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Thread: Fannie and Freddie tab is $146B and rising

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    Re: Fannie and Freddie tab is $146B and rising

    Quote Originally Posted by jujuman13 View Post
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    Fannie and Freddie tab is $146B and rising - STLtoday.com

    Quote(Fannie Mae and Freddie Mac took over a foreclosed home roughly every 90 seconds during the first three months of the year. They owned 163,828 houses at the end of March, a virtual city with more houses than Seattle. The mortgage finance companies, created by Congress to help Americans buy homes, have become two of the nation’s largest landlords.)

    Congress should never have created these two monstrosities.
    actually, those "monstrosities", created during the end of the depression, fueled the growth of home ownership after WWII
    Fannie Mae was so successful, so profitable, it was 'privatized' ... such that the stockholders enjoyed the profits but when things turned sour, the American taxpayer paid for the losses. yes, the GSEs which privatized profits and socialized losses were taken from successful government administration to private ownership and administration ... under the presidency of a republican, nixon, in 1969. Freddie Mac was begun in 1970 - also during his regime

    Quote(Bill Bridwell, a real estate agent in the desert south of Phoenix, is among the thousands of agents hired nationwide by the companies to sell those foreclosures, recouping some of the money that borrowers failed to repay. In a good week, he sells 20 homes and Fannie sends another 20 listings his way.

    “We’re all working for the government now,” said Bridwell on a recent sun-baked morning, steering a Hummer through subdivisions laid out like circuit boards on the desert floor.


    For all the focus on the historic federal rescue of the banking industry, it is the government’s decision to seize Fannie Mae and Freddie Mac in September 2008 that is likely to cost taxpayers the most money. So far the tab stands at $145.9 billion, and it grows with every foreclosure of a three-bedroom home with a two-car garage one hour from Phoenix. The Congressional Budget Office has predicted that the final bill could reach $389 billion.)

    So yet more money has to found from somewhere to rescue these monolithic entities.
    yes, that is what happens when the government agrees to incur any losses while it allows the privateers to enjoy any profits. a 'heads i win, tails you lose' kind of proposition

    And NO I AM NOT GOING TO BLAME OBAMA for this particular mess, in fact I am 100% certain that he had absolutely nothing to do with the way these two were handing out Mortgages as though it were candy.
    This mess was started By Bill Clinton and his administration.
    it appears you are looking to blame the wrong fellow
    nixon privatized the GSEs, relinquishing their profits while continuing to expose their potential losses to the taxpayer. USA-1 has provided the youtube where dubya bin lyin eliminated the down payment providions, and eliminated the "paperwork" burden ... he eliminated the documentation which allowed the liar loans to flourish
    and you probably don't know it - or refuse to acknowledge it - but the bulk of the GSEs' losses are NOT from the loans they underwrote. they imposed credit criteria to which lenders had to "conform" if they wanted to sell their mortgages to the GSEs. it was the NONconforming loans which were the biggest part of the meltdown. those high risk, high profit loans could not be packaged quickly enough for the securitization sales on the international investment market. those loans were misrepresented by the rating houses. those ratings institutions had a vested interest in seeing that they were high rated, even if they were not. but where were bush's regulators?
    it was the GSEs, which were doing little business because they required conforming - rather than liar- loans, fearing that they were missing out on all the profits being churned by the mortgage industry that jumped into the securitization market with both feet. its Board insisted; the stockholders were expecting better returns than conforming loans would generate. so, the GSEs jumped into the securitized debt offering market with both feet. why not. the profits would be passed to the stockholders and any losses would be turned over to the American taxpayer. this happened on the shrub's watch, while investigations were going on about the irreconcilable financials provided to congress by the GSEs. this happend on dubya's watch
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    Re: Fannie and Freddie tab is $146B and rising

    Quote Originally Posted by justabubba View Post
    actually, those "monstrosities", created during the end of the depression, fueled the growth of home ownership after WWII
    Fannie Mae was so successful, so profitable, it was 'privatized' ... such that the stockholders enjoyed the profits but when things turned sour, the American taxpayer paid for the losses. yes, the GSEs which privatized profits and socialized losses were taken from successful government administration to private ownership and administration ... under the presidency of a republican, nixon, in 1969. Freddie Mac was begun in 1970 - also during his regime




    yes, that is what happens when the government agrees to incur any losses while it allows the privateers to enjoy any profits. a 'heads i win, tails you lose' kind of proposition


    it appears you are looking to blame the wrong fellow
    nixon privatized the GSEs, relinquishing their profits while continuing to expose their potential losses to the taxpayer. USA-1 has provided the youtube where dubya bin lyin eliminated the down payment providions, and eliminated the "paperwork" burden ... he eliminated the documentation which allowed the liar loans to flourish
    and you probably don't know it - or refuse to acknowledge it - but the bulk of the GSEs' losses are NOT from the loans they underwrote. they imposed credit criteria to which lenders had to "conform" if they wanted to sell their mortgages to the GSEs. it was the NONconforming loans which were the biggest part of the meltdown. those high risk, high profit loans could not be packaged quickly enough for the securitization sales on the international investment market. those loans were misrepresented by the rating houses. those ratings institutions had a vested interest in seeing that they were high rated, even if they were not. but where were bush's regulators?
    it was the GSEs, which were doing little business because they required conforming - rather than liar- loans, fearing that they were missing out on all the profits being churned by the mortgage industry that jumped into the securitization market with both feet. its Board insisted; the stockholders were expecting better returns than conforming loans would generate. so, the GSEs jumped into the securitized debt offering market with both feet. why not. the profits would be passed to the stockholders and any losses would be turned over to the American taxpayer. this happened on the shrub's watch, while investigations were going on about the irreconcilable financials provided to congress by the GSEs. this happend on dubya's watch
    That is just crazy talk

    We all know it was the most powerfull man in the universe's fault

    Barny Frank, lowly congressmen by day, but avenging gay superhero by night, able to cause the most powerfull financial institutions to make the most idiotic loans, able to overpower a Republican President, Congress and Senate and force his super agenda on the US government
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    Re: Fannie and Freddie tab is $146B and rising

    Quote Originally Posted by USA-1 View Post
    Non of the subprime loans were Fannie Mae.

    YouTube - Home Ownership and President Bush
    Fannie didn't actually make the loan, but they bought the loans and essentially insured them, and they got tax incentives to do so. According to the WSJ, in 1996, HUD set a goal for Fannie Mae and Freddie Mac that at least 42% of the mortgages they purchase be issued to borrowers whose household income was below the median in their area. This target was increased to 50% in 2000 and 52% in 2005.

    Before this, beginning in 1992, Congress pushed Fannie Mae and Freddie Mac to increase their purchases of mortgages going to low and moderate income borrowers.

    I think it is dodging the issue to argue that Fannie did not give any of these loans, and ignore that they were were basically required by the government to purchase billions of dollars worth of these loans, thus driving up demand.
    Last edited by NolaMan; 06-21-10 at 09:25 PM.

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    Re: Fannie and Freddie tab is $146B and rising

    Quote Originally Posted by USA-1 View Post
    No, it was a whole new ball game. Low interest and relaxed lending policies. A lot of people made a lot of money off the housing boom. Bush and Greenspan created it. They are responsible for it's consequences.
    It was more of an "all of the above" problem.

    The US housing bubble was actually caused by regional government restriction of land supply coupled with federal laws that increased the demand for homes.
    The regions affected were properties in the metropolitan areas of the east and west coast.[3] [4] The local areas restricted building under the guise of “smart growth” or through restrictive zoning laws and planning commissions, whatever the name, the net effect was to restrict land supply and thus drive up the cost of land in these areas.
    Starting with the Community Reinvestment Act (CRA) of 1977 Congress forced banks to give loans they would not otherwise give.[5] This raised demand and gathered momentum after Reagan left office when the White House pressured HUD,[6] the Attorney General,[7] The Federal Reserve and all institutions with regulatory authority over banks to pressure them to make loans to low income Afro-Americans using racial statistics to determine whether the banks were compliant. Jonathan R. Macey, a professor at Cornell University Law School, stated "No bank, no matter what it does, is safe from charges of discrimination. And this is true despite the fact that the industry spends over half of its profits to comply with regulations."[7]
    In 1995 these regulating agencies required the use of “innovative or flexible” lending practices.[8] Fannie Mae and Freddie Mac were pressured to lower their down payment requirement as well.[9] In 2002 Congress passed the American Dream Down Payment Act which subsidized the down payments of low income home buyers. These loans were encouraged by the Federal Reserve which had lowered the interest it charges to 1%.
    The Federal Reserve began raising the rates in 2004. By 2006 the rates were 5.25% which lowered the demand and for those on adjustable rate mortgages increased their payments until they couldn’t pay anymore. The foreclosures followed increasing supply dropping housing prices further.
    The mortgages had been bundled together and sold on Wall Street to investors and other countries who were looking for a higher return than the 1% offered by Federal Reserve. Instead of the limited regions suffering the housing drop it was felt around the world. The same Federal Reserve that had enforced sanctions on those banks who didn’t give these loans now suggested bank take overs and more regulations. The Congressmen who had pushed the hardest to create these “subprime loans”[10][11] now blamed Wall Street for selling them.[12][13] (So far none of these laws have been repealed. They are simply not being enforced.)
    ……………….

    In 1995, Fannie Mae and Freddie Mac began receiving affordable housing credit for buying subprime securities [76]
    Some borrowers got around downpayment requirements by using seller-funded downpayment assistance programs (DPA), in which a seller gives money to a charitable organizations that then give the money to them. From 2000 through 2006, more than 650,000 buyers got their down payments through nonprofits.[77] According to a Government Accountability Office study, there are higher default and foreclosure rates for these mortgages. The study also showed that sellers inflated home prices to recoup their contributions to the nonprofits.[78] On May 4, 2006 the IRS ruled that such plans are no longer eligible for non-profit status due to the circular nature of the cash flow, in which the seller pays the charity a "fee" after closing.[79] On October 31, 2007 the Department of Housing and Urban Development adopted new regulations banning so-called "seller-funded" downpayment programs. Most must cease providing grants on FHA loans immediately; one can operate until March 31, 2008.[77]

    Causes of the United States housing bubble - Wikipedia, the free encyclopedia
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    Re: Fannie and Freddie tab is $146B and rising

    Quote Originally Posted by lizzie View Post
    To blame the meltdown on the Community Reinvestment Act is totalt nonsense. The sub-prime debacle has many causes, including greed, lack of and ineffective regulation, failures of risk assessment and management, and misplaced optimism. But CRA is not to blame.

    First, the timing is all wrong. CRA was enacted in 1977, its companion disclosure statute, the Home Mortgage Disclosure Act (HMDA) in 1975. While many warned against bad subprime lending before the turn of the millennium, the massive breakdown of underwriting and extension of risky products far down the income scale-without bothering to even check on income-was primarily a post-2003 phenomenon. To blame a statute enacted in 1977 for something that happened 25 years later is quite a stretch.
    "This Administration will constantly strive to promote an ownership society in America. We want more people owning their own home. It is in our national interest that more people own their own home. After all, if you own your own home, you have a vital stake in the future of our country."" GWB

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    Re: Fannie and Freddie tab is $146B and rising

    Quote Originally Posted by USA-1 View Post
    To blame the meltdown on the Community Reinvestment Act is totalt nonsense. The sub-prime debacle has many causes, including greed, lack of and ineffective regulation, failures of risk assessment and management, and misplaced optimism. But CRA is not to blame.

    First, the timing is all wrong. CRA was enacted in 1977, its companion disclosure statute, the Home Mortgage Disclosure Act (HMDA) in 1975. While many warned against bad subprime lending before the turn of the millennium, the massive breakdown of underwriting and extension of risky products far down the income scale-without bothering to even check on income-was primarily a post-2003 phenomenon. To blame a statute enacted in 1977 for something that happened 25 years later is quite a stretch.
    Secondly the punishment for being in the bad books of the CRA is to have a review done of its standing according to the CRA and use that information as part of decision making regarding allowing mergers or takeovers to occur. It did not prevent mergers but was only taken into consideration when wanting to merger or takeover other banks.

    Also companies like Countrywide, Ditech etc, the ones that made the majority of subprime loans were not subject to the CRA to begin with
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    Re: Fannie and Freddie tab is $146B and rising

    Quote Originally Posted by USA-1 View Post
    Actually it was a short process. Greenspan lowered interest rates and Bush tried to make everyone a home owner. The chart proves it.
    I work in the housing industry and we trippled our workforce after 9/11 to keep up with the artificial demand created by those two boneheads.
    It should have never happened.
    When specifically were the feds interest rates too low? The fed does not look at specifically housing inflation when they decide monetary policy. So when was the fed funds interest rate so far out of line that it was causing an obvious harmful level of inflation in the CPI?

    Also, banks don't decide the 30 year fixed morgage rate by looking at the overnight federal funds rate either. They determine the interest rate based on inflation expectations and demand for securities. The fed does determine monetary policy so lets focus on inflation. If interest rates were "too low" in the housing market this implies expectations for inflation were low at the time. Doesn't this seem to contradict your claim that the fed funds rate was "too low," since this would be causing unneeded inflation?

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    Re: Fannie and Freddie tab is $146B and rising

    Quote Originally Posted by drz-400 View Post
    When specifically were the feds interest rates too low? The fed does not look at specifically housing inflation when they decide monetary policy. So when was the fed funds interest rate so far out of line that it was causing an obvious harmful level of inflation in the CPI?

    Also, banks don't decide the 30 year fixed morgage rate by looking at the overnight federal funds rate either. They determine the interest rate based on inflation expectations and demand for securities. The fed does determine monetary policy so lets focus on inflation. If interest rates were "too low" in the housing market this implies expectations for inflation were low at the time. Doesn't this seem to contradict your claim that the fed funds rate was "too low," since this would be causing unneeded inflation?

    Depends on how you measure inflation, and where the money that is being created from "too low "interest rates is going. If the measurement of inflation does not take into account the direct rise in housing prices the inflation rate will not pick up on that part of the economy that is inflating.

    As for the period of too low interest rates

    Try late 2001-2005. 2005 if I recall correctly was the time when the fed started to raise rates fairly aggressively.
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    Re: Fannie and Freddie tab is $146B and rising

    Quote Originally Posted by Lord Tammerlain View Post
    Depends on how you measure inflation, and where the money that is being created from "too low "interest rates is going. If the measurement of inflation does not take into account the direct rise in housing prices the inflation rate will not pick up on that part of the economy that is inflating.

    As for the period of too low interest rates

    Try late 2001-2005. 2005 if I recall correctly was the time when the fed started to raise rates fairly aggressively.
    2001 - 2005 we were recovering from a recession. There was a negative output gap and cyclical unemployment. Furthermore the inflation rate as measured by the CPI was like at or under 2% (with the exception of late 2002 - early 2003) until mid 2004. After mid 2004 there was a jump in inflation, the output gap was almost gone, we were settling near the natural rate of unemployment, and the fed began raising interest rates.

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    Re: Fannie and Freddie tab is $146B and rising



    By looking at the taylor residuals one could see that the fed set their interest rates lower than this rule would suggest. Now if we use other measures of inflation other than the headline CPI number, maybe the core cpi or the feds alternate calculation, or the gdp deflator the residuals become smaller. Nothing says the fed has to or should follow the taylor rule, but it can be used as a rule of thumb when speaking of these things. But if we take for granted, the feds rates were too low because they were lower than the taylor rule, there is no evidence this would have changed the outcome of the housing bubble. Consider some evidence from the rest of the world:

    Last edited by drz-400; 06-22-10 at 11:51 PM.

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