Senators Ask Fannie, Freddie to Freeze Foreclosures

[jk]

Senators Ask Fannie, Freddie to Freeze Foreclosures
By Alison Vekshin
Sept. 11 (Bloomberg) -- U.S. Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days.
``This action would provide immediate relief to many homeowners'' and let the companies ``turn these non-performing loans into performing assets to minimize losses,'' Senators Charles Schumer, Robert Menendez and other panel Democrats said today in a letter to the companies and the Federal Housing Finance Agency, which is overseeing them under the government conservatorship. The companies also should ease their policies on modifying mortgages, the senators wrote.

etc


http://www.bloomberg.com/apps/news?p...d=aovAPlvMndWc


:rolleyes:

[Sapiens]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

How many credit events would that trigger? :rolleyes:

[GRG55]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Senators Ask Fannie, Freddie to Freeze Foreclosures
By Alison Vekshin
Sept. 11 (Bloomberg) -- U.S. Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days.
``This action would provide immediate relief to many homeowners'' and let the companies ``turn these non-performing loans into performing assets to minimize losses,'' Senators Charles Schumer, Robert Menendez and other panel Democrats said today in a letter to the companies and the Federal Housing Finance Agency, which is overseeing them under the government conservatorship. The companies also should ease their policies on modifying mortgages, the senators wrote.

etc


http://www.bloomberg.com/apps/news?p...d=aovAPlvMndWc


:rolleyes:

"...This action would...let the companies ``turn these non-performing loans into performing assets to minimize losses..."

Did they really say that not foreclosing suddenly changes the loans into "performing assets"?

I shudder to think what kind of accounting treatment it'll take to make that happen.

[oddlots]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

It seems to me there's a pattern here. Much as Paulson claims not to want to "kick the can down the road" is there not a (perhaps defensible?) argument to the stalling tactic epitomised by this tactic and so common (implicitly or explicitly) in recent government action. The notion in Austrian circles is one end of the spectrum: let the market clear at whatever price and take the pain now for gain later. (That is, arguably, a sensible proposition if we had anything approaching a free market in this "fallen" world.) But if you zoom out and look at the currency politics it becomes kind of obvious that its in the US's best interest to stall so as to let dollar depreciation do its work over time so that it fills in underneath these assets to support prices at some, presumably, lower but not catastophically low price. Kind of like a MACD pattern.

This might seem ridiculous given the dollar rally but if you think of China's inflation problem (not to mention gulf countries) and the margin compression it represents via commodity rises, I think you can see that the conflict between country's interests cannot be represented as, for example:

- US wants to debase dollar to inflate debt away in real terms at all times
- China wants a weak Yuan to stimulate

... a position that no-one would consciously take but one we (observers) fall into becase it's hard to conceptualise a situation that has (at least) two players who take different, seemingly opposite positions at various times (I want dollar up / down) while pursuing a coherent strategy to achieve each a single but differently fleshed out end: optimal "growth.")

To my mind the Chinese have an interest in a higher dollar at the moment despite the hit to export competitiveness because the commodity inflation on dollar marked commodities (and so margin compression) is killing them. At the moment it's in the US interest to accommodate as they have a huge amount of debt to move so need to gain some altitude in the dollar index and the bond "bubble" in preparation. The symbiosis lives!

Honestly, if you're running an economy that is very dependant on asset price appreciation (UK, US) and you've passed the puke point, Minsky moment where it becomes clear that it was at least mostly a Ponzi scheme based on riding (and assuming) ever easier funding you're going to reach a period of intense juggling between keeping the creditors happy (relatively speaking) at one moment and the debtors happy at another. I think this is the real meaning of the ratchet phenomenon as Hudson and EJ use it.

The takeaway: I think this news represents confirmation that the game plan is exactly to avoid market clearing in order to allow time for longer term dollar depreciation to work its magic. Score one to the itulip thesis.

:confused::mad::p;):rolleyes::cool::eek: )My eight year old insisted I use every smilley.

[The Outback Oracle]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Something that worries me about this thesis of allowing inflation to eat away the debt. I'm not saying thaqt is not what these morons are trying to do but it's surely been tried for the last 20 years at least. The very phenomenon of inflation, with the resulting negative interest rates, makes saving insane and, as for the last however many years, there just becomes more and more debt. Inflation will NOT solve the problem, only exacerbate it.
Any attempt at positive (after tax) interest rates in an inflationary environment would surely lead to a higher dollar.

[santafe2]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Something that worries me about this thesis of allowing inflation to eat away the debt. I'm not saying thaqt is not what these morons are trying to do but it's surely been tried for the last 20 years at least. The very phenomenon of inflation, with the resulting negative interest rates, makes saving insane and, as for the last however many years, there just becomes more and more debt. Inflation will NOT solve the problem, only exacerbate it.
Any attempt at positive (after tax) interest rates in an inflationary environment would surely lead to a higher dollar.

It does make saving insane. Isn't that the point? If saving money is insane, people in the US will spend and more people will leverage their spending. I don't think anyone with the power to do it, wants to solve the problem and we should invest our resources accordingly.

[GRG55]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

It does make saving insane. Isn't that the point? If saving money is insane, people in the US will spend and more people will leverage their spending. I don't think anyone with the power to do it, wants to solve the problem and we should invest our resources accordingly.

Exactly. Very difficult to achieve a 70+% consumption economy without a well developed, deeply ingrained expectation of negative real interest rates for long periods of time.

[Jim Nickerson]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

It does make saving insane. Isn't that the point? If saving money is insane, people in the US will spend and more people will leverage their spending. I don't think anyone with the power to do it, wants to solve the problem and we should invest our resources accordingly.

I do not agree that saving is insane. Personally I had rather have cash assets that are depreciating rather than a car that is, or a TV that is, or an ipod that is, or any of the gaming doodads in which people spend money, or granite counter tops, or designer togs.

What is insane is not to save something--people

[Jim Nickerson]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

It does make saving insane. Isn't that the point? If saving money is insane, people in the US will spend and more people will leverage their spending. I don't think anyone with the power to do it, wants to solve the problem and we should invest our resources accordingly.

I do not agree that saving is insane. Personally I had rather have cash assets that are depreciating rather than a car that is, or a TV that is, or an ipod that is, or any of the gaming doodads in which people spend money, or granite counter tops, or designer togs.

What is insane is not to save something--people surely

[Jim Nickerson]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

It does make saving insane. Isn't that the point? If saving money is insane, people in the US will spend and more people will leverage their spending. I don't think anyone with the power to do it, wants to solve the problem and we should invest our resources accordingly.

I do not agree that saving is insane. Personally I had rather have cash assets that are depreciating rather than a car that is, or a TV that is, or an ipod that is, or any of the gaming doodads in which people spend money, or granite counter tops, or designer togs.

What is insane is not to save something--people surely are

[Jim Nickerson]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

It does make saving insane. Isn't that the point? If saving money is insane, people in the US will spend and more people will leverage their spending. I don't think anyone with the power to do it, wants to solve the problem and we should invest our resources accordingly.

I do not agree that saving is insane. Personally I had rather have cash assets that are depreciating rather than a car that is, or a TV that is, or an ipod that is, or any of the gaming doodads in which people spend money, or granite counter tops, or designer togs.

What is insane is not to save something--people surely are not improving their lots by spending all they make and can borrow.

[The Outback Oracle]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

Ahhhhhhhhhhhhhhh Jim! Jim?
I got news for you mate....I doubt you're average "people"

[c1ue]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

I think saying that saving is insane is not quite correct.

What I would say instead is that the present policies make saving VERY PSYCHOLOGICALLY HARD.

Because instead of a tangible good - necessary or not - you are hit constantly with losses.

But unless we get Weimar'd, a dollar saved is still worth something and offers flexibility whereas a purchased consumer good's value drops much much faster.

And from the overall state of retirement planning in the US, it is clear that the vast majority of people do not have the discipline to do long term planning.

[LargoWinch]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

I do not agree that saving is insane. Personally I had rather have cash assets that are depreciating rather than a car that is, or a TV that is, or an ipod that is, or any of the gaming doodads in which people spend money, or granite counter tops, or designer togs.

What is insane is not to save something--people surely are not improving their lots by spending all they make and can borrow.

Agreed that thrift is better than futile purchases, however in a fair and honest system savers - like you Jim (and me :p) - should be rewarded and not penalized.

Tax on interest income here in Canada is like 47%! Thanks but no thanks. So what choice does someone has to prevent its purchasing power from eroding? The answer: Speculation.

Cash should not depreciate, but appreciate or at least maintain its purchasing power in real terms.

Anyway, this is my "blow the steam" post for today.

[The Outback Oracle]

Re: Senators Ask Fannie, Freddie to Freeze Foreclosures

It actually does not matter a tinker's 'damn' whether you think saving is insane or not! The point is that in this case people do what is rational. In an inflationary environment, if you want a TV, a car, a house, a visit to the local bordello, it pays to borrow for it rather than save for it. The thinking becomes endemic. Everyone knows money is 'worthless'o they spend it as soon as they get it.
Anyway suppose you want a house to live in. The cost is $500,000. The price is rising at say 20% per year. The interEst rate on borrowings say 7.5%. After 12 months borrowing you are $62500 ahead... tax free.
The poor beggar who saved every cent and say ended with $50,000 in th bank at say 4% interest earns $2000 and then gets taxed half of it. Bloody bewdy! He's in front $1000...whoops inflation....he's behind $49,000 even though he saved everything he could.
Who the hell is nuts? It doesn't take much for Fred Nurk to work out which is the easy way!
INFLATION LEADS TO HIGHER DEBT OF ONE FORM OR ANOTHER! IT HAS FOR THE LAST 40 YEARS AND WILL CONTINUE TO DO SO.