Fannie & Freddie: Science Projects Gone Wrong

[WhiskeyGirl]

Fannie & Freddie: Science Projects Gone Wrong

We have not only created a black hole, but two.   Not the world-eating monster doomsday theorists feared.   These eat money, not matter.  They are called Fannie Mae and Freddie Mac.

This morning Freddie said it posted a record third quarter loss of $25.4 billion dollars.   That’s a per-share loss of $19.44.    Not surprisingly, it needs more money.   It’s asking the Treasury for another $13.8 billion dollars.  This looks relatively modest compared to Fannie Mae’s quarterly loss of $29 billion bucks.

The problem with these devourers of capital is that they are not normal companies.  These are entities which possess a near explicit government guarantee on their assets.   They operate under a federally-sponsored conservatorship and more money may be needed to keep them out of full fledged liquidation.

$55 billion dollars wiped out in just three months between the two.   An endless buffett of taxpayer cooking. As the debate rages on in Washington about whether to help GM, Ford and Chrysler, Fannie and Freddie continue to wipe out capital at a record pace.   But it also is getting more to eat every time it cleans the plate.

http://briansullivan.blogs.foxbusiness.com/2008/11/14/fannie-freddie-science-projects-gone-wrong/

How does one stop financial black holes?

[WhiskeyGirl]

Mortgage giant received gifts for political favors
How Freddie Mac halted the regulatory drive, benefitting congressmen like Kanjorski

By PETE YOST
Associated Press Writer
December 08, 2008

WASHINGTON — When the Washington Nationals played their first-ever baseball game in the nation's capital in April 2005, two congressmen who oversaw mortgage giant Freddie Mac had choice seats — courtesy of the very company they were supposed to be keeping an eye on.

Efforts to tighten government regulation were gaining support on Capitol Hill, and Freddie Mac was fighting back. The baseball tickets for the home opener were means of influence.

According to confidential company documents obtained by The Associated Press, Reps. Bob Ney, R-Ohio, and Paul Kanjorski, D-Pa., spent the evening in hard-to-obtain seats near the Nationals dugout with Freddie Mac executive Hollis McLoughlin and four of Freddie Mac's in-house lobbyists.

Who paid for those seats?  Freddie and Fannie?  Taxpayers?

Who is still paying for those seats?  Freddie and Fannie?  Taxpayers?

Internal Freddie Mac budget records show $11.7 million was paid to 52 outside lobbyists and consultants in 2006. Power brokers such as former House Speaker Newt Gingrich were recruited with six-figure contracts...

Who paid for those lobbyists and consultants?  Freddie and Fannie?  Taxpayers?

Who is still paying for those seats?  Freddie and Fannie?  Taxpayers?

Can Newt Gingrich be House Speaker and a paid power broker at the same time?

The Bush administration and Federal Reserve Chairman Alan Greenspan were sounding the alarm about the potential threat to the nation's financial health if the fortunes of the two mammoth companies turned sour. They did eventually, when they took on $1 trillion worth of subprime mortgages and when their traditional guarantee business deteriorated. Commercial banks regarded Freddie Mac and Fannie Mae as competitors and were anxious to pick up business that would result from scaling back the two companies.

Did people/banks knowingly sell worthless/junk mortgages to Freddie & Fannie?

The AP previously described, in October, how Freddie Mac thwarted efforts to bring a tough regulatory bill sponsored by Republican Sens. Chuck Hagel of Nebraska, John Sununu of New Hampshire, Elizabeth Dole of North Carolina and John McCain of Arizona to a full Senate vote.

At a meeting days after Hagel's bill went to the full Senate, Syron and McLoughlin berated the company's in-house lobbyists for failing to keep Hagel's bill corralled in committee, said the four people familiar with events at Freddie Mac at the time.

Freddie Mac shifted into high gear, secretly paying a Republican consulting firm, Washington-based DCI Group, $2 million to kill Hagel's legislation. The covert lobbying campaign targeted Republican senators in 2005-06.

In 2005, Freddie Mac hired political consultant Frank Luntz, a Washington fixture whose specialty is choosing the right buzz words to achieve a particular goal. The records AP obtained do not cover 2005 and Freddie Mac refuses to confirm that it brought Luntz on board. But four people familiar with events at Freddie Mac at the time confirmed the Luntz hire. All four spoke on condition of anonymity, saying they fear reprisals if their names were revealed. Luntz did not respond to efforts to contact him through his office.

Was Luntz paid by Freddie/Fannie/Taxpayers? 

Why didn't Congress aggressively fix Freddie/Fannie before they went under with taxpayer money?  Were all these payments tax-free to the recipients?

http://www.poconorecord.com/apps/pbcs.dll/article?AID=/20081208/NEWS/812080324

Will history show that this failure was planned by political parties?  International agents?  Those that want to bring down the United States?  Greed?

Has anything changed?  Has there been a clean sweep in Washington? 

Change everyone can believe in?

[WhiskeyGirl]

Any reform on the agenda for the new administration?  Any efforts to close the black hole of debt?  Losses through liar loans and irresponsible loans made good by taxpayers?  Any move for responsibility?  Responsible lending practices?

Subprime lending disaster continues

Posted: Wednesday, Jan 07, 2009 - 05:00:32 pm EST
By Paul M. Weyrich - Guest columnist

Have you ever heard of the Community Reinvestment Act?...It is among the factors responsible for the worst housing crisis in America since 1932. It was enacted during the Carter administration. It neither was repealed nor enforced during the administrations of President Reagan or President George H. W. Bush. President Clinton, however, enforced the law vigorously. The act forced banks to make loans to people who had little or no ability to liquidate them. This created the subprime market which in turn created a fragile economic housing “bubble.”...

The act ought to be repealed. In any reasonable situation, it would be. But it won’t because too many powerful interests in Washington want to see it continue as they attempt to manipulate our society to fit their ideology. Powerful members of Congress are talking about strengthening the law. What does that mean? In addition to enforcing the act, the Clinton administration set targets for low-income home ownership at the Department of Housing and Urban Development and at the government-sponsored mortgage corporations Fannie Mae and Freddie Mac. The federal government had to bail out these entities when the subprime mortgages failed. These institutions supposedly were, in the words of a federal official, just too large to fail...

What is the goal of the new administration?  What are the plans for America?  National debt so large it will never be repaid?  Take generations of destruction to repay?  Maybe repayment through moral and ethical decay?  Human trafficing? 

Does that mean Fannie/Freddie should continue to be a source of campaign contributions?  Maybe Congress should change these two organizations and forbid any campaign, PAC, bonus, or lobbyist payments?  Contributions paid for by taxpayer bailouts?  Past and future?

Now, there are calls to halt mortgage foreclosures.  Nothing about creating good long term jobs for Americans to ensure that people have jobs and money to pay for housing.  Who is going to pay for all those mortgages?  Where is the money coming from? 

All I read about are jobs 'saved' or 'created' just to "jump start" the economy jobs--no long term prospects.  No jobs in the neighborhood.  The kind that end when building is complete.  How many schools can anyone build?  Roads to no where?

...When Paulson was named Secretary of the Treasury, Myron Ebell, a spokesman for Competitive Enterprise Institute, a free-market think tank, called upon the Senate not to confirm him. Howard Phillips of the Conservative Caucus wanted him fired.

They were right, but Paulson alone should not be blamed. The chairman of the Federal Reserve, Ben Bernanke, and the chairman of the Securities and Exchange Commission, my old friend Christopher Cox, all had an idea of what was coming, yet they made no public statement. Paulson will leave office when President Bush leaves on Jan. 20. The others will remain. President Obama should fire all of them, urge Congress to repeal the Community Reinvestment Act and to dismantle both Fannie and Freddie...

The nation is broke and deeply in debt.  Like administrations of the past, the new administration doesn't seem to have a plan to pay off the debt, just plans to spend incredible amounts of money.  The nation is broke and deeply in debt.  IMO, they will just push the debt, tax increases and continuing disaster to the next administration.  Seems like I read about not worrying about the debt for two years, or rumors that the new admin plans to work on it...many of these same people were in positions on Capitol Hill during the past 15 years. 

...However, given the numerical strength of the Democratic Party in Congress and its base of special interests in diversity mandates, the act probably will not be touched. Would Rep. Barney Frank (D-Mass.) have an incentive to repeal it? How about Sen. Christopher Dodd (D-Conn.)? Both have received substantial political contributions from Fannie and Freddie. How about President-elect Obama doing something? He was the second-largest recipient of political contributions from Fannie and Freddie. So, he probably will not...

What kind of reforms have Freddie and Fannie seen since 2005?  Some saw the problem coming, others chose to ignore the problem.  Is it likely that fiscal responsibility/reform is on the front burner in 2009?  2010?  2011?  2012? 

...Will anything be done to get at the root of the problem? That would take a President or a Congress with unusual courage. We are unlikely to see either for many years...

Will spending and printing money will be the rage on Capitol Hill in the years to come?  Will the party end when Americans face hyper-inflation and lose ALL of their savings?  Cannot afford to buy a loaf of bread? 

There is enough blame to go around in this mess. To tackle this serious problem, we will need to elect a different kind of President and Congress.

Has the federal government become the twin brother or sister of Wall Street?  To big to fail?  To big and connected to reform?  To big to look after the best interests of the nation?  Forever the slush fund of special interest groups and campaign contributors?  When will change come to America?

How can Americans compete with slave labor?  How can American business compete with the people of nations that don't have environmental, labor, social and healthcare burdens?  When will "fair trade" work for Americans?

"we need to elect a different kind of President and Congress."  A new America, a rebirth for the American spirit.  I agree.

http://www.tristate-media.com/articles/2009/01/07/warricknews/editorial/03weyrich.txt

just my humble opinions

[WhiskeyGirl]

OPINION JANUARY 7, 2009, 11:35 P.M. ET

President Bush Tried to Rein In Fan and Fred
Democrats and the media have the housing story wrong.

By KARL ROVE
Mythmaking is in full swing as the Bush administration prepares to leave town. Among the more prominent is the assertion that the housing meltdown resulted from unbridled capitalism under a president opposed to all regulation.

Like most myths, this is entertaining but fictional...

Rather than a failure of capitalism, the housing meltdown shows what's likely to happen when government grants special privileges to favored private entities that facilitate bad actors and lousy practices.

Follow the money...

Fannie and Freddie are "government-sponsored enterprises" (GSEs), chartered by Congress. As such, they had an implicit promise of taxpayer backing and could borrow money at rates well below competitors.

...the Bush administration warned in the budget it issued in April 2001 that Fannie and Freddie were too large and overleveraged. Their failure "could cause strong repercussions in financial markets, affecting federally insured entities and economic activity" well beyond housing.

But the GSEs fought back. They didn't want to see the Bush reforms enacted, because that would level the playing field for their competitors. Congress finally did pass the Bush reforms, but in 2008, after Fannie and Freddie collapsed.

...the GSEs engaged in a lobbying frenzy. They hired high-profile Democrats and Republicans and spent $170 million on lobbying over the past decade...

When Republican Richard Shelby of Alabama, then chairman of the Senate Banking Committee, pushed for comprehensive GSE reform in 2005, Democrat Sen. Chris Dodd of Connecticut successfully threatened a filibuster. Later, after Fannie and Freddie collapsed, Mr. Dodd asked, "Why weren't we doing more?" He then voted for the Bush reforms that he once called "ill-advised."

...Rep. Barney Frank of Massachusetts defended Fannie and Freddie as "fundamentally sound" and labeled the president's proposals as "inane." He later voted for the reforms. Sen. Charles Schumer of New York dismissed Mr. Bush's "safety and soundness concerns" as "a straw man." "If it ain't broke, don't fix it," was the helpful advice of both Sen. Thomas Carper of Delaware and Rep. Maxine Waters of California. Rep. Kendrick Meeks of Florida berated a Bush official at a hearing, saying, "I am just pissed off" at the administration for raising the issue.

I see some of these people on TV wanting to FIX the economy.  Hmmm...

It took Fannie and Freddie over three decades to acquire $2 trillion in mortgages and mortgage-backed securities. Together, they held $2.1 trillion in 2000. By 2005, the two GSEs held $4 trillion, up 92% in just five years. By 2008, they'd grown another 24%, to nearly $5 trillion. They held almost half of all American mortgages.

How many of those $5 trillion are in foreclosure?  Behind?  Lost somewhere in the paperwork?  Filing drawer?  What do the real numbers at Fannie and Freddie look like?

...Peter Wallison of the American Enterprise Institute and Charles Calomiris of the Columbia Business School suggest $1 trillion of this debt was subprime and "liar loans," almost all bought between 2005 and 2007...

Quick!!!  Sell to the non-existent people, the homeless, the phantoms wanting to sell housing at inflated prices...someone might really REFORM the program...

That's why some mythmakers are so intent on denying that Mr. Bush worked to rein in the GSEs. But facts are stubborn things, as Ronald Reagan used to say, and in this instance, the facts support Mr. Bush and offer a harsh judgment on key Democrats. Perhaps that explains why so many in the media haven't told the real story.

Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.

Follow the money...

http://online.wsj.com/article/SB123137220550562585.html?mod=special_page_campaign2008_mostpop

During my life, I had the privledge of knowing a gracious lady who lived to almost 90.  Mary worked hard, married and raised a family.  She lived through the depression and kept her savings in 'safe' investments during her lifetime.  After she passed, her daughter often told the story of how she was afraid to own a home.  What if I lose my job?  What if I get sick?  What if I can't pay the mortgage? 

She lived through a time when Americans lost their homes in record numbers and stood in long lines at soup kitchens.  The Great Depression changed her view of the world.  I wonder how many Americans will shy away from investing and home ownership because of the current situation?  How many will scrimp and save to avoid financial devastation?  How many will never risk owning a home?  How many will remain jobless in the years to come? 

I have to believe the next Warren Buffet is somewhere, young and watching the world go around.  I remember Warren Buffet on TV and in the news being described as a compulsive saver.  Saving is quite different from spending money.  I am not the best saver, not the worst spender, but I'll do better in the future.

It takes years to rebuild a nation.  When does the roller coaster crash and the spending stop?  How long for rebuilding?  2080?

Just my humble opinions.