The Coming Bailout of Fannie Mae and Freddie Mac
by PubliusFrom the Boston Globe:
Fannie and Freddie were once the most powerful forces in the US housing industry. They pumped liquidity into the sector by buying up mortgages written by banks and mortgage companies. That kept the cost of capital low and increased the volume of mortgages. Government backing allowed the two to borrow money at lower rates than anyone else in the housing financing market.
While Fannie and Freddie operated under some form of congressional oversight, they ultimately answered to their stockholders. Their business was making money. They joined Wall Street firms in making record profits — and hauling in record bonuses — by buying, securitizing, and reselling subprime mortgages that never should have been written in the first place.
The housing market’s collapse sowed destruction and put the nation’s biggest banks on a government lifeline. No lifeline has been bigger than the rope the feds threw Fannie and Freddie, though. In September 2008, the two firms received a bottomless line of credit. So far, their tab stands around $148 billion — more than AIG, the company that insured all of Wall Street’s worst housing bets, is in hock for.
In January, the Congressional Budget Office said the total cost to taxpayers could reach $373 billion.
Government aid to Fannie and Freddie has been handed out piecemeal so far. It’s easier to stick another $3.3 billion on the tab, as the two did last week after posting massive quarterly losses, than it is to grab the whole $300 billion pie all at once. But there’s a growing recognition in Washington that Fannie and Freddie can’t keep stringing along like this.
There is no easy way to clean up Fannie and Freddie. Lawmakers can’t just kill them, as has been suggested. The pair have actually been operating under a recent government mandate to increase their mortgage purchases, as a way of propping up the fragile housing market; if they disappeared suddenly, the economic aftershocks would be catastrophic.
Nor do they have a clear near-term path to privatization. The gap between the companies’ estimated bailout tab and what they’ve received so far reflects sizable losses they should incur, but don’t have reserves to absorb. Fannie alone has lost more than $150 billion over the past three years. Both companies were recently taken off the New York Stock Exchange.
That leaves nationalization. It’s notable that the White House has until after midterm elections to file formal reorganization plans for Fannie and Freddie. If Washington can’t kill or privatize the mortgage firms, it will have to assume responsibility for their massive liabilities.
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96 Comments
Can anyone say Franklin Raines and Jamie Gorelick?
How about Bwarney Fwank or Chris Dodd?
But but but but Obama said there will be no more bailouts….
I have an Internet Based Grocery Service I'd like to sell you.
All this crap is starting to look like the movie "Groundhog's Day", same thing over, over and over again.
But, but Barney Frank said that F&F didn't need gov't oversight and they both were stable…
Let US all face the cold, hard facts, in laymans terms.
Fannie Mae and Freddie Mac, were nothing more than the clearing house, which bundled up junk mortgage paper and sold it to offshore, foreign investors, who thought they were buying something good, something Made in America, backed by the Full Faith and Credit of the United States. It was a sham.
Fannie and Freddie were nothing more than bunko artists, running a three card Monte game, that started with the Community Reinvestment Act, Jimmah Carter and Slick Willie Clinton.
That, in a nutshell is the simple schematic of it.
Do they have to wipe spittle off of everything after Bwarny speaks?
I vote "NO"!!!
I am still waiting on a dividend check from these guys. What the…
Is it fully stocked with imaginary groceries?
Whack-a-mole………
Are there any financial people that post here? What does this mean for the long term bonds sold to finance these dinosaurs. I have some Fannie May Bonds that my financial adviser is saying are 'safe'. I was thinking of turning them into cash but he says if I don't need the money to leave them. I suppose I should just as another financial adviser. I just have no faith in the backing of our federal government.
If there's no spit, you must acquit!
The globe article states that nationalization is the only option. But there is another.
Folks could admit that the entire strategy is a failure, let if fail, and chalk it up to knowledge gained – meaning stop digging and start climbing out of the hole instead!
Thank you CL. Finally……Someone who backs up far enough to know what started this mess.
Didn't he though?
He just exudes confidence from every pore.
Nope, just grocery backed securities…..
FAIL?
Did you say FAIL?
Good Lord! Donchaknow there are some things just tooooooo biggggg to fail?
Imaginary condoms……..we desperately need them……LOL
He exudes something alright!
I agree that we just can't eliminate Fannie and Freddie but it is beyond my understanding how just pumping more and more money into them will solve anything. Bail them out and they are right back with their hand out for more money. There is no real plan that I can see to actually clean these firms operations and until they are cleaned up and Congress stops meddling with their operatrions, no amount of bailouts will help.
I am waiting for the Dali Bama to forgive the mortgages people have from Freddie and Fannie. Vive le Revolution!
I am not a financial advisor.
But have lost some big chunks of money, on bad investment advice.
The best advice I could ever give you, or anyone else, is listen to your gut. If something doesn't feel right, do something about it.
Without looking specifically at what you have, it would be hard to say, but I do know that Fannie and Freddie both filed within the last 4-8 weeks to be delisted and non-reporting. The next step is normally a total default. They filed for this delisting to hide the tracks.
And there you have the end result of "Hope and Change".
………and a tub of Petroleum Product.
Vaseline………
THAT, is the simple FACT.
The Community Reinvestment Act.
Further perpetrated by the like of Al Sharpton and Jessie Jackson; demonstrating in front of banks and shaking them down. MAKING banks give mortages to those who were ill suited, and ill advised to handle a mortgage.
It is criminal.
More Corruption!
I can't tell you how much I have lost over the past few years, Holly, because my "financial advisor" told me to hang tight vs. sell. If I had listened to my gut, I'd be worth about 40% more now. The problem with these advisors is that their knowledge (or lack thereof) is based on history and we are living in a time unlike any other so history is useless and few are capable of accurately predicting the financial future of the U.S. (and those that have made predictions are VERY pessimistic) . . . . Personally, I would turn those bonds into cash–or gold/silver.
Eventually we will get it right then…..and get out of this loop we are stuck in….hopefully it begin 11/2/10…and really start in to change in 11/6/12…
More lies and Corruption from these Socialists!
More lies and Corrption from these Socialists!
Fannie and Freddie were both as stable as Bwarney Fwank was.
among other things that might come out of his mouth.
Exactly right. Holdings in those companies are essentially bond notes of the government variety.
Always go with your gut notion. There are reasons for the little voices. Ones education is creeping into the thoughts even though you don't remember learning it.
I only Hope that WE can Change it back…………
are you going to apply for stimulus money? and can you get one of those signs for your internet site.?
Dang, that will teach me. My friend Barry said they were solid because he got that from his pal Frank who ran it. I was counting on the "Hope and Change" now all I have is some stinking change. Dang!
I wear a size 13 shoe. There is nothing I would enjoy more than putting a pair of steel toe boots and kicking obama right square in the ass. He has earned it.
could the same be said of social security? or any other of a long list of government run organizations?
Publius,
Your article title: "The Coming Bailout of Fannie Mae and Freddie Mac"
Does anyone care to guess where all that money is going to go?
ACROSS THE POND.
Yep, thats right, to foreign investors, to try and appease them and make them whole. Right now the Chinese and Arab states hold the preponderance of that junk paper, and they are NOT happy.
why can't we get rid of them? is the whole country too big to fail? turn them out on the street, and let them fail on thier own.
Ash, you always bring common sense into the conversation. If we dig a big enough hole, won't we be able to cover ourselves? I mean China would welcome us with open arms won't they?
That's right……I hear voices all the time. LOL
Fire the crooks, fire the crooks.
Yes.
Just different versions of the same Ponzi Scheme.
They put Bernie Madoff in jail for 150 years, for much less.
Another nutshell version for the "backed by the Full Faith and Credit of the US" part:
Heads The well-connected win.
Tails: Taxpayers lose.
Lots of well-connected made lots of money playing big risks because they knew when "tails" turned up, the taxpayers would get stuck with the loss.
As everyone here knows, this led to the financial meltdown, the recession, and contributed to Obama's election; but it was mostly Frank/Dodd's creation — not Bush. They were rewarded with getting to help author the recent financial "reform" bill which will produce similarly spectacular results in time.
Great Weath will be heaped together in the last days. James 5: 1-5 . Another prophecy come true!
Riddle:
What do Charles Ponzi, Bernie Maddoff, Fannie Mae and Freddie Mac have that separates them?
TWO, were not GSE's.
It has been on my mind for the last few weeks, I could use the money for a nice wedding gift for my son, buy a new Ford truck and maybe go on a nice vacation (no, not the Spain variety there's not that much money).
I should bail because it just doesn't feel right. I hope I did not wait too long
You are absolutely correct.
Who made the most on this? Anyone care to hazard a guess?
Goldman Sachs.
They aggregated and bundled the paper. They bet it would go up, while simultaneously betting it would default. AIG is tied up in the middle, with credit guarantee default swaps.
I hang out here much longer, I'm going to have to take a break and change my shorts…..
i would SELL them asap, Frank has said b4 he thinks bondholders should share the pain and look what happened to the 'secured' 'senior' bondholders of Chrysler and GM!!
My voices tell me not to go to work today; that I need to stay home and clean my guns……
Neat.
Let's all go to Detroit and buy foreclosed properties. They say you can buy 'em for ten cents on a peso.
Here’s my two cents: (while I still have it) Do we currently have ANY banks that have done this right? What I’m saying is: Are there ANY loans that have been granted in the general public across the nation that are being paid for……. I don’t believe ANYTHING these people are saying, was there not one single financial genius among them that at one point said… HEY, WE’VE GOT A PROBLEM.
If in fact Freddie and Fannie have gotten so far in debt and they just kept their pedal foot down on the accelerator (to quote our dear and current President)…. shouldn’t we be taking the keys away from these contemptible clowns!
“ENRON… HALIBURTON…BLOOD FOR OIL…” while these morons on the left were looking to burn anything Bush (or perceived Bush) at the stake.. Our country was being rammed in the behind…. in full view and with winks and nods of those who are still raping and pillaging.
I hope to God that someone who has more money and resources than I will use the FOI to investigate these crooks (that are still collecting a hefty pay check… and if fired or resign take a huge golden parachute with them). Good Lord… it just never stops!
This isn't a bailout, this is a home rescue program., no more bailouts will be called bailouts is what he meant.
When the hell does it end. Where the HELL is MY bailout. 35 years on the job and my reward is to pay for the unaccountable. High crimes and misdemeanors is too small a term for the malfeasant in Washington.
Well, in some ways we already reached China with our hole, didn't we? We are plenty covered up and what we have to do now is brush ourselves off and then realize what got us so dirty. That way all cleaning up efforts are not wasted totally.
Yes we have to see spending happen. That is what makes our economy go. The thing missing is what actually creates the wealth to spend. For too long we have used creative accounting to fill this gap when what we really need to be doing is admitting that labor is what creates true wealth. We have far too much administration and not enough workers actually producing tangible products.
We have to roll up our shirt sleeves, tell the ideologues to face the facts that their pie in the sky stuff doesn't work, no matter how honorable a case they make for their positions, and show the true core of the American Dream.
Individual Liberty, with the personal responsibility that goes alongside it, is the answer. We must free ourselves from the government chains that bind us if we are to realize the prosperity this country once knew.
Absolutely. Social Security is anything but……
Kinda like the Federal Reserve is anything but…..
Holly,
For what it's worth: http://www.realestatezing.com/fannie-mae/bonds.ht...
Personally, I don't trust ANYTHING backed by the US Government, including the dollar bill.
ROTFL You guys are hilarious! Thank God for comedy, we need something these days eh?
Pumping more money only solves/saves the political agenda, which is all bailouts are meant to preserve.
I know we will.
In case anyone missed it…
January 10, 1963
Current Communist Goals
EXTENSION OF REMARKS OF HON. A. S. HERLONG, JR. OF FLORIDA
IN THE HOUSE OF REPRESENTATIVES
Thursday, January 10, 1963
Mr. HERLONG. Mr. Speaker, Mrs. Patricia Nordman of De Land, Fla., is an ardent and articulate opponent of communism, and until recently published the De Land Courier, which she dedicated to the purpose of alerting the public to the dangers of communism in America.
At Mrs. Nordman's request, I include in the RECORD, under unanimous consent, the following "Current Communist Goals," which she identifies as an excerpt from "The Naked Communist," by Cleon Skousen:
[From "The Naked Communist," by Cleon Skousen]
CURRENT COMMUNIST GOALS
1. U.S. acceptance of coexistence as the only alternative to atomic war.
2. U.S. willingness to capitulate in preference to engaging in atomic war.
3. Develop the illusion that total disarmament [by] the United States would be a demonstration of moral strength.
4. Permit free trade between all nations regardless of Communist affiliation and regardless of whether or not items could be used for war.
5. Extension of long-term loans to Russia and Soviet satellites.
6. Provide American aid to all nations regardless of Communist domination.
7. Grant recognition of Red China. Admission of Red China to the U.N.
8. Set up East and West Germany as separate states in spite of Khrushchev's promise in 1955 to settle the German question by free elections under supervision of the U.N.
9. Prolong the conferences to ban atomic tests because the United States has agreed to suspend tests as long as negotiations are in progress.
10. Allow all Soviet satellites individual representation in the U.N.
11. Promote the U.N. as the only hope for mankind. If its charter is rewritten, demand that it be set up as a one-world government with its own independent armed forces. (Some Communist leaders believe the world can be taken over as easily by the U.N. as by Moscow. Sometimes these two centers compete with each other as they are now doing in the Congo.)
12. Resist any attempt to outlaw the Communist Party.
13. Do away with all loyalty oaths.
14. Continue giving Russia access to the U.S. Patent Office.
15. Capture one or both of the political parties in the United States.
16. Use technical decisions of the courts to weaken basic American institutions by claiming their activities violate civil rights.
17. Get control of the schools. Use them as transmission belts for socialism and current Communist propaganda. Soften the curriculum. Get control of teachers' associations. Put the party line in textbooks.
18. Gain control of all student newspapers.
19. Use student riots to foment public protests against programs or organizations which are under Communist attack.
20. Infiltrate the press. Get control of book-review assignments, editorial writing, policymaking positions.
21. Gain control of key positions in radio, TV, and motion pictures.
22. Continue discrediting American culture by degrading all forms of artistic expression. An American Communist cell was told to "eliminate all good sculpture from parks and buildings, substitute shapeless, awkward and meaningless forms."
23. Control art critics and directors of art museums. "Our plan is to promote ugliness, repulsive, meaningless art."
(Continued)
24. Eliminate all laws governing obscenity by calling them "censorship" and a violation of free speech and free press.
25. Break down cultural standards of morality by promoting pornography and obscenity in books, magazines, motion pictures, radio, and TV.
26. Present homosexuality, degeneracy and promiscuity as "normal, natural, healthy."
27. Infiltrate the churches and replace revealed religion with "social" religion. Discredit the Bible and emphasize the need for intellectual maturity which does not need a "religious crutch."
28. Eliminate prayer or any phase of religious expression in the schools on the ground that it violates the principle of "separation of church and state."
29. Discredit the American Constitution by calling it inadequate, old-fashioned, out of step with modern needs, a hindrance to cooperation between nations on a worldwide basis.
30. Discredit the American Founding Fathers. Present them as selfish aristocrats who had no concern for the "common man."
31. Belittle all forms of American culture and discourage the teaching of American history on the ground that it was only a minor part of the "big picture." Give more emphasis to Russian history since the Communists took over.
32. Support any socialist movement to give centralized control over any part of the culture–education, social agencies, welfare programs, mental health clinics, etc.
33. Eliminate all laws or procedures which interfere with the operation of the Communist apparatus.
34. Eliminate the House Committee on Un-American Activities.
35. Discredit and eventually dismantle the FBI.
36. Infiltrate and gain control of more unions.
37. Infiltrate and gain control of big business.
38. Transfer some of the powers of arrest from the police to social agencies. Treat all behavioral problems as psychiatric disorders which no one but psychiatrists can understand [or treat].
39. Dominate the psychiatric profession and use mental health laws as a means of gaining coercive control over those who oppose Communist goals.
40. Discredit the family as an institution. Encourage promiscuity and easy divorce.
41. Emphasize the need to raise children away from the negative influence of parents. Attribute prejudices, mental blocks and retarding of children to suppressive influence of parents.
42. Create the impression that violence and insurrection are legitimate aspects of the American tradition; that students and special-interest groups should rise up and use ["]united force["] to solve economic, political or social problems.
43. Overthrow all colonial governments before native populations are ready for self-government.
44. Internationalize the Panama Canal.
45. Repeal the Connally reservation so the United States cannot prevent the World Court from seizing jurisdiction [over domestic problems. Give the World Court jurisdiction] over nations and individuals alike.
Count them up, most of this BULLSHIT has already come to pass, thanks idiot liberals…!
Ironically, the truth is some of the funniest, and often times the most offensive, material out there. You are right, we need a good dose of it every day.
And with that comment in particular P2O, you demonstrate that you bring straight up common sense to the discussion as well!
Well said. creeping indeed.
Should read continuing in place of coming.
True that. Add the word "reinvestment"…..wait…..they already tried that……
Missy,
Do some research on the Congressional Progressive Caucus.
Pull up their website, read their goals.
You will be plumb shocked!
This cannot be posted too many times.
Virtual radishes give you virtual gas. Virtual energy problem solved–virtually.
This one is pure gold and the smoking gun to boot!
Communists Sue Democratic Party For Stealing Platform
4/12/2010, 5:27 pm
In a surprise move, the CPUSA (Communist Party USA) has announced a lawsuit against the Democratic Party and its leadership for the alleged theft of intellectual property. The plaintiffs claim that the entire so-called "new" Democratic agenda is, in fact, the product of a decades-long, painstaking campaign by CPUSA theorists, agitators, and underground subversive cells – which makes it the intellectual property of the Communist Party USA, protected by American copyright laws.
"They stole our entire platform, rebranded it 'progressive', and claimed it as their own," declared a CPUSA spokesperson at a press conference in San Francisco. "And we communists say, not so fast! Not in this country anyway, where we still have property rights and the rule of law, thank God! Actually, let me rephrase that…"
The Communist Party representative explained that government ownership of the auto and financial industries, redistribution of wealth, and free rationed healthcare have always been among the glorious CPUSA objectives: "We held on to these goals through all the difficult years of factional infighting, purges, denunciations, and heroic espionage on behalf of the Soviet intelligence services.
"This may seem like a foreign idea to you, but we sacrificed everything for it – our friends, our neighbors, and our nation. We suffered from all kinds of ulcers and split personality disorders by blindly following Stalin's directives. We risked our chances of promotion within US government agencies by dutifully advancing Soviet foreign policy. And for what? So that some spoiled Democrats could ride on our backs to power while throwing us crumbs in the form of minor cabinet appointments?
http://thepeoplescube.com/red/viewtopic.php?f=3&a...
(Full text of this article can be read at the above URL)
Yes.
I stumbled across the Congressional Progressive Caucus the other night while doing some research. I was shocked! I bet that 99% of conservatives never knew it existed.
We need to plaster it all over the internet. The alarming fact to me, is that most of the members of the Progressive Caucus, are also members of the Congressional Black Caucus.
Their goal?
Bottom line is to overthrow the Government and fundamentally change it to the way THEY want it to be.
I counted the entire list and except for number 13 every one of these things have come to pass….
I think a $373 billion bailout of FMAC & FNMA is a conservative number.
I just looked and all I can say is….
SCAM WOW!
Virtually all of the communist organizations are linked from them and right back to them!
THIS IS TREASON!
Publius, you're leaving out the option that should have been done in the first place: bankruptcy. Liquidate the companies and have them come back leaner.
Several keyboards later…
I think I'm going to be sick –
Thanks for the info and link – great reading for the weekend ~
Just when you think you've heard it all, more worms crawl out -
Oh oh, I will perhaps be taxed on the commodity? The left will surely try to get some. If I thought they could put it to good use, I would discount what I have left.
Can you clean them at work?
Fire the cooks. How will we eat? Oh, crooks. Never mind.
The libunatics will use Gulf of Mexico petroleum mixed with sand & salt.
Are you sure it's spit?
OK, sorry, that made me throw up a little in my mouth saying it.
You touched it deftly. Labor is the only thing our national debt is based on now. We trade our sweat and knowledge for something of value. Milton Friedman when talking about greed said “the one who is greedy is always the other guy, but it is our desire to earn more that creates wealth. Socialist states are no less greedy the capitalist states. They control the labor (human resource) and take all the wealth. Capitalist states allow for anyone and everyone to leverage their talents to gain personal wealth.” IMO, that is the bastion of the greatest economic machine on earth. FREE ENTERPRISE.
The good news is that, according to the Obama administration, the rich will pay for everything. The bad news is that, according to the Obama administration, you're rich.
P. J. O'Rourke
The really frightening thing is the pace all of this is moving at now but nobody dare call Chairman O a socialist or a communist for fear of leftist reprisal.
We are a nation of "fourth estate" COWARDS!
You nailed that to the wall. The sooner the CRA is repealed, plus Fat Fannie and Bloated Freddie divested or absorbed by the private sector the better.
NO BAILOUT…PERIOD!
The sooner these two black hole government sponsored enterprise banks Fat Fannie and Bloated Freddie are broken up, and divested, the better. Add, HUD needs to be dissolved too! The government must get out of the business, of being a business and back to as mandated only by the Constitution.
I don't think they make enough Lexapro and Zanax to deal with this govt anymore! Liquor isn't cutting the mustard either! Any suggestions?
Love you man. Peace.
A few days ago China said it would invest in Fannie and Freddie. Clearly they were given inside information by Geitner that these institutions would not be allowed to fail, thanks to the US taxpayer.
m.waters, c.rangel, c. dodd, b.frank,.f.p.stark, n. pelosi, blago, t. rezko, h.reid, obamasoros. what else needs to be said ?
…but it's not real money, it's "government money."
Careful not get the back of his neck as his ears are covered with his rectal walls!
Is there one brain cell in Washington not focused on paying off someone or making a dollar? Bailing out a corrupt quasi government agency will not solve any problem. Fannie and Freddie must go down with the Democrats.
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