The gang that cannot shoot straight, has come galloping into Washington, D.C., and robbed the Treasury, the People's Bank once again. Sheriff Obama and his hooligan crew of law enforcers carried the loot out to their horses for them and invited them to a good dinner. They are still in town, living it up! Why not? In the past, Fanny Mae and Freddy Mac always provided the Democrats and Obama in particular with great campaign contributions. The more money the sheriff lets them steal, the more money they give him to remain sheriff.
Fanny Mae has just asked for another $8.4 billion from the Treasury after First Quarter losses this year of $13.1 billion, including $1.5 billion in dividends paid to the government on its preferred stock. The government took control of Fanny Mae, a government-sponsored corporation, in September 2008. Fannie Mae ended the First Quarter with a net worth of -$8.4 billion dollars. This government-run business lost $15.2 billion in the Fourth Quarter of 2009 and $23.2 billion in the First Quarter of 2009.
Just four days earlier, Freddie Mac asked for a $10.6 billion handout. Its First Quarter loss was $8 billion. Freddy Mac had previously received $50.7 billion in bailouts, while Fanny Mae had previously received $76.2 billion. Fanny Mae had already been given $15.3 billion of taxpayer's money as recently as 31 March 2010. In December 2009, the Obama administration removed a $400 billion cap on gifts to Fanny Mae and Freddy Mac and promised unlimited support in 2010. The total taxpayer money given them since they were taken over by the government, including the current requests, is $145.6 billion.
In the First Quarter, Fanny Mae purchased or guaranteed about $191.4 billion in loans. Its credit losses were $5.1 billion, which was up from $4.1 billion the previous quarter. The number of loan defaults was up in the first quarter. 5.47% of Fanny Mae mortgages were delinquent in the First Quarter, which is up from 5.38% in the Fourth Quarter of 2009. The single-family foreclosure rate was up from 1.03% in the previous quarter to 1.36%.
Obama and the Democrats have refused to include Fanny Mae and Freddy Mac in any financial industry reform bill effort, since they are using them to reduce home foreclosures with loan modifications and will not admit their guilt in weakening the entire financial system of the U.S. In the First Quarter, Fanny Mae made 94,000 mortgage modifications, after making 42,000 in the Fourth Quarter of 2009. Together, Fanny Mae and Freddy Mac own or guarantee almost 31 million home mortgages worth about $5.5 trillion. This is more than 40% and close to half of all home mortgages.
It is common to say that the recession began in the United States and was caused by too much easy credit. Republicans go on to say government-sponsored Fanny Mae and Freddy Mac caused the recession and Democrats say an unregulated Wall Street caused it. In fact, it was triggered by the sharp increase in oil prices. After May of 2004, the price of oil went up in real terms, dropped briefly in late 2006, and then spiked upward beginning in early 2007. By July of 2007, production in Canada had dropped. It dropped in Italy in August 2007, in France in October 2007, and the Euro area as a whole in November 2007. Japan's production reached a peak in October 2007, though it had a one-month uptick in February 2008. The decline in the U.S. was in February 2008. In January 2008, the OECD leading indicators were down from a year before by 4.1 points in Ireland, 2.8 points in Japan, 2.6 points in Korea, 2.3 points in Sweden, but only 0.8 point in the U.S. Stock prices are another leading indicator. Stock prices peaked in Japan and in the Euro area four months before they peaked in the U.S. and the U.K. in October 2007! In the 4th quarter of 2008, real GDP was lower around the world than it had been 1 year before, but it had dropped by much less in the U.S. than almost anywhere else. The dollar value of imports into the U.S. did not fall until August 2008 and the consumer purchases did not fall in the U.S. until September 2008. The U.S. was the last economic engine to sputter to a stop and it took the combination of the oil price spike, the recession already underway in the rest of the world, Fanny Mae's and Freddy Mac's vulnerability, and the Wall Street over-extension combined to put us into this severe recession.
While we cannot blame the entire recession on Fanny Mae and Freddy Mac, they were the most egregious weaknesses and the most easily avoided ones in the U.S. economy. They were following a foolish policy of easy credit for people who could not make their loan payments under almost any condition of strain and they with the easy credit Federal Reserve were the starting point for much of what went wrong in the private sector. Government regulation of Freddy Mac and Fanny Mae did not keep them out of trouble and there is no reason to believe more federal regulation would have helped on Wall Street. In fact, some of the problems on Wall Street turned out to be due to too much regulation and too cozy a relationship with the federal government. The biggest backers of the unwise lending practices through the years were the Democrats. Obama had contributed once he was in the Senate and he had worked on a lawsuit against Citibank himself to force them to lower their lending standards before that. Meanwhile, President Bush had warned a number of times that the easy credit policies of Fanny Mae and Freddy Mac were a major risk for the economy. McCain also joined in with warnings. These were all ignored by Congress, which in 2007 and 2008 was controlled by the Democrats.
Fanny Mae and Freddy Mac could not be more controlled by the federal government. We have only to examine how badly run they are to see the looming disaster as the Democrats try to gain more regulatory control over the major financial institutions of America. We will be turning investment company after bank after insurance company into the next Fanny Maes and Freddy Macs. This is exactly what the Democrats want to do. Imagine how easy it will be to extort money from these more regulated companies and how easy it will be to command many of them to self-destruct. Even as Fannie Mae had collapsed, Obama and the Democrats had been able to milk it mightily for campaign contributions. This is the fate of the entire financial industry, if they get their way.
Showing posts with label Freddy Mac. Show all posts
Showing posts with label Freddy Mac. Show all posts
10 May 2010
08 April 2010
Fannie Mae and Freddie Mac and the Full Faith and Credit of the USA
Robert Romano posted an interesting article on the debt of Fannie Mae and Freddie Mac and the U.S. debt on 7 April 2010. Romano is the Senior Editor of the ALG News Bureau. ALG is Americans for Limited Government, which is an organization doing good work for the cause of American liberty. I will summarize the most interesting points in his article below.
Congress placed the government secured entities (GSEs) Fannie Mae and Freddie Mac under federal government conservatorship in 2008 because they were effectively bankrupt. Congress formed the Federal Housing Finance Agency to manage their sorry financial mess, which Congress had long worked hard to foster. In June 2008, their combined debt was $6.6 trillion, of which $4.7 trillion was mortgage-backed securities. Congressman Scott Garrett asked Treasury Secretary Timothy Geithner why this debt taken on by the federal government had not been added to the national debt. The U.S. debt of $12.6 trillion should really be $19.2 trillion and this would result in the downgrading of U.S. debt due to excessive risk. There is quite a song and dance going on here while trying to avoid this.
Geithner says this corporate debt is not the same as U.S. Treasuries and should not be considered sovereign debt. He says, "By statute, all obligations and securities issued by GSEs must include a statement that makes clear that such obligations and securities are not guaranteed by the United States and do not constitute a debt or obligation of the United States." But, he also says the "Treasury is committed to supporting the GSEs while in conservatorship and to ensuring that the GSEs have sufficient capital to meet their debt obligations and honor their guarantees." When Fannie Mae and Freddy Mac were nationalized, the FHFA director James Lockhart told Congress that "the conservatorship and the access to credit from the U. S. Treasury provide an explicit guarantee to existing and future debt holders of Fanny Mae and Freddy Mac." It seems clear that when Congress nationalized the GSEs, the earlier statute that their obligations were not guaranteed by the federal government, had to be superseded or inherently contradicted.
Foreign investors held $1.5 trillion of the $4.7 trillion in mortgage-backed securities. In June 2007, the last an accounting by nation was performed, China held $376 billion, Japan $228 billion, Russia $75 billion, Luxembourg held $39 billion, Belgium $33 billion, Britain $28 billion, and Middle Eastern national funds are also big holders. Many of these nations apparently said they would not buy Treasury bonds to support the U.S. national debt if the government did not rescue them from the bankrupt mortgage-backed securities they held. The federal government has since bought up $1.25 trillion of mortgage-backed toxic security debt. The Treasury will not say whose toxic securities they bought, but they only dealt with primary dealers who could directly deal with the Federal Reserve Bank of New York. When the TARP program was put together, the Treasury was forbidden to purchase the mortgage-backed securities of foreign central banks. But, it appears likely that Geithner has done just that with paper which is indeed backed by the explicit backing of the United States. What else could he have paid the primary dealers for the toxic securities with?
This is just me again: Our real national debt is clearly much greater than the $12.6 trillion figure we are told in a huge lie that it is. There is still much more hidden debt than just that of Fanny Mae and Freddy Mac also.
Congress placed the government secured entities (GSEs) Fannie Mae and Freddie Mac under federal government conservatorship in 2008 because they were effectively bankrupt. Congress formed the Federal Housing Finance Agency to manage their sorry financial mess, which Congress had long worked hard to foster. In June 2008, their combined debt was $6.6 trillion, of which $4.7 trillion was mortgage-backed securities. Congressman Scott Garrett asked Treasury Secretary Timothy Geithner why this debt taken on by the federal government had not been added to the national debt. The U.S. debt of $12.6 trillion should really be $19.2 trillion and this would result in the downgrading of U.S. debt due to excessive risk. There is quite a song and dance going on here while trying to avoid this.
Geithner says this corporate debt is not the same as U.S. Treasuries and should not be considered sovereign debt. He says, "By statute, all obligations and securities issued by GSEs must include a statement that makes clear that such obligations and securities are not guaranteed by the United States and do not constitute a debt or obligation of the United States." But, he also says the "Treasury is committed to supporting the GSEs while in conservatorship and to ensuring that the GSEs have sufficient capital to meet their debt obligations and honor their guarantees." When Fannie Mae and Freddy Mac were nationalized, the FHFA director James Lockhart told Congress that "the conservatorship and the access to credit from the U. S. Treasury provide an explicit guarantee to existing and future debt holders of Fanny Mae and Freddy Mac." It seems clear that when Congress nationalized the GSEs, the earlier statute that their obligations were not guaranteed by the federal government, had to be superseded or inherently contradicted.
Foreign investors held $1.5 trillion of the $4.7 trillion in mortgage-backed securities. In June 2007, the last an accounting by nation was performed, China held $376 billion, Japan $228 billion, Russia $75 billion, Luxembourg held $39 billion, Belgium $33 billion, Britain $28 billion, and Middle Eastern national funds are also big holders. Many of these nations apparently said they would not buy Treasury bonds to support the U.S. national debt if the government did not rescue them from the bankrupt mortgage-backed securities they held. The federal government has since bought up $1.25 trillion of mortgage-backed toxic security debt. The Treasury will not say whose toxic securities they bought, but they only dealt with primary dealers who could directly deal with the Federal Reserve Bank of New York. When the TARP program was put together, the Treasury was forbidden to purchase the mortgage-backed securities of foreign central banks. But, it appears likely that Geithner has done just that with paper which is indeed backed by the explicit backing of the United States. What else could he have paid the primary dealers for the toxic securities with?
This is just me again: Our real national debt is clearly much greater than the $12.6 trillion figure we are told in a huge lie that it is. There is still much more hidden debt than just that of Fanny Mae and Freddy Mac also.
31 January 2009
Walter Williams - Congress's Financial Mess
Walter E. Williams, professor of economics at George Mason University, has written another interesting commentary on the current financial crisis called Congress's Financial Mess. He notes that the new media have repeatedly insisted that the current financial crisis was caused by deregulation and free markets. He goes on to show that this is not at all the case.
Professor David Henderson, research fellow at the Hoover Institution of Stanford University, studied how regulation has grown in general over the last few decades. He published his results in "Are We Ailing From Too Much Deregulation?" in Cato Policy Report (Nov/Dec 2008). He examined the Federal Register for its lists of new regulations.
Regulatory spending by the banking and finance industries:
The Clinton administration made a concerted effort to force Fannie Mae to expand mortgage loans to low and moderate income people in 1999. They used the 1977 Community Reinvestment Act to make the banks make high-risk loans they otherwise would not make. Banks not submitting were fined and their mergers and branch expansion plans were denied or held-up.
In 2008, about $5 trillion of mortgages outstanding were owned or securitized by Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing, and the Veterans Administration. This was one-third of all such mortgages.
[Government also encouraged the inflation of home and property values with extremely low interest rates through inflation of the money supply by the Federal Reserve Board over the last several years.]
To make matters still worse for us taxpayers, Bush gave the auto industry a bailout of $17 billion in addition to about $700 billion in bailouts to banks and financial institutions. Now, the presidents of 36 state government universities are asking for a bailout. State governors and local governments are readying proposals for bailouts, with California $15 billion in the red, Florida $5 billion negative, and Michigan shutting down a prison to save money.
Williams notes that the news media is insulting our intelligence! Unfortunately, they appear to be right about the intelligence, or at least the attention span, of the average voter.
Professor David Henderson, research fellow at the Hoover Institution of Stanford University, studied how regulation has grown in general over the last few decades. He published his results in "Are We Ailing From Too Much Deregulation?" in Cato Policy Report (Nov/Dec 2008). He examined the Federal Register for its lists of new regulations.
- 1977-1980, Carter, annual average of 72,844 pages of new regulations
- 1981-1988, Reagan, annual average of 54,335 pages
- 1989-1992, Bush, annual average of 59,527 pages
- 1993-2000, Clinton, annual average of 71,590 pages
- 2001-2008, Bush, annual average of 75,526 pages
- 1980, 146,139 employees
- 2007, 238,351 employees, an increase of 63%
Regulatory spending by the banking and finance industries:
- 1980, $725 million
- 2007, $2.07 billion, an increase of 286%
The Clinton administration made a concerted effort to force Fannie Mae to expand mortgage loans to low and moderate income people in 1999. They used the 1977 Community Reinvestment Act to make the banks make high-risk loans they otherwise would not make. Banks not submitting were fined and their mergers and branch expansion plans were denied or held-up.
In 2008, about $5 trillion of mortgages outstanding were owned or securitized by Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing, and the Veterans Administration. This was one-third of all such mortgages.
[Government also encouraged the inflation of home and property values with extremely low interest rates through inflation of the money supply by the Federal Reserve Board over the last several years.]
To make matters still worse for us taxpayers, Bush gave the auto industry a bailout of $17 billion in addition to about $700 billion in bailouts to banks and financial institutions. Now, the presidents of 36 state government universities are asking for a bailout. State governors and local governments are readying proposals for bailouts, with California $15 billion in the red, Florida $5 billion negative, and Michigan shutting down a prison to save money.
Williams notes that the news media is insulting our intelligence! Unfortunately, they appear to be right about the intelligence, or at least the attention span, of the average voter.
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