New Fannie/Freddie Looting

[BigBagel]

http://www.nytimes.com/2009/12/17/business/17wards.html


http://www.bloomberg.com/apps/news?p...Nkv_GkYs&pos=1

http://www.nytimes.com/aponline/2009...=fannie&st=cse

The first link is a NY Times article dated 12/17/2009 detailing the possibility of increased commitments from the government to Fannie and Freddie. The article suggested an increase to 400 billion for each.

The second article is from today. The Times article was wrong. They did not increase the commitments to 400 billion. They took off the cap completely.

The third article details that the top executives in these two government supported agencies will receive between 4 and 6 million in compensation.

Fannie owes dividend payments to the Treasury. From what I understand they will borrow the money from the Treasury and then pay it back to the Treasury.

The looting continues.

[BigBagel]

Re: New Fannie/Freddie Looting

and of course they did this on Christmas Eve.

[grapejelly]

Re: New Fannie/Freddie Looting

was there EVER any doubt that this was happening? It could be several trillion dollars, no matter, the US gubmint is good for it

[GRG55]

Re: New Fannie/Freddie Looting

http://www.nytimes.com/2009/12/17/business/17wards.html


http://www.bloomberg.com/apps/news?p...Nkv_GkYs&pos=1

http://www.nytimes.com/aponline/2009...=fannie&st=cse

The first link is a NY Times article dated 12/17/2009 detailing the possibility of increased commitments from the government to Fannie and Freddie. The article suggested an increase to 400 billion for each.

The second article is from today. The Times article was wrong. They did not increase the commitments to 400 billion. They took off the cap completely.

The third article details that the top executives in these two government supported agencies will receive between 4 and 6 million in compensation.

Fannie owes dividend payments to the Treasury. From what I understand they will borrow the money from the Treasury and then pay it back to the Treasury.

The looting continues.

The desperation in the Administration and Congressional efforts to arrest the continued fall in [housing] collateral values is truly breathtaking.

[ThePythonicCow]

Re: New Fannie/Freddie Looting

The desperation in the Administration and Congressional efforts to arrest the continued fall in [housing] collateral values is truly breathtaking.

Perhaps the iTulip post Xmas Present-Rahm Emanuel's Resignation? explains some of this. Fannie and Freddie continue to look like one of the larger political cesspools in our scenic landscape. Federal housing and mortgage funding has never, IMHO, been about the average person having or owning housing. It has been about stealing money, lots of money.

[GRG55]

Re: New Fannie/Freddie Looting

Perhaps the iTulip post Xmas Present-Rahm Emanuel's Resignation? explains some of this. Fannie and Freddie continue to look like one of the larger political cesspools in our scenic landscape. Federal housing and mortgage funding has never, IMHO, been about the average person having or owning housing. It has been about stealing money, lots of money.

An interesting observation from the Calculated Risk blog:

It is possible that the Treasury directive on Wednesday to extend the review period for all active HAMP trial modifications until at least Jan 31, 2010, and the announcement on Thursday to uncap the potential losses for Fannie and Freddie are somewhat related.

There is a possibility that the Treasury is planning on introducing a principal reduction component to HAMP in January, and this could lead to significantly larger losses for Fannie and Freddie (just speculation on my part). There has been no announcement yet, and even if this is proposed it might only apply to Fannie and Freddie related loans, and not private MBS (the number of Fannie/Freddie loans compared to private MBS varies significantly by servicer)...

...Of course Treasury initially oversold the HAMP program claiming the initiative would "reach up to 3 to 4 million at-risk homeowners". Now they are defining "reach" as being "offered to".

The key problem for the Treasury is they are concerned house prices will become unglued again if another flood of foreclosures hit the market. And this in turn could lead to further losses for the banks.

[GRG55]

Re: New Fannie/Freddie Looting

And this won't help...if it comes to pass...

Freddie sees mortgage rates hitting 6% in 2010

By Dina ElBoghdady
Washington Post Staff Writer
Saturday, December 26, 2009

After hitting an all-time low in early December, the average rate on a 30-year, fixed-rate mortgage rose to 5.05 percent this week and could climb to 6 percent by the end of 2010, if not sooner, according to giant mortgage financier Freddie Mac...

...The key catalyst for interest rates going forward will be the end of a Federal Reserve program that buys a sizable chunk of mortgage-backed securities issued by firms such as Fannie Mae and Freddie Mac. That program succeeded in immediately pushing mortgage rates well below the 6 percent mark when it was announced last year.

But the Fed has committed to winding down the program by March. The central bank is betting that by gradually tapering its purchases, private buyers of mortgage-backed securities, who have largely been absent from the market, will return and rates won't rise much.

But Amy Crews Cutts, deputy chief economist at Freddie Mac, said interest rates are bound to rise to 6 percent by the end of 2010 because private buyers will demand a higher rate of return on the securities than the Fed did. Lenders may have to raise the rates they charge to consumers in order to make that happen.

"Extraordinary resources have been put into keeping the rates down and supporting the mortgage markets and it's hard to imagine that the rates can go much lower than they are," Crews Cutts said. "Anything we get at or below 5 percent is a gift at this point."...

[strittmatter]

Re: New Fannie/Freddie Looting

http://www.businessinsider.com/heres...reddie-2009-12

Here's The Secret Reason We Eliminated The Bailout Caps On Fannie And Freddie

As some observers have pointed out, all the move really did was formalize what everyone has figured for decades, that the two zombie GSEs were truly organs of the federal government, and that their debts would be backed up ad infinitum.

5. Increasing the demand for Fannie and Freddie’s MBS by reducing the multiplier for bank risk based capital requirements from 20% to 10%. This action would help serve to keep spreads to treasuries narrow. Banks would only need 0.8% risk based capital to support their holdings of Fannie Freddie MBS versus the 1.6% needed today. The earlier noted lifting of Treasury’s capital support caps could provide the justification for this reduction in capital requirements, since it signals an increase in the government’s commitment to Fannie and Freddie..

The above actions would preserve and strengthen the government’s involvement and control over the country’s housing finance system and make it harder to reintroduce substantial private sector involvement later on. They would also continue distortions in the marketplace leading to who knows what unintended consequences. Finally these steps would do nothing to deleverage the housing finance system, a key step in returning it to any degree of normality.