Posted on 09/09/2008 8:53:07 AM PDT by cowtowney
Taxpayers are now on the hook for as much as $200 billion to rescue Fannie Mae and Freddie Mac, and if you want to know why, look no further than the rapid response to this bailout from House baron Barney Frank. Asked about Treasury's modest bailout condition that the companies reduce the size of their high-risk mortgage-backed securities (MBS) portfolios starting in 2010, Mr. Frank was quoted on Monday as saying, "Good luck on that," and that it would never happen.
There you have the Fannie Mae problem in profile. Mr. Frank wants you to pick up the tab for its failures, while he still vows to block a reform that might prevent the same disaster from happening again.
At least the Massachusetts Democrat is consistent. His record is close to perfect as a stalwart opponent of reforming the two companies, going back more than a decade. The first concerted push to rein in Fan and Fred in Congress came as far back as 1992, and Mr. Frank was right there, standing athwart. But things really picked up this decade, and Barney was there at every turn.
(Excerpt) Read more at online.wsj.com ...
We, as taxpayers on the other hand, are left holding the bag.
Each family of four, will owe at LEAST $2600 for his decisions. And the sad truth is that these organizations are not killed. They’ll live to see another day according to the agreement. More pain inflicted by Comrade Barney.
Push your representatives to KILL Fannie and Freddie.
Just ask Japan how that worked out for them.
Forbes is estimating $300 billion for these two money holes, which is $4000/family of four.
They’ll take back paper, if you want to pay it off over time, though.
I heard on Rush today that HUD back in the 90’s under Andrew Cuomo mandated that freddie and fannie had to make loans to low income households–ie high risk households. And this on top of the loans to low income neighborhoods (ie high risk loans) fostered by the Community Reinvestment Act 1979.
The CDO concept was developed by (convicted) Michael Milken of (now-defunct) Drexel Burnham Lambert. After the securities scandal, the vehicle lay dormant until picked up by the mortgage industry around 1999/2000. CSPAN aired an interview with a journalist who looked into the subject; took more than a few calls from some articulate folks who objected to placing the blame on Fannie/Freddie for exactly the reason I stated. The CDO package - courtesy of Mikey Milken - is flawed.
Per the WSJ article:
But the biggest payoff for Mr. Frank is the “affordable housing” trust fund he managed to push through as one political price for the recent Fannie reform bill. This fund siphons off a portion of Fannie and Freddie profits — as much as $500 million a year each — to a fund that politicians can then disburse to their favorite special interests.
This is also why Mr. Frank won’t tolerate cutting the companies’ MBS portfolios. He knows those portfolios (bought with debt borrowed at taxpayer-subsidized rates) were a main source of Fannie’s profits before the housing crash, and he figures that once this crisis passes they can do it again. And this time, his fund will get part of the loot.
Politcal power/favors and socialism at it’s core. What’s next the autos, airlines?? We are in this mess in the first place in part because of the existance of fannie and fred. They were able to offer below market rates to home-buyers, thus subsidizing the market, leading to riskier behaivor in the market by other institutions to compete. I heard a data point on cnbc this morning that the UK has higher home ownership without any GSEs. This reminds of Reagan’s famous quote...”hi, we are the government and we are here to help”
Agree completely. The government makes the problems then comes to the rescue. Meanwhile, our freedoms and liberties get squeezed.
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