Tuesday, January 12, 2010

Fannie Mae/Feddie Mac Is Worse Than You Think.

It seems that aside from bad judgment, there was a fair amount of actual fraud.

It seems that Fannie Mae and Freddie Mac--the U.S. government, in effect--"routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A...." The much-reviled Wall Street bankers relied on those representations by agents of the federal government when they bought and sold securities backed by those misrepresented mortgages.

Qualitatively, this is not quite as bad as Bernie Madoff's Ponzi scheme, but it is worse than anything Enron did. Quantitatively, it caused financial devastation compared to which Enron and Madoff are barely grains of sand in the ocean. So, wouldn't one expect our reporters to show a little curiosity? Silly question, perhaps: mainstream reporters don't like where that trail leads. Also, to be fair, most of them are not smart enough to understand it.



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