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9 sats \ 4 replies \ @siggy47 13h \ parent \ on: Baby-Boomers are Loaded. Why Are They Not Spending? (The Economist) econ

I guess so, but it's hard to judge overleveraged if they're unsophisticated, and they have never seen housing prices drop in their lifetime. In 2008 it was a fast, enormous drop in value. All the so called experts were saying everything was fine. It looks obvious in the rear view mirror.

41 sats \ 3 replies \ @Bell_curve 12h

True

One story that never got enough attention was federal takeover of Fannie Mae and Freddie Mac in 2007. That was a harbinger of disaster in the housing market. I remember thinking why aren’t more people freaked out by this event…

9 sats \ 2 replies \ @siggy47 12h

Yes. That was so weird. Those entities are bizarre to begin with. I dont see how they can be publicly traded.

41 sats \ 1 reply \ @Bell_curve 12h

I consulted ChatGPT:

Freddie Mac, along with Fannie Mae, was placed into government conservatorship on September 6, 2008, not 2007. This action was taken by the Federal Housing Finance Agency (FHFA) in response to the financial crisis and concerns over the stability of the housing market.

Why the Conservatorship Happened

By 2007, the U.S. housing market was already showing signs of collapse due to the subprime mortgage crisis. Freddie Mac and Fannie Mae had heavily invested in mortgage-backed securities (MBS) that contained a significant number of risky loans. As housing prices fell and defaults surged, these assets lost value, threatening the solvency of both institutions.

In early 2008, Freddie Mac and Fannie Mae’s stock prices collapsed, and investors lost confidence in their ability to operate without government support. In July 2008, Congress passed the Housing and Economic Recovery Act (HERA), granting the FHFA new regulatory powers, including the ability to place the GSEs into conservatorship. By September, Treasury Secretary Henry Paulson and FHFA Director James Lockhart determined that both entities were insolvent and placed them under government control.

Key Aspects of the Conservatorship 1. Federal Government Control – FHFA took over the management of Freddie Mac and Fannie Mae. 2. Treasury Support – The U.S. Treasury provided up to $200 billion in financial backing through stock purchases and credit lines. 3. Dividend Payments – Under the agreement, Freddie Mac had to pay nearly all profits to the U.S. Treasury as dividends. 4. No End Date – The conservatorship was intended as a temporary measure, but Freddie Mac and Fannie Mae remain under government control today.

Aftermath and Impact • Freddie Mac and Fannie Mae returned to profitability in the years following the crisis, paying back the government’s investment. • Their role in the housing market remains critical, backing a majority of new mortgages. • Policymakers have debated ending conservatorship, but no definitive plan has been implemented.

Would you like more details on the effects of conservatorship or potential reform efforts?

9 sats \ 0 replies \ @siggy47 12h

Thanks. My memory is fuzzy about the sequence of events. I remember being at my mother in law's house for Sunday dinner and watching the announcement about Lehman Brothers.