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Thread: Politics, shaky economy create no rush to restructure Fannie and Freddie

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    Politics, shaky economy create no rush to restructure Fannie and Freddie

    From today's edition of The Washington Post with respect to Fannie Mae and Freddie Mac:

    Sixteen months after they were seized to prevent their collapse, the companies remain wards of the state, running a tab that has now exceeded $125 billion in what has become the single costliest component of the federal bailout for the financial system.

    Some members of Congress have complained that the huge public commitment is unsustainable. But the administration has been reluctant to start reforming Fannie Mae and Freddie Mac, officials and analysts say, because the firms in their current form play an essential role in supporting the housing market at a time when it is still under severe stress. As other financial firms have exited the market and credit has seized up, Fannie and Freddie have been behind the vast majority of mortgages made since the start of the financial crisis. The companies now own or back more than half of all U.S. home loans.
    http://www.washingtonpost.com/wp-dyn...031003944.html

    The article notes that it will be at least another year before a plan is introduced to address the future of the two GSEs.

    IMO, the GSE situation is a microcosm for the larger fiscal challenges that lie ahead for the U.S. The public commitment is likely unsustainable. But politics and economics associated with the housing market currently preclude serious reform, much as barriers lie ahead of any credible fiscal consolidation.

    Having said that, the larger question with respect to the GSEs does not concern whether a permanent federal commitment is sustainable. Instead, it involves the far more wrenching issue of whether the U.S. housing market as it currently exists is sustainable. If not, then a federal commitment toward an unsustainable situation is, itself, not sustainable. At some point, foreign financing related to housing i.e., direct financing through the purchase of GSE securities or indirect financing through the purchase of Treasury securities could fail to increase at a rate necessary to sustain the current housing market model.

    I suspect that the answer is that the market is not sustainable in its present form. As a result, reforms that address the role of housing-related tax incentives, size of downpayments as a share of purchase price, and transparency, among other components, will all be needed down the road even if the GSEs are restructured, broken into smaller pieces, and reprivatized (a possible solution that is far from assured). In addition, from the household perspective, saving will need to increase as a percentage of income, especially if public financing is constrained by the nation's long-term fiscal imbalances or a credible fiscal consolidation effort that will necessarily involve a combination of tax hikes, spending reductions, and mandatory spending program reform.

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    Re: Politics, shaky economy create no rush to restructure Fannie and Freddie

    The Dems are waiting for the Republicans, when they take power soon, to tear apart Fannie and Freddie. Then they can use it for 2012 by claiming Republicans have it out for poor people.

    Just like Dodd and Frank did to create this mess in the first place.

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    Re: Politics, shaky economy create no rush to restructure Fannie and Freddie

    Quote Originally Posted by Erod View Post
    The Dems are waiting for the Republicans, when they take power soon, to tear apart Fannie and Freddie. Then they can use it for 2012 by claiming Republicans have it out for poor people.

    Just like Dodd and Frank did to create this mess in the first place.
    You neglected to say that Clinton signed it into Law.

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    Re: Politics, shaky economy create no rush to restructure Fannie and Freddie

    I've been waiting for a good opportunity to use this graph. It's really surprising to see how frequently people overstate the cost of the "'bank bailout" while ignoring the substantial costs of the housing bailout.

    People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.

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    Re: Politics, shaky economy create no rush to restructure Fannie and Freddie

    Quote Originally Posted by RightinNYC View Post
    I've been waiting for a good opportunity to use this graph. It's really surprising to see how frequently people overstate the cost of the "'bank bailout" while ignoring the substantial costs of the housing bailout.

    Government owned/operated corporations can't pay back bailout money, because the government can't create wealth. Only the private sector can.

    If we bailout the post office, the post office will never repay that bailout money; it's impossible.
    Quote Originally Posted by Top Cat View Post
    At least Bill saved his transgressions for grown women. Not suggesting what he did was OK. But he didn't chase 14 year olds.

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    Re: Politics, shaky economy create no rush to restructure Fannie and Freddie

    Quote Originally Posted by apdst View Post
    Government owned/operated corporations can't pay back bailout money, because the government can't create wealth. Only the private sector can.

    If we bailout the post office, the post office will never repay that bailout money; it's impossible.
    So when the post office was turning a profit, what was that?
    People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.

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    Re: Politics, shaky economy create no rush to restructure Fannie and Freddie

    Quote Originally Posted by RightinNYC View Post
    So when the post office was turning a profit, what was that?
    That was paying back Peter the money that was robbed to pay Paul. Then, they robbed Peter to pay Paul, all over again.
    Quote Originally Posted by Top Cat View Post
    At least Bill saved his transgressions for grown women. Not suggesting what he did was OK. But he didn't chase 14 year olds.

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    Re: Politics, shaky economy create no rush to restructure Fannie and Freddie

    Quote Originally Posted by apdst View Post
    Government owned/operated corporations can't pay back bailout money, because the government can't create wealth. Only the private sector can.
    If we bailout the post office, the post office will never repay that bailout money; it's impossible.
    That is bull crap

    The goverrnment can create wealth just as the private sector can


    A toll Road built by the government that turns a profit from the tolls, created wealth just a toll road built by private industry that turns a profit created wealth
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    Re: Politics, shaky economy create no rush to restructure Fannie and Freddie

    Quote Originally Posted by apdst View Post
    That was paying back Peter the money that was robbed to pay Paul. Then, they robbed Peter to pay Paul, all over again.
    and if paul used the money he robbed from peter to build peter a house? It's not as simple as you make it
    The Makeout Hobo is real, and does indeed travel around the country in his van and make out with ladies... If you meet the Makeout Hobo, it is customary to greet him with a shot of whiskey and a high five (if you are a dude) or passionate makeouts (if you are a lady).

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    Re: Politics, shaky economy create no rush to restructure Fannie and Freddie

    Quote Originally Posted by Lord Tammerlain View Post
    That is bull crap

    The goverrnment can create wealth just as the private sector can



    No it can't. Where does the money come from?

    A toll Road built by the government that turns a profit from the tolls, created wealth just a toll road built by private industry that turns a profit created wealth
    Where does the money come from? The private sector. If the private sector isn't making money, the government isn't getting revenue.

    Again and again and again, that's bullcrap, the government can't create wealth. Only the private sector can create wealth.
    Quote Originally Posted by Top Cat View Post
    At least Bill saved his transgressions for grown women. Not suggesting what he did was OK. But he didn't chase 14 year olds.

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