Freddie, Fannie and the Third Rail of Housing Policy
by PubliusFrom today’s New York Times:
With midterm elections near, though, there will be talk aplenty about dealing with the companies precisely because Dodd-Frank didn’t address them. Unfortunately, if past is prologue, this talk is likely to be more political than practical.
Fannie and Freddie amplified the housing boom by buying mortgages from lenders, allowing them to originate even more loans. They grew into behemoths because they lobbied aggressively and played the Washington political game to a T. But after both companies bought boatloads of risky mortgages, they required a federal rescue.
The Treasury’s study on Fannie, Freddie and housing finance must be delivered to Congress by the end of January 2011. In a speech last week, Timothy F. Geithner, the Treasury secretary, told a New York audience that resolving the companies isn’t “rocket science.”
But attaining genuine remedies for our housing finance system could actually be harder than rocket science. That’s because it would require an honest dialogue about the role the federal government should play in housing. It also requires a candid conversation about whether promoting homeownership through tax policy and other federal efforts remains a good idea, given the economic disaster we’ve just lived through.
Alas, honest dialogues on third-rail topics like housing have proved to be a bridge too far for many in Washington. So, what we may hear instead about Fannie and Freddie before the elections is a lot of sound and fury signifying a stealthy return to the status quo.
This would be unfortunate, not only because the financial crisis presents a rare opportunity to reassess the supposed benefits of homeownership but also because there was a lot not to like about the way these companies operated and the ways their friends in Congress enabled that behavior.
Outwardly, Fannie and Freddie wrapped themselves in the American flag and the dream of homeownership. But internally, they were relentless in their pursuit of profits from partners in the mortgage boom. One of their biggest and most steadfast collaborators was Countrywide, the subprime lending machine run by Angelo R. Mozilo.
Countrywide was the biggest supplier of loans to Fannie during the mania; in 2004, it sold 26 percent of the loans Fannie bought. Three years later, it was selling 28 percent. What Countrywide got out of the relationship was clear — a buyer for its dubious loans. Now the taxpayer is on the hook for those losses.
But what was in it for Fannie?
An internal Fannie document from 2004 obtained by The New York Times sheds light on this question. A “Customer Engagement Plan” for Countrywide, it shows how assiduously Fannie pursued Mr. Mozilo and 14 of his lieutenants to make sure the company continued to shovel loans its way.
Read the whole thing here. It is a good article. Of course, it would have been very helpful if this had come out, you know, while Congress was considering its bill to remake the financial services industry. Of course, the 2,000+ page bill did nothing to address Fannie and Freddie. Because, you know, when our house burns down we should all just ignore the guy who lit the match.
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54 Comments
In my own opinion, the Pension Benefit Guaranty Corporation problem is far worse.
Thats not to say that the problem with Fannie Mae and Freddie Mac is not huge, but, at least with Fannie and Freddie, the Government (Taxpayers) still ends up owning the Homes and Property.
…"That’s because it would require an honest dialogue about the role the federal government should play in housing."…..
That's a real no brainer. No, the government should not be it the housing business. It should be left to the private sector and free market economics. We don't need nor do we want a nanny state where the taxpayer has to pick up the tab when incompetents fail and crooks rob the cookie jar.
If Obama and company think a housing bailout will help break the back of this country they'll do it!
THe root cause of the collapse of the housing market, right here – Fannie, Freddie, and government-pushed high risk loans.
Used to be a mortgage was the safest loan made, before big government decided to play Frankenstein. Meanwhile, my late mother's condo has been on the market for a year and a half, and the asking price has dwindled to what she paid for it in 2000. Frustrating to have elderly women calling and asking if we'll carry the mortgage. Take a bow, Barney Frank, Andrew Cuomo, Franklin Raines et al.
"Government isn't the solution, it's the problem." Ronald Reagan
Again,..again,…….again,……AGAIN,….!!!!!!
where were the Republicans from 2000 to 2006
By this time it should be easy to document that NOT everyone is well suited to home ownership. It
is a PitA most of the time, ask me, I'm about to be forced to fire a crew of painters in the morning.
.
It may happen sooner than one thinks if the rumor about forgiving house debt from what a home cost at purchase and it's current market value. However, it only involves Freddie and Fannie mortgages; and it does not apply to other types of mortgages or the folks who have already lost their homes.
Let me know America when you are ready for a new kind of housing finance industry that is self-sustaining and self-regulating and uses no government-operated secondary market of any kind. Tired of corruption and buying houses for people who won't make their payments? We can end that anytime you want and give you a better deal than you'll ever get out of a mortgage. Really, it's all up to you, but it's waiting out there for us.
Barney Frank and Chris Dodd drove this car into the ditch. We the People pulled them out and and didn't take the keys. Now Dodd and Franks are driving toward a Canyon. Stop these two thiefs, they must be held accountable.
Feathering their nests at he expense or unwitting assistance of taxpayers, donchaknow!
Where was the LSM when the GWB Adm warned the house banking committee that F&F
were unsustainable, oh yeah I remember, they were assisting Maxine Waters play the race
card on behalf of Franklin Raines………
..mmm Maxine Waters…..where have I heard that name lately?:-D
.
One of the benefits for shoveling loans to Fannie/Freddie was the obscene bonuses paid to crooks like Jaime Gorelik, Franklin Raines, and Johnson, as subsequent audits showed. Everybody won in this scam: unethical lenders like Countrywide, Democrat Congressmen on the take, Leftists giving away homes (money) to people regardless of their ability to pay, and the Derivative marketplace that got junk mortgages backed by the US government. Everybody but the taxpayer that is.
So now the real estate industry has melted down and the taxpayer is on the hook to pay hundreds of billions. But Franklin Raines, Barney Frank, Dodd, and the others responsible for this disaster are sitting fat and happy, when they should really be tarred, feathered, and put in stocks for a few months while children throw rotten fruit at them.
Bush tried multiple times to stop the corruption at Fannie/Freddie, but was stymied by both the Democrat-controlled Congress and typical RINO/quisling collaboration with the corruption.
One of the first things on the agenda of the new GOP led house MUST be an investigation of "Fawnee Mawe" and "Fweddy Mawk" and their sugar daddy "Bawney Fwank".
These institutions are being used like a slush fund for democrats.
You really have to wonder how much of the theft has been funneled through front groups, shell corporations and phony financial institutions such as ACORN, SEIU and "Shore Bank"….
Ralph only recently have SOME Republicans returned to their roots. Dem/Rep same difference, except that the Repubs have some roots to go back to. The entire country was asleep for the last 4 decades, all of us. We hire the clowns in Washington and none of us (me especially included) were checking up on them. We pay their enormous salaries and we just assumed they were working in our best interest. Essentially every American wrote a blank check out to a delivery boy asking him to pick up grocery items and to include his tip in it. We are all guilty.
The Government meddled in Capitalism by using our credit system to implement their social engineering policies. Then they blamed Capitalism when the wheels fell off the cart and the economy nearly collapsed. Their answer to the crisis was more Government regulation instead of more Capitalism. They will continue until nothing but crony Capitalism is left in this country. We must vote all the liberals out! Every last one of them.
"But attaining genuine remedies for our housing finance system could actually be harder than rocket science. That’s because it would require an honest dialogue about the role the federal government should play in housing.
I disagree. What's so hard about people being able to buy what they can afford, instead of what the government want to give away to a few that can't even afford public housing, yet make the responsible citizen pay, and pay and pay? The government MUST get out of pretending to be a business/corporation, and back to only what they were mandated by the Constitution.
Otherwise, It's called SOCIALISM: http://i25.tinypic.com/2a6qef4.gif end it NOW!
Well said Galt99. But let me add that these people really are not liberals. They are collectivists.
This is where the problem lies. It goes back to Racism. Ok, the purported reports of Racism. Educated and/or hard working people were buying homes within their means. My parents bought their only home in 1965 for $13K with a loan my dad was eligible thru his service as a US Sailor. People were buying houses they could afford. Some where in the 70s there was a perceived disproportionate amount of Whites owning homes compared to Blacks. Carter then decided that Blacks needed to own just as many homes and he set up the Community whatever act. Banks were guilt-ed into lending money to people who could not afford homes just so we could have social justice. Then banks were lending money all over the place so even the illegals could own homes. Even if you didn't have a social security number you could get a home loan. Now we have a completely collapsed housing market all in the name of social justice
Watch out for the forgiving of loans pushed by the obama administration through Fannie and Freddie in order to pay off a voting block for their support.
There, fixed it: http://img819.imageshack.us/img819/7549/fanniemar...
Thanks Jimmy Carter for the CRA, and Bill Clinton and Bob Rubin putting it on steroids, and thanks “W” for TARP, and John McCain for Barry. You guys really do a swell job in Washington…assholes! Fire’em all!
Funny!
This "All the news that's fit to fake" NYT article is a typical JournoLista socialist media smokescreen. It doesn't ask, and of course doesn't answer, they key issue: WHO motivated Freddie and Fannie to act like a bunch of imbecilic spendthrifts wasting the taxpayers' money on sub-prime garbage?
To protect their lunatic-left d-crat socialist pals, the NYT won't tell you it's 1. the Queen of the House, buffoon barney frank, and 2. his senate co-conspirator, the ultimate "Friend of Mozilo", Scottish cottage (i.e. palatial estate and mansion) owner, countrywide dodd.
One need look no further than the actions and policies of these two reprobates to find the REAL culprits if the current economic catastrophe. (Yes, alan greenspan played a key role – but he was a pawn acting in support of the atrocious policies promoted by these two moronic masterminds of catastrophe.)
Failure to address the Fannie and Freddie problem is like giving aspirin to a patient with a brain tumor. Bawhnie Fwank has used them as a personal piggie bank. No wonder no investigation. R's will have a field day on this one. Forensic accountants galore in D.C."
"Because in D.C. you Don't Count."
Yep, the housing bubble started with Carter's 1977 CRA, then slowly escalated into a bundled Wall Street/world disaster. Firings are to easy, I'd say hanging are more appropriate, especially for Frank, Waters, Dodd etc!
"We are fast approaching the state of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the state of the darkest periods of human history, the stage of rule by brute force." –Ayn Rand
Yes, the starting point was Jimmy Carter's "1977 Community Reinvestment Act," of which was enhance on twice by Clinton in the 90s. And yes you're right, all congress critters guilt tripped on racism, while in the meantime, allowing socialism, and/or social justice to flourish. They got tripped up by the greed of Wall Street when a few sharpies got the bright idea to bundle thousands/millions of sub-prime mortgages from Fat Fannie, Bloated Freddie, and other greedy lenders and then peddle them world wide. Investors expected to gain an untold amount of profits when the Adjustable Mortgage Rates (AMR) kicked in. They in turn were Rube Goldberged by the have-nots, when massive defaults occurred in place of massive profits, hence followed by a massive housing, and financial bust.
IMO, the whole crapola of government pretending to play the part of business/corporations have to come to a fast, and abrupt halt. We simply can't have two parallel economies or systems going. People and business either have to float, or sink on there own, without the help of taxpayers dollars. Add, our government have to get back to fiscal responsibility, a balance budget, or end up sinking too!
StanH, they are all culpable and JP, a hanging just might put an end to knucklehead politicians creating idiotic laws in the future.
The Potomac two-step. We’ve allowed these Washington bastards to set themselves up as Lords with their little fiefdoms. Washington is nothing but an instrument of self aggrandizement, where sleazy politicians bilk the public…disgusting! …and it must be brought down a peg or two, or ten. Austerity needs to be the new norm!
……."rumor about forgiving house debt from what a home cost at purchase and it's current market value"
Sounds like vote buying to me
If someone gets the mortage forgiven they should not be allowed to vote for say 8 years,
That would keep the appearance of impropriety down in my book
While we are at it all the people prople that got 99+ weeks of unemployment should wait 4 years to vote.
Becoming another pragmatist who now knows that if you want a job done right, you do it yourself?
And then they wonder why we want term limits.
But that's several trillion dollars. If I'm not mistaken, Fannie and Freddie hold a very large percentage of the total loans in the country. I could see a 14th amendment, equal treatment class action lawsuit if us conservatives wanted to try and block Obama from trying it. We'd need a team of lawyers on our side and a butt load of money, plus the stones to try it though.
One more time!
If you cannot afford IT, Don't sign for IT!
Because I cannot afford it either! Neither can my grandchildren! Or their children!
Would take to long as the damage to the country would be done.
THE MSM MYTH:
Bush causes financial meltdown…Obama elected….order restored
THE REALITY:
Frank/Dodd steer Fannie/Freddie…fuels financial meltdown…Obama elected and exploits crisis to seize power and socialize country…Frank/Dodd empowered to author financial "reform"…Financial Meltdown II awaits.
Yes, that's rub isn't it. Obama is using the courts to tie up legislation he's against right now. Look at Arizona.
"………Where was the LSM when the GWB Adm warned the house banking committee,……"
comment never saw the light of day,……but,…..
Bush should have given this message every day and twice on Sunday till,……….
all Americans knew it.
well I certainly hope that all Americans now realize that ,…….
our involvement means more than,……
just going to vote once every four years.
Yep Rebas, I've known that pretty much all my life, but every fifteen or so years I need the point
reinforced, evidently. Perhaps I should have it tattooed on my arm. I think these guys I hired
were interior painters and had no idea how much time is required to prep an outdoor job. I guess
they thought they could do this big ol farmhouse up in four days, would have been a neat trick if
they could have pulled it off. Would have averaged them $57/hour. Not bad pay for unemployed
fellows. I knew better, but after the third knock on my door, decided to take a chance on them.
They're young and local from our very small town sooooo………………
MY bad………
I bet he would NOW if he could have a do-over. He let Maxine Waters bluff him off with the
race card, he as well as all the Repbs on that committee. Look at the horrendous damage
done by Maxine and that race card, and we still haven't stopped the bleeding. Those two
outfits are still going full-tilt, s i c k e n i n g.
The pigs were lined up at the trough, and now the trough is empty. So, as always, it falls to the taxpayers to refill the slop bucket.
We've been had! but don't give up. The obsession, by Obama Team, to raise the lower class by giving them loans that they could not pay was a failure. The continued obsession by Team Obama to pour Tax payer money into entitlement programs is bankrupting America, and padding the pockets of politicians, and deliberately creating a dependent lower class which have no choice but to vote Democrat to keep their checks coming.
This is the way the Democrats convert Americans from freedom into dictatorship. Read "Rule for Radicals" to see how they are doing it. And the obvious obsession of the Obama Admin to rob America's Fed Reserve of every penny to plunge US into insolvency is no accident. It is punishment by socialists who see their way as the only way vs. a Constitutional govt.
Fight back with legal actions and elections. Report voter fraud! They won with that last time. Bring States law suits to demand that Obama enforce our existing Federal Laws.
PS: Bush was wrong in not enforcing Fed Immigration Law, but Bush looks like a minor offender compared to Obama who has proved to be a socialist Dictatorial threat to America's safety, security and freedom! Something we have to fight aggressively against!
you want to live in public housing or private housing ??
you want to swim in a public pool or private pool?
you want to go to a public clinic or a private clinic?
have a good day
… can't wait till the "real" hearings on Fannie and Freddy !!!! (See below)
http://www.youtube.com/watch?v=NJiQRe8Mqao
Too many of them were trying to sing along with W's "New Tone". That just proves how pointless it is getting the back-stabbing Dems to like (let alone agree with) conservatives. The Republican party needs to accept that the far left are dead set to achieve their Utopia of a government controlled society and must be opposed.
Sentences, and sentence fragments. First, the fragment:
"…it would require an honest dialogue about the role the federal government should play in housing."
And now the sentence(s):
The role of the FG = ZERO! This folly will be a burden on the shoulders of PRODUCTIVE Americans for at least a generation. All in the misnomer of "social justice"…
my kids wanna use monkey poop.
Yes, neither party, but for a few exceptions, wants to have an "honest dialogue" about anything, let alone the housing issues. Let's hope some of these new candidate will do what they say.
Better late than never, I thought the lib press would never address Fannie and Freddie.
Will John McCain be vindicated? In 2006 he said:
"If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole."
There were people who saw this coming. And the band played on.
Dave:
I thought they did some type of bailout already.
Walter Hanson
Minneapolis, MN
Not anything close to what their thinking about now.
Collectivists, parasites, and "victims" using the altruist cudgel.
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