trader_4 wrote
wrote

Clueless again.
The housing failure alone would have simply meant a lot of people got
evicted. The thing that made it a global crisis was that the banks and
mortgage companies leveraged these mortgages with derivatives that
were worth many times more than the underlying mortgages.

That's wrong too.

Yep.

AFAIK, there was no leveraging that caused the problems.

Correct.

The "derivatives" were simply pooling mortgages together
into securities and selling shares in them to investors.

Thats securitisation, not derivatives. Different animal entirely.

It was fundamentally sound, not leveraged
and it increased funding for mortgages.

Yep and radically reduces risk because of the bundling.

The only problem was in the lending practices where
banks and institutions made progressively riskier loans
to people with marginal ability to be able to keep up
with the payments on real estate that had already
appreciated sharply and was over valued.

The real problem was the AAA ratings that they didnt
even come close to qualifying for. That allowed operations
like govt who could only invest in AAA rated securitys
to invest their surplus short term cash in those and
when the housing bubble burst, as it was always going
to, no one had any idea what those securitys were
actually worth and so no bank would lend any other
bank on the short term money market, so most of the
financial system imploded very spectacularly indeed.

And then when the problems started, it was further
complicated by the fact that investors only knew
they had an investment in mortgages, without
any way of knowing how many of those mortgages
were in trouble, what the properties were really
worth at the moment, etc.

And it is never possible to know that when a housing
bubble bursts. Particularly with the terminally stupid
US non recourse system where you are free to hand
the keys back and walk away with no penalty. And
when so many were actually stupid enough to lend
more than the value of the property, those who
intended to flip the property before the sucker
interest rate hiked to normal rates, they didnt
even lose the initial mortgage payments, the
lender handed those to the borrower.

And absent the MBSs, it most certainly would
not have simply meant a lot of people got
evicted. There were huge losses there,
because the values of the properties declined,

Imploded in many cases because no one
was writing those mortgages anymore.

the real estate market turned poor, millions of properties
were under water, not worth the mortgage value.

With the borrower free to hand the keys back and
walk away with no penalty at all with the mortgagee
left with the close to worthless property.

THAT is what lead to the huge losses, those were real
and would have been widespread whether the mortgages
were part of MBSs, held by Fannie or Freddie (which
went bankrupt), held by banks, or held by the seller.

Yeah, Fretwell has never had a ****ing clue about what
2008 was about.

Commercial banks like BoA were heavily
invested in them with depositor money.

That's wrong too. AFAIK, BOA and similar didn't invest in MBS.
They originated the mortgage loans, packaged them into MBS
and sold them to investors. And banks have always had exposure
to mortgage loan risk, that's their business. Prior to MBSs banks
passed mortgages on to Fannie and Freddie, this was similar.

Much of that bail out money also went to bail out foreign investors.
That is why it was claimed to be a global crisis.

Show us your proof for that claim, because I suspect it's also BS.

Yep, **** all ended up with foreign investors.

I never heard of *any* of the 2009 bail
out money going to foreign investors.

Some may have done to those who managed to
sue financial institutions that convinced them to
invest in AAA mortgage backed securitys, MBSs.

It was a worldwide crisis, because when the core of the US
financial system is in crisis, it will always be a worldwide crisis.

And because vast numbers of operations world wide
invested in US MBSs and came to regret doing that.
Even my local council did that and got bitten.