Mariner-

My comment was made in the context of the sheer size of the problem. Like your merchant seaman friend, I too thought, from July 2007 onwards, that there was a huge potential problem with sub prime mortgage mess and the tepid Fed’s response to it.

However, I don’t remember ever seeing until the last couple months that the scale of the problem was in the TRILLIONS of dollars. A couple hundred billion dollars maybe, with a few large banks going down like WaMu. Okay the financial system would be hurt by that, but it would not be like the situation we face today.

L3 was stating that the current set of rules and laws will be enough to corral the miscreants if they play with the 2 Trillion dollars of play money that the Treasury has lent out with virtually no transparency or accountability. My point was that if the full Trillion dollar extent of the sub prime crisis was hidden, in a much more transparent situation, then the Treasury lending out or giving away( we’re not really sure are we?) 2 trillion is even more problematic.

BTW, Greenspan warned against the excesses of Freddie and Fannie before he left office. He saw a potential problem; he just didn’t see the collapse coming as a result. Paulsen and Bernacke to my knowledge never warned against the problems of Freddie and Fannie until after the sub prime crisis began. Sub prime lending accelerated to unbelievable heights on their watch. They didn’t even curtail subprime lending once even the media knew there was some sort of problem. Their response from July 07 on was always too little , too late , until they they wanted the bailout.