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

donsutherland1

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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/content/article/2010/03/10/AR2010031003944.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.
 
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.
 
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.
 
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.

banktax1.gif
 
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.

banktax1.gif

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.
 
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?
 
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.
 
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
 
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
 
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.
 
and if paul used the money he robbed from peter to build peter a house? It's not as simple as you make it

It's just that simple, actually. Your over-complicating it.

Government isn't in the business of generating revenue. It's in the business of receiving tax revenue from the private sector.
 





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



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.

So

If the government cant create wealth lets blow up the Hoover dam as it is worthless, and let the private sector build something there that will increase the wealth of the nation. I wonder what would be a good thing to build there, perhaps a dam that provides electricity and water for irrigation


It does not matter where the money is coming from, what matters is what is done with it, whether it was a productive use of the money or not. Does a government typically create wealth, no, but it can. Does the private sector typically create wealth yes, but it can destroy it quite easily
 
So

If the government cant create wealth...

Often, arguments for limited government evolve into notions that go well beyond the case that can reasonably be made for limited government. The fallacy that government cannot create wealth is one example. Let's say a government helps finance basic research and that research later leads to a scientific breakthrough that is commercialized and generates a stream of income. In that case, government played a positive role in helping create wealth. Education and infrastructure investments are examples whereby government investment lays a framework for wealth creation.

That government investment helped create wealth does not, of course, justify an ever more expansive role for government. Excessive government would suffer from the same net costs of any large entity i.e., inefficiency, lack of coherence, etc. Moreover, on account of the government's ability to leverage the force of law, it would be in a position to pass on the net costs to society in a way private firms that are subject to failure cannot.

The value of government investment noted above also does not rationalize an oversized public sector role in the economy. State-owned enterprises often fare badly not because of incompetence, but because such enterprises are subject to non-economic constraints e.g., political interests take precedence over economic ones. As such, decisions that may not be optimal from a purely economic standpoint are made on grounds of political necessity. A classic example of such a tradeoff would be a decision to forego capital investment that would displace labor, because a democratically-elected government might face potential problems at the polls if it were to take measures that would raise unemployment. In that example, job security for voting constituents would take precedence over capital investment, the political interest would prevail over the economic one, and the short-term benefit (maintaining employment) would override the longer-term one (increased productivity) even if the net long-term benefit exceeded the short-term cost of higher unemployment.
 
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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.
So, kinda similar to the way repubs run things. :doh
 
no reform of fannie and fred but a roofless reconstruction in late december

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

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.

meanwhile, abc reports that the non partisan Congressional Oversight Panel warns:

another crisis – a bigger crisis that weakens both our financial sector and our larger economy – is more than predictable, it is inevitable

Economists Warn Another Financial on Way to U.S. Economy - ABC News

the cause of the economists' concern is:

a "doomsday cycle" wherein banks use borrowed money to take massive risks in an attempt to pay big dividends to shareholders and big bonuses to management – and when the risks go wrong, the banks receive taxpayer bailouts from the government

in other words, the continuance of the "high risk lending" that got us in this mess in the first place, except on a GREATLY INCREASED SCALE

in other words, obama is so far just more of the same, only a LOT WORSE

hey, them's the Oversight Panelists talking, not the peaceful prof

take up your gripes with ms elizabeth warren, the chair

she's some kinda egghead guru from harvard, i believe, whom i read about elsewhere somewhere whom EVERYONE just raves about

i think she even won a nobel (which doesn't quite count for as much as it used to)

on a final note, it is common knowledge in the real estate community that the end of foreclosures is NO END IN SIGHT

Foreclosures exceed 300,000 for 11th straight month | The Money Times

we're facing a DOOMSDAY CRISIS, says ms warren and her upper division colleagues

there's no way out

americans have lost HOPE

sorry

are you really SURE you want to be president, after all, mr pie-in-the-face?
 
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no reform of fannie and fred but a roofless reconstruction in late december

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



meanwhile, abc reports that the non partisan Congressional Oversight Panel warns:



Economists Warn Another Financial on Way to U.S. Economy - ABC News

the cause of the economists' concern is:



in other words, the continuance of the "high risk lending" that got us in this mess in the first place, except on a GREATLY INCREASED SCALE

in other words, obama is so far just more of the same, only a LOT WORSE

hey, them's the Oversight Panelists talking, not the peaceful prof

take up your gripes with ms elizabeth warren, the chair

she's some kinda egghead guru from harvard, i believe, whom i read about elsewhere somewhere whom EVERYONE just raves about

i think she even won a nobel (which doesn't quite count for as much as it used to)

on a final note, it is common knowledge in the real estate community that the end of foreclosures is NO END IN SIGHT

Foreclosures exceed 300,000 for 11th straight month | The Money Times

we're facing a DOOMSDAY CRISIS, says ms warren and her upper division colleagues

there's no way out

americans have lost HOPE

sorry

are you really SURE you want to be president, after all, mr pie-in-the-face?
Well then, I guess we can all agree that government regulations are needed because the "free market" won't police itself and will even do the exact things that nearly collapsed our entire economy, if allowed to.
 
that's absurd

no free market lender is gonna put THE MAJORITY of his capital out there to people who don't qualify, can't pay it back, have no income, are depending on refinancing to meet adjustables and balloons, rely on negative amortizations, and are, in essence, the definition of BAD RISKS

fannie and fred would, did and continue to do so

obama TRIPLED DOWN

man up
 
that's absurd

no free market lender is gonna put THE MAJORITY of his capital out there to people who don't qualify, can't pay it back, have no income, are depending on refinancing to meet adjustables and balloons, rely on negative amortizations, and are, in essence, the definition of BAD RISKS

fannie and fred would, did and continue to do so

obama TRIPLED DOWN

man up

Man up? What are you, 16?

Anyway, so you disagree that regulation is needed?
 
that's absurd

no free market lender is gonna put THE MAJORITY of his capital out there to people who don't qualify, can't pay it back, have no income, are depending on refinancing to meet adjustables and balloons, rely on negative amortizations, and are, in essence, the definition of BAD RISKS

fannie and fred would, did and continue to do so

obama TRIPLED DOWN

man up

Really no free market lender would do that

AIG, Leahman Brothers, Bear Sterns, Washington Mutual, Countrywide, Citi, GMAC etc

I think the market can be just as idiotic as any government
 
for such suicidal practices to be implemented on such a massive scale at so institutional a level nation wide requires more than mere stupidity to explain
 
for such suicidal practices to be implemented on such a massive scale at so institutional a level nation wide requires more than mere stupidity to explain
Could provide the source to prove that Fanny and Freddy were mandated by the government give home loans to "people who don't qualify, can't pay it back, have no income, are depending on refinancing to meet adjustables and balloons, rely on negative amortizations, and are, in essence, the definition of BAD RISKS"?
I'd like to examine the evidence of this being institutionalized by the government.
 
never said they were mandated, i'm too smart

google yourself
 
never said they were mandated, i'm too smart

google yourself

IOW, you're just ranting and spouting off and then when pressed you duck and run. Got it.
 
it is what it is and has nothing to do with me (except, it appears, in your mind)

we're looking at a total collapse imminently because the poisonous practices employed by the previous president have been adopted by the present

and to a much increased degree

read the links

sorry
 
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