Page 1 of 3 123 LastLast
Results 1 to 10 of 27

Thread: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

  1. #1
    Sage

    Join Date
    Jul 2009
    Last Seen
    05-16-15 @ 02:32 PM
    Lean
    Undisclosed
    Posts
    12,537

    US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    U.S. to Lose $400 Billion on Fannie, Freddie, Wallison Says - Bloomberg.com

    Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute.

    “The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.

    The U.S. seized the two mortgage financiers in 2008 as the government struggled to prevent a meltdown of the financial system. The debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks grew an average of $184 billion annually from 1998 to 2008, helping fuel a bubble that drove home prices up by 107 percent between 2000 and mid-2006, according to the S&P/Case- Shiller home-price index.

    The Treasury said on Dec. 24 it would provide an unlimited amount of assistance to the companies as needed for the next three years to alleviate market concern that the government lifeline for Fannie Mae and Freddie Mac, the largest source of money for U.S. home loans, could lapse or be exhausted.

    Lax regulation of Fannie Mae and Freddie Mac led to the mortgage companies taking on too many risky loans, Wallison said.

    “It turns out it was impossible to regulate them,” he said. “They were too powerful.” He said no one knows how much will be needed to keep the companies solvent.

    From 1990 to 1999, Wallison served on the board of directors of MGIC Investment Corp., the largest U.S. mortgage insurer, including a stint on the audit committee, according to Bloomberg data and company filings.

    The continued government support of Fannie Mae and Freddie Mac makes buying their debt a good investment, Wallison said.

    “It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.”

  2. #2
    Sage

    Join Date
    Jul 2009
    Last Seen
    05-16-15 @ 02:32 PM
    Lean
    Undisclosed
    Posts
    12,537

    Re: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    Some observations:

    1. Just 2 days ago the White House announced a THIRD bailout of GMAC, the government now owning 56% of the still bleeding Too Big.

    2. Now, cede a NO CEILING increase for flat broke Fannie and Fred, already afforded FOUR HUNDRED BILLION, all gone.

    3. Ah, the ECONOMICS of it.

    4. Unlike Govt Motors, which owes you and me some tens of B's, the Colossi of Escrows are in to us for HUNDREDS of B's, even more than a T.

    5. Proof that Mr Wallison speaks truth is the action of Treasury in having to rescale its ceiling.

    6. That the roof was actually removed, not simply raised, indicates expectations of a lot more than HALF A TRILLION bankrupt bucks to come.

    7. Mr Geithner implies as much by arranging for no ceiling.

    8. These uber-sized underwritings of the upside down are encoded by executive fiat, Treasury orders, with no Congressional backing.

    9. Oversight resulting in a 400 billion dollar loss does not inspire much confidence when it comes to concerns about the government's managing of health care.

    10. These extraordinary Treasury actions have received almost no media coverage.

    11. It's odd, these are the kind of stories the MSM have shown great interest in in 2009.

    12. I attribute the scant attention to exhaustion.

    13. On we go.

    14. This overtall, overloaded federal scaffolding the president is erecting, its feet rusted, cannot longer stand.

    The Prof

  3. #3
    Girthless
    RightinNYC's Avatar
    Join Date
    Mar 2005
    Location
    New York, NY
    Last Seen
    01-23-11 @ 11:56 PM
    Gender
    Lean
    Slightly Conservative
    Posts
    25,894

    Re: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    Not sure that it will actually turn out that way, but if so, that will be devastating.

    On the bailout of the banks, the government turned a profit of $19b.
    On the bailout of the car companies, the government lost $30b.
    On the bailout of Freddie/Fannie, the government will lose ?.

    And yet at the end of the day, when people think of government bailouts and taxpayer losses, who do you think they'll blame?
    People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.

  4. #4
    Equal Opportunity Hater
    obvious Child's Avatar
    Join Date
    Apr 2008
    Location
    0.0, -2.3 on the Political Compass
    Last Seen
    12-09-14 @ 11:36 PM
    Lean
    Other
    Posts
    19,883

    Re: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    Quote Originally Posted by RightinNYC View Post
    Not sure that it will actually turn out that way, but if so, that will be devastating.
    But what's the alternative of doing nothing?

    What people like Prof fail to understand is that reducing liquidity during a liquidity crisis makes the crisis worse. Shutting down support for Freddie and Fannie would do just that which should be obvious for those who are educated. At the same time Prof blames Obama for not getting us out of the crisis. So he complains about Obama not doing the necessary things to fix the economy and then blames him for doing the necessary things to fix the economy.

    Is that due to ignorance or just partisan views?

    The situation is they are losing gobs of money, up to $400 billion in mortgages
    Which appears to be write down losses. If and when the housing market comes back up (which given recent indicators appears to be rising), then the mortgages could bounce back similar to how the investment in Chrysler back in the day worked. It's hard to say.

    Freddie and Fannie were a mistake in the first place from day one, but we can't change that now. We have to deal with the problems we have.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  5. #5
    Girthless
    RightinNYC's Avatar
    Join Date
    Mar 2005
    Location
    New York, NY
    Last Seen
    01-23-11 @ 11:56 PM
    Gender
    Lean
    Slightly Conservative
    Posts
    25,894

    Re: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    Quote Originally Posted by obvious Child View Post
    But what's the alternative of doing nothing?
    Don't know. Based on the fact that the bailouts of the auto industry, the banks, and the insurers will only result in a loss of $42b, it seems absurd that the bailout of Fannie/Freddie should result in a loss of $400b. That alone is enough to make me question whether it's the best use of money, though I doubt there's a reliable empirical way of evaluating that.
    People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.

  6. #6
    Equal Opportunity Hater
    obvious Child's Avatar
    Join Date
    Apr 2008
    Location
    0.0, -2.3 on the Political Compass
    Last Seen
    12-09-14 @ 11:36 PM
    Lean
    Other
    Posts
    19,883

    Re: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    Quote Originally Posted by RightinNYC View Post
    Don't know. Based on the fact that the bailouts of the auto industry, the banks, and the insurers will only result in a loss of $42b, it seems absurd that the bailout of Fannie/Freddie should result in a loss of $400b. That alone is enough to make me question whether it's the best use of money, though I doubt there's a reliable empirical way of evaluating that.
    I don't know about that. The numbers reported are short term losses. It seems a bit premature to declare it a failure without acknowledging potential gains like the large gains the government got on the Chrysler divestment. Taking a bit of my money that was used to prop up a firm that survived saving huge amounts in unemployment benefits down the supply chain that earned a profit that was used to pay down the debt saving me even more money in the future? Sounds like a decent use of a small portion of my taxes.

    True, not all will turn out like that as many bank take overs, but it's not unheard of.

    As for the Fannie/Freddie, I suspect the $400 billion loss is due to Market to Market. The mortgages are essentially worthless, thus the auditors are forcing them to write them down which hits the income statement. It's somewhat paper, somewhat real losses. As I stated earlier, if and when the housing market comes back up, those mortgages could be worth significantly more then what the auditors at the moment believe them to be. But proper accounting does dictate that you report assets at current values. I wonder what the footnotes on the write downs state. I suspect there's some wording saying that the losses are due to current prices and that future prices may differ significantly. The down side is that the balance sheets go to pot and the fed has to pour more cash in to shore up the financials.

    What I don't get is how decreasing liquidity now will help the economy which is essentially the outcome of what the Prof is arguing for. Whether he knows this is something entirely different though.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  7. #7
    Sage

    Join Date
    Jul 2009
    Last Seen
    05-16-15 @ 02:32 PM
    Lean
    Undisclosed
    Posts
    12,537

    Re: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    you explain basic economics very well, and your economics are correct

    i think you got the prof wrong, tho

    i haven't argued a position, i'm too smart to commit myself like that when i don't have to

    instead, i observed, reported and attempted to analyze what it all means

    when i'm confident, i might predict what'll come next

    i try to focus on big things, and this one is big

    it is what it is

    for housing to recoup money of this proportion, to get back what was lost, it will have to grow on the order of 100%

    but signs appear otherwise

    that the roof was removed and not simply raised indicates an expectation of a lot more to come

    that more backing is required rather shows the bottom's not been hit

    it's certainly not a positive development

    you really shouldn't say, "people like the prof," and disparage others so

    happy new year

  8. #8
    Equal Opportunity Hater
    obvious Child's Avatar
    Join Date
    Apr 2008
    Location
    0.0, -2.3 on the Political Compass
    Last Seen
    12-09-14 @ 11:36 PM
    Lean
    Other
    Posts
    19,883

    Re: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    So are you saying you are rendering no opinion as such observations? Because you look like you're complaining about the turn of events and many of your posts blast Obama.

    Where did you get the 100% magnitude?

    you really shouldn't say, "people like the prof," and disparage others so
    Except that's the truth. Frankly speaking, most people here have no understanding of what the hell actually happened (or why). There's a whole thread bashing Bernake about boosting M0 without understanding why he did it. Most people here really have no understanding at all in any way shape or form the intricacies of the economy. Two recent fools here try to argue that raw data that doesn't deal with why things happen prove one factor was the cause without running linear regression to isolate it. Hello? Basic statistics. Did you even go to college? Sheesh. It amuses me to watch Bush backers who defended everything he did economically turn around and attack Obama for nearly identical policies calling him a "socialist." It would be unbelievable if I didn't know just how ignorant people here are. It's even more amusing to watch Bush bashers defend the policies of Obama that are early identical to Bush. Apparently changing the letter behind the name causes complete reversals of opinions on the same policies.

    It doesn't take a rocket scientist to see why America is so screwed up. Voters are idiots.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  9. #9
    Sage

    Join Date
    Jul 2009
    Last Seen
    05-16-15 @ 02:32 PM
    Lean
    Undisclosed
    Posts
    12,537

    Re: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    whoa

    anyway, what obama's doing does not seem to be working

    that's the point

    who cares about my personal disposition to his failure?

  10. #10
    Sage

    Join Date
    Jul 2009
    Last Seen
    05-16-15 @ 02:32 PM
    Lean
    Undisclosed
    Posts
    12,537

    Re: US To Lose $400 Billion on Fannie, Freddie, Wallison Says

    oh, yeah, in my opinion bush was a quasi-socialist

    if that makes you feel any better

    either way, please have a wonderful new year

Page 1 of 3 123 LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •