who had a position in a business and caused it to fail would be kicked to the curb and forced to forego all bonuses and perks. Why is it that the CEOs of these type institutions are given great perks and allowed to continue in their positions. Shouldn't they be summarily fired and kicked to the curb?
Wouldn't the regular working class stiff like to be able to screw up royally on the job and not only get to keep their job but get bonuses, stock options, retirement etc etc. |
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I couldn't agree more. We need to stop relying on the government to fix everything. These are tough times but if we insist on artificial remedies like that which the government would have to employ we will never get through this. It sucks yes but we can get passed it on our own. |
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Since when is it the government's role to create an entity for buying mortgages in the secondary market? These entities should never have been created by the government. It is the height of tyranny for the government to use it's power to tax for accelerating "home ownership". Where is that outlined in the Constitution? The sole purpose of any action moving forward should be to minimize the risk to taxpayers and to deconstruct any government involvment in these entities. |
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before the Financial Services Committee and it is mostly appalling. It is so obvious that both Congress and the Bush administration are determined to kick this problem beyond the November elections. Paulson's "blueprint" is nothing short of a blank check without accountability. William Poole has it right. Fannie and Freddie will be nationalized one way or the other. It will cost $5 trillion which ever way we go. Paulson's approach solves nothing. It is time to face reality and start making decisions. We need proper regulation enforcing sensible regulations and a return to STANDARDIZED accounting rules. If we don't restore confidence to our banking system soon, like yesterday, nothing else matters. We can't wait until November because we are about to elect the least economically qualified president ever (Obama or McCain, same thing). |
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Introduce a resolution to force the SEC to re-impose the uptick rule on short-selling. The SEC has already announced that they will "temporarily" suspend naked short selling. Make that permanent. That would have an immediate impact on volatility of prices and squeeze out most of the "speculative" portion of prices (if there is any). Simple, you can do it now and it will have a real impact. |
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The $5 trillion represents the total liabilites in the form of mortage securities Fannie Mae and Freddie Mac hold. Only a small portion are in default (foreclosure).
Here's the problem:
1)Asset depreciation in the form of falling home prices have negatively affected the balance sheets of any banks that carry a large load of mortgage back securities. Freddie and Fannie have seen hundreds of billions in equity go up in smoke as home prices in the Far West and East Coast plunge.
2)People who own stock in Freddie and Fannie began to a sell off early this month. Panics can get ugly; both institutions saw thier market capitalization disappear as thier share prices lost 90-95% of thier value. In short, niether of them had enough cash to pay day-to-day operations.
I don't know how much of Fannie and Freddie's mortgage securities were tied to ARM or high risk mortgages, but the fact that Congress has underwritten these 2 mortgage giants leads one to believe that the officers running them took risks that normally would not be taken (ie underwrite mortgages to high risk customers). |
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Infuse Freddie and Fanny with enough cash (180 day loan at 1%) to get themselves recapitalized and setteled. Then begin to slowly offload the securites. Both institutions should be shutdown. |
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Another $1000 from the Countrywide Financial Political Action Committee. You know, the same Countrywide Financial that's the poster child for fraudulent mortgage dealings. |
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Who was ultimately responsible for lowering the mortgage standards to allow so many unqualified buyers to get loans. I remember getting my first mortgage in the late 70's and interest rates were at 10-12% fixed level and the banks were extremely picky during this period of time, wanting 20-25% down payments and they did extensive income checking. Since then I have had 2-3 mortgages, but still felt thoroughly checked out by the banks.
On a related observation, over the last few years, housing plans containing 3000-4000 square foot homes were popping up in my neighborhood like weeds. Then they were immediately occupied and 6 months later were turned over or back on the market, or defaulted back to the banks. It seems like the builders took advantage of this easy money, and that the root cause of this mess was the easy money.
Did Congress have anything to do with this? Without studying all the facts its seems interconnected and a government type manipulation of the lending institution standards.
If that is the case, then I say to our government "hands off" and let the losses be absorbed by the home buyers, institutions and their investors. The institutions will need to reset their lending practices and the speculation in real estate and the associated balloon will need to deflate.
On the positive side, there should be some great housing deals for those frugal enough to save their cash.
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If any PERSONAL RESPONSIBILITY comes into play with the mortgage mess? I mean, if you CANT afford the payment in the first place, and your interest only loan will go up to the clouds in 2 years, YOU should be renting until you actaully SAVE a few dollars for that home. My husband and I saved for years to buy our first home. It's bigger than anything we ever rented, but not as big as we'd like and much smaller than we need with so many kids. BUT, we scrimped, saved, kept our credit in check and did not buy stuff we did not need. Our cars are paid for, and are by no means new. My husband has a mid managemtn job and does not make a vast forutne. I have a small home business. Why do I have to pay to bail out irresponsible people who should never be owning a home they are now losing, in the first place? Hummmmm? |
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The $5 trillion does NOT reflect the mortgages on the books. Those are around $3 trillion. $5 trillion represents what it would cost to buy back Fannie shares at $7 and Freddie shares at $5 very near where both shares closed yesterday. There is a moral imperative at work here. If you believe in well-regulated free markets like I do and like the GOP USED TO, we need to shrink Fannie and Freddie. Free markets have harsh solutions for businesses and companies that need to shrink: bankruptcy and/or hostile takeovers. Fannie and Freddie are too big too fail but they represent a blatant moral hazard of such magnitude that they prevent free markets to work. A takeover will at least transfer profits and ill-gotten bonuses back into the taxpayers pockets and eventually the problem will go away as other banks are allowed to re-enter the mortgage business they were unfairly crowded out of. It is going to happen one way or the other.
It is interesting that the Bush administration is finding most of their support from the most liberal Democrats and most unscrupulous Republicans in Congress. It's the only way Paulson's "blueprint" will pass. This is empowering the next Congress and administration to go big government in the biggest way ever. Think Maxine Waters. |
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AP is reporting that the FBI is raiding IndyMac on suspicion of fraud. I believe that the political spin surrounding Senator Schumer detracted everyone from reality. Bank stock rally currently underway notwithstanding, the worse is still ahead of us on all of this. Congress is still planning to bail out certain of its corporate friends and using "children and poor people" as another ruse for bailing out special interests. There is nothing going in Congress at the moment that is helpful and with all of the money being printed (while the dollar keeps falling) to finance the new unbudgeted spending, there is no reason to believe that we are headed for a bleak stretch. Just read the comments here. Even the so-called conservatives are calling for "more government" solutions. We don't need more or less regulation, we need sensible regulations that are enforced and STANDARDIZED accounting rules that are designed to DISCLOSE to shareholders. Currently, accountants treat shareholders like the IRS. Creative accounting makes sense in minimizing your taxes but it defeats the purpose of reporting results to your investors. |
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The reason lending standards were lowered was due to a bipartisan political mandate to bring about an "ownership society". It was a backdoor attempt to subsidize poor neighborhoods. I haven't seen any reporting on this but in some place where proper counseling took place, these subprime mortgages are actually performing as well and better than the high quality mortgages. Fannnie and Freddie were drivers in encouraging lenders to be more "open minded" and "flexible" and since these mortgages were re-packaged as "alternative investment products", the mortgage originators had to skin in the game. The mortgages they originated, the more risk-free money they generated for themselves. Total mess. Thank you Team Bush.
We don't have an over-regulation problem but the opposite. We live in a lawless society these days and it's not just on illegal immigration. Everyone is feeding at the public trough. |
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There's a movie called "other people's money" that deals with both sides of the coin when we bail out an inept or uncompetitive business and the ramifications.
Wouldn't it be cool to get a debate on this subject just like the passionate debate between Gregory Peck and Danny Devito in the movie?
And after that, do the same debate on the relevance of American Auto.
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Some have blamed the Community Reinvestment Act of 1977 (Under President Carter), revised in 1995(Under President Clinton), and again in 2005 (under President Bush) as the root cause of the subprime mortgage meltdown.
From what I can tell, this law basically forced lenders to offer risker mortgages to allow more people access to credit.
I have been trying to trace who sponsored and passed this bill and it's amendments. I suspect that the 2005 changes are the ones that did us in.
It sounds like socialistic manipulation of the housing lending market by the US Congress to me. This smells like another DNC initiated "economy bomb" unleashed on the unsuspecting voters.
Another good reason to vote DNC scoundrels out in November.
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I've been looking for information on CRA of 1977 but all I find are reports about results in specific localities. I really do believe that this is the trick that was used to open the flood gates and I suppose it did a lot of good for the communities it was supposed to benefit. But because it was left unregulated by a corrupt and woefully underfunded bureaucracy and so the same loosening of the rules that made mortgages available to people in poor neighborhoods was applied in loosening standards to everyone broadly. Those CRA mortgages were not "liar loans" and I've heard several local administrators of that program citing admirable results due to active counseling and screening of applicants. Fannie and Freddie, their protests notwithstanding, were primary causes in corrupting the due diligence process up and down the channel.
There has also long existed a powerful bipartisan mandate to aggressively promote home ownership to which Bush contributed mightily with his "ownership society". There is no shortage of parallels between the LBJ "Great Society" programs and Bush's "Compassionate Conservatism". Bush didn't waste time vetoing bills the way that wastrel LBJ did. |
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Are you in favor of re-nationalizing Fannie and Freddie for the purpose of breaking them up?
Are you in favor of the Paulson blank check bailout bill that does nothing to reform the two GSEs?
Everyone on that Financial Services committee is assumed to be in the tank for Fannie and Freddie and from what I saw last week, I believe it except for Ron Paul and maybe a couple of others whose names were not revealed (Bloomberg runs a crawler at the bottom of the screen that obscures nameplates). One was a freshman Congresswoman whose excellent questions (to Bernanke and Paulson) were immediately intercepted by Barney Frank and rudely rebutted because she apparently drifted from the party line. She got to ask the last question after everyone else had been dismissed. I'm don't think it was you but maybe it was. If it was, I'm impressed. |
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in my opinion if you need to be bailed out by the gov't maybe you should deal with the consequences of your bad business decisions. |
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