GSE’s Shouldn’t Count On Bailout: Treasury Dept.
MarketWatch has some news from Washington. “A senior Treasury official warned that Fannie Mae and Freddie Mac shouldn’t expect government assistance if they get into financial trouble. In a speech to a real estate group, Treasury Undersecretary Emil Henry said past government bailouts don’t mean the government will act again.”
“‘Past actions, especially in the case of government bailouts, are not a good predictor of future actions,’ Henry said in prepared remarks to a real estate roundtable. ‘And,’ Henry asked, ‘do we really want to continue down a path that could lead to irresponsible calls for an unnecessary and preventable GSE bailout?’”
“Legislative action has been stalled in the Senate over the issue of limiting Fannie and Freddie Mac’s massive holdings of mortgage-backed securities. Signs are emerging this week that the administration may not be willing to wait for congressional legislation to reform Fannie Mae.”
“On Tuesday, Treasury Undersecretary Randal Quarles said his agency will review the process it uses to approve requests by the mortgage companies to issue debt. Secretary Alphonso Jackson said separately on Tuesday that the Department of Housing and Urban Development would probe whether Fannie Mae and Freddie Mac are improperly holding billions of dollars in assets and liabilities.”
From Reuters. “Fannie Mae’s $11 billion in accounting errors cost shareholders some $25 billion to $30 billion in losses, the acting director of the Office of Federal Housing Enterprise Oversight told a Senate panel on Thursday.”
“The acting director of Fannie Mae’s regulator on Thursday said the agency continues to find control problems at the mortgage finance company. James Lockhart, acting head of the OFHEO, said he agreed with studies from the Federal Reserve that conclude that the investment activities of Fannie and its sibling government-sponsored enterprise Freddie Mac provide little if any benefit to homebuyers.”
“U.S. Assistant Treasury Secretary Emil Henry Thursday cited ‘new and troubling revelations that Freddie Mac’s accounting and internal controls continue to be in disarray.’”
“Henry said of Freddie Mac that ‘they have recently reported that they can ‘begin’ the registration process’ with the Securities and Exchange Commission only after releasing full year 2006 results. ‘Is it reasonable for Freddie Mac to begin this process over five years after announcing that they would register with the SEC?’ the Treasury official asked.”
“Just as troubling, he said, is Freddie Mac’s recent announcement that it needs to limit the number of internal controls initiatives and defer ‘lower priority’ internal control efforts.”
“‘As a former Wall Street banker, I can tell you that I cannot imagine any non-GSE company being able to maintain its status in the capital markets with such an unremedied speckled past,’ Henry said. ‘Indeed, one (sad) irony of this situation is that the two entities that impose some of the most systemic risk to our system are held to some of the lowest standards of accountability.’”
“Fannie Mae’s top regulator said Thursday that his agency has discovered new ‘control problems’ at the mortgage giant as recently as several weeks ago. James Lockhart said both Fannie Mae and Freddie Mac will take several years to correct their internal control problems.”
“‘Neither of these companies are timely reporting at this point,’ he said. He said Fannie Mae and Freddie Mac ‘are not even close to conforming with Sarbanes Oxley, at this point.’ ‘These companies were so poorly run that it is going to take many years to fix,’ he said.”
“‘Fannie and Freddie, along with their trade association allies, cannot continue to block the Senate from taking up this bill,’ said Sen. John Sununu. Sen. Chuck Hagel said Congress has been continually warned about the risks posed by Fannie Mae’s and Freddie Mac’s activities. ‘We have been warned time after time, year after year, about the systemic failure that’s at risk here. And my goodness, when will the Congress act?’ he said at a Banking Committee hearing.”
‘As a former Wall Street banker, I can tell you that I cannot imagine any non-GSE company being able to maintain its status in the capital markets with such an unremedied speckled past,’ Henry said. ‘Indeed, one (sad) irony of this situation is that the two entities that impose some of the most systemic risk to our system are held to some of the lowest standards of accountability.’
It’s worse than an irony, especially with Moodys, S&P and Fitch telling everyone that the US taxpayer will bail these guys out. Maybe this situation is about to be addressed.
…when all the hands are out of the cookies jar, because there are no more cookies left — just IOUs.
‘Indeed, one (sad) irony of this situation is that the two entities that impose some of the most systemic risk to our system are held to some of the lowest standards of accountability.
But… but… they’re regulated.
They must be paragons of virtue if the government is watching/supporting them! It would never create a more massive problem than could have ever existed on it’s own. It’s regulation. It’s gooooood!
The problem is they aren’t regulated to the extent that is required because they have been allowed to lobby congress.
There is a strong arguement that we shouldn’t have GSE for mortgage lending at all. Governement has no business sponsoring a for profit business in my opinion. But the problem here could have been averted with the proper regulatory controls.
The problem is that ‘properly regulated’ invariably turns into ‘improerply regulation’ and then consquently into ‘regularly abused’.
I’m sure this all started out quite wonderful. The road to hell…
Thank God that we have someone willing to stand up and say NO to bailing out FM. What does this mean to FM shareholders ? What does this mean for foreigners buying MBSes ?
I think FM is using the accounting issues as a stall tactic.
Now I wish someone would stand up and say they aren’t going to bail out the housing industry.
Internal Control problems is worse than accounting irregularties. Irregulatries indicate non-compliance. Deficient internal controls means that compliance cannot be achieved. No internal controls no compliance. Things will get worse. A lot worse. I have the feeling they are hiding bad news through growth.
I wish I could say that. I want to say that. Unfortunately, I am just a lowly, humble, pissed-off taxpayer.
Is this empty rhetoric, or does Treasury mean business? Perhaps Hank Paulson will make his mark on history by cleaning up the GSE mess…
Yep, it would also benefit his buddies at Goldman if FNM and Freddie were neutered.
In this case, hopefully Yea for crony capitalism!
I’ll take a capitalist crony over crooked politicians anyday! Too bad our choices have come down to that…
It was the banks who would benefit from limiting the GSE’s activities who were directly responsible for the capital that inflated the bubble (Freddie and Fannie didn’t buy Option ARMs until very recently well after they were quite popular with the Mortgage reits/thrifts).
You can blame Fannie and Freddie for displaying to the world that for the last 70 years Americans would rather sell themselves into slavery than get behind on their mortgage payments. Also that most homeowners have no idea how to price interest rate options. Which was the reason that the bubble got started in the first place.
Hahahahaha. You really think anyone can clean up the mess? We don’t know how big the mess is, and the congressmen keep using words like “systemic risk” over and over again. With an increasing number of non-performing assets, it can only get worse. Yeah, I am skeptical. And don’t forget the forthcoming sequel, the Pension Benefit Guarantee Corp. bailout.
And the second sequel: The bailout of pensioners whose pensions were dumped on the PBGC, and who find the reduced monthly payment stream is insufficient to cover retiree medical expenses.
Pretty ugly huh… I don’t understand why you aren’t running a little of your hard earned money into gold. You know the risks. The global housing bust is just the tipping point. Where you going to run to preserve your assets from ever increasing taxes and depreciating fiat currencies and equities.
I will wait until gold finishes crashing before I go there. It looks to me like it has crashed to the point of no return for this inflation cycle.
The underfunded portion of PBGC is a drop in the bucket compared with the amount of money that would be required if FNM failed. My mother works for United Airlines and I am darn sure PBGC isn’t going to give a penny more than is required by law.
I know about PGBC.
Celebrate one little success at a time, hopefully Treasury clips FNM and FRE wings severely.
It seems like a repeat of what Poole said over a year ago.
…”An understanding of the risks facing Fannie Mae and Freddie Mac—which I will sometimes refer to as “F-F” to simplify the exposition—is important from two perspectives. First, investors should be aware of these risks. Although many investors assume that F-F obligations are effectively guaranteed by the U.S. Government, the fact is that the guarantee is implicit only. I will not attempt to forecast what would happen should either firm face a solvency crisis, because I just do not know. What I do know is that the issue is a political one, and political winds change in unpredictable ways.”…
GSE Risks
William Poole*
President, Federal Reserve Bank of St. Louis
St. Louis Society of Financial Analysts
St. Louis, Mo.
Jan. 13, 2005
http://tinyurl.com/k5ybs
“F-F” — short for “F_cked and F_ckeder”
Very true and amusing… Thanks for cheering me up today!
Sounds like Fannie Mae is starting to get its come-uppance…
————————————————————————-
Perjury Probe Sought For Ex-Fannie Officials
By Annys Shin
Washington Post Staff Writer
Thursday, June 15, 2006; Page D01
A key House member has asked federal prosecutors to investigate whether former Fannie Mae chairman and chief executive Franklin D. Raines and former chief financial officer J. Timothy Howard lied to Congress two years ago about the company’s accounting practices.
The allegations by Rep. Richard H. Baker (R-La.) center on statements made by Raines and Howard at an Oct. 6, 2004, appearance before the House Financial Services subcommittee on capital markets, which Baker oversees. Baker said those statements have been contradicted since then by the company’s chief regulator, the Office of Federal Housing Enterprise Oversight, which last month issued the findings of its nearly three-year investigation into the company’s $10.6 billion accounting scandal.
http://www.washingtonpost.com/wp-dyn/content/article/2006/06/14/AR2006061401416.html?sub=new
Wasn’t Raines a Clinton appointee? Looks like pay back is a bit**!
The government did a good thing in creating a secondary mortgage market. It should have declared victory and gone home.
Instead we have a costly occupation, a growing insurgency, not enough boots on the ground, and the possible use of a financial weapon of mass destruction.
financial weapons of mass destruction = derivatives, possibly used to help keep Fannie Mae’s stock afloat in the wake of a steady stream of bad news, including an unmitigaged, ongoing accounting scandal.
I find it more than a little ironic that the guy who said that originally is one of the biggest players in the oldest derivative market out there. Buffett’s statement was intended to get hedge funds out of his business and help to increase his margins. Odd that all the anti-corporate types (not saying you’re one of them but you have lots of company) took his plan hook, line ,and sinker.
I beg to differ. IMO the agencies were never needed in the first place. Private financial companies repackage loans and resell them all the time. There is no need for an implicit tax payer bail out. Too much moral hazard as we are all learning now.
Keep in mind that when they were created no one was doing what they did. The private ones sprung up because the GSEs had been created. Besides risk premiums aren’t high enough on the privately financed ones to indicate that investors aren’t viewing everything housing related as deserving of a governemnt bail out.
If we assume that Fannit Mae, etc. are going belly-up, doesn’t that mean some of the banks will as well? And doesn’t it mean that the government can’t ignore this kind of problem or we’ll have chaos? Can anyone help me here?
Banks issue the loans to Fannie Mae (FHA Loans VA Loans and a few others) Freddie Mac does the “conventional” loans. Banks should not be hurt by issuing these type of loans except that banks arenet buyers of MBS’s and as houses go into foreclosure the interest generated by the MBS’s becomes suspect.
The MBS market and the derivatives from the MBS market are greater than the government can handle.
Nobody talks about GNMA. I did well with investing in it while rates went down. Made out well and probably sold too early. I like both Jimmy and Warren Buffett.
Seriously, how is Ginny different from Freddie or Fanny?
Thanks in advance!
Ginny has an actual government guarantee (as it is fully owned by the government rather than publicly traded). Freddie and Fannie are “special companies” they were founded by congressional charter, have their own separate regulator (only brought into existance in 1993), don’t pay state or local taxes, but do not carry an implicit or explicit government guarantee (but try to convince anyone that the government won’t bail them out–especially after the S&L bailout).
Read about bank asset exposure to real estate loans here:
http://www.safehaven.com/article-5371.htm
“Chart 4 shows that U.S. commercial banks’ mortgage-related assets are now over 60% of their total earning assets - a postwar record high. If the U.S. housing bubble were to go “whoosh,” great damage would be done to the U.S. banking system.”
Enough said.
Sounds like Act I of the Fannie and Freddie opera is about to go on center stage; and why not, Enron has now hit the stage exit.
“A senior Treasury official warned that Fannie Mae and Freddie Mac shouldn’t expect government assistance if they get into financial trouble.
How can that be possible? Is this just “Lender of Last Resort” talk? (The only way a lender of last resort can be effective is if people believe they won’t lend otherwise people will be reckless knowing they will get bailed out…at least in theory.)
Good point. If you have to live with moral hazard, your best strategy may be an attempt to convince at least some of the people that the moral hazard is non-existent.
Another problem the government created besides the “implicit guarantee” is lower capital requirements. The agencies only have a 5% capital requirement opposed to a commercial bank’s 10%.
This is getting really, really scary.
There are huge differences between the regulatory structures of the GSEs and commercial banks. A bank has to have Tier 1 capital (essentially tangible book equity) of 4%. The enterprises currently are required to have core capital, equity but due to their mission equity and tangible equity are the same of 3.25%. 75 bps is a whole lot less than the 5% number you pulled out of your hat.
shouldn’t count or won’t get?
Can anybody hear the liquidity slowly draining out of the mortgage (housing) market?
A decline in M2 = deflation. I smell a recession coming on…….grrrrrrrr.
Here’s a philosophical question:
Now that the derivatives/hedges/low risk premiums/crappy lending has been out of the barn for years… is it better to:
1) take away the punchbowl real quick, giving us a good hard dose of medicine right away (but it might destroy the financial system, right?)
or
2) do it slowly and let everything unwind in a somewhat more orderly fashion?
It’s interesting to me, because we have (all at the same time)
- increased scrutiny of Fannie Mae/Freddie Mac. (which will put a cramp on the MBS business, at least for a while until someone can take their place)
- increased fed funds rates, which at least affect the ARMs out there and MAYBE the Fixed rates in an indirect fashion
- slightly increased Fixed rates (which I know are more determined by other investors and secondary markets, hence the ‘conundrum’)
- increased insurance rates
- increased home taxes
Could this be why thus far we’ve only seen Fed “suggestions” about lending practices, instead of forcing the banks’ hands using fractional requirements, or more close scrutiny of lending practices?
Are they trying to take away the bowl slowly, forecasting their intentions, allowing as many derivative players to unwind slowly as possible?
Did my rambling make any sense?
clouseau.
I choose 2 over 1 at any time that is not catastrophic, and our time is not, as bad as it may be - no Civil War, no Great Depression. It is better to operate the market slowly through some kind of equilibrium positions than to push the market somewhere where there might not be any equilibrium. For example, the Fed could continue the small steady rate increases and tell that it will stop when CPI is securely below 3%.
Clouseau, I have always enjoyed your posts and I think you have a staunch midwestern common sense (funny that it is called common sense when it is so rare). So from a Cheesehead educated in a California Pac 8 school in Palo Alto, my thoughts are Fannie and Freddie are immune from requirements (too large aka Continental Bank 1987)
Most of the truly risky ARMs are attached to LIBOR, many option arms are tied to the TBill however World Savings and others use COSI, CODI, LIBOR and any index they can create.
The FED has only one thing it can do that is play with FED fund rates. The suggestion of tightening credit can not become a mandatory request however if not followed the FED can look at reserve requirements. If a bank were to have bought a 10 year bond for par (100) yielding 2% and still held it that bond would have dropped in value for bank accounting that bond is allowed to be kept on the books at PAR. The accounting could change.
GM has ~30 Bil in outstanding bonds, the derivatives on the bonds are~ 275BI. If GM goes south the loss will be greater than 30bil
The total outstanding derivative market is ~ 100trl.
When LTMC went under in 1997, the loss was ~9bil and the FED could not handle it. The financial markets came closer to collapse than 1987.
In a sigma 3 event ( an outlier, but not like ’87s 18 sigma event), the derivatives could lose 1 trillion dollars - wheee.
Hedge funds are particularly vulnerable to an outlier event and to cut losses could turn a sigma 2 into a sigma 5.
All hedge funds believe Suzanne “Its a great investment it only goes up.”
I would never trust hedge funds that allow managers to buy crap like posted here from Vanity Fair
In Greenwich, Connecticut, a recent invasion of Wall Street hedge-fund managers has raised the bar for architectural ego trips. An exclusive V.F. report from McMansion central
http://tinyurl.com/zq8xa
The FED is in the unenviable position of being forced to raise rates to keep 3 billion dollars a day coming into our bonds. At the same time the world is raising their rates making it more attractive to invest overseas. Switzerland is contemplating going back on the gold standard (pulled out 2000).
So the question is since the FED is powerless is there any other government that could support the dollar collapse?
The answer seems to be NO.
Whether the end happens in a 2 week collapse or a 2 year drag, the damage will be the collapse of the financial system.
a good read is from the federal reserve bank of San Francisco
2005-08; April 29, 2005
The Long-term Interest Rate Conundrum: Not Unraveled Yet?
http://tinyurl.com/nsdhg
A number of explanations of the “conundrum” have surfaced, and this Economic Letter will focus on one in particular, namely, the tremendous increases in purchases of U.S. Treasury securities by foreign central banks (especially by those in East Asian countries). Some estimate that during the past two years, such purchases have depressed the 10-year Treasury yield by as much as 40 basis points.
This argument, if true, implies risks to long-term interest rates and to the U.S. economy going forward. If foreign governments were to decide to “diversify” their foreign currency reserves (Koizumi 2005) and reduce their demand for U.S. Treasury securities, the yields on these and other long-term instruments, such as mortgages, would move up. …”
So the Central banks will try to diversify out of dollars, Bernanke will have to keep raising rates to get bonds sold and we end up in spiraling inflation.
15 years to unravel
I apologize if this scenario is depressing, but it was first postulated during the dot com Bubble and unfortunately appears to be holding true. Russia unloading its dollars, China unloading dollars, Japan dumping dollars, Thank God for England or our most recent bond issue would not have sold as well.
Fifteen years sounds about right. A careful scrutiny of the price-earnings chart near the beginning of Robert Shiller’s “Irrational Exuberance” shows that the other three times in the twentieth century before Y2000 that the P/E ratio on the S&P 500 exceeded 25, it gradually gyrated down to a deflated level of 5 over at least a 16 year period. So I would say 2016 would be the earliest we can expect the secular bear market in stocks (soon to be joined by housing) to end, and it may take longer this time given how out of balance the housing bubble has left the economy.
Yesterday the S&P came down to what? Twelve to 15 P/E?
Wow Hoz.
That is an awesome post. I’m gonna have to read it slowly, to make sure I digest what you’re saying… but I think that I agree with it on an intuitive level, since I have no real formal economic education…
I tend to wobble between a head in the sand, “I’m sure it will be ok, the Fed is probably smarter than we all think, and maybe has tricks up their sleeves” and “oh my god, we’re all gonna die!!”
Overall, I think the truth is probably both. I’ve met Bernanke (through Princeton) and the guy seemed smart as a tack sharpened with a diamond and honed with a laser. I doubt any human can get us through this, but if one exists he seems like a pretty good choice, at least better than Greenspan IMO.
Thanks for the compliment about the “midwestern common sense”, I hope it’s true. (and it’s totally funny, because I’m a born and bred Californian, although I’ve been transplanted to the midwest since 99)
clouseau
“2) do it slowly and let everything unwind in a somewhat more orderly fashion?”
Quick, highly visible crashes have a very bad effect on economies because of the endogenous tendency of sheeples to become very precautious in the wake of high-profile, scary economic news. I believe the crash underway is being managed ever-so-carefully to play out at a snail’s pace so that only the highly observant will notice while it is in progress. Only in retrospect will the rest of the world catch on, as one might do by viewing this stock price chart:
http://finance.yahoo.com/q/bc?s=TOL&t=5y&l=off&z=l&q=l&c=kbh,%5EDJI
#2 is my thought as well. I’m not sure if it’s “better” or not (in the LONNNNG run) but it’s what I feel has been chosen, by whomever it is that chooses such things.
While helping his pet bedlington terrier fill out a 5 line undocumented income loan application for an adorable duplex close to the beach in central florida… “Fannie Mae’s top regulator said Thursday that his agency has discovered new ‘control problems’ at the mortgage giant as recently as several weeks ago.”
lol
There is some good discussion about weakness in China’s banking sector here.
http://bigpicture.typepad.com/comments/2006/06/eight_lesson_fo.html#comments
You remember, China, right ? They are the ones that buy our MBSes…
Looks like the perfect storm is brewing.
Judging by Bernanke’s speech today, it seems inflation is under control. I smell some DEflation coming on.
WOW!
Just WOW! Incoming! I really don’t know what to say about this. This will really shed a light on lending practices when the accounting reveals the fico scores and “appraisals” whoever it is that buys these loans will have to confront! Given the complete lack of anything resembling lending standards what will these loans go for in a declining market? 80 cents on the dollar? Lower? Who would want them? Will FB’s be able to claim that the property is no longer worth any where’s near what they owe and fight to re-negotiate the loan? What a mess.
“Will FB’s be able to claim that the property is no longer worth any where’s near what they owe and fight to re-negotiate the loan? What a mess.”
That’s a possibility. If a 600K mortgaged home drops to 300K, and the buyer is ready to default as the arm resets, the customer might offer to keep paying if the bank lets them pay off, say, 450K at a 6% fixed rate. Better for the bank than getting 300K in foreclosure.
I kind of doubt it, as that buyer would probably end up defaulting anyway once he’s hit with the 150K tax liability for the write off.
It would also be a bad precedent for banks to set, as 50 million mortgage holders would call up and ask for the same deal, even if they have the ability to keep paying what they signed for.
We will surely see a lot of cramdowns. Say a F_ed Borrower defaults on a 500k loan for a couple months and then contacts the bank trying to avoid forclosure. The bank knows it is better to work with the borrower to sell for say 400k now then to wait months waiting to complete the forclosure process in a declining market. They also want to get the bad loan off their balance sheet as fast as possible and write off the 100k as bad debt expense. Many of the F-ed Borrowers don’t realize the tax consequences of having 100k of debt forgiven and will be happy to get out of their house without declaring bankruptcy and losing all of thier assets.
I have a question - if the government won’t bail out FNM, then it’s not really a GSE anymore, is it?
They have a line of credit from the govt. A few billion I think. Also, notice how the officers and the board appointees have political connections.
Here we go:
“Official: Fannie Will Need Years to Reform”
WASHINGTON (AP) — Fannie Mae is in such a mess that it will take years for the mortgage giant to reform its ways and recover from an $11 billion accounting scandal, the top government official overseeing the company told lawmakers Thursday.
Fannie Mae’s two top executives, testifying before the same Senate committee, said they are in the midst of a total overhaul of the government-sponsored company, which has pledged to complete by year’s end the restatement of its earnings back to 2001. It’s expected to be one of the largest restatements in U.S. corporate history.
But the head of the agency that oversees Fannie Mae and its smaller sibling Freddie Mac insisted that both companies have made “disappointingly slow” progress.
“These companies were so poorly run that it’s going to take many years to fix,” James B. Lockhart, acting director of the Office of Federal Housing Enterprise Oversight, testified before the Senate Banking Committee.
http://hosted.ap.org/dynamic/stories/F/FANNIE_MAE?SITE=DCTMS&SECTION=HOME&TEMPLATE=DEFAULT
that is right - grow cajones - and under no circumstances, bailout anyone…. let them eat crow
In case anybody’s forgotten the tab for the ‘90/’91 S&L bail-out was $500 billion.
The GSE’s are nothin’ more than gargantuan Enron’s who are responsible for doubling the price of housing in 4 years with their easy money and acceptance of garbage appraisal work.
The FEDS bail-out out these corrupt MF’s, you can pretty much take it to the bank you’d better be thinkin’ about movin’ off-shore, ’cause the US of A has become nothin’ more than a 3rd World Banana Republic rathole with a soon to be worthless currency.
They shouldn’t “expect” a bailout, but they will get one just the same. Election year politics make me queasy.
OT - the stock market took a dump earlier this week and today they cleaned out their “shorts”, get it? Bwahaha
FNMA and other 1st mortgage holders wont be getting hurt the most. It will be the banks that did the 2nd’s that will take the full brunt of the losses. Lets just assume that the market will decline coast to coast 20%. So the properties are now worth 80% of their original value. 1st mortgages are rarely above 80%. If they are, they have mortgage insurance to protect the lender against losses.
The banks who loaned money on the top 20% in the form of 2nd mortgages. If the value goes down 20% and the property forecloses, the 1st mortgage holder will get all the proceeds, if any while the 2nd mortgage holders won’t get a nickel.
That’s all assuming the correction is 20%. If more, then the 1st mortgage holders will be in the soup too
Exactamundo!
Shh, the rational comments aren’t nearly as exciting for the masses as, they’re both Enron waiting to happen!
People think the federal government runs on magic, baby boomers started turning 60 this year and congress just dumped another hundred billion down that toilet in the middle east. Maybe the boomers can do without social security/medicare because they have so much in savings (chuckle). With the consumer crying uncle and taxes on capital cut to the bone that means american labor will pay for all this with all the wage gains they’ve been seeing the last few years.
Two comments for the crew at FNM. One, is Pricks. Two is, You can not polish a horse turd. All these guys are enjoying terrific retirement benefits at our expense. I urge everyone to write their reprenstatives. This stuff SUCKS!
I have met some of the FNM people - this was about 7 years ago. Then, their avg salary of their ees was about 2X the avg at my company (mine is Fortune 100) and they were POMPOUS. Well, it seems nothing has changed.
Out of all the players in this debacle, I am most disappointed in the banking industry. As posted here, there are no real underwriting requirements anymore. They are writing shit loans; and as IT IS THEIR BUSINESS, the nation counts on them to know what they are doing. What they ‘traded’ was common sense for a short term $ and have screwed us.
Sheople are sheople: dumb, lazy, looking for the quick out. Checks and balances ususally kept them in their place, but this is different. It seems like the banks are staffed with the “gifted” know-nothing generation of over-indulged Gen Yers and have royally screwed this up.
Time will tell just how bad.
I wrote both of my state’s Senators suggesting that an investigation of the GSE(s) should be sooner rather than later. I received replies from both of them, their office staff of course. They prefer e-mail since DC hard-copy mail must be scanned for bombs, germs, etc., so it stalls for weeks. Keep your message brief and to the point. They really do listen.
Umm….. I am confused. The Bush administration is actually proposing something that sound like a good policy. That is almost antithetical to their nature. So, the obvious question, given this administration, which Bush cronies benefits from this?
The ones that want to be re-elected in November.
Yeah, he amazingly did the right thing today of signing the northern islands of Hawaii as a national monument. Might this be another ethical and reasonable policy this administration is enacting? I strongly doubt it, it has to be of use to his corporate benefactors somehow. Still, it all makes me do a double take.
Yeah, I agree with that one too. I would agree with any other administration on that decision, it sounds good, but with this one….it’s like there is always a catch. Given this administrations past, I can’t help but be cynical when they do something that I agree with. With them, it’s always, like, what’s the catch? How do your cronies benefit.
Two benefits, first the enterprises (especially Fannie) are seen politically as sheltered areas for financially minded Dems to work (Raines was on the short list for a Treasury post for example). Second there are a ton of commercial and investment banks who would love to buy the ~$1.5 trillion in mortgages that the enterprises have especially if they were forced sellers (due to portfolio limits).
News flash it wasn’t the enterprises (whose conforming loan requirements pretty much made them only side players in most bubble areas) who inflated this bubble. It was the firms who would be buying those loans who provided the risk capital that inflated the bubble.