Boosting Prices So The True Economic Recovery Can Begin
Readers suggested a topic on the latest revelations and proposals from the central bank. “Is it perhaps really true that ‘Nobody could have seen it coming’? It isn’t as though an army of gadflies didn’t try to warn the Fed about where things were headed.’ ‘Newly released transcripts of Fed meetings during Bernanke’s first year as chairman show that, among Fed officials, he often expressed the most concern about housing. But no official, according to the transcripts, recognized the extent of the damage a housing bubble would cause. A year later, the housing market’s collapse helped send the nation into its worst recession since the Great Depression.”
“In September 2006, Treasury Secretary Timothy Geithner, then a Fed official, expressed confidence that ‘collateral damage’ from housing could be avoided.”
A reply, “As long as the banksters have limitless QE to ward off a financial reckoning day for their fraud, hubris and avarice, Timmay’s assertion that collateral damage (for his bankster accomplices) can be averted is largely true. As far as taxpayers, savers, and our children, that’s another story entirely.”
Another added, “This to me is the saddest part of the whole story. When the bust is finally allowed to run its course, most in the populace will be unable to connect the dots. Due to the time lag in reaction to the original actions that brought us here, the current President, Congress, business and civic leaders at that point in time will be blamed and probably demonized. Some maybe even physically threatened as the true architects of this mess slink away scott-free to some Brazilian ranch to ride out any visceral reaction.”
To which was was said, “That is the game. Since you are from NY, note that we have not yet begun to pay for the retroactive public employee pension enhancements of 2000. Neither the unions nor the state legislature want any connection between that deal and rising taxes/service cuts.”
“Moreover, many CEOs who leveraged up in the 1990s were lionized, whereas those dealing with the fallout ever since are considered failures who are overpaid. The reality is they were overpaid in the 1990s, too.”
Another, “I think you are right, except that we are in busting mode and those in office are very reluctant to shatter the illusion. It’s a choice between villified now and revered later or celebrated now and vilified later.”
“Our last President impulsively said ‘This sukker’s going down’ and then his lips were sewn shut. Most people wanted to believe that the nasty bailouts would really save our sorry behinds. Isn’t working out that way. The Pres we have now just smiles and reads from the promtor. I was hoping he would go all JFK. Hasn’t happened.”
One had this, “The very fact that Bernanke was paraded around as an expert on the Great Depression, just before the collapse tells you they knew everything. The fact that Hank Paulson took the job as treasury secretary so he could cash out at the top tax free saving 200 million dollars so he could move into treasuries just before the crash tells you they knew everything that was coming. One look at where they invested would tell you if they knew what was coming.”
And finally, “Is the Fed’s White Paper proposal to use taxpayer-funded GSE losses to revitalize the housing markets merely a ploy intended to further enrich Goldman Sachs? Massive injections of printing press money could work wonders to revitalize the value of shi#@y mortgage assets.”
The Wall Street Journal. “Goldman Sachs Group Inc. recently approached the Federal Reserve Bank of New York and offered to buy a multibillion-dollar bundle of risky mortgage bonds that the Fed acquired in the 2008 bailout of American International Group Inc., according to people familiar with the matter.”
“The New York Fed responded by quietly canvassing a few securities dealers for bids on the bonds Goldman wanted to purchase, seeking competing offers to determine whether Goldman’s offer represented the best value for the bonds, the people said.”
The Sun Times. “When Charles L. Evans talks, people listen. The president and CEO of the Federal Reserve Bank of Chicago recently spoke to about 200 business leaders at a presentation sponsored by the Lake Forest-Lake Bluff Rotary Club. They came to hear his personal perspectives on the current economy — and one of the topics was housing. Evans said that a more vibrant housing market is one of the key improvements needed to boost home prices and lift the overall economy.”
“He further noted that the Fed had recently been criticized by some Congressional leaders for issuing a special white paper on housing issues, which also suggested potential policy solutions. Whether perceived as contentious or not, Evans felt the paper focused needed attention on solving the distress sale crisis and improving valuations so that true economic recovery could begin.
“The National Association of Home Builders and the National Association of Realtors strongly agree with Evans and other Federal Reserve leaders, too. Both NAHB and NAR endorse specific recommendations in the above-noted white paper — such as loosening mortgage lending and refinancing criteria for credit-worthy borrowers.”
“The overall message is clear. Federal Reserve leaders know it, as do builders and Realtors. Much more must be done to solve the housing crisis — even if those solutions prove politically unpopular. ”
“By Julie Morse, a licensed Realtor in Illinois and Wisconsin.”
“That is the game. Since you are from NY, note that we have not yet begun to pay for the retroactive public employee pension enhancements of 2000. Neither the unions nor the state legislature want any connection between that deal and rising taxes/service cuts.”
It isn’t much different in San Diego, another place where those who executed a gargantuan heist walked away wealthy and free, leaving subsequent generations of San Diegans holding the bag.
Pension Scandal? San Diego Had a Pension Scandal? Who Knew…
When the San Diego City Council asked Chief Operating Officer Jay Goldstone whether the three people the mayor was putting on the pension board were the only ones to apply for the posts, he said yes. He now says he misspoke.
Posted: Friday, May 1, 2009 12:00 am
By Scott Lewis
Thursday, April 30, 2009 | The other day, three men appeared in front of the San Diego City Council to answer any questions that august body might have for them as they went through the final stages of being appointed to the city’s pension board.
San Diego Mayor Jerry Sanders had selected Herb Morgan, Richard Tartre and Edward Kitrosser to replace three people on the pension board. Voters decided in 2004 that since so many billions in taxpayer dollars were at stake with every decision made there, the board that oversees the San Diego City Employees’ Retirement System should no longer be dominated by city employees.
Serving on the board is thankless. And it has historically been difficult to find people who are both qualified according to the city law and are willing to do it. This is why it’s a bit surprising that the mayor was so excited to dump two of the qualified people on that board.
Fortunately for us, however, the City Council actually did decide to ask these new guys a few questions to gauge whether they understood what it was like in the lions’ den they were entering.
Did they know anything about public pension systems? Did they know anything about the scandals the city had faced over the last several years?
Councilman Carl DeMaio asked the three if they had ever heard of the 1996 and 2002 deals known as Manager’s Proposal I and Manager’s Proposal II, or MP1 and MP2. These, of course, were the notorious deals in which the city, faced with mounting liabilities in its pension fund, decided to underfund said pension fund and, at the same time, to persuade the employees who dominated the pension board to agree — the city awarded employees even higher retirement benefits.
This was stupid. The deals left so few assets in the employee’s retirement account that the city was forced to dramatically raise its annual contributions to the fund and short other parts of the budget. And the city’s taxpayers have spent millions on auditors and investigators both trying to understand the deals and then enabling the former city attorney to try to undo them.
This is why the city’s taxpayers decided they wanted to be in charge of the pension board. Its job is to make sure the fund is run well. Its job is not to make sure the city’s political leaders don’t have to face the consequences of their awful management.
Nothing has more defined the city’s financial condition or its politics in the past decade and a half more than these two deals. A mayor resigned in disgrace because of MP-2 after a headline writer at The New York Times notoriously dubbed San Diego “Enron by the Sea” and a national news magazine dubbed him one of the three worst mayors in the nation. The city spent more than $20 million on outside investigators so that we could understand what happened. The city’s retirement board spent nearly $3 million on its own report so it could also understand what happened and make changes.
Perhaps more important to the new members of the pension board might be the fact that several former members of the pension board are still under criminal indictment for what happened in the latter of the two manager’s proposals.
You’d think this might be of interest to people now willing to volunteer for this board.
So DeMaio asked these three men if they knew about these deals — MP1 and MP2.
He received blank stares in return.
He asked if the new members of the pension board had heard of the Navigant report. This was the document that outlined the city’s retirement system’s own responsibility for the situation and admitted to material misstatements in financial disclosures.
Again, these guys are essentially being asked to ensure this never happened again. They knew nothing about it.
“I’m a little embarrassed that the amount of research I tried to do after being requested to apply did not include the Navigant report so I’m unfamiliar with it,” Morgan replied to DeMaio.
Yes, notice that phrase “after being requested to apply.” These guys were sought out. The Mayor’s Office and the CEO of the pension system recruited Morgan, Petroza and Tart to serve on the board.
They would like these people to replace three people currently on the pension board. This includes Bill Sheffler and Tom Hebrank — two people infinitely steeped in the reform efforts the board has undertaken in recent years. Sheffler’s an actuary himself. He was on the city’s Pension Reform Committee. If you were to draw a picture of exact type of person with the exact type of experience taxpayers would want representing them on this board, you would draw up an actuary with glasses and a mustache just like Bill Sheffler.
Expertise and knowledge about what happened, apparently, is actually undesirable, though, to the mayor.
I’m not the only one baffled by this. Sheffler and Hebrank have spent years trying to reform the way the pension board worked and they succeeded in part. They have just the right amount of experience on the board to really get us somewhere now.
“We have years of experience in Mr. Sheffler and Mr. Hebrank. I just cannot see why it would be a good decision not to reappoint at least one of them if not both of them to the board and I think it’s a big mistake we are making as a city, as a plan sponsor, to jettison that experience — that institutional memory,” DeMaio said.
Lani Lutar, CEO of the San Diego County Taxpayers Association agreed.
“It’s baffling to me that Mr. Sheffler is not being considered for reappointment to the retirement board when you consider his background and expertise as an actuary as well as his historical knowledge of the city’s pension troubles,” Lutar said.
…
they don’t want knowledge…they want happy talk.
Issue more bonds for pension funding on the San Diego taxpayers back to make sure there is money for all retirements. It is only fair bloated pensions be paid as promised by the political correct in past and present office.
“By Julie Morse, a licensed Realtor in Illinois and Wisconsin.”
R.A.L.
I think they should just repeal the economic fundamentals of supply-and-demand for the housing market. $50K median income? No problem… everyone should buy a $300K+ house.
More houses than households? No problem… everyone with a $50K median household should buy two $300K houses.
I see no problem with this.
Wasn’t something similar to your proposal already tried? How did it work out?
“But no official, according to the transcripts, recognized the extent of the damage a housing bubble would cause. A year later, the housing market’s collapse helped send the nation into its worst recession since the Great Depression.”
My hopes are high that historians will set the record straight on what happened with respect to the housing bubble and its subsequent collapse, especially if Ron Paul gets elected.
The winners write the history books.
I’m thinking the winners in this context are going to be whoever controls the funding and peer review process over monetary policy research. The Fed presently has an outsized influence in this process, but I suppose if Dr. Ron Paul were elected and managed to “End the Fed,” that would no longer be the case, and it might be possible to set the record straight.
Some review of U.S. history might help support my point:
The White House Historical Association / Classroom
PRIMARY DOCUMENTS | The Bank War / Jackson Veto and Webster’s Reply : 1832
Primary Document Lesson PDF
Raucous crowds celebrated Andrew Jackson’s inauguration as president in 1829, swarming through the streets of Washington and trashing the White House (at least according to Jackson’s appalled opponents). Jackson, born in a log cabin and hailing from the West, symbolized to many a new era in American politics, an era which celebrated the common man and the common man in turn celebrated his election.
Jackson believed that out of all the officials in the federal government, the only one who truly represented all the people was the president. Members of the House of Representatives served only their own districts; senators represented their own states (and were at this time chosen by the state legislatures, not elected directly by the voters); and Supreme Court justices and federal judges were appointed, not elected. As president, then, he felt a special responsibility to protect the people’s rights and interests. Jackson also believed that the government should not favor any one person or group over others; that is, it should not favor the few at the expense of the many. This belief contributed to Jackson’s decision to veto the re-charter of the Second Bank of the United States, unleashing what came to be called “the Bank War.” This lesson will examine Jackson’s veto and his opponents’ response.
Objectives
To identify and evaluate the arguments for and against re-chartering the Second Bank of the United States as stated in Andrew Jackson’s veto message and Daniel Webster’s reply.
To evaluate Jackson’s claim to being the “president of the people” by examining his veto of the bill re-chartering the Second Bank of the United States.
senators represented their own states (and were at this time chosen by the state legislatures, not elected directly by the voters)
I wonder why Ron Paul (along with the John Birch Society) wants to end direct elections of Senators, and return their choosing to the dark rooms of the state legislatures.
Maybe Paul thinks its time to stop letting corporations choose our Senators and return to having corrupt state officials choose them.
I think the part of this that everyone missed was the MBS mess. Even when you could see that housing was overvalued, MBS were in the shadows. And MBS magnified the damage caused by the bursting of the bubble.
“MBS mess”…
which continues to date, as the Fed’s White Paper serves as a useful blueprint for how to get the U.S. taxpayer to help reflate the value of sh!tty subprime MBS, just in time for Goldman Sachs to get in on the pump-and-dump action:
MARKETS
JANUARY 13, 2012
Goldman Bids for Bad Bonds
Offer to N.Y. Fed For AIG’s Debt Rattles Market
By SERENA NG, AL YOON and LIZ RAPPAPORT
Goldman Sachs Group Inc. recently approached the Federal Reserve Bank of New York and offered to buy a multibillion-dollar bundle of risky mortgage bonds that the Fed acquired in the 2008 bailout of American International Group Inc., according to people familiar with the matter.
The New York Fed responded by quietly canvassing a few securities dealers for bids on the bonds Goldman wanted to purchase, seeking competing offers to determine whether Goldman’s offer represented the best value for the bonds, the people said.
But the effort, intended to be discreet, rattled the market for subprime-mortgage debt on Thursday when some market participants learned the New York Fed was considering additional sales of bonds from the portfolio known as Maiden Lane II. An index that tracks prices of subprime-mortgage bonds fell 2% on Thursday afternoon to about 47 cents on the dollar. The index had risen nearly 10% earlier this month.
The bonds that Goldman sought to buy represented roughly a third of a mortgage portfolio with an unpaid principal balance of almost $20 billion, the people said. It couldn’t be determined how much Goldman offered, but the bonds in Maiden Lane II had an average fair value of roughly 47 cents on the dollar at the end of September, suggesting Goldman could have been willing to pay about $3 billion.
It is unclear if Goldman or another dealer will be able to buy the bonds from the New York Fed, which has previously said it will sell only if it can fetch good value for the securities.
…
The bonds that Goldman sought to buy represented roughly a third of a mortgage portfolio with an unpaid principal balance of almost $20 billion,
Has Goldman somehow managed to identify the fraction of these mortgages that will not default?
Almost everything that’s happened with the GSe’s was planned, even as these “minutes” are put out to make it seem like these people were clueless.
February 2005
‘The Office of Federal Housing Enterprise Oversight is pushing legislation through congress that prepares for the insolvency of the mortgage giants. Patrick Lawler, OFHEO chief economist told a forum ‘Receivership is a valuable thing.’
February 2005
‘For years politicians and financial pundits have repeated the baloney that government-created Fannie Mae, Freddie Mac and the Federal Home Loan Bank are NOT backed by the US taxpayer as banks are. That sounded fine when the going was good, but now that cracks have begun to appear the government is whispering about ‘receivership’ and ’systemic risk’. Get this; ‘The potential for systemic risk arising from the GSEs’ size and their central role in mortgage markets combined with the difficulty of managing the risks inherent in a large mortgage portfolio raise fundamental questions about the value they add … relative to the risks their current operations pose,” the White House said Feb 7th.’
‘A new regulator is called for with ‘expanded enforcement authority, the ability to place the businesses in receivership and ‘unambiguous authority” to set risk-based and minimum capital requirements, according to the budget document.’
So they had set this all up early in 2005. Let’s look at what they also knew at the same time:
February 2005
‘Freddie Mac unveils a new mortgage product intended for the ’savvy borrowers’. ‘(T)he second-biggest provider of financing for U.S. housing, said that it will expand its interest-only payment option to more adjustable-rate home loans to meet demand from borrowers’.
‘(Its) designed for borrowers who fully understand that the monthly payment will rise following the interest-only period,’ Freddie Mac said in the statement. The story points out ‘they are popular with consumers who are stretching financial resources and might not be able to repay the loans when interest rates rise.’
April 2005
‘Among first-time home buyers in 2004, according to the NAR, the median down payment was 3 percent, half what it was in 2003. What is new today is that lenders are allowing for the layering of risks on top of one another. What we don’t know is what if we put all these risks together and put them in a rising interest rate environment, a declining housing market, or a weakening economy.’
‘The shift in lending standards started after the dot-com stock bust in 2000. By 2003, with the refinancing boom coming to a head, banks quickly set about trying to recruit more first-time home buyers, encourage second-home buying and promote home equity lines of credit as an easy and responsible way to fix up the house or finance a vacation.’
‘The amount Americans owed on home equity lines of credit jumped to about $491 billion at the end of 2004, up 42 percent from a year earlier, and more than triple the amount at the end of 2000.’
EARNINGS
FEBRUARY 9, 2011
White House Plans to Revamp Mortgage Market
Administration Proposal to Recommend Eliminating Fannie and Freddie, Curbing Government Role in Housing Finance
By NICK TIMIRAOS
More than two years after the government seized Fannie Mae and Freddie Mac, the Obama administration will recommend phasing out the housing-finance giants and gradually reducing the government’s footprint in the mortgage market, according to people familiar with the matter.
The administration is expected to include three options for a post-Fannie and Freddie world when it releases a long-awaited proposal for the future of the nation’s $10.6 trillion mortgage market, which could come as soon as Friday. Together with federal agencies, Fannie and Freddie have accounted for nine of 10 new loan originations in the past year.
The White House’s “white paper” will begin what promises to be a prolonged and fiery debate about the future of how homes are financed across the U.S. Any wind-down of Fannie and Freddie would happen gradually to avoid roiling markets, and the central, unanswered question is what kind of federal function, if any, the administration and Congress will invent to take their place.
Steps to reduce the government role in the mortgage market likely would raise borrowing costs for home buyers, adding pressure on the still-fragile U.S. housing markets. Consequently, analysts believe any transition could take years and would be driven by the pace of the housing market’s recovery.
The fight over how to restructure the housing-finance system has roiled Washington, and yet both parties have been hesitant to propose detailed legislation.
For conservatives, Fannie and Freddie played a starring role in the financial crisis, and any solution that is viewed as replicating their function could face fierce opposition from some Republicans. But more moderate Republicans may resist such an approach and could join Democrats who have said a federal role is necessary to ensure broad access to home ownership.
While advancing one detailed plan risks providing fodder for partisan battles, offering multiple proposals may help the administration force those views into the open, said Michael Barr, a former assistant Treasury secretary in the Obama administration.
“If you focus on the steps everybody agrees on—here are the 10 things you’ve got to do—that gives people a chance to unite behind a set of steps,” he said. A list of options he added, has the benefit of forcing Republicans “to come up with their own plan, and make their own mistakes.”
…
Ben has the Archives that will counter any of the Rhetoric Bull$itt……
I have a hunch there is an interesting story behind the timing of this resignation.
Michael Williams to Resign as CEO of Fannie Mae
Tue, 2012-01-10 17:13 — NationalMortgagePROFESSIONAL
Fannie Mae has announced that its Chief Executive Officer Michael J. Williams has decided to resign from his role. Williams was appointed president and CEO of the government-sponsored enterprise (GSE) in 2009, after the company was placed under the federal conservatorship of the Federal Housing Finance Agency (FHFA). He will continue as CEO and as a director until Fannie Mae’s board of directors names a successor, at which time he will leave the company.
“As CEO, I have focused the company on providing the necessary funding to support sustainable homeownership and quality affordable housing; creating the solutions needed to stabilize the market and help homeowners in distress; and building a strong new leadership team that can move the company and the industry forward,” said Williams. “For the past three years, we have executed on this important mission, while making fundamental changes to prepare housing finance for a better future. I decided the time is right to turn over the reins to a new leader. As I told our employees today, I am extremely proud of what we have achieved together, and I am confident that they will continue to make a positive difference.”
Under Williams’ leadership, Fannie Mae has enabled approximately six million households to refinance into a lower cost mortgage, 1.7 million homeowners to purchase a home and provided financing for nearly one million units of quality, affordable rental housing. The company has built a strong new book of business. This new book, which consists of loans purchased or guaranteed since January 2009, is nearly 50 percent of the company’s overall book of business. Through its loss mitigation efforts, nearly one million homeowners have avoided foreclosure, while Fannie Mae has helped to stabilize neighborhoods and reduce credit losses on its legacy (pre-2009) book of business.
…
” By 2003, with the refinancing boom coming to a head, banks quickly set about trying to recruit more first-time home buyers, encourage second-home buying and promote home equity lines of credit as an easy and responsible way to fix up the house or finance a vacation.”
But I’ve been told the banks were forced to make those loans by the CREs. They make it sound like the banks were willing participants.
“Is the Fed’s White Paper proposal to use taxpayer-funded GSE losses to revitalize the housing markets merely a ploy intended to further enrich Goldman Sachs? Massive injections of printing press money could work wonders to revitalize the value of shi#@y mortgage assets.”
Answer: As always, YES.
The goal is ALWAYS to give money to Goldman and their buddies. If you are part of the “insiders”, you get free money. Everyone else gets taxed.
Here is an interesting quote from an article I was reading this morning by John Browne, via Safehaven website:
“Bernanke offers endless words about the Fed’s willingness to keep the economy on track. In reality it appears as if he only wants to do one thing: keep asset bubbles from collapsing by continually debasing the currency and looting the savings of thrifty Americans. Any other policy intentions should be considered misdirection.”
That is their solution. Devalue the currency and steal by misdirection.
Impoverish “savers” and reward the speculators. A lot of people have caught one, as we blog about this daily. People who have worked hard and tried to save are getting angry. Speculators, not so much. So, the FED has a little PR problem. So, they talk about “transparency”. BS.
“The Fed was the enabler of the most massive asset and debt boom in history. Now, the unraveling of this profligacy threatens abject poverty for billions of people. Therefore, it is little wonder the Fed is unpopular and is seeking to retrieve its image. What is the reality of offering public access to Fed forecasts? Is it genuine transparency or is it done to add further weight to negative interest rates as a means of forcing consumers to spend rather than save?”
From the movie Trading Places: “Turn the machines back on. Turn the machines back on!” That’s all they want. Keep the game going so the boyz at Goldman can skim some more out of yours and my accounts.
“The overall message is clear. Federal Reserve leaders know it, as do builders and Realtors. Much more must be done to solve the housing crisis — even if those solutions prove politically unpopular. ”
“By Julie Morse, a licensed Realtor in Illinois and Wisconsin.”
Of course, we understand the position of the Realtors. the liked the housing game with multiple bids and 5 houses per buyer. It was a short-term profit driven road to ruin. Now we are well down the road to ruin and they want to go back and play the profit-taking game again.
Wouldn’t that be nice?
Well, the solutions would be unpopular because we all know that any schemes the government comes up with are only to prop up housing prices, in hopes of getting the same game going again, if only on a smaller scale. That’s the whole concept. Prop up housing prices.
I thought the government and the Realtor groups were all interested in “affordable housing”. Aren’t LOW prices, affordable housing???
So, I must conclude, the Realtor and Builder groups have one thing in mind: Self-interest. They don’t want to find new kinds of work. They want a new speculative boom. Everyone will benefit. Higher prices for everyone. Yahoo! All Hail the FED!
More “quantitative easing (i.e. money printing), and more Purchases of worthless MBS. Go Ben, Go! Bring us inflation and force up prices of food and energy. We’ll all love that, too!
Well stated… Stay on’em.
This is where alpha sloth can chime in and say, ‘replace the Fed with what?’
I’ve got an idea; let’s take the most splendid conference room in DC, put in a big table and surround it with a couple dozen really expensive chairs. On each chair let’s put a tall stack of worthless mortgage paper and top it with a smiling Cabbage Patch doll. And each time someone suggests that bankers should distort the economy, show them into this room to point out the folly of these actions.
‘replace the Fed with what?’
I thought I had coined that line.
But I think you have an interesting answer. Since the government is trying to downsize and become more efficient, perhaps it could be supplemented with a robotic printing press technology that stabilizes the currency without getting involved in wealth reallocation politics.
I thought I had coined that line.
Nay! ‘Tis mine!
“a robotic printing press technology that stabilizes the currency without getting involved in wealth reallocation politics.”
As long as it’s Fail-Safe.
1/11/2012 @ 4:16PM
Fannie, Freddie Turmoil Opens Market to Tough Mortgage Medicine
The leadership shake-up at Fannie Mae (FNMA) and Freddie Mac (FMCC) leaves the door open for a new management that might be willing to take a more active role in reviving the housing market, even if it comes at the expense of near-term losses.
Fannie Mae CEO Michael Williams announced on Tuesday that he would step down from his position once a successor is found, only three months after Freddie Mac CEO Charles Haldeman Jr. announced that he planned to leave his position in 2012.
The departures at the top leaves the government scrambling to find replacements to head the mortgage finance companies, at a time when some policy makers and Federal Reserve officials are arguing for more action to stimulate housing and the economy.
The two agencies have cost taxpayers more than $150 billion since their takeover by the government in 2008. While they continue to play an outsized role in the housing market- underwriting more than 90% of all conforming mortgages in the country along with the FHA- the companies actively seek to minimize taxpayer losses, which is sometimes at odds with efforts to boost housing.
…
Bring back Franklin Raines. Since he didn’t go to prison, and instead got a job as an “economic advisor” to President Obama, he is probably the best qualified to re-establish reckless lending practices.
It seems his “advice” isn’t doing Obama much good, anyway.
The Buzz
Can anyone save Fannie Mae and Freddie Mac?
By Paul R. La Monica @lamonicabuzz
January 11, 2012: 1:45 PM ET
Former Treasury Secretary Henry Paulson put mortgage agencies Fannie Mae and Freddie Mac into conservatorship in 2008. But little progress has been made since to help them.
NEW YORK (CNNMoney) — It has been more than three years since then Treasury Secretary Henry Paulson fired his famous metaphorical bazooka and the federal government seized control of mortgage agencies Fannie Mae and Freddie Mac.
Sadly, Fannie and Freddie are still a cause for worry and a source of national embarrassment.
Late Tuesday, Fannie Mae said that CEO Mike Williams was stepping down sometime this year. That follows the news late last year that Freddie Mac CEO Ed Haldeman was also planning to leave.
Former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron have each been charged with fraud by the Securities and Exchange Commission.
Both agencies, which play key roles in helping to secure financing for homeowners, have continued to rack up sizeable financial losses over the past few years. It is estimated that their bailout will eventually cost taxpayers as much as $124 billion through 2014.
Yet, not much has been done to try and change the two companies for the better. There was shockingly little in the way of actual reform for Fannie (FNMA, Fortune 500) and Freddie (FMCC, Fortune 500) in the Dodd-Frank Wall Street Reform Act that became law in 2010.
Several members of Congress, including former Senator Chris Dodd and House Rep. Barney Frank, have been accused of conflicts of interest regarding Fannie and Freddie. Lawmakers have repeatedly denied that this played a role in the lack of any major new regulations for Fannie and Freddie.
But the biggest problem is that the full government control of Fannie and Freddie makes the agencies convenient legislative tools for members on both sides of the aisle.
…
‘full government control of Fannie and Freddie makes the agencies convenient legislative tools for members on both sides of the aisle’
That’s how they like it. Something that is often overlooked with the GSEs; they were huge. About the time they stopped producing financial statements they were 2 of the 5 biggest corporations in the world.
If you look back at who sits on the boards, who gets lobbied, it’s clear these two companies have been slush funds for DC politicians for decades. They are simply vehicles of corruption. OK, but shouldn’t we be focusing on what to do next?
IMO, the last group we should be listening to are the builders, UHS and the Fed. This from the last link:
‘policies could be considered that would help moderate the inflow of properties into the large inventory of unsold homes’
One, that’s what they’ve been doing for years. Two, manipulating markets is illegal. Three, it won’t work you *#@&^ idiots!
Prices are going to find their natural level. You know some BS is coming at you when anybody talks about “boosting” prices of a large market item.
I thought the idea was to replace Fannie Mae and Freddie Mac.
House Democrats want new housing regulator
WASHINGTON | Wed Jan 11, 2012 12:56pm EST
(Reuters) - More than two dozen House Democrats called on Wednesday for President Barack Obama to unseat the acting regulator of housing finance agencies Fannie Mae and Freddie Mac, saying he has failed to take steps that would aggressively address the nation’s housing crisis.
The group of 28 Democrats, led by Representative Dennis Cardoza, are all from California, which has been hard hit by the housing market’s collapse. In their letter, the lawmakers urged Obama to replace Edward DeMarco as acting director of the Federal Housing Finance Agency and to immediately nominate a new director.
“FHFA has consistently and erroneously interpreted its mandate far too narrowly and as such has failed to take adequate action to help homeowners,” the letter said.
…
“FHFA has consistently and erroneously interpreted its mandate far too narrowly and as such has failed to take adequate action to help homeowners,” the letter said.
I’d expect such ridiculous rhetoric from a group of Democrats. Yes, a “REGULATOR” is not thereto enforce rules and prevent fraud and avoid bad moves in an industry or agency.
A “regulator” is there to help dish out money to our friends and constituents. Unbelievable. As deeply indebted and underwater as this agency has become, the Congress Critters just want it to be dishing out money to “stimulate”. Don’t be so….ah..Conservative.
They must spend everyday reading Krugman and similar Keynesian crap.
More Corruptocrat corruption.
Retardican reaItors Johnny Isaakson and Richard Shelby are slithering in the background somewhere.
Fannie Mae, Freddie Mac Salaries Frozen for Second Year by FHFA
By Lorraine Woellert
Jan. 11 (Bloomberg) — Fannie Mae and Freddie Mac employees will receive no merit pay or cost of living increases in 2012, the companies’ regulator said.
The Federal Housing Finance Agency, which is charged with conserving the companies’ assets, directed them to freeze employee pay for 2012. It is the second consecutive year the agency has instructed the companies not to increase salaries.
The mortgage finance companies have been surviving on taxpayer aid since 2008, when they were placed into government conservatorship. They have cost taxpayers more than $153 billion so far.
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So public pandering like “freezing salaries” headlining on the MSM is the solution?
*THINK*
I guess since they have already been politically forced to blow $153 billion on a futile attempt to prop up housing, they don’t have a few nickels left over to give the hapless employees who haven’t left yet a cost of living increase?
A mere festoon of frugality, a distraction so to speak. For what they will cost you and I, all the office staff could get a nice COLA and we’d not notice.
Ha! COL increases are only positive at this point because of all the money we are hosing the investors with.
Yes, the tightening of the belts continues at the Federal level:
http://www.usatoday.com/news/washington/story/2011-12-26/federal-starting-salaries/52236360/1
And this…
http://www.washingtonpost.com/blogs/federal-eye/post/white-house-proposes-05-percent-pay-increase-for-federal-workers/2012/01/06/gIQA18fyeP_blog.html
Existing Federal workers should be seeing their pay get CUT, by about the same 5 percent that Joe 6-pack has seen his cut. No, instead they’re talking about the sacrifice they’re making with a modest half-percent raise.
Cry me a river.
“I was hoping he would go all JFK.”
huh..what would that look like?
You know…REALLY take on the PTB…and end up with your brain all over your wife.
JFK took on the powers that be?? LOL
It appears he may have taken them on a bit too much for his own good…
They say he was in the process of bypassing the Fed…
Lot’s of people reminiscence about JFK but cannot tell you why. stylish is why.
“I was hoping he would go all JFK.”
huh..what would that look like?
JFK -
Largest tax cuts in American history
Pro-gun (NRA Life Member)
Anticommunist and not afraid to use troops for America’s national interest
Bona fide war hero - personally brave and deeply patriotic
Assassinated by a devout Marxist leftist named Lee Harvey Oswald
“Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of liberty.”
“And so, my fellow Americans: ask not what your country can do for you - ask what you can do for your country. My fellow citizens of the world: ask not what America will do for you, but what together we can do for the freedom of man.”
—JFK would be shunned by the left today…
“And so, my fellow Americans: ask not what your country can do for you - ask what you can do for your country. My fellow citizens of the world: ask not what America will do for you, but what together we can do for the freedom of man.”
Sounds like JFK believed in the importance of personal responsibility in America’s citizenry — a quality which today’s politicians seem to prefer conveniently ignoring.
January 09, 2012 3:34 PM
Fannie Rating Faces Cut as Lawmakers Siphon Funds, BofA Says
Jan. 9 (Bloomberg) — The odds of credit rating downgrades on the bonds of Fannie Mae and Freddie Mac rose after lawmakers tapped the government-supported mortgage companies to pay for last month’s extension of a payroll tax cut, according to Bank of America Corp.
Investors in the so-called agency debt market should favor the bonds of other government-sponsored enterprises such as the Federal Home Loan Banks and Federal Farm Credit Banks because of the risk, Ralph Axel, a Bank of America analyst in New York, wrote in a Jan. 6 report.
Congress, to finance the two-month extension of the tax cut in December, ordered an increase in the premiums that Washington-based Fannie Mae and Freddie Mac in McLean, Virginia, charge to guarantee mortgage debt. The funds generated by the extra fees will be directed to the government for the next 10 years.
“This greatly diminishes the last remaining avenue for revenue growth, and we believe the credit rating agencies will see this as a net negative for their credit,” Axel wrote in his report. “When combined with the issue of limited capital, this significantly increases the possibility of a rating downgrade in the medium term.”
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The Foreclosure-To-Rental Screwjob – OpEd
Written by: Mike Whitney
January 13, 2012
Federal Reserve chairman Ben Bernanke wants US taxpayers to purchase more of the garbage loans and mortgage-backed securities (MBS) that the big banks still have on their books. (Cash for trash) That’s the impetus behind the Fed’s 26-page white paper that was delivered to Congress last Wednesday. The document outlines the Fed’s plan for ‘stabilizing the housing market’, which is a phrase that Bernanke employs when he wants to provide more buy-backs, giveaways, subsidies and other corporate welfare to big finance.
“Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery,” Bernanke opined in a letter to the Senate Banking and House Financial Services committees.
Indeed. The housing depression continues into its 5th year with no end in sight, mainly because the people who created the crisis are still in positions of power. And, they’re still offering the same remedies, too, like handing the banks another blank check to save them from losses on their bad bets. That’s what this new “housing stabilization” boondoggle is really all about, bailing out the bankers. Here’s a summary from Bloomberg:
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None of this really passes the smell test, does it? The only thing we know for sure is that the “fix is in” and that Bernanke will do what he always does when the banks are in a pinch. Throw them a lifeline.
Mike Whitney writes on politics and finances and lives in Washington state. He can be reached at fergiewhitney@msn.com
For the record, I had a really busy week on my day job. The timing of the Fed’s White Paper release thus proved rather inconvenient, though I did my best to try to shine a bright light of truth on this nefarious policy initiative during my spare time.
It’s a shame when the state of journalism deteriorates to a level where the comments following an article are more enlightening than the article itself.
Central banks
Crazy aunt on the loose
For central bankers in the rich world, unconventional is the new conventional
See article
Jan 7th 2012 | WASHINGTON, DC
Readers’ comments
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AtlantisKing Jan 6th 2012 1:06 GMT
When the people responsible for taking the punch bowl out of the party rely of the crazy aunt, we have to believe things are really dire. Monetary policy lost its potency around the middle of QE2. There’s no liquidity crisis, but a confidence crisis and no amount of extra money can change that.
All those unconventional actions are doing is to erode the central banks credibility and make it more difficult to reign in liquidity in the future. It is a fair assessment that it can’t be done and we’ll have a much bigger inflation problem than in the 1970s.
bampbs Jan 6th 2012 21:41 GMT
If you expect to fail, it doesn’t matter how cheap money is. It doesn’t happen very often, but when confidence is broken, the government ought to pay for jobs programs.
guest-wllijee Jan 7th 2012 18:40 GMT
How is this in any way even a partially free-market economy? Why is the financial industry subsidized and protected from risk at the public’s expense? I am no Ron Paul supporter, but it is rather obvious that central banks’ frenzy for quantitative easing is immediately beneficial to creditors (particularly private banks, hedge funds, insurance companies, and investment firms). If the government is going to intervene to help creditors, what moral or economic motivation is there for a debtor to continue to pay its debts?
dumaiu Jan 8th 2012 18:49 GMT
Quote:
Whatever central bankers do, they cannot repair problems best fixed by politicians.
A really good starting point - worth developing, because there are a lot of different issues politicians have to deal with. They cannot be dealt with by a single policy, or even a single family (eg fiscal) of policies.
At the moment we don’t seem to have a politician anywhere with a brain large enough to accommodate all the different social, legal, regulatory, commercial, financial and fiscal policies we need to put right if we are to sort this mess out.
And with all the political skulduggery going on we can’t find a committee that adds up to the sum of its parts, let alone exceeds it.
Where is the leadership?
Sit Alpert, Hockett and Roubini round a table and listen to them. Then let honest competent technicians fill in the gaps.
guest-wsmmman Jan 8th 2012 19:47 GMT
Whilst the technical inventiveness of the central bankers may be admired, this merely creates a new moral hazard; that ineffectual inactive politicians are ‘insured’ by central bankers and avoid addressing the real economic problems.
Furthermore the greater the intervention of the central banks, the greater teh political impact they have. As mentioned generally this means benefiting creditors and penalising debtors. This impact can be enormous and all without any mechanism for ensuring accountability.
I wrote a piece about the political implications of central bank activities before Christmas:http://mattduhan.wordpress.com/2011/12/14/the-deep-politics-of-the-eurocrisis-part-ii/#comment-14
Frank Hollenbeck Jan 10th 2012 15:09 GMT
Money is a measure of value, just like a meter is a measure of distance. Suppose you were building a house with requirements on its size, and the government changed the lengths of the meter every day. How long would it take you to build your house? Money is the same thing. the ECB tightened policy last year, loosened policy this year, who know what will happen next? when will we take the matches away from the kid before he burns the house down?
“
whenwill we take the matches away from the kid before he burns the house down?”Has anyone ever asked the Fed how high housing prices, which subsequently pinch household budgets and drastically reduce discretionary funds, lead to economic recoveries in economies which are based almost entirely upon consumer spending?
If older homeowners can sell for more, that helps the cruise ship industry.
Since the Fed never once acknowledged that there was a bubble, or that prices became unsustainably inflated, the question is moot.
What no one wants to talk about is the distributional implications of government actions to keep housing prices high, including those that involve borrowing money and taking on contingent liability.
This transfers money to suburban homeowners and their lenders from renters in central cities and poorer people in rural hometowns.
It transfers money to older generations that have the homes from younger generations that might want to buy them. Younger generations that are poorer, and will have to pay back the debts.
And younger generations that will face poverty in old age, as Social Security and Medicare are gutted. Why? Because the national debt will have been exploded by prior generations, in part to keep up the cost of housing.
The period where government intervened to reduce inequality was a brief one indeed. It ended 30 years ago, and we’ve gone way past neutral.
Reverse-Robin Hood governmental intervention is the new black. And if it seems bad now, just wait until anti-class-warfare advocate Mitt Romney gets into the White House.
As the political heat intensifies, US banks may get burnt
“Go get a job right after you take a bath,” was the message that Republican presidential hopeful Newt Gingrich had for the Occupy Wall Street protesters in November.
Occupy Wall Street protester gets job on Wall Street
A spokesman for Miss Postert’s former colleagues said that they wished her well and said that a number of people had left high-paying Wall Street jobs to join them Photo: AP Photo/Jason DeCrow
Richard Blackden
6:09PM GMT 14 Jan 2012
Since it began life in Manhattan’s Zuccotti Park last September, the movement has sought to spark a national debate about America’s economic system and how its spoils are shared. And now Gingrich has become a very unlikely ally to the protesters.
As the contest to be the Republican who takes on Barack Obama in November’s election rolled into South Carolina last week, Gingrich launched a series of venomous attacks on front-runner Mitt Romney. According to Gingrich and several of the other Republican contenders, Romney amassed a fortune in the private equity industry by loading up companies with debt, slashing jobs and then flipping them for a quick return.
Romney, who co-founded private equity firm Bain Capital and is crafting his run for the White House around an ability to create jobs, has argued his rivals are putting capitalism on trial.
Wall Street banks know they’re not going to win any popularity contests with US unemployment at 8.5pc, but they will still have been surprised at where the latest criticism of the financial services industry is coming from.
We will only know after Saturday’s vote in South Carolina whether Romney’s Wall Street CV is becoming a headache for him. Much clearer, though, is that the European debt crisis inflicted considerable pain on Wall Street trading desks in the final three months of 2011.
Wall Street trading desks are a zero-sum game when they are trading with their own money. They only make money collectively when their customers or the taxpayer is the loser on the other end.
Less than zero sum when you count up expenses.
Say bye bye large salaries and hefty bonuses.
Housing bust still haunts finance sector
11:40 PM, Jan. 13, 2012
JPMorgan Chase said Friday that its income fell 23 percent in the fourth quarter of 2011 after the bank set aside a large sum for litigation reserves and its investment banking income declined. / Associated Press
NEW YORK — The U.S. economy may be healing, but banks are suffering from a housing hangover.
JPMorgan Chase spent $3.2 billion last year to fight lawsuits, almost all of them over poorly written mortgages. That was down from $5.7 billion in 2010, but it made clear that housing still haunts the bank, five years after the bubble burst.
The bank said Friday that it set aside $528 million in the last three months of 2011 to fight lawsuits. It also spent $925 million in the fourth quarter to carry out foreclosures and handle mortgage defaults.
“There’s still a huge drag,” CEO Jamie Dimon said. “I mean, you’re talking about several billion dollars a year in mortgage alone.”
The expenses took a bite out of JPMorgan’s quarterly profit, which fell 23 percent from a year earlier, to $3.7 billion, and missed Wall Street expectations. Stocks across the banking industry declined as a result.
For the full year, JPMorgan, the nation’s largest bank, posted a record profit of $19 billion, up from $17.4 billion in 2010.
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It strikes me as peculiar that the bottom caller brigade seems to always ignore the role of Fed intervention in putting in bottoms. Certainly it matters if the central bank is perpetually pursuing housing price reflation opportunities?
1/13/2012 @ 3:41PM
Why Schwab Thinks the Housing Market Has Bottomed
A Foreclosure sign is seen in front of a bank-…
Investors are waiting for one large part of the economy — real estate — to show signs of a revival before piling into the stock market.
Liz Ann Sonders, chief investment strategist at Charles Schwab, says we’re near a bottom in the housing market, leading her to predict the economy will improve steadily this year rather than to sag in the first half as many economists expect. So now might be the time for investors, who are fleeing mutual funds and the stock market in general, to buy equities.
Sonders’ biggest gamble is her view that housing is indeed near its low point after declining for five years. There’s been an uptrend in new- and existing-home sales, housing starts and builder confidence. Lennar Corp. (LEN), the nation’s third-largest homebuilder, said the housing market is beginning to stabilize. Lower home prices and interest rates are making it more affordable for consumers to buy homes.
While there remains a glut of inventory in the housing market, Sonders believes we are nearing the point in the chart of housing data that we will look back on and realize it was the low point. The recovery will be driven by local economies, with certain regions leading others.
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The low point in volume isn’t necessarily the low point in prices. So I guess it depends on your definition.
I’ve suggested for some time that last year was likely the low point in volume. Release of shadow inventory coupled with lower prices would result in falling prices coupled with increased transactions. This would result in an increase in transactions volume as prices continue to fall is the likely way forward.
I agree…and it appears Schwab agrees with us as long as they’re talking about volume and not price.
Only in America can union goons get this special treatment….
but labor lawyers told The Buffalo News last summer that the Supreme Court ruled in 1973 that labor unions seeking improved terms and conditions of employment cannot be charged with extortion even if their efforts are accompanied by violence, property damage or similar coercive actions.
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Indictment accuses union members of racketeering
buffalo news | January 10, 2012 | By Matt Gryta
Mark N. Kirch, president and business manager of Operating Engineers Local 17 and nine others associated with that Hamburg-based construction union, have been named in a fresh federal racketeering indictment, prosecutors announced Tuesday.
It is the latest development in a six-year-old extortion investigation of Local 17, which earlier saw several guilty pleas.
The 10 were among those indicted in 2008 on similar charges. The latest, superseding indictment, accuses them of participating in a criminal enterprise which forced local and out-of-town employers to hire workers selected by the defendants, as well as threatening — and in some cases, committing — bodily harm, destruction of property and workplace sabotage at construction sites and against innocent bystanders, the prosecutors said.
Those actions added millions of dollars to the cost of construction projects throughout the region, prosecutors maintain.
The 10 defendants were among union members indicted in 2008. Two others at the time have since pleaded guilty.
Neither the defendants nor their attorneys could be reached to comment late Tuesday, but labor lawyers told The Buffalo News last summer that the Supreme Court ruled in 1973 that labor unions seeking improved terms and conditions of employment cannot be charged with extortion even if their efforts are accompanied by violence, property damage or similar coercive actions.
The 1973 Supreme Court decision (which was not to hear the case I think ) was that union crimes during strikes did not fall under the Federal Anti-Racketeering Acts. That doesn’t make violence “legal”. It might make it the responsibility of the corrupt state governments. Again, if I get it, murder is not a federal crime, it’s a state crime, unless you say you hate the person and his whole tribe.