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It started like a slasher movie....
Terrifying New Financial Reform Twist Could Put Banks On The Hook For Winding Down Fannie And Freddie
The tension was unbearable. Many had to look away....
Bank executives were panicking last night over a proposed fix to Title II of financial reform literally penciled in at the last minute. The fear is that that the proposed change to the orderly liquidation authority could leave banks on the hook for a possible wind-down of Fannie Mae and Freddie Mac that could cost as much as $400 billion. In the House counter-offer below, Fannie and Freddie are penciled in as falling under the definition of 'financial company,' meaning they could be resolved by the orderly liquidation process.
If you haven't been paying attention, the thing to know here is that financial reform envisions a big winddown fund that's funded by the banks themselves -- prepaying their own funeral expenses, basically. Fannie and Freddie are technically still alive, and have never been wound down, continually slurping aid from the government.
but it ended on a happy note....everyone that mattered was saved.
Senators Reject Proposal For Banks to Bail Out Fannie, Freddie
June 24, 2010, 12:58 PM EDT
June 24 (Bloomberg) -- Senate negotiators working on the financial-regulatory bill today rejected a proposal from House Republicans that would make big banks liable for the costs of winding down Fannie Mae and Freddie Mac.
The proposal would have made the government-controlled home loan companies, which own or guarantee more than half of the $11 trillion U.S. mortgage market, part of a Wall Street-financed “rainy day” fund that would be used to pay for the liquidation of large failed companies.
In a letter to lawmakers today, American Bankers Association Chief Executive Officer Edward Yingling said the provision “could impose a tremendous additional liability on the banking industry of hundreds of billions of dollars.”
Left unsaid was who would pay the piper.....
Saved Is Good....
Terrifying New Financial Reform Twist Could Put Banks On The Hook For Winding Down Fannie And Freddie
The tension was unbearable. Many had to look away....
Bank executives were panicking last night over a proposed fix to Title II of financial reform literally penciled in at the last minute. The fear is that that the proposed change to the orderly liquidation authority could leave banks on the hook for a possible wind-down of Fannie Mae and Freddie Mac that could cost as much as $400 billion. In the House counter-offer below, Fannie and Freddie are penciled in as falling under the definition of 'financial company,' meaning they could be resolved by the orderly liquidation process.
If you haven't been paying attention, the thing to know here is that financial reform envisions a big winddown fund that's funded by the banks themselves -- prepaying their own funeral expenses, basically. Fannie and Freddie are technically still alive, and have never been wound down, continually slurping aid from the government.
but it ended on a happy note....everyone that mattered was saved.
Senators Reject Proposal For Banks to Bail Out Fannie, Freddie
June 24, 2010, 12:58 PM EDT
June 24 (Bloomberg) -- Senate negotiators working on the financial-regulatory bill today rejected a proposal from House Republicans that would make big banks liable for the costs of winding down Fannie Mae and Freddie Mac.
The proposal would have made the government-controlled home loan companies, which own or guarantee more than half of the $11 trillion U.S. mortgage market, part of a Wall Street-financed “rainy day” fund that would be used to pay for the liquidation of large failed companies.
In a letter to lawmakers today, American Bankers Association Chief Executive Officer Edward Yingling said the provision “could impose a tremendous additional liability on the banking industry of hundreds of billions of dollars.”
Left unsaid was who would pay the piper.....
Saved Is Good....