U.S. to Lose $400 Billion on Fannie, Freddie, Wallison Says

[Denny Crane]

http://www.bloomberg.com/apps/news?pid=20601087&sid=a2Z5GnTAPcuo

U.S. to Lose $400 Billion on Fannie, Freddie, Wallison Says

By Betty Liu and Matthew Leising

Dec. 31 (Bloomberg) -- Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute.

“The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.

The U.S. seized the two mortgage financiers in 2008 as the government struggled to prevent a meltdown of the financial system. The debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks grew an average of $184 billion annually from 1998 to 2008, helping fuel a bubble that drove home prices up by 107 percent between 2000 and mid-2006, according to the S&P/Case- Shiller home-price index.

The Treasury said on Dec. 24 it would provide an unlimited amount of assistance to the companies as needed for the next three years to alleviate market concern that the government lifeline for Fannie Mae and Freddie Mac, the largest source of money for U.S. home loans, could lapse or be exhausted.

Lax regulation of Fannie Mae and Freddie Mac led to the mortgage companies taking on too many risky loans, Wallison said.

“It turns out it was impossible to regulate them,” he said. “They were too powerful.” He said no one knows how much will be needed to keep the companies solvent.

From 1990 to 1999, Wallison served on the board of directors of MGIC Investment Corp., the largest U.S. mortgage insurer, including a stint on the audit committee, according to Bloomberg data and company filings.

The continued government support of Fannie Mae and Freddie Mac makes buying their debt a good investment, Wallison said.

“It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.”

To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net.

 

[Buzz Killington]

well, at least we're still infusing money into GMAC!

 

[Sug]

Thanks Bush for deregulating the mortgage industry.

 

[Denny Crane]

http://www.usnews.com/blogs/barone/...were-wrong-on-fannie-mae-and-freddie-mac.html

Democrats Were Wrong on Fannie Mae and Freddie Mac
October 06, 2008 05:10 PM ET | Michael Barone

Seventeen. That's how many times, according to this White House statement (hat tip Gateway Pundit), that the Bush administration has called for tighter regulation of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Congress has cooperated only once. In spring 2007, as House Financial Services Committee Chairman Barney Frank likes to point out, the House did pass a bill in response. The Senate did not act until 2008; Senate Banking Committee Chairman Christopher Dodd spent most of 2007 camped out in Iowa running for president. The legislation passed by Congress in 2008 enabled Treasury Secretary Henry Paulson to put Fannie and Freddie into federal conservatorship this summer when they failed. But it didn't prevent them from spewing a huge amount of toxic waste, in the form of subprime and Alt-A mortgages, into our financial institutions from 2004 to 2007. As Stephen Spruiell points out in The Corner on National Review Online, Fannie and Freddie spewed out $1 trillion worth (face value) of subprime mortgages between 2005 and 2007. That's a whole lot of toxic waste. For more detail, consult the items referred to in my previous blogpost on this subject (most of the comments seem to have been disputes about the plot line of the movie It's a Wonderful Life, which I should think could be settled by consulting a reference work).

Much if not all of that could have been prevented by a bill cosponsored by John McCain and supported by all the Republicans and opposed by all the Democrats in the Senate Banking Committee in 2005. That bill, which the Democrats stopped from passing, would have prohibited the GSEs from speculating on the mortgage-based securities they packaged. The GSEs' mission allegedly justifying their quasi-governmental status was to package or securitize such mortgages, but the lion's share of their profits—which determined top executives' bonuses—came from speculation.

 

[Sug]

http://www.usnews.com/blogs/barone/...were-wrong-on-fannie-mae-and-freddie-mac.html

Democrats Were Wrong on Fannie Mae and Freddie Mac
October 06, 2008 05:10 PM ET | Michael Barone

Seventeen. That's how many times, according to this White House statement (hat tip Gateway Pundit), that the Bush administration has called for tighter regulation of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Congress has cooperated only once. In spring 2007, as House Financial Services Committee Chairman Barney Frank likes to point out, the House did pass a bill in response. The Senate did not act until 2008; Senate Banking Committee Chairman Christopher Dodd spent most of 2007 camped out in Iowa running for president. The legislation passed by Congress in 2008 enabled Treasury Secretary Henry Paulson to put Fannie and Freddie into federal conservatorship this summer when they failed. But it didn't prevent them from spewing a huge amount of toxic waste, in the form of subprime and Alt-A mortgages, into our financial institutions from 2004 to 2007. As Stephen Spruiell points out in The Corner on National Review Online, Fannie and Freddie spewed out $1 trillion worth (face value) of subprime mortgages between 2005 and 2007. That's a whole lot of toxic waste. For more detail, consult the items referred to in my previous blogpost on this subject (most of the comments seem to have been disputes about the plot line of the movie It's a Wonderful Life, which I should think could be settled by consulting a reference work).

Much if not all of that could have been prevented by a bill cosponsored by John McCain and supported by all the Republicans and opposed by all the Democrats in the Senate Banking Committee in 2005. That bill, which the Democrats stopped from passing, would have prohibited the GSEs from speculating on the mortgage-based securities they packaged. The GSEs' mission allegedly justifying their quasi-governmental status was to package or securitize such mortgages, but the lion's share of their profits—which determined top executives' bonuses—came from speculation.

From the same article, a comment:

Yet HR3221 barely made it past the house with 163 Republican "Nays".
I'm still tracking backward but so far I see that HR3221 was introduced in July 2007.

It passed in the House in August of '07 in spite of 83% of republicans voting "nay".

It was rejected in the Senate Cloture in Feb of 08 with nearly unanimous republican "nay" votes.

It finally passed the Senate in July of '08 with 25% of republicans voting "nay".

Something fishy about the the GOP and the 17 times they tried to seek changes to the housing reg. For all I know right now, the introduced and defeated they're own bills. Or, there were bills that were passed that were then Vetoed by the Pres. There's a lot of ways that things can happen so that one can claim "17 times they tried to seek changes". Perhaps he left it on a little note on the bulletin board.

Every time I read one of these things, I notice a lack of evidence that would leave me saying "Yeah, you couldn't make that up." In fact, I notice a lack of evidence at all.

What were these bills that the Republican's introduced? By the number and title please.

What were the votes? Where there reasons that certain legislators might have voted against them that had nothing to do with the intent of the bill? Like some earmark? Or that the bill didn't actually do what it's title proposed? (i've seen that)

 

[Sug]

Another comment on the "story" you posted.

Michael Barone's 'story"
McCain co sponsered the bill in 2005? All repblicans approved it all Democrats opposed so it failed. Weren't Republicans the majority in 2005?

And if this is true, why didn't McCain use this instead of the Ayers crap he was trying to sell the country

Sommething is rotten with this tale.

 

[Denny Crane]

You said blame Bush.

http://gatewaypundit.firstthings.co...17-times-in-2008-alone-dems-ignored-warnings/

Bush Called For Reform of Fannie Mae & Freddie Mac 17 Times in 2008 Alone… Dems Ignored Warnings

(Dems controlled congress in 2008, no?)

2008

January: Bank of America announces it will buy Countrywide.

January: Citigroup announces mortgage portfolio lost $18.1 billion in value.

February: Assistant Secretary David Nason reiterates the urgency of reforms, says “A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully.” (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)

March: Bear Stearns announces it will sell itself to JPMorgan Chase.

March: President Bush calls on Congress to take action and “move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages.” (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)

April: President Bush urges Congress to pass the much needed legislation and “modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes.” (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)

May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.

“Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans.” (President George W. Bush, Radio Address, 5/3/08)

“[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator.” (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)

“Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans.” (President George W. Bush, Radio Address, 5/31/08)

June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying “we need to pass legislation to reform Fannie Mae and Freddie Mac.” (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)

July: Congress heeds the President’s call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.

 

[Denny Crane]

Another comment on the "story" you posted.

Republicans didn't have 60 seats to overcome the democrats' filibuster.

 

[Denny Crane]

http://hotair.com/archives/2008/09/17/mccains-attempt-to-fix-fannie-mae-freddie-mac-in-2005/

Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

In this speech, McCain managed to predict the entire collapse that has forced the government to eat Fannie Mae and Freddie Mac, along with Bear Stearns and AIG. He hammers the falsification of financial records to benefit executives, including Franklin Raines and Jim Johnson, both of whom have worked as advisers to Barack Obama this year. McCain also noted the power of their lobbying efforts to forestall oversight over their business practices. He finishes with the warning that proved all too prescient over the past few days and weeks.

It never made it out of committee. Chris Dodd, then the ranking member of the Banking Committee and now its chair, was in the middle of receiving preferential loan treatment from Countrywide Mortgage, one of the companies gaming the system in the credit crisis.

 

[Sug]

Bush was the president.

 

[Denny Crane]

http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html

 

[Denny Crane]

Bush was the president.

The president can write bills and submit them to congress. He cannot make law by fiat.

 

[Sug]

The president can write bills and submit them to congress. He cannot make law by fiat.

Did he sign the bill?

Better yet, did he veto it?

 

[Denny Crane]

Did he sign the bill?

The process is as follows:

1) Bill is introduced in either house or senate.
2) Bill must be passed in both houses - typically the bills are not identical.
3) The SAME Bill must be passed in both houses, thus they go to a conference between the two houses (as they are on health care right now).
4) Once passed, the bill is sent to the president where he may sign it, veto it, or not sign it which ends up a veto.

To complicate the process, the senate rules allow open debate on a Bill until there is a vote of cloture, which takes 3/5ths majority. Without 60 votes for cloture, all it takes is ONE senator to be able to prevent the Bill from even being voted on. We saw the handful of senators who knew better than to vote on the health care Bill hold out for outright bribes for their votes to get to the 60 needed for cloture.

The republican house passed lots of legislation that never made it to a vote in the senate. The same is true for Pelosi's democratic house as well. And, again with the health care Bill, the house passed it much earlier than the senate, though it was worked on in both houses at the same time.

Republicans had 54 republican votes, I do believe, during their peak in Bush's terms.

 

[BrianFromWA]

[video=youtube;mEJL2Uuv-oQ]