Toe Jam Posted August 6, 2011 Share Posted August 6, 2011 sigh. http://news.yahoo.com/fannie-mae-seeks-5-1-billion-more-taxpayers-121029211.html Mortgage finance giant Fannie Mae said it would ask for an additional $5.1 billion from taxpayers as a weaker housing market causes continued losses on loans made prior to 2009. The largest U.S. residential mortgage funds provider on Friday also reported a second-quarter net loss attributable to common shareholders of $5.2 billion, or 90 cents per share. It forecast continued weakness ahead, with high unemployment and foreclosures expected to put more downward pressure on home prices. Link to comment Share on other sites More sharing options...
DRSmith Posted August 6, 2011 Share Posted August 6, 2011 Any money given into the mortgage market should come with strings attached, cutting mortgages for home owners who are residing in the house and were honest at the time of purchase. Link to comment Share on other sites More sharing options...
Mad Mike Posted August 6, 2011 Share Posted August 6, 2011 May 24, 2006 - Study Finds 'Extensive' Fraud at Fannie Mae They portray the District-based mortgage funding giant -- a linchpin of the nation's housing market -- as governed by a weak board of directors, which failed to install basic internal controls and instead let itself be dominated and left uninformed by chief executive Franklin Raines and Chief Financial Officer J. Timothy Howard, who both were later ousted.The result was a company whose managers engaged in one questionable maneuver after another, including two transactions with investment banking firm Goldman Sachs Group Inc. that improperly pushed $107 million of Fannie Mae earnings into future years. The aim, OFHEO said, was always the same: To shape the company's books, not in response to accepted accounting rules but in a way that made it appear that the company had reached earnings targets, thus triggering the maximum possible payout for executives including Raines, Howard and others. Old news but part of what got us into this mess. If the government really needs to fix this, a radical solution is needed. There are millions of families in dire straits, not because they over extended or did anything wrong, but simply because the economy collapsed (in large part due to Fannie and Freddie) and they lost their jobs. Pumping the money directly into Fannie Mae is a travesty of justice. Fanny gets the cash and keeps the homes to make more profit by selling them again as the market picks up while executives make million dollar bonuses. I call bull****. If anything is to be done in the form of pumping money into the system, do it the way it should have been done the first time. Give the money directly to the homeowners who can prove they did not spend well beyond their means for a the single purpose of paying off their loan. The proof need not be too complicated. Show income before losing the job and major expenses such as home and vehicle payments. People above middle class income levels and/or with multiple homes etc. would be excluded. It could even be in the form of low interest, long term loans with a grace period before repayment must begin. Experts can work out the details. The point being that Fannie still gets the money (without the free house to sell again), while decent hardworking Americans get the relief they need to keep a roof over their head and spend on the goods and services the economy needs to sell in order to grow. Link to comment Share on other sites More sharing options...
Koolblue13 Posted August 6, 2011 Share Posted August 6, 2011 We are most certainly going to give them more of our money. Link to comment Share on other sites More sharing options...
SnyderShrugged Posted August 6, 2011 Share Posted August 6, 2011 Giving them billions more should really help the credit rating a ton. Link to comment Share on other sites More sharing options...
Stillers6SB Posted August 6, 2011 Share Posted August 6, 2011 Giving them billions more should really help the credit rating a ton. No. It's a better idea to let the housing market tank even more than it has in the past 5 years. Who would be able to get a home mortgage today if it weren't for fannie and freddie? Almost nobody. Link to comment Share on other sites More sharing options...
PeterMP Posted August 6, 2011 Share Posted August 6, 2011 No. It's a better idea to let the housing market tank even more than it has in the past 5 years.Who would be able to get a home mortgage today if it weren't for fannie and freddie? Almost nobody. Would it really get much worse? Unless somebody can really show that it would get a lot worse, I'm prepared to just say let'em go. Link to comment Share on other sites More sharing options...
SnyderShrugged Posted August 6, 2011 Share Posted August 6, 2011 No. It's a better idea to let the housing market tank even more than it has in the past 5 years.Who would be able to get a home mortgage today if it weren't for fannie and freddie? Almost nobody. Heck. Just skip the salad and pay off everyone's mortgage. Link to comment Share on other sites More sharing options...
Koolblue13 Posted August 6, 2011 Share Posted August 6, 2011 eyS5n0ByLag Reminds me of this. Link to comment Share on other sites More sharing options...
Stillers6SB Posted August 6, 2011 Share Posted August 6, 2011 Would it really get much worse?Unless somebody can really show that it would get a lot worse, I'm prepared to just say let'em go. Yes, it would get much worse. Mortgage rates would be much, much higher. Home purchase costs would be higher. Less people could afford houses. Demand for houses would be much lower. Prices for houses would be lower. What part don't you understand? Link to comment Share on other sites More sharing options...
PeterMP Posted August 6, 2011 Share Posted August 6, 2011 Yes, it would get much worse. Mortgage rates would be much, much higher. Home purchase costs would be higher. Less people could afford houses. Demand for houses would be much lower. Prices for houses would be lower.What part don't you understand? The part where you support that all of that would happen to any great extent if Fannie went under. If Fannie was allowed to go under, the FHA and Ginnie Mae aren't going away, right? How much of the current loan activity is tied to Fannie that can't somehow be picked up or encouraged via the FHA and Ginnie Mae? Link to comment Share on other sites More sharing options...
Hubbs Posted August 6, 2011 Share Posted August 6, 2011 The part where you support that all of that would happen to any great extent if Fannie went under.If Fannie was allowed to go under, the FHA and Ginnie Mae aren't going away, right? How much of the current loan activity is tied to Fannie that can't somehow be picked up or encouraged via the FHA and Ginnie Mae? Unfortunately, the true reason that the government won't ever allow Fannie and Freddie to go under is the same reason that AIG had to be "rescued," the same reason that no major bank could be allowed to fail after Lehman, and even the same reason that has "forced" the EU to be so determined to throw as many euros at the PIIGS as it takes to prevent a true sovereign default. The reason is the fact that the entire global financial system has been allowed to grow into an extremely interwoven, even more extremely inter-dependent, and even more over-leveraged parasite that depends on perpetual growth and no significant failure of any major type of debt to survive. Banks hold over $1.6 trillion in Fannie and Freddie debt on their balance sheets as assets that are treated as if they have an explicit "full faith and credit" guarantee of the federal government, even though they don't. Forcing Fannie and Freddie's creditors to take a haircut will cause many of those creditors to fail, because they're too leveraged to take the hit. Then, the creditors of those institutions would also begin to fail for the same reason. And that's not even taking into account the institutions that would suddenly be on the ropes because they depend on Fannie/Freddie mortgage guarantees. Some day, historians will look back and note how mind-blowingly idiotic we were to put ourselves in this situation. But I suspect that day will only come after we experience a "Great Reset" in which the current global financial system collapses once and for all—not because world governments won't want to continue pursuing their acts of sheer desperation to save the system, but because they simply won't be capable of saving it anymore. After all, as numerous economists have said before, "That which can't go on forever, won't." Link to comment Share on other sites More sharing options...
HailGreen28 Posted August 6, 2011 Share Posted August 6, 2011 No. It's a better idea to let the housing market tank even more than it has in the past 5 years.Who would be able to get a home mortgage today if it weren't for fannie and freddie? Almost nobody. Why not? I don't think getting my mortgage with BB&T had anything to do with either "macs". Did yours?What's changed since then? Link to comment Share on other sites More sharing options...
PeterMP Posted August 6, 2011 Share Posted August 6, 2011 Unfortunately, the true reason that the government won't ever allow Fannie and Freddie to go under is the same reason that AIG had to be "rescued," the same reason that no major bank could be allowed to fail after Lehman, and even the same reason that has "forced" the EU to be so determined to throw as many euros at the PIIGS as it takes to prevent a true sovereign default.The reason is the fact that the entire global financial system has been allowed to grow into an extremely interwoven, even more extremely inter-dependent, and even more over-leveraged parasite that depends on perpetual growth and no significant failure of any major type of debt to survive. Banks hold over $1.6 trillion in Fannie and Freddie debt on their balance sheets as assets that are treated as if they have an explicit "full faith and credit" guarantee of the federal government, even though they don't. Forcing Fannie and Freddie's creditors to take a haircut will cause many of those creditors to fail, because they're too leveraged to take the hit. Then, the creditors of those institutions would also begin to fail for the same reason. And that's not even taking into account the institutions that would suddenly be on the ropes because they depend on Fannie/Freddie mortgage guarantees. Some day, historians will look back and note how mind-blowingly idiotic we were to put ourselves in this situation. But I suspect that day will only come after we experience a "Great Reset" in which the current global financial system collapses once and for all—not because world governments won't want to continue pursuing their acts of sheer desperation to save the system, but because they simply won't be capable of saving it anymore. After all, as numerous economists have said before, "That which can't go on forever, won't." Any idea what the total liability of the government with respect to FDIC if every bank in the country fails? Link to comment Share on other sites More sharing options...
Hubbs Posted August 6, 2011 Share Posted August 6, 2011 Any idea what the total liability of the government with respect to FDIC if every bank in the country fails? It's pretty impossible to come up with a true estimate, especially since the M3 statistic has been discontinued, but if you want a ballpark number, $10 trillion. Link to comment Share on other sites More sharing options...
PeterMP Posted August 7, 2011 Share Posted August 7, 2011 It's pretty impossible to come up with a true estimate, especially since the M3 statistic has been discontinued, but if you want a ballpark number, $10 trillion. That's $10 trillion in addition to the deposits it has? Any idea of what China's actual cash holding are? Link to comment Share on other sites More sharing options...
Thiebear Posted August 7, 2011 Share Posted August 7, 2011 i understand we kep pumping billions into them.... What is their plan to get better? March 25, 2010 http://www.fool.com/investing/general/2010/03/25/how-do-we-fix-fannie-mae-and-freddie-mac.aspx I remember once they were going to put their debt into banks ready to fail but the backlash to the trick was instant. Published: Tuesday, 17 Aug 2010 Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan are hosting a summit to fix Fannie Mae and [FNMA 0.295 -0.011 (-3.59%) ] Freddie Mac [FMCC 0.329 -0.014 (-4.08%) ], where Industry leaders will offer their ideas on how to fix the mortgage behemoths. Since Fannie and Freddie were placed under government conservatorship in September 2008, the two companies have set aside $171 billion for credit losses and requested $148 billion in taxpayer aid. The White House and Congress have proposed legislation to create a safer financial system in the wake of the recent crisis, but they have yet to deal with two of the biggest culprits: Fannie Mae and Freddie Mac (NYSE: FRE ) . The two were guilty of doing exactly what Goldman Sachs (NYSE: GS ) , JPMorgan (NYSE: JPM ) , et al did: enabling a bubbly housing market. The process of taking these agencies to account finally began Tuesday, when the House Financial Services Committee held a hearing on how to restructure the government-sponsored enterprises, as well as on the general future of our nation's housing-finance system. Fannie Mae and Freddie Mac, which guarantee or own half of the nation's $11 trillion in mortgages, were taken over by the government in September 2008. Since then, the government has injected $127 billion into the duo and pledged unlimited aid to keep the housing market afloat. To get a sense of how lawmakers are approaching the revitalization of America's housing-finance system, I spoke with Rep. Paul Kanjorski (D-Penn.), the chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises. Here is an edited transcript of our conversation. Jennifer Schonberger: You participated in a hearing Tuesday on how to restructure Fannie Mae and Freddie Mac, as well as the future of our nation's housing-finance system. Having discussed ideas in the hearing, what do you think is the best solution? Rep. Paul Kanjorski: I think the first thing we should do is recognize that this is not going to be a problem that gets solved early or fast, or a solution that's going to come into use overnight. It's a work-out situation on the existing portfolio that Fannie and Freddie have -- and they're very sizable. Then, above and beyond that, it's the development of institutions that will further stimulate [commercial] real estate and residential housing in the U.S. and the determination of whether it's necessary to do that. My judgment is, we do need something that will continue to stimulate housing and take the valleys and hills out of the problem ... Fannie and Freddie existed for a good number of years and were very successful in gaining a constant growth and prosperity in the residential real estate field. Now we've lost that ... Can they survive now? They could probably be rehabilitated, but that would be expensive and take a long time. And on the other hand, we can't afford not having a support system for the residential real estate market in the U.S. So we're going to have to listen to all the suggestions, think the problem through, and then take steps -- but not giant steps -- and make sure that we do no harm to the field. If you were to run in with a fast solution, you could cause depreciated assets to depreciate even more and cause even greater losses in the overall system ... Whatever that new system will be, it will have some of the same objectives as the old Fannie and Freddie, but with more safeguards in place so that you can't use it as an asset base for speculation. Schonberger: Do we stick with a public/government-controlled system, or do we privatize it? And if we stick with a public system, should we put a hard cap on the number of loans that are doled out [or] homes that are subsidized? Kanjorski: I think we have to recognize that we're in a dynamic, growing economy. So we cannot deal with hard caps, because if you put in a hard cap that would appear rational today, 10 years down the road it may become irrational, because of the growth of the population and the growth in the economy. So we have to be flexible and vigilant -- perhaps pay a little more attention to the needs of the economy and the society and be pliable enough to make those needs resolve. But don't let them run wild. I haven't come to any conclusion. I know there's a segment of people who'd like to totally go to privatization. If we hadn't had a need for Fannie and Freddie, we wouldn't have had it. We had them because the private market didn't afford the opportunity to do what was necessary to create a secondary market for financing. That hasn't gone away. It's going to continue, it seems to me. We could look at the need to have Fannies and Freddies, but not of the size that would put the system in jeopardy. We could create little Fannies and Freddies, and create them in such a way that if they got into financial difficulty, they could be allowed to collapse and it wouldn't be a big deal. What we had here is something that got so huge and so large that it would have created a whirlpool and brought down the entire system ... we had little choice. We shouldn't make those mistakes again in the future ... Schonberger: When we look at fixing the system and what happened with Fannie and Freddie -- how they got caught up with the exuberance on Wall Street -- how much of it comes down to the government just enforcing prudence, ensuring that entities don't take on risk that is imprudent, as the government would do for any commercial bank like Citigroup (NYSE: C ) or Wells Fargo (NYSE: WFC ) ? Kanjorski: Actually, this is a lot of our thinking now in how we're constructing regulatory reform. The Congress in ‘94 had authorized the Federal Reserve to establish conditions and circumstances for mortgaging. They did not do that. True, that was 16 years ago, but to a large extent you could trace some of those 16 years to deterioration in underwriting, and by virtue of that happening, a weakening of the system of Fannie and Freddie until it went critical ... We've got to try to make sure it doesn't happen again. Schonberger: How long, in your estimation, before we revitalize the system? Kanjorski: Certainly not months. I think we're talking about years -- probably two to five years to give an outside guesstimation before you can really come up with some workable solutions. If you try an area, you're going to make some mistakes, and on the other hand we can't allow this to happen indefinitely -- as it is now -- because we really don't have a functioning real estate market and are hurting a lot of people in the system. Schonberger: Do you see yourself taking the lead on proposing any legislation around this? Kanjorski: In our jurisdiction, we're certainly going to be working on it. I'm encouraging everybody who has ideas to synthesize them and send them to me and let's think about it. We have no preference. If we're going to make a hard decision, I'm going to encourage everyone on the committee who has ideas to throw them in the barrel. We'll try to pick something that we feel is the best solution. Link to comment Share on other sites More sharing options...
PeterMP Posted August 7, 2011 Share Posted August 7, 2011 i understand we kep pumping billions into them....What is their plan to get better? Assuming that Hubbs numbers and general analysis are right (that if we let Fannie fail, we are looking at the failure of a large percentage of the banks in the largest economies in the world) and this just isn't an issue of preventing the housing market of going down some more. Then fixing the problem is going to require a combination of 3 things: 1. People stop defaulting. 2. The value on houses where people have defaulted and/or continue to default on to go up. 3. That people start buying more homes. And that these be "real" improvements and not just government manufactured improvements some how connected to increases in government debt. This would require a pretty dramatic improvement in the US economy in the middle of a global economic down cycle, and since there is no 'dramatically improve your economy in the middle of a global economic down cycle' pill, I'd expect currently their plan involves lot's of prayer. Link to comment Share on other sites More sharing options...
Hubbs Posted August 7, 2011 Share Posted August 7, 2011 That's $10 trillion in addition to the deposits it has?Any idea of what China's actual cash holding are? In addition to the deposits what has? The FDIC? The FDIC doesn't have anything. It's barely climbed out of the red. China has a bit more than $1 trillion in Treasuries, another couple hundred billion in agency bonds, and likely a few more hundred billion in other dollar-denominated assets. (The exact numbers are, of course, a People's Secret.) They don't hold much in actual cash. It would directly harm their trade strategy. They need to recycle dollars back to us so that we can continue using them to purchase their exports, fueling Chinese employment and keeping unrest generated by tens of millions of migrant workers at a minimum. Assuming that Hubbs numbers and general analysis are right (that if we let Fannie fail, we are looking at the failure of a large percentage of the banks in the largest economies in the world) and this just isn't an issue of preventing the housing market of going down some more. Then fixing the problem is going to require a combination of 3 things:1. People stop defaulting. 2. The value on houses where people have defaulted and/or continue to default on to go up. 3. That people start buying more homes. And that these be "real" improvements and not just government manufactured improvements some how connected to increases in government debt. This would require a pretty dramatic improvement in the US economy in the middle of a global economic down cycle, and since there is no 'dramatically improve your economy in the middle of a global economic down cycle' pill, I'd expect currently their plan involves lot's of prayer. Just to be clear, there are different types and levels of failure, and every institution's ultimate exposure to each type and level varies. It's not quite accurate to say that letting Fannie fail would automatically lead to the rapid failure of "a large percentage of banks in the largest economies in the world." Hell, I can think of ways in which we could technically let Fannie fail without causing too much immediate damage that would be directly linked to Fannie. These ways would involve a ridiculous amount of overt can-kicking, and wouldn't actually solve any of the problems that would ultimately be the result of Fannie's failure, they would merely delay them while likely changing their form (and making their eventual impact worse in the process). That kind of action would, however, be so painfully obvious, and so politically unacceptable, that it's incredibly unlikely to ever happen. Instead, we'll get more of what we've gotten for the past three years—perpetual zombie bankruptcy, in which Fannie and Freddie slowly drain away taxpayer resources as we wait for that magical return to 3.5% growth and 5% unemployment that the CBO promises is only three or four years away, just as it's promised every year since 2008. In other words, yes, the primary plan is to pray. Link to comment Share on other sites More sharing options...
Stillers6SB Posted August 9, 2011 Share Posted August 9, 2011 Why not? I don't think getting my mortgage with BB&T had anything to do with either "macs". Did yours?What's changed since then? Except for a very few cases, BB&T and other banks don't even lend any mortgage $ without support from the GSEs. Fannie Mae along with its sibling, Freddie Mac, currently own or guarantee about half of all mortgages in the United States and backed nearly 90 percent of the mortgages in the past year.Since January 1, 2009, government agencies Fannie Mae, Freddie Mac, and Ginnie Mae have collectively guaranteed more than 80 percent of all single-family mortgages in the United States. http://loanrateupdate.com/mortgages/fannie-mae-reports-net-loss-of-2-9-billion-in-2q Link to comment Share on other sites More sharing options...
Thiebear Posted August 9, 2011 Share Posted August 9, 2011 So we are actually making it worse, not better. Link to comment Share on other sites More sharing options...
SnyderShrugged Posted August 9, 2011 Share Posted August 9, 2011 So we are actually making it worse, not better. This has been true for a very long time. Nobody listened Link to comment Share on other sites More sharing options...
Stillers6SB Posted August 9, 2011 Share Posted August 9, 2011 So we are actually making it worse, not better. Nope. The housing market would be a lot worse without the GSEs giving support. Link to comment Share on other sites More sharing options...
sacase Posted August 9, 2011 Share Posted August 9, 2011 Let it crash, at least it will reflect true home prices, not the inflated prices we are paying now. Link to comment Share on other sites More sharing options...
Fergasun Posted August 9, 2011 Share Posted August 9, 2011 Let it crash, at least it will reflect true home prices, not the inflated prices we are paying now.Yes, yes, yes! Why do people think they have some type of "right" to an over-inflated house value? Link to comment Share on other sites More sharing options...
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