Quote:
Originally Posted by afc wimbledon
I seem to recall F&F were only involved in around 10% of the sub prime mortgages.
I suspect the bundling of mortgages probably allowed brokers to make it look like all their crap mortgages were backed by the goverment when most weren't.
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This is the most thorough treatise that I've
read.
Bottom line is that F&F's portfolio had default rates well below that of subprime loans, which is probably the bigger factor. Also, just in magnitude, what F&F held could not create that large a meltdown. The highly leveraged, private securitization CDO / CMO market that companies like AIG were mired in was large enough in magnitude, and based on a shaky enough loan portfolio, that it clearly spurred the whole mess.
If anybody is interested in the securitization and the leveraged bets from private companies that was responsible for the melt down, I would recommend Yves Smith's
Econned or even go as far back as
Liar's Poker to see how this all started. Econned is heavy but it makes it clear how the CDOs created in the secondary market from crappy MBS tranches. Taibbi's last
book spells out, in an easy to read format, the garbage that AIG was creating.