Lessons from Bailout History II

On January 29, 2008, this Commentary covered lessons from previous bailouts worldwide. While I thought the topic was appropriate then, and focused on that topic in my Hudson Institute presentation of February 12, 2008, we have since seen the bailout of Bear Stearns and serious concerns about Lehman and – this week – the GSE’s, […]

Who’s afraid of GSEs?

A middle-aged couple inviting their unsuspecting guests to partake in the escalating unraveling of their existential crisis. Not quite Edward Albee, but the story of Fannie and Freddie certainly has the right ingredients for the playwright’s next Tony award winner. Terrifying, to start with, judging from the successive stampedes on the companies’ stock prices as […]

Paul Krugman: Fannie, Freddie and You

Paul Krugman says Fannie and Freddie won’t bring down the economy, and they did not cause the difficulties they are experiencing, but that doesn’t mean they don’t have problems such as under-capitalization: Fannie, Freddie and You, by Paul Krugman, Commentary, NY Times: And now we’ve reached the next stage of our seemingly never-ending financial crisis. […]

Fannie Mae and Freddie Mac

How did we get into this mess, and how do we get out of it? First, a little background: Both Freddie and Fannie were initially created by the U.S. Congress with the goal of expanding the residential mortgage market. They are for this reason referred to as “government-sponsored enterprises”, or GSEs, even though both eventually […]

More CCCP Than CCP – Danger of a Rigged OTC Casino

Just as the Patriot Act, felonious wiretapping and Iraq invasion plans were put in process prior to 9/11 by a handful of Nixonian operatives determined to reshape the United States government and Middle East geopolitical map, one begins to sense that some big financial players have carefully crafted plans to be rolled out as “solutions” […]

Who Should Bear Responsability For Mistakes Made in Assigning Credit Ratings To Securitized Debt?

In helping potential counterparties to assess the creditworthiness of individual bond issues, Credit Rating Organizations (CROs) earn profits by producing classificatory information that regulators find helpful and that investors and guarantors use to compare credit spreads on issues of risky debt. However, CRO revenues come not from the investor or regulatory side, but from fees […]