Tag Archives: perverse incentives

Fannie Mae, Freddie Mac Remain A Massive Risk To Taxpayers

How did this happen? President Clinton decreed that Fannie Mae and Freddie Mac should buy more risky mortgage loans banks were forced by politicians to extend to minority home buyers. Banks are one of the few businesses that can not … Continue reading

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NPR: How ‘Reckless’ Greed Contributed To Financial Crisis

Where’s the evidence that bankers and Wall Street financiers were any less greedy at any other time in history? Human nature does not change from year to year. Greed is just a function of human nature. The system channels how … Continue reading

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Perverse Incentives In The Housing Market

A new book blames Wall Street for the financial collapse of 2008. This book says the problem is not Fannie Mae and Freddie Mac and federal government demands that banks lend to people not credit-worthy. How could enforced lowering of … Continue reading

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What Will Life Be Like Without Fannie and Freddie?

Politicians love to meddle so much in the free market, I can’t believe the government will withdraw from the mortgage market, no matter how much damage it causes. Politicians want to appear to be helping hard-working American families achieve the … Continue reading

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Will Bank of America Buy Back Tens Of Billions Of Bad Mortgages?

There are perverse incentives in the mortgage game but none more perverse than the fact that the entity selling a loan rarely has the same incentive that the loan be repaid than the eventual owner of a loan. Citigroup and … Continue reading

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State attorney generals of Nevada and Arizona file lawsuits against Bank of America regarding mortgage modification

Countrywide is to blame! When Bank of America acquired the troubled lender, the bank went from number six in mortgage originations to number one. But much of the way Countrywide was doing business was sloppy. America’s mortgage system had some … Continue reading

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Regulating The Regulators Of Our Financial System

It’s been a year since Lehman Brothers went bankrupt. What has changed in our regulation of such financial firms? Very little. Crazy incentives induced by government regulation created a financial collapse. Perverse incentives caused lenders to lend money to people … Continue reading

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Fed Wants To Wean Housing Market Off Its Trillion-Dollar Intervention

The Federal Reserve has decided to keep interest rates at their current levels. They’re pulling back on their program to buy about $1.5 trillion in mortgage-backed securities. The Fed wants to keep mortgage rates low to keep the housing market … Continue reading

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Two New Books On The Mortgage Crisis Reviewed In Sunday’s New York Times

One guy who signed on for a mortgage he could not handle was a New York Times economics writer. His new book is called BUSTED. Alyssa Katz has published, Our Lot: How Real Estate Has Come To Own Us. Katz … Continue reading

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The Right Way To Do Mortgage Relief

WASHINGTON, Oct 31, 2008 /PRNewswire-USNewswire via COMTEX/ — The following commentary was written by Bernard Wasow of The Century Foundation: The New York Times reported on October 31 that the federal plan to help homeowners in foreclosure is stirring up … Continue reading

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