September 08, 2008

Too big, too fast

This morning, again, the front pages are doing the job of this blog. The New York Times
bottom-lines the situation in Washington DC:
“The downfall of Fannie and Freddie stems from a series of miscalculations and deferred decisions, both by their executives and government officials, according to company insiders, regulators, auditors and outside analysts. The companies expanded rapidly in recent years, initially playing down the risks posed by a housing bubble. Then, as the housing slump expanded nationwide, they resisted raising enough new capital that might have provided a financial cushion to weather the storm. Lawmakers, paralyzed by partisan infighting, delayed strengthening regulatory oversight of the politically powerful companies.”

While, in the "other Washington,” a similar story unfolds in the Times about the firing of the CEO of the country’s biggest saving and loan:

“Mr. Killinger is the latest chief executive in the financial services industry to lose his job as the credit crisis has worsened. Earlier on Sunday, the heads of Fannie Mae and Freddie Mac were forced out after the Treasury Department orchestrated a takeover of the companies. The chief executives of Citigroup, Merrill Lynch, Wachovia and Bear Stearns have also been dismissed as losses mounted.”
“Washington Mutual, based in Seattle, has been one of the lenders hit hardest by the downturn in the housing market. It has one of the biggest portfolios of so-called pay option mortgages, and had long focused its operations on lower-income urban borrowers. Losses at the bank have been devastating.”

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