Les tenants de l’interventionnisme ont été rapides à blâmer la crise financière actuelle sur les lacunes du libre marché. Toutefois, c’est loin d’être aussi simple.
Dans son texte, Robert V. Green, analyste de la firme Breifing.com (Abonnés seulement), explique comment et pourquoi l’interventionnisme électoraliste des gouvernements passés a engendré le fiasco de la présente crise.
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Updated: 30-Sep-08 13:32 ET
The Financial Crisis: Part I -- It's the Fed's Fault
[BRIEFING.COM - Robert V. Green]
Much of the debate surrounding the failure of the financial market bailout bill (HR 3997) revolves around the principle of whether the public sector should "bailout" the private sector. Virtually absent from this debate, however, is the idea that the government actually created, inadvertently, this entire problem. No one, particularly politicians, appears ready to admit that the well-intended government actions to ensure every American could buy a home are at the root of today's problem.
The Old Way
To understand why the federal government bears much of the responsibility for today's credit problems, it is necessary to take a look at how the capital market for mortgages has evolved over time.
In the "old world" of mortgages (for individuals), commercial banks were the primary source of capital.
Banks applied high standards for credit-worthiness. Verifiable income and a significant down payment were required. The percentage of total income allocated to mortgage and taxes was usually limited to 25%. Debt-to-equity ratios were usually 80%, meaning a down payment of 20% was required.
The Glass-Steagall Act required that commercial banks hold these mortgages until maturity or the debt was repaid. Reselling the mortgage or securitizing a pool of mortgages was forbidden.
The Problem With the Old Way
Since banks were required to hold a mortgage for the duration, they were very selective about issuing mortgages.
In fact, banks in urban areas were often accused of "redlining," or discriminating against applicants from "predominantly minority neighborhoods."
During the 1960s and continuing well into the 1990s (and still heard today), the cry for government policies to increase home ownership was a strong and powerful voice.
The unintended result of this social agenda is at the root of today's credit crisis.
Fannie Mae
The U.S. government developed a policy of making home ownership by Americans a priority beginning in the Depression.
In 1938, a government agency called the Federal National Mortgage Association was created. This agency was originally charted to guarantee mortgage loans by banks, if such loans met specified criteria.
The social purpose of this agency was to stabilize the credit markets, so that ordinary Americans would be able to obtain home mortgages. (Sound familiar?)
Although the Federal National Mortgage Association primarily provided guarantees, not capital, it was effective in reviving the mortgage markets. This role was expanded after World War II to provide guarantees for mortgages issued to veterans. Although the Veterans Association (VA) processed and issued mortgages, the guarantee was provided by the Federal National Mortgage Association.
Expansion Of Policy
Over time, the charter of the Federal National Mortgage Association was expanded. The most significant of these changes occurred in 1968.
In 1968, the Federal National Mortgage Association was split into two entities.
The first created Ginnie Mae, which retained the role of guaranteeing mortgages issued by a private lender to fund housing for "special assistance programs."
The second was Fannie Mae, whose new role was to create new mortgage capital by issuing debt securities and using the money to purchase mortgages from commercial lenders. The concept was that a commercial lender could issue a mortgage, sell it to Fannie Mae, and then use the proceeds to issue another mortgage.
Fannie Mae was also "privatized" at this time, but the U.S. government provided what amounted to a "letter-of-credit" for Fannie Mae debt securities, in order to make them attractive to investors.
Expansion Of the Mortgage Capital Market
Fannie Mae used the capital raised from debt issuance to purchase mortgages. Profit was derived from the difference between the interest rate issued on the debt and the interest rate paid by the mortgage holders.
Fannie Mae originally held the mortgages that it purchased from lenders. However, in 1981, in order to expand the capital markets for mortgages, Fannie Mae began selling mortgage backed securities, or MBS.
Mortgage Backed Securities
Mortgage backed securities would eventually lead to the problem we are facing today.
The MBS, which did not exist prior to 1981, had the effect of passing the risk of default in a mortgage loan to someone else -- for a fee. The MBS can rightfully be thought of as the "first hot potato" that started the debacle in the credit markets.
A mortgage backed security is a pool of mortgages with roughly similar characteristics (term, interest rates, credit quality of borrowers) that is sold as a single entity. The security itself has a face value (usually above $100 million) with an interest rate and a maturity date.
Different from a regular bond, however, the MBS has prepayment characteristics, as the individual mortgages within the pool are paid off. These means purchasers of MBS securities face uncertainty (risk) of the exact amount of interest that will be paid -- and how long the security will last.
To make MBS securities attractive, Fannie Mae guaranteed payment of the interest rate coupons on MBSs, regardless of whether the cash flow from mortgage payments could make the interest payments or not.
The Fannie Mae guarantee of interest and principal payment on its MBS debt had the effect of "neutralizing" risk in the secondary markets for mortgages. The secondary market would become accustomed to "passing risk to someone else," which has now become the U.S. taxpayer.
This guarantee would also later become the downfall of Fannie Mae, but for 20 years, MBS securities seemed like a wonderful way to make "home ownership" possible for every American.
The Success Of Public Policy
Home ownership increased from 55% of U.S. homes in 1950 to 63% in 1965 to 69% in 2006.
The total number of homes with mortgages increased even more dramatically, however, rising from 36 million in 1960 to more than 75 million in 2007. During this time, the U.S. population has only grown by two-thirds, from 180 million in 1960 to 300 million today.
There can be no question that the public policy goal of expanding the mortgage capital markets has led to greater home ownership by Americans.
So what has gone wrong?
What Went Wrong?
There are two basic things that went wrong in the secondary market for mortgage credit.
These were:
· Standards for mortgage issuance declined
· MBS securities were restructured into new securities, to accommodate the riskier loans
Both of these trends were the natural consequence of the evolving social policy of expanding home ownership, but few (especially elected officials) are linking the evolution of social policy to today's crisis.
On top of these two market trends, two larger trends combined to create the "perfect storm" we are facing today. These two trends are not a direct consequence of social policy, but are significant factors in creating today's crisis.
These were:
· A sharp rise in interest rates, reversing a 20-year trend of decline
· Overbuilding of new houses, leading to pricing pressures
On top of all this, the creation of credit default swaps in the mid-1990s allowed for new and creative ways to avoid risk in the secondary market for mortgages.
It is the credit default swaps that are the focus of much of the current debate. While CDS securities can rightfully be viewed as the catalyst that created this crisis, they are really only the last step in the evolution of how incentives were created to draw capital into the mortgage markets.
To truly understand the nature of today's credit crisis, it is necessary to include and examine the social agenda of expanding U.S. home ownership.
The Real Problem
The real problem is that government policies and actions to allocate more capital toward mortgage originations has created an over-allocation. In order for capital markets to absorb all of the resold mortgages, creative new securities were invented.
Most of the new securities created incentives for capital to flow into mortgage markets. All of these new securities required regulatory action and approval.
Each new "invention" was designed to either hide or pass-off inherent risk to someone else. Without these creations, the allocation of more capital to mortgages would never have happened.
Expressed as simply as possible, today's financial crisis can be directly related to the social agenda of expanding the allocation of capital to mortgages for individuals.
By setting a tone of reducing risk to attract investors, the public initiatives created an atmosphere of "passing the risk to someone else." The private market initiatives followed this tone, which has led to today's financial crisis.
The Government Should Bail Out the Credit Markets
Over the past 40 years, these social initiatives gave birth to the private market problems we are facing today. It is only fitting that government action now "undo" this situation by assuming the risk. It was only by burying, obscuring, or reassigning that risk that attracted capital to the mortgage markets in the first place.
Ironically, few elected officials seem to see this link between federal housing policy and today's crisis.
Some actually seem resolved to use government action to reinforce this policy. An example is Rep. Lynn Woolsey (D - Calif.), who stated Monday that the bailout bill should include provisions allowing people in foreclosure to keep their homes, funded by a 0.25% tax on all stock market transactions.
More To Come
In Part II of this series, we will look at how the repackaging of MBS securities has led to the fractured world of mortgage securities today. It is this "fractured" nature of mortgages that makes this crisis a problem for all citizens, not just Wall Street institutions.
In Part III of this series, we will look at how CDS securities accelerated the collapse of the credit markets.
We do believe that the markets and the U.S. economy can successfully make it through this crisis. However, the social policy of "mortgages for everyone" probably has to be abandoned.
Comments may be e-mailed to the author, Robert V. Green, at rvgreen@briefing.com
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