Credibly promising to be irresponsible...since 2004!
---If the GSEs had such a small role in the crash, why do they need the biggest bailout?---One doesn't follow from the other.If I have a truck load of cash and someone tosses in a lighted match my losses will be bigger than his even though he caused the problem.
read the rest of the tweet, oh strange named commenter!
A somewhat more useful example.Let's say you never bought stock in your life and hid your money under the mattress.Then, at the very top of the Internet bubble you dump all your cash into the Q's.Did you cause the bubble?No.Would you participate in the losses?You betcha.
If you had the biggest losses of anyone then yes, you did contribute to the bubble.
Oh strange named commenter, if only agreeing to buy up loans absolves the GSEs, then you must certainly also agree that politicians cannot be blamed, whether for regulation or deregulation.Either you can blame a party for having policy that contributed to other actors making bad decisions or not. Knowing that the GSEs would buy up loans is a more direct cause than any deregulation- even when they didn't originate or securitize them.
The argument that Fannie and Freddie are less to blame because their market share of poor issues went up later is silly. It's not that they weren't involved all along-they were. Their market share went up later because all the smart money bailed out first but the GSEs saw it as a chance to regain market share.
In response to the Krugman re-post, refer to Ed Pinto's work for a more thorough analysis.
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