first way, it won't. I'd think that bit of economic truth would tell people what it is we should do, but...
Right now, even stuff that comes out of Silicon Valley, as you put it, is really often coming from China, etc., and we're just making a profit off the sales end, with a few people legitimately doing design and writing software here. For instance, the iPod and Mac are quintessentially American products, right? Yeah. Made in China. That's what my iPod and Mac both say on their chassis.
I don't know what the solution has to be, or if we'll wake up soon enough to even make use of one, but I do know that management isn't really the problem. It's labor costs; and it's been labor costs for decades as the disease of entitlement took hold in the hearts of our citizens. It's management's job to keep the company on a positive balance sheet. When employee demands make that impossible, the employees have become the problem.
Re:i'm uncomfortable with this idea (Score:3, Informative)
Whether you're comfortable with a scientifically proven, many many times confirmed fact, is, you will certainly agree, irrelevant. In fact, all of your points are irrelevant, because it just happens that there are people who are born with this, seemingly neurological defect.
As for you saying that
we're all psychopathic to some degree or another
, I imagine that you seem to be, marginally at least, and tend to see everyone in that light. That is definitely your problem. You need to cope with it otherwise, than painting everyone with your brush.
Re:Come to California... (Score:1, Informative)
Give someone enough rope to hang themselves....
Awful analysis - not even self consistent. Actually, not even your analysis - just a regurgitation of something in Slate, or ... wherever you nubbed it from.
I loved this fact:
More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
Yes, those evil private lenders just lent money like crazy to anyone with a pulse - which was the real cause of everything. But wait a second, doesn't that mean that the tighter standards at F & F were more discriminatory than the "private sector"? And they are making the rules "even tougher". How can that be?
Are you implying that FMay and FMack were uninvolved in this 84% of mortgages? If so, you don't know much about finance. I guess your little article didn't tell you it's not just what F & F have in their portfolio - it is their guarantees that allowed the private sector to function the way it did. It is a lot easier to do business transactions when the implication is they are "backed by the full faith and credit of the United Stated" via a quasi-governmental organization.
It was this blind faith in the security of the mortgage market that created the lending frenzy. To them, there was no risk, so the more you lent, the more you made.
Of course it takes money, and the easiest way to get money from people is to let them think they will get more back. Since it never occurred to people to consider what might happen if property values went down, they added to the frenzy by buying products like neg-am loans when they could no longer afford to pay the asking price for a home they "just had to have".
After all, the only way property values could go down is if the government (Fanny and Freddie) ran out of money, and we all know that can't happen, right?
Re:It's not fearlessness that's the problem (Score:3, Informative)
Some laws keep out herbal solutions that could replace some pharmaceutical solutions because hundreds of years of anecdotal evidence isn't good enough.
I'm sorry, but this is wrong. If there was a natural, effective, SAFE, alternative to any medicine then that's what would get used. Do you think all the pharmaceutical companies spend all that money on R&D just for fun? If there was already a compound that did the job then they could save an enormous amount of money by just manufacturing, marketing, and selling that instead of the synthesized/synthetic solution. Herbs and supplements are "alternative medicine" because they DON'T WORK. When something DOES work it stops being "alternative medicine" and becomes simply medicine.
Re:Come to California... (Score:1, Informative)
Here's another perspective:
It's not that hard to understand what went wrong.
1) If the government leans on FM to give mortgages to higher risk folks, all the other financial institutions have to follow suit - it's called competition, and effectively the politicians based on their ideology (and not risk data) decided that everyone should be allowed a house. There's been a bias towards home ownership in the U.S. for a long time - the Clinton Administration just decided to put pressure on folks who wouldn't write bad loans.
2) Businesses had short horizons and wanted to maximize shareholder value (quarterly!) - so they wrote bad loans to people who normally wouldn't get them.
When ideology starts determining who gets what versus rational analysis the result is the same - you have a period where the discontinuity continues, and then a correction.
T A N S T A A F L
THERE AINT NO SUCH THING AS A FREE LUNCH (OR LOAN!) .
Let's take point 1 for a moment and suspend the belief that all lenders are spawned from satan, or even let's assume YOUR a lender and you followed some set of criteria.
Person A applies, you check your lending criteria and say OK I will give you this much.
Person B comes in. You check your lending criteria - and they don't meet your criteria. You deny them. At worst they don't end up with a mortgage that will be financially a huge burden (if they supplied you with accurate data). At best - they will work for a little longer, save a little more and try again.
Now let's get politicians involved.
Person C comes in - identical to Person B. You check your criteria and they fail to pass it. You think to yourself 'Oh man do I really need the hell and negative publicity of denying them a loan? Oh well it's the governments mandate gotta do it!'. So you write them the loan.
Time passes you write millions of these, then guess what? There's more defaulting on the loans. It's not rocket science.
Financial conservatives believe that you don't help people by lying to them about what they can afford because they genuinely believe that telling a person they cant afford a morgage is a better thing than giving them a mortgage they cant afford.
This doesn't mean all businesses do the right thing - many dont - but don't assume all people are evil because they aren't handing out free mortgages.
we're all schizophrenic, all manic depressive, etc (Score:3, Informative)
manic depression, schizophrenia, psychopathology, etc., are all aspect of every human being alive. its just that in most people, its below a certain threshold. above that theshold, and you begin to show qualities which put you in a category of illness
but everyone, to some degree, exhibits an ability to dampen their human empathy. if you showed parents the body of their dead child, and one retched on the spot, and the other calmly and grimly left, which is the "normal" person? is the parent who exhibited no physical revulsion a psychopath? we all process these things differently, and you have no objective, only subjective measurement for temporary or permanent empathy deficits
just look at stanley milgram's experiments where he took normal everyday people and got them to shock people to death (in simulation)
http://en.wikipedia.org/wiki/Milgram_experiment [wikipedia.org]
just with the excuse of peer pressure and following orders. so what does that mean? psychopathology is widespread?
no, it means "psychopath" is in every single one of us, and can come out under all sorts of conditions. yes, for some, it is easier conditions, but the term psychopathic behavior, in potential, and in our behavior in the past, is an accurate description of something you have done or could do under the right conditions, or me, or anyone reading these words
civilized behavior is a very thin veneer on a bunch of large bipedal monkeys. if the food supply dwindled, you watch how you and your fellow men behave. i think the majority of that behavior you would describe as psychopathic: you have to block out your ability to empathize with the plight of other people suffering if your own survival is threatened. we all can do that. the potential for psychopathic behavior is in all of us
Re:Money for Something (Score:4, Informative)
No. First, the top 5 percent own more than half [multinationalmonitor.org] -- i.e., the majority -- of all wealth. Second, most of those stocks in middle-class retirement funds are not owned by those middle-class people, they're owned by the Wall Street financial services corporations, and so are controlled by the boards of those corporations. The account holders are customers, not owners.
Uh, no. The resources used for economic production -- land, natural resources, factories, money, ideas (copyrights and patents) -- all are privately owned and controlled.
I'm not "whining" about anything, I'm pointing out that a system of centralized power is good for those who have the power, and not for the rest of us.
But several things are stopping me from being ultra-rich. First, I cannot afford to waste my time collecting dollars: I have little desire to be rich. (Prosperous, yes, of course.) But more than that, as a person of strong ethical character I see few ways to accumulate large amounts of wealth that don't involve unethical behavior. Finally, to become rich in our society it's pretty much necessary to start that way -- the U.S. has very poor intergenerational class mobility. [americanprogress.org]
What trouble? They provide no labor. They take some risk of not getting their money back, but so do people at the blackjack table. We don't consider them virtuous.
And they take more than a cut: in our capitalist system, the majority of the value created by labor is skimmed off by the investment class.
The U.S. GDP is about $14 trillion [wikipedia.org]. Our workforce is about 150 million people [bls.gov]. The average American worker creates about $93,000 worth of value a year. Do they receive a salary that reflects that? Nope. Most of that amount goes to interest, dividends, and rents paid to various investors, people who didn't do the work but reap the benefit -- and most of it goes to the aristocracy.
Re:/facepalm (Score:3, Informative)
This is a classic case of blaming the victim. It tells a very narrow part of the story, designed to draw attention away from the real problem - the Bush tax cuts.
During the Bush years, taxes were cut so much on the wealthy a flood of new capital entered the market. The return on T-bills was terrible due to the massive interest rate cuts. All of this capital was desperately seeking a haven with decent returns. Investment banks looked around and saw the mortgage market, which had consistently been rock solid due to the lending practices of the banks. Default rates were less than 2%. They started selling CDOs to pick up the slack in the T-bill market. This put enormous pressure on banks to make more loans, which caused them to loosen their borrowing standards. The existence of Fannie and Freddie were really irrelevant - it wasn't Fannie and Freddie buying the mortgages, it was other banks putting together CDOs to sell them to investment banks.
But nice try blaming the Democrats for trying to help the less fortunate. Too bad we're not buying it anymore.