Fixing Fannie and Freddie for Good

[dav...@agent.com]

Fixing Fannie and Freddie for Good
By JIM PARROTT and MARK ZANDI, DEC. 15, 2015, NY Times

IN the longstanding debate about what should be done to overhaul
Fannie Mae and Freddie Mac, the mortgage behemoths that taxpayers
rescued at the height of the financial crisis, a growing number of
groups, including several hedge funds and other investors, as well as
civil rights groups and consumer advocates, are offering a surprising
answer: Go back to the very system we just bailed out.

In September 2008, after the two institutions had racked up tens of
billions in losses that had wiped out their capital, and amid fears
about what their insolvency might mean for the American housing market
and the wider economy, the then newly created Federal Housing Finance
Agency stepped in to place Fannie and Freddie in conservatorship.
Taxpayers have backstopped the two institutions and their mortgage
securities ever since.

Yet, hard as it is to imagine, given the colossal scale of this
bailout and the dramatic effect that their failure had on the broader
economy, many are arguing that we should now resurrect Fannie and
Freddie as the privately owned but taxpayer-backed oligopoly whose
collapse contributed mightily to the financial turmoil and resulting
Great Recession.

More surprising still, one of the primary reasons offered by many
proponents of this view is that we cannot end their stranglehold
without decreasing competition in the mortgage market.

This view isn’t merely counterintuitive; it’s wrong.

Fannie Mae and Freddie Mac are among the largest financial
institutions in the world, currently purchasing roughly one-half of
the mortgages issued by lenders in the United States. They package and
create securities out of these loans, and provide guarantees to the
investors that they will be paid their principal and interest under
any economic scenario. They thus act as critical gatekeepers in
determining what kinds of mortgage loans lenders can make, and who
gets a loan and under what terms.

The concern is that any move to reform Fannie and Freddie by
diminishing their dominance of the housing finance system will
inevitably mean that the nation’s biggest banks will swoop in to take
over their gatekeeping role. If they do, then these banks will use
that power to their advantage, squeezing out smaller competitors.

This would indeed be a bad outcome. We would simply be swapping one
dysfunctional system dependent on too-big-to-fail institutions for
another with the same problem.

If this were what reforming Fannie and Freddie was all about, then the
critics of reform would be right. But it’s not.

The point of the kind of reform that we support is to end the system’s
dependence on too-big-to-fail institutions. It is critical to ensure
that no institution central to the system has an incentive to take on
excessive risk, knowing that taxpayers will bail them out if things go
wrong, as happened with Fannie and Freddie and could happen in a
system overly dominated by other too-big-to-fail institutions.

One of us, Mark Zandi, is on the board of a mortgage insurer; the
other, Jim Parrott, advises several financial institutions in the
housing finance industry. Some of these institutions could benefit
from Fannie and Freddie reform, while others may suffer. But our focus
is not the interests of these institutions, any more than it is those
of the big banks or the shareholders of Fannie and Freddie. The aim of
reform should be to create a healthier housing finance system, which
means, among other things, one with greater competition.

In winding down Fannie and Freddie’s duopoly, Congress could and, we
have long argued, should explicitly prohibit institutions that make
mortgage loans from also playing the role of gatekeeper to the
secondary market of mortgage-backed securities. Congress could also
cap the market share of any single gatekeeper at a low enough level to
preclude market concentration, or it could even create new gatekeepers
to ensure that smaller lenders never are locked out of making mortgage
loans.

Legislative reform could be a long time coming, however, given the
complex politics of the issue. In the meantime, the F.H.F.A. should
work to ease the mortgage giants’ unhealthy hold on the market.

The agency has already taken two steps that hold great promise:
requiring that Fannie and Freddie share the risk they take when
guaranteeing mortgage securities with a broad range of private
financial institutions, and that they develop a common platform for
offering securities on mortgage loans.

Done right, these steps could eventually open up the market to greater
competition, reducing the dominance of Fannie and Freddie without
enabling other too-big-to-fail institutions to take their place.

It is simply not true that we are forced to choose between one system
dominated by Fannie Mae and Freddie Mac and another dominated by a few
huge banks. The argument is at best ill considered, and at worst a red
herring that will undermine any attempt to achieve significant reform.

There is no reason we can’t create a dynamic mortgage market with
plenty of competition, free of an unhealthy dependence on institutions
we cannot afford to let fail. As we consider reforming the role of
Fannie Mae and Freddie Mac, we should settle for nothing less.

Jim Parrott is a senior fellow at the Urban Institute and the owner of
Falling Creek Advisors, a financial consulting firm. Mark Zandi is the
chief economist at Moody’s Analytics.

[Unknown]

dav...@agent.com wrote:
> Fixing Fannie and Freddie for Good
> By JIM PARROTT and MARK ZANDI, DEC. 15, 2015, NY Times
>
> IN the longstanding debate about what should be done to overhaul
> Fannie Mae and Freddie Mac, the mortgage behemoths that taxpayers
> rescued at the height of the financial crisis

The govt did not rescue Fannie and Freddie.
Fannie and Freddie rescued the US Housing Market.

Without the govt takeover Fannie and Freddie would
have survived, because they were backing the best
mortgages, but the rest of the housing market
was riddled with mortgages that were not as sound.
Without the takeover the housing market would
have collapsed. That means house prices would
have collapsed back to 1950 levels and the huge
loss of household wealth would have pushed the
nation onto a depression worse than the Great
Depression.

The whole purpose of Fannie and Freddie was to
provide liquidity to the residential mortgage market.
That is a task that the private sector has time
and again proven ill-suited to perform. That's
because privately supplied liquidity always
ends like the 2008 crash.

What we are talking about here is BANKING.
Fannie and Freddie are large central banks
dedicated to the financing home mortgages.
They take in short term deposits and finance
long term loans - just like any bank does.
Banks should always be run as public Utilities.
The great financial crises was caused by private
entities acting as banks but not constrained
like a public utility. The lending that went
on in this private banking system was atrocious.
It was just like when banks were governed by the
gold standard. The level of stupidity in lending
that emerged was so egregious that most people have
a hard time believing it even happened.

The lesson that everyone should have been learned
from the housing bubble and crash was that the
alternative to financing thru Fannie and Freddie
are very much
worse.

[Beam Me Up Scotty]

On 12/16/2015 09:07 AM, jim wrote:

> The govt did not rescue Fannie and Freddie.
> Fannie and Freddie rescued the US Housing Market.

["""At the same press conference, United States Treasury Secretary Henry
Paulson, stated that placing the two GSEs into conservatorship was a
decision he fully supported, and that he advised "that conservatorship
was the only form in which I would commit taxpayer money to the GSEs."
He further said that " *I attribute the need* *for* *today's* *action
primarily to the inherent conflict and* *flawed* *business* *model
embedded in the GSE structure* , and to the ongoing housing correction."[1]

The same day, the Federal Reserve Bank chairman Ben Bernanke stated in
support: "I strongly endorse both the decision by FHFA Director Lockhart
to *place Fannie Mae and Freddie Mac into conservatorship* and the
*actions taken by Treasury Secretary Paulson to ensure* *the* *financial
soundness of those two companies* ."[4] The following day, Herbert M.
Allison was appointed chief executive of Fannie Mae. He came from
TIAA-CREF.""""]

[""""However, other critics in D.C. claim that the GSE business model
faces inherent conflicts due to its combination of government mission
and private ownership. The *GSEs were given monopoly privileges* against
which private enterprise could not compete. Both *GSEs had a* *line* of
credit with the US Treasury Department* , and both GSEs were *exempt*
*from state and local income tax on corporate earnings* . The GSEs were
the only two Fortune 500 companies *exempt from regulation* by the
Securities and Exchange Commission. Because of *implicit* *government
backing* , Fannie Mae Discount Notes became the *second* *largest*
*short-term notes issued* (second only to T-bills).""""""]


["""" The law raised the Treasury's debt ceiling by US$800 billion, to a
total of US$10.7 trillion, in anticipation of the potential *need* *for*
*the Treasury to have the flexibility to support Fannie Mae* , *Freddie
Mac* , or the Federal Home Loan Banks.[21][22][23]"""""""]


[""""""In addition to *the government conservatorship* , which CBO
estimates *will increase the federal government's net liabilities* by
$238 *billion* , *several government agencies* have taken steps to
increase liquidity within Fannie Mae and Freddie Mac. Among these steps
includes:[32]

*Federal Reserve purchases* of $23 billion in GSE debt (out of a
potential $100 billion) and $53 billion in GSE-held mortgage backed
securities (out of a potential $500 billion).

*Federal Reserve purchases* of $24 billion in GSE debt.

*Treasury Department purchases* of $14 billion in GSE stock (out of a
potential $200 billion).

*Treasury Department purchases* of $71 billion in mortgage backed securities

*Federal Reserve extension* of primary credit rate for loans to the GSEs
"""""""]






The hidden back door money was flowing into Fannie/Freddie
This makes the failure even more epic.... they were getting help from
the other Federal Agencies, *the money meant for those agencies* *was*
*diverted to bail out Fannie/Freddie* .

You are contradicting reality when you tell us it was a NOT as large a
failure as any of the the private sector failures. It was a huge
failure. The government hid as much as they could from plain sight.


There was upwards of $1 Trillion dollars listed above "thats easy to
see" and I'm sure there's even more when you dig deep and have the
authority to see the real books and find where the government diverted
other money since it kept sinking after all this was done to prop up
Fannie/Freddie.

Obama cut the war spending by bringing all the troops home and leaving
nothing in IRAQ. SO there's even more money that went somewhere... and
I'd suspect a lot more went to Fannie/Freddie to hide the true size of
the failure of Liberalism. Yes the Liberals created Fannie and Freddie's
Problems. Liberals used Fannie/Freddie as a cash cow for their election
campaigns and a back door Affirmative Action program to get money loaned
out to minorities with little or no credit, by lowering the credit
standards and using credit default swaps to offset the fact that these
borrowers were a high risk.


Liberalism helping the poor, ended up destroying what little wealth the
poor actually had. How was that helping the poor? It left many of the
poor homeless and in debt.

*The ideology of Liberalism is a never ending stream of contradictions*

[Unknown]

Beam Me Up Scotty wrote:
> On 12/16/2015 09:07 AM, jim wrote:
>
>> >The govt did not rescue Fannie and Freddie.
>> >Fannie and Freddie rescued the US Housing Market.

> ["""At the same press conference, United States Treasury Secretary Henry
> Paulson, stated that placing the two GSEs into conservatorship was a
> decision he fully supported, and that he advised "that conservatorship
> was the only form in which I would commit taxpayer money to the GSEs."

Of course why would taxpayers pay money without taking ownership?

The CBO warned F&F shareholders in 2004 that if
house prices dropped as little as 5% Freddie and
Fannie would have a cash flow shortage that would
trigger a govt takeover. The shareholders rejected
the idea of building more cash reserves because
they didn't want any of their dividends going to
create cash reserves. They didn't believe a 5% drop
was possible for house prices to drop.
It was the shareholder's own stupidity that resulted
in the their loss of ownership in a very profitable
business.

[One Party System]

dav...@agent.com wrote in news:em227b5l34kikm87i...@4ax.com:

>
>

The only way to fix them is to close them and stop having the government
meddle in the free market.

--
There is a certain class of race-problem solvers who don’t want the patient
to get well, because as long as the disease holds out they have not only an
easy means of making a living, but also an easy medium through which to
make themselves prominent before the public.

Booker T. Washington

[Unknown]

One Party System wrote:
> dav...@agent.com wrote in news:em227b5l34kikm87i...@4ax.com:

>
> The only way to fix them is to close them and stop having the government
> meddle in the free market.
>

That's what got us into this mess.

The only time that the private markets got involved
to any significant degree with financing US
mortgages was during the recent bubble years.
And the private investors financed the stupidest
mortgages that anyone can possibly imagine.
Of the $6 trillion worth of residential mortgages
financed through various private investment
channels less than $700 bn of those mortgages survive
today. That's how bad they were.

Do you want that record of failure to be repeated?

[dav...@agent.com]

How many wars have governments got us into??

[nickname unavailable]

lets try to explain to the idiots one more time, that it was the private sector that issued the bad mortgages, then sold them to stupid investors, not fanny or freddie: looneytarian thought has unleashed fascism on america


http://www.alternet.org/print/news-amp-politics/two-big-political-mistakes-obamas-presidency

that in 2006 private lending institutions issued [24] about 85 percent of subprime mortgages. But he could and should have gone much further and performed an ideological jujitsu on the right-wing narrative by agreeing with Rubio that the collapse was in large part driven by "reckless government policies," but then explain that the recklessness was in eliminating safeguards that for more than two generations had protected the American economy and households.
In 1999, Congress recklessly repealed the Glass-Steagall Act that for 50 years had stopped Wall Street from speculating with government guaranteed deposits. A year later, Congress recklessly deregulated the derivatives market. The next year the new federal bankruptcy act gave derivatives priority for payment. In 2004, the SEC recklessly waived the rules that limited lenders to a maximum debt-to-net-capital ratio of 12-to-1 for five giant Wall Street firms -- Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley. They promptly ratcheted up ratios to 30- and even 40-to-1. Three years later, Washington overturned effective state anti-predatory lending laws.
As William Black reports [25], from 2002-2007, honest appraisers delivered to Washington officials a petition ultimately signed by 11,000 of their colleagues charging that lenders were pressuring them to artificially inflate prices on properties and blacklisted those who refused. The government recklessly refused to act.

[nickname unavailable]

On Saturday, December 19, 2015 at 1:15:31 AM UTC-6, dav...@agent.com wrote:

stephen moore the liar: why do looneytarians flock to liars like moths to a flame? Conservative Media's Favorite Economist Caught Distorting Facts About Taxes And Job Creation



http://mediamatters.org/blog/2014/07/25/conservative-medias-favorite-economist-caught-d/200213


Conservative Media's Favorite Economist Caught Distorting Facts About Taxes And Job Creation
Blog ››› July 25, 2014 4:48 PM EDT ››› CRAIG HARRINGTON
Heritage Foundation chief economist Stephen Moore was caught using incorrect statistics to mislead readers about the relationship between tax cuts and job creation in the United States.
On July 7, Moore published an op-ed in The Kansas City Star attacking economic policies favored by Nobel Prize-winning economist Paul Krugman. The op-ed claimed that "places such as New York, Massachusetts, Illinois and California ... are getting clobbered by tax-cutting states." Moore went on to attack liberals for "cherry-picking a few events" in their arguments against major tax cuts, when in fact it was Moore who cited bad data to support his claims.
On July 24, The Kansas City Star published a correction to Moore's op-ed, specifically stating that the author had "misstated job growth rates for four states and the time period covered." The editorial board of the Star inserted this annotation to Moore's inaccurate claims:
Please see editor's note at the top of this column. No-income-tax Texas gained 1 million jobs over the last five years, California, with its 13 percent tax rate, managed to lose jobs. Oops. Florida gained hundreds of thousands of jobs while New York lost jobs. NOTE: These figures are incorrect. The time period covered was December 2007 to December 2012. Over that time, Texas gained 497,400 jobs, California lost 491,200, Florida lost 461,500 and New York gained 75,900. Oops. Illinois raised taxes more than any other state over the last five years and its credit rating is the second lowest of all the states, below that of Kansas! (emphasis original)
On July 25, Star columnist Yael Abouhalkah explained the correction in more detail. Abouhalkah wrote that Moore had "used outdated and inaccurate job growth information at a key point in his article" and that Moore should have used data from 2009 to 2014, rather than from 2007 to 2012. Abouhalkah also argued that "the problems with Moore's opinion article damaged his credibility on the jobs issue."
Moore's credibility on "the jobs issue" is not the only troubling aspect of his economic punditry. Moore was recently brought on as the chief economist at the conservative Heritage Foundation after serving for many years on the right-wing editorial board of The Wall Street Journal and as a go-to economic commentator on Fox News. Moore has a history of disparaging reasonable economic policies in favor of fiscally irresponsible tax cuts for the wealthy and painful spending cuts to vital programs.
Moore has referred to unemployment insurance as a "paid vacation" for jobless Americans and bizarrely claimed that laws guaranteeing paid sick leave for full-time workers were "very dangerous for cities." Moore spent years basely claiming that the Affordable Care Act would reduce job creation, seamlessly transitioning from one debunked talking point to the next along the way. He is also an outspoken opponent of increasing the minimum wage, claiming that even a moderate rise in wages would result in a "big increase" in unemployment. In a recent foray out of the safety of right-wing media, Moore's anti-living wage spin was easily cut down by CNN anchor Carol Costello.
The original intent of Moore's Star op-ed was to garner support for tax cuts enacted over the past two years by Gov. Sam Brownback (R-KS), which The New York Times and other outlets have labeled "ruinous." The tax cuts have been such a dramatic failure that more than 100 members of the Kansas Republican Party have sworn to help replace Brownback with a Democrat willing to reinstate taxes and spending at their previous levels.

[dav...@agent.com]

nickname unavailable <video61a...@gmail.com> wrote:

> dav...@agent.com wrote:
>> jim <""sjedgingN0Sp\"@m...@mwt.net"> wrote:
>> >One Party System wrote:
>> >> dav...@agent.com wrote in news:em227b5l34kikm87i...@4ax.com:
>> >
>> >> The only way to fix them is to close them and stop having the government
>> >> meddle in the free market.
>> >
>> >That's what got us into this mess.
>> >
>> >The only time that the private markets got involved
>> >to any significant degree with financing US
>> >mortgages was during the recent bubble years.
>> >And the private investors financed the stupidest
>> >mortgages that anyone can possibly imagine.
>> >Of the $6 trillion worth of residential mortgages
>> >financed through various private investment
>> >channels less than $700 bn of those mortgages survive
>> >today. That's how bad they were.
>> >
>> >Do you want that record of failure to be repeated?
>>
>> How many wars have governments got us into??
>

>http://www.alternet.org/print/news-amp-politics/two-big-political-mistakes-obamas-presidency
>

https://en.wikipedia.org/wiki/List_of_ongoing_armed_conflicts

[dav...@agent.com]

nickname unavailable <video61a...@gmail.com> wrote:

> dav...@agent.com wrote:
>> jim <""sjedgingN0Sp\"@m...@mwt.net"> wrote:
>> >One Party System wrote:
>> >> dav...@agent.com wrote in news:em227b5l34kikm87i...@4ax.com:
>> >
>> >> The only way to fix them is to close them and stop having the government
>> >> meddle in the free market.
>> >
>> >That's what got us into this mess.
>> >
>> >The only time that the private markets got involved
>> >to any significant degree with financing US
>> >mortgages was during the recent bubble years.
>> >And the private investors financed the stupidest
>> >mortgages that anyone can possibly imagine.
>> >Of the $6 trillion worth of residential mortgages
>> >financed through various private investment
>> >channels less than $700 bn of those mortgages survive
>> >today. That's how bad they were.
>> >
>> >Do you want that record of failure to be repeated?
>>
>> How many wars have governments got us into??
>

>http://mediamatters.org/blog/2014/07/25/conservative-medias-favorite-economist-caught-d/200213
>

https://en.wikipedia.org/wiki/List_of_ongoing_armed_conflicts

[Unknown]

What has rhat tio do with GSE backed lending?

I hate to encourage your off topic babbling nonsense,
but I looked at your list of ongoing armed conflicts and
it looks to me that almost all the wars nowadays involve
combatants that don't belong to any established govt army.
Mercenaries or volunteers are doing most of the fighting.

[dav...@agent.com]

jim <""sjedgingN0Sp\"@m...@mwt.net"> wrote:

>dav...@agent.com wrote:
>> nickname unavailable <video61a...@gmail.com> wrote:
>>> dav...@agent.com wrote:
>>>> jim <""sjedgingN0Sp\"@m...@mwt.net"> wrote:
>>>>> One Party System wrote:
>>>>>> dav...@agent.com wrote in news:em227b5l34kikm87i...@4ax.com:
>>>>>
>>>>>> The only way to fix them is to close them and stop having the government
>>>>>> meddle in the free market.
>>>>>
>>>>> That's what got us into this mess.
>>>>>
>>>>> The only time that the private markets got involved
>>>>> to any significant degree with financing US
>>>>> mortgages was during the recent bubble years.
>>>>> And the private investors financed the stupidest
>>>>> mortgages that anyone can possibly imagine.
>>>>> Of the $6 trillion worth of residential mortgages
>>>>> financed through various private investment
>>>>> channels less than $700 bn of those mortgages survive
>>>>> today. That's how bad they were.
>>>>>
>>>>> Do you want that record of failure to be repeated?
>>>>
>>>> How many wars have governments got us into??
>>>
>>> http://www.alternet.org/print/news-amp-politics/two-big-political-mistakes-obamas-presidency
>>
>> https://en.wikipedia.org/wiki/List_of_ongoing_armed_conflicts
>>
>What has rhat tio do with GSE backed lending?

If governments are unable to do their job peacefully,
it means that they have too much on their plate,
too much power. They don't need to be involved in
social engineering by getting involved in private sector
business. And they certainly don't need to be trying
to prevent every disease known to man. If we can't
have a peaceful world with 7.3 billion, it also won't be
possible with 8 or 9 or 10 billion.

[Unknown]

your story is a lie.
Private investors financed the reckless lending
that caused the housing bubble

> They don't need to be involved in
> social engineering by getting involved in private sector
> business.

Private investors do not need to be involved
in financing mortgages. Private businesses have
failed miserably whenever they get involved.