They are one of the main reason's -along with the banks- I am not building anything anymore.
The building "boom" of the last 25 years or so has been fueled by excessive debt.
In 1960, if you didn't bring 20% down to the table, you'd have a very hard time getting a mortgage.
The folks for whom we voted allowed banks, via the Fed (Central Bank), to offer riskier loans without risk. They did this through Fannie and Freddie.
The way it worked was: Person walks into bank. Bank sells person home loan. Bank makes immediate profit (origination fees). If loan is below a certain amount (jumbo), Fannie/Freddie are obligated to buy the loan from the Bank. That structure created the moral hazard that led to the debt-fueled housing bubble that was building from the 80s all the way to when it popped in 2005.
At the time of the pop, banks were giving NINJA (No Income, No Job) loans out like candy. They'd sell the loan to the consumer and then immediately turf the loan to Freddie/Fannie. The system was set up to allow banks to have, essentially, zero end risk. Fannie/Freddie got all the risk. The incentive, quite obviously, was to loan to anybody who could fog a mirror, make the immediate fees, and turf the risk to the Government Sponsored Entities (GSEs) known as Freddie and Fannie.
That was the design, and it worked to perfection. Then, when it all started to blow apart in 2005, the GSEs are holding the bag, and Congress is "obligated" to bail them out. There's a reason that GSE paper pays treasury-note-level interest - the assumption was always that, although the GSEs are not technically part of the U.S. Govt., that the U.S. govt. was backing them. The assumption proved correct.
The best part is that the banks, many of which were holding GSE MBSs (mortgage backed securities), begged the govt. for a bail out and got it.
It's a brilliant scheme. The Big Banks make risky bets, and when they don't pay off, they go to Congress and beg for a bail out on the grounds that "if we go down, the whole system goes down." Congress uses your money to bail out the banks, and, the kicker - the banks have consolidated further and are even bigger now than in 08. It's so sad it's hilarious.
So builder guy, let me put a positive spin on it for you.
You built during the great bubble run up. Instead of lamenting the fact that the bubble has popped and will not reinflate in your lifetime, consider that the money you made in the last 20 or so years was derived from debt that, in a system that held banks liable for their mistakes, would never have existed.
Instead of bashing the bankers and GSEs, consider that, if not for them, there would never have been the building boom in the first place. Because it's true.
Of course, don't confuse that with the Banks being good guys. They are the ones driving the country off of a financial cliff for the purpose of making a quick profit.
And of course, in the end, we're all to blame, because we have the voting power to stop it, but we're all too busy being fat and happy.
