This is insanity. In case you missed it, the Treasury Department announced on Christmas Eve that Fannie and Freddie would get unlimited federal funding, and executives at the GSEs will receive Wall Street style bonuses. The news hasn’t gotten any better since then.
Bloomberg reported:
The U.S. government’s expanded capital backstops and portfolio limits for Fannie Mae and Freddie Mac increase “the prospect of large-scale” purchases by the companies of delinquent mortgages out of the securities they guarantee, according to Credit Suisse Group analysts.The Treasury Department announced Dec. 24 that the two mortgage-finance companies, which were seized by the U.S. almost 16 months ago, could tap an unlimited amount of capital for three years, up from as much as $200 billion each. It reworked caps on Fannie Mae and Freddie Mac’s mortgage-asset portfolios to require the holdings to fall to $810 billion each by Dec. 31, 2010, rather than about $690 billion.
“This announcement increases the prospect of large-scale voluntary buyouts by removing the portfolio cap hurdle and helping funding by potentially increasing debt-investor confidence,” Mahesh Swaminathan and Qumber Hassan, the Credit Suisse debt analysts in New York, wrote in a report yesterday.
Analysts including those at Credit Suisse and JPMorgan Chase & Co. have been predicting a spike in the companies’ buyouts of loans from their securities early next year. Aside from more purchases being required by the debt’s contracts as additional loans get modified under the Home Affordable program or fall more than two years past due, accounting-rule changes will force all loans in their securities onto their balance sheets, limiting the financial impact of actually buying them…..
If I understand this correctly, the taxpayers will funnel unlimited funds to Fannie and Freddie to buy out delinquent mortgages. Unlike the banks we bailed out, don’t expect Fannie and Freddie to pay us back. They’re bleeding money. So much so that the Obama administration has simply given up on figuring out just how much money they’re losing!
It’s a favorite government trick to announce bad news on a Friday afternoon, so it appears in Saturday’s paper, the least likely edition to be read. By Sunday and Monday, it’s old news. The Obama Treasury just went one better, announcing on Christmas Eve that they were uncapping the amount they believe will have to be invested in Fannie and Freddie. The Bush Treasury first estimated the government-sponsored enterprises’ (GSEs) losses at $100 billion each. The Obama administration, which has been using the GSEs to stabilize the housing market by reducing their underwriting standards, upped the ante to $200 billion each. Now the administration has thrown in the towel completely, and dropped a large lump of coal in each taxpayer’s stocking—it won’t even try to estimate the total losses of Fannie and Freddie.
If you think these GSEs are bad, wait until you find out the government’s intention of turning America’s major banks into Fannies and Freddies. Soon our entire economy will be one big Government Sponsored Enterprise.
Ask yourself this: How long can this go on?
Absurd and ridiculous. How wish we could go back to a time when our Representatives loved and cherished the constitution. When congressmen really cared about what their constituents really thought.
I found yesterday that is a rather lengthy read, but a must read.
http://www.constitution.org/cons/crockett.txt
Hey Lonely, you should strongly consider placing that article here so that others can read it.
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Hopefully this will not last beyond November 2010.
These people are exactly the reason we are supposed to have checks and balances, equal representation…instead, the entire conservative population of the country is ignored because “we won”. We handed the power of this country to a bunch of spoiled bullies.
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