Archive for Saturday, February 12, 2011

Plan calls for dissolving Fannie Mae, Freddie Mac

February 12, 2011

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— The Obama administration wants to shrink the government’s role in the mortgage system — a proposal that would remake decades of federal policy aimed at getting Americans to buy homes and would probably make home loans more expensive across the board.

The Treasury Department rolled out a plan Friday to slowly dissolve Fannie Mae and Freddie Mac, the government-sponsored programs that bought up mortgages to encourage more lending and required bailouts during the 2008 financial crisis.

Exactly how far the government’s role in mortgages would be reduced was left to Congress to decide, but all three options the administration presented would create a housing finance system that relies far more on private money.

“It’s clear the administration wants the private sector to take a more prominent role in the mortgage rates, and in order for that to happen, mortgage rates have to go up,” said Thomas Lawler, a housing economist in Virginia.

Abolishing Fannie and Freddie would rewrite 70 years of federal housing policy, from Fannie’s creation as part of the New Deal to President George W. Bush’s drive for an “ownership society” in the 2000s. It would transform how homes are bought and redefine who can afford them.

Treasury Secretary Timothy Geithner said the plan would probably not happen for at least five years and would proceed “very carefully.” In the meantime, he said the companies would have the cash they need to meet their existing obligations.

“We think there’s very broad consensus on the Hill and in the broader private market that there needs to be a transition to a much smaller role for the government,” he said.

Ever since the housing market went bust and the country fell into a financial crisis, pressure has been building for the government to do away with Fannie and Freddie and reduce taxpayer exposure to risk.

Fannie and Freddie own or guarantee about half of all mortgages in the United States. Along with other federal agencies, they played some part in almost 90 percent of new mortgages over the past year.

Comments

jmadison 4 years, 4 months ago

These two agencies were major culprits in the bubble that caused the financial panic of 2008 and subsequent downturn. For years, these agencies were safe places for the politically connected to receive outlandish salaries while their party was out of power, i.e. Rahm Emanuel, Jamie Gorelick, Franklin Raines, all dems, and Robert Zoellick and John Buckley, both repubs. These agencies have been bilking the taxpayers for years. As many things in Washington, an agency is presented as the answer to some social ill, and is perverted to line the pockets of the politicians. In addition to the big banks fleecing their customers, then being bailed out by their friends in government, these two agencies were complicit in the fleecing of the taxpayers. I believe that Franklin Raines, a former chief of OMB in the federal government, received over $90 million in remuneration from Fannie Mae. Good riddance to both agencies--if in fact it happens.

just_another_bozo_on_this_bus 4 years, 4 months ago

But the fact remains that almost all of the liar loans originated with private lenders, not Fannie or Freddie, and in a very large percentage of cases, otherwise qualified buyers were steered away from cheaper loans with better terms to more expensive ones with much worse terms simply because these lenders could make more money on them.

Sure, fix what's wrong with Fannie and Freddie, but don't mistake that for a fix to the corruption and greed that emanated from the private lenders and their Wall Street partners that were the primary culprits.

Jimo 4 years, 4 months ago

Agreed. Fannie and Freedie chased the market and were late to the party. You don't "create the bubble" when you don't show up until the bubble is already at maximum size. They did not create liar loans, the bizarre no interest mortgages, they did not sell and package mortgages in systemic fraud (in fact, they were some of the ones being defrauded) or engineer unintelligible securitized financial instruments nor market them to widows and orphans or employ financial instruments of mass destruction (a/k/a, derivatives).

Even the GOP "minority report" issued a week ago on the financial panic didn't dispute that the core of the problem lay with a pairing of irresponsible private capital and a too lax regulatory approach by government (they just sought to spread the blame outward layer after layer). Without the action of private financial interest or a 'no regulation' approach to government, the financial bubble could never have existed. You don't need to keep searching for other monsters.

jafs 4 years, 4 months ago

According to the recent investigation, Fannie and Freddie were minor players in the meltdown, and not significant causes of it.

Richard Heckler 4 years, 4 months ago

This should alarm smart people far more than the national debt:

Still Banking on Fraud | Dollars & Sense

Reforms Fail to address the “control fraud” that caused the financial crisis. By William K. Black

A truly amazing thing has happened in banking. After the worst financial crisis in 75 years sparked the “Great Recession,” we have

* Failed to identify the real causes of the crisis
* Failed to fix the defects that caused the crisis
* Failed to hold the CEOs, professionals, and anti-regulators who caused the crisis accountable—even when they committed fraud
* Bailed out the largest and worst financial firms with massive public funds
* Covered up banking losses and failures—impairing any economic recovery
* Degraded our integrity and made the banking system even more encouraging of fraud
* Refused to follow policies that have proved extremely successful in past crises
* Made the systemically dangerous megabanks even more dangerous
* Made our financial system even more parasitic, harming the real economy

And pronounced this travesty a brilliant success http://www.dollarsandsense.org/archives/2011/0111black.html

Face it Bank of America,Goldman Sachs and CitiBank should be subject to an FBI investigation and Grand Jury probe over the home loan scandal.

Bring on the FBI and the Grand Jury!!!

What to do? Your money is your vote!

Move Your Money - To local institutions and do your community a large favor.

A database to assist those wishing to move their money out of big banks that took taxpayer money and used it to pay themselves large bonuses:

http://moveyourmoneyproject.org/

Flap Doodle 4 years, 4 months ago

You know, I'd swear I saw this very same chunk of drivel on LJW just a couple of days ago.

Getaroom 4 years, 4 months ago

you mean by that you were reading your own drivel....

BigPrune 4 years, 4 months ago

But if Fannie and Freddie disappear, what will Chris Dodd and Barthney Frank do for perks for themselves and their friends and lovers?

sr80 4 years, 4 months ago

they will only change the names to frick and frack,sounds legit to me.

just_another_bozo_on_this_bus 4 years, 4 months ago

No, they made the bad loans because they knew they were going to package them up in a security and sell them off to become someone else's problem-- and we all now know whose problem that really became.

just_another_bozo_on_this_bus 4 years, 4 months ago

The government's culpability was in looking the other way while massive fraud was taking place.

I can agree with you wholeheartedly that "too big to fail" is very much behind the problems we are now seeing. But there are good reasons to provide some level of backing to banks, as long as that backing is for depositors, and not the owners of the bank. This prevents runs on banks such as happened in the early part of the Great Depression, and greatly exacerbated the financial crisis created primarily by excessive Wall Street speculation. In addition to depositor's insurance, I think we also need to make it much easier to go after the assets of any bank executive who drives his bank under by bad banking practices.

But the bottomline is that the cause of this collapse was that community banking has nearly gone away, replaced by a Wall Street casino game.

just_another_bozo_on_this_bus 4 years, 4 months ago

Given that the SEC was nearly completely gutted of regulatory power by Phil Gramm and Clinton's Wall Street economic advisors, I guess you could say they were encouraging it.

You contend that further gutting the SEC would solve that problem. I disagree.

just_another_bozo_on_this_bus 4 years, 4 months ago

No, I meant what I said. The SEC was told that the derivatives market was completely off-limits, and the mega-craps game took off from there.

camper 4 years, 4 months ago

Greenspan did not know all along Liberty, atleast this is what I gathered from an interview I saw of him. Even he said he struggled with the concept of derivatives. And while he kept inflation in check, he did not forsee that people were putting money into things that did not show up in the consumer price index like Real Estate and stock....the prices of which rose significantly. I don't think he saw the enormity of the market correction that took place.

just_another_bozo_on_this_bus 4 years, 4 months ago

Very rambling and long-winded, and just generally poorly written. Nothing much new in there either, even though he makes the occasional good point. Looks to me like a lot of fearmongering designed to sell subscriptions to his newsletter.

CHEEZIT 4 years, 4 months ago

THat's what I thought too. Kinda like most of the stuff on here!

Getaroom 4 years, 4 months ago

NO, Shewmon, Baby Brush never gets off the hook, he was planted in his seat by The Supreme Court and not by the registered voters. I think they added a little bit of BIG BUSINESS fertilizer just for good measure. One needs look further on the subject of financial failure than good old Capitalist Greed, individuals who have lived too long with over extended credit and the The Supreme Court (procreating/messing with nature again) by turning corporations into individuals, which in turn supports the buying of politicians who make laws and rules to the BIG BUSINESS's liking. And through the fog of convenient amnesia during that debate, let us not forget the unfettered Savings and Loans failure after deregulation under the watchful eye of.... Name that Republican Hero__?
Ever lost your financial pants TS?
And fine examples of Corporate take over of BIG GOV. are: BIG HEALTH INSURANCE and BIG PHARMA that you also love to let romp unfettered in the field of the "Free Market". TS, when you, Liberty(don't mess with Texas) and the Popless Snappy let us all know you have given up your rights to Medicare and Social Security and publicly displayed your birth certificates(no copies please) then you can make it up however you want. Get a room and hash out how you want to share running your own country, buy it(private money of course), and let us know if you have any of those nasty Socialist Interstate Highways or Anchor Babies we need to avoid. Remember that when you electrify that border fence, you must remember to build your own coal fired power plant. When you say you want your country back the way it was and your Bible like Constitution, just how far back are you willing to go? Can you see the African Continent from the front porch where you have your Tea Parties? Go on now, keep telling yourselves that there is no African DNA in your gene pool. Take heart though in knowing that when you are your own gods you can make everyone in your own likenesses. By the way, do you have your papers in order comrades? Better, 'cause Baby Brush's favorite reality show, Home Land Security is on the way....... Or do you prefer Obama's private army of brown shirt ruffians checking to make sure you bought Health Insurance. Wouldn't want those "death squads" knocking on your door now, or would you.....? Drink your cool aide and go nite-nite cause it's time to count the lemmings as they/you go to the BIG WATERS. Don't forget to count your selves now and sleep tight...........glug glug glug..........

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