really?

I'm not a big conspiracy theorist, but this mess is getting absolutely ridiculous. I've taken statistics and did pretty well in it. So, what are the odds of the entire bag of feces hitting the oscillator right near the end of an election cycle? Sorry, but I think that it was precipitated by the not-so-invisible hand. You know, the one that lives in D.C.?

It seems like this all started when we heard news of the recent "re-federalization" of Fannie Mae and Freddie Mac, which somehow simultaneously were and were not federal institutions.  Fannie and Freddie have been at risk for some time now. I'm sure that someone can trace it all of the way back to when they were created, but to be more "current" let's just take some advice from former Fed Chairman Alan Greenspan.

Greenspan has, over the last few months, repeatedly called for portfolio restrictions. He seems particularly troubled by what he views is a public perception that Freddie and Fannie are government insured entities. This, he has stated, not only promotes risk-taking on the part of some investors, but also gives the corporations a competitive advantage when it comes to mortgage rates. The two were created by Congress as vehicles to pump money into the housing market but are both publicly traded stock companies.

This was published in 2005, by the way. I really like the line about "the perception that Freddie and Fannie are government insured entities." Perception becomes reality, anyone? I'm sure it was not the first time that he was concerned.  Too bad he wasn't too concerned with the Fed facilitating artificially low interest rates with Fed policy.

Somehow, perhaps magically, this concern became real for the Washington politicos in the fall of 2008. From my understanding it was due to depreciation in the housing market.  But this concept is strange to me because the housing market has been in decline for some time now.  From Bernanke in November of 2006:

The deceleration in economic activity currently under way appears to be taking place roughly along the lines envisioned in the Federal Reserve's July report. As anticipated, the slowdown primarily reflects a cooling of the housing market. Most other sectors of the economy appear still to be expanding at a solid rate, and the labor market has tightened further.

Perhaps it just took this long to finally make a dent on the multi-trillion dollar balance sheet of Fannie and Freddie. Sorry, but it doesn't seem like too much of a "surprise" from the abundant data that existed before 2008. Then, with the "fall" of these behemoths, the ones that were dependent on the teats that had run dry started having problems as well. Big frickin' surprise. Color me shocked.

And is anyone else thinking that foreclosures have spiked in the last month because people running for office are constantly promising (and I don't know how) to keep people in their homes?  Heck, guess that means this big ass mortgage payment can go to hell! Granny Government gonna clean up this mess for me!

Why were the warning signs ignored for so long?  Why did "just recently" become the time for action? But I suppose my main question that will likely go unanswered, and history will not be provided the opportunity to tell, is "Is all of this reaction actually necessary?"  Sorry, but the Action Boat done left shore.   I guess the illusion of leadership is a lot easier to maintain than actual leadership. And it's a lot more profitable in the short run.