“Experience keeps a dear school, yet Fools will learn in no other.” — Benjamin Franklin, Poor Richard’s Almanack, 1743
We all know why Hollywood makes crappy sequels: The first film in the series made money. Which is why Hollywood squeezed out the likes of Superbabies: Baby Genius 2, Highlander 2: The Quickening and The Concorde… Airport ’79 onto the innocent, unsuspecting heads of American movie-goers. But Hollywood, bless their blackened, cocaine-engorged, money-hungry hearts, knows enough not to make a sequel to a film that everyone hated the first time.
So why are America’s political and financial elites hard at work on creating Subprime Meltdown 2: Melt Harder?
Remember when the whole banking system almost crashed when Bill Clinton’s sub-prime mortgage disaster caught up to us in 2008?
It turned out that loaning hundreds of thousands to people with shoddy credit history wasn’t sustainable, and you’d think we would have learned that lesson.
Yahoo Finance reports that starting in 2026, our two lending giants are once more relaxing their lending standards below a credit score of 620.
Fannie Mae eliminated its minimum credit score requirement on Nov. 15, 2025, as noted in an update to its Selling Guide.
‘Previously we used a minimum credit score to determine whether a borrower was eligible for a credit risk assessment,’ the government-sponsored enterprise said in a statement. Fannie Mae added that the update would ensure risk analysis is ‘agnostic of third-party credit scores.’
That’s like saying you want to make your highway safety decisions apart from highway death statistics.
The GSE also said that risk decisions would be based on ‘a broad set of factors, such as borrower reserves, debt levels, property characteristics, and loan purpose.’
In other words, risk will now be assessed by the need for high level executives to hit loan bonus targets.
Since Freddie Mac and Fannie Mae provide capital to the mortgage industry for more than half the mortgages in the U.S., the credit bureaus are also moving away from a traditional credit requirement.
We’ve seen this movie before, and the first time it hit screens, in 2008, it almost destroyed the western banking system and brought on the worst recession since The Great Depression.
I didn’t like that movie the first time, and I certainly have no desire to sit through it a second time.
Tags: banking, Economics, Fannie Mae, Freddie Mac, Regulation
A side effect to not doing a credit risk assessment is that you also don’t do things that would verify the identity of the buyer. Why ask them questions about their financial history, when you can just assume they are who they say they are.
Bessent?… Bessent?
Well, leesee…
(1) they make a tub of money off of it
(2) they don’t ever get punished for it
(3) somebody else has to pick up the tab
What’s not to like?
ZeroHedge reports this morning that the housing market is softening, albeit with regional differences:
“Stark Reversal” From Pandemic: US Home Price Growth Slowest Since Q2 2023
by Tyler Durden
Tuesday, Dec 30, 2025 – 09:08 AM
“Home prices in America’s largest 20 cities surged 0.32% MoM in October (far higher than the +0.1% MoM move expected) but for context, this is the weakest annual home price growth since the March through July 2023 period, when the market was absorbing the initial shock of the Fed’s rapid rate hikes.”
Banks don’t make money when the housing market stagnates, so it is hardly surprising that they started a little creative credit scoring. American taxpayers wind up holding the bag when the scheme collapses.
One thing has changed. The first time around, most of the buyers on the secondary market didn’t understand the systemic risks in these CDO’s. Not so today: These things will sell at a discount that represents the underlying risks. Monoline insurers won’t touch them, and everyone replaying the script to “The Big Short” movie (specifically the part where the plucky protagonists get rich) will tank the price. All these costs will show up on the balance sheets for the GSE’s and they will have to run to Congress for more money.
Even Congress isn’t stupid enough to bail them out a second time, if for no other reason than the electoral fallout has been demonstrated.
“But Hollywood, bless their blackened, cocaine-engorged, money-hungry hearts, knows enough not to make a sequel to a film that everyone hated the first time.”
Um….Tron?
Two sequels for an original movie that flopped…both of which flopped even worse in turn.
Not to say this fact detracts from your point, just to say I think you give Hollywood too much credit.
They really are that bad at their jobs.
The original Tron made $33 million box office vs. $17 million in production costs. Now, under the traditional 2.5x rule of thumb, that’s probably a small loss, but small enough that it probably made money by the time cable, home video, merchandising tie-ins, etc. are factored in.
Tron Legacy had $400 million box office vs $170 million production costs, so it probably eventually earned out as well.
“The original Tron made $33 million box office vs. $17 million in production costs.”
There you go…messing up a perfectly pithy and mildly witty riposte with annoying little facts.
Full disclosure, I actually enjoyed the original Tron movie. the first sequel not so much and have no interest in seeing the second.
I did think all of them were considered flops at the box office but I didn’t actually research it before spouting off.
Bad Troll.
Production costs do not include marketing and distribution costs for a film. Hollywood hides those numbers and they are often over $100 million for big Hollywood productions. Theaters also get their cut of box office. Domestically, studios get 55%, overseas (outside of China) they get 45% and in China they get under 20% (assuming they can get the cash out of China). So you can always assume that a studio gets less than 50% of the box office. The UK production tax credit reports have repeatedly shown that production cost reports understate the real cost. Disney especially consistently lies about their production costs.
Tron, the original, lost big at the box office. It took many years on TV and video to eventually turn it profitable. Thanks to Disney + that option doesn’t currently exist for the Tron films.