Monday, December 28, 2009

Fannie & Freddie - US Gov. Uncapped Funding Limits?



The Obama administration’s decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.
Welcome to the new transparency:
The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each.

Hot Air Reports:
If an administration wanted to pull a fast one on American citizens and keep a move that puts them on the hook for hundreds of billion dollars as quiet as possible while still disclosing it, when would be the best time to take that action? How about an evening when people all across the country turn off their televisions and laptops to spend time with family and friends, celebrating an important religious holiday? Could any President be as calculating and cold-blooded as to do something like that?

I ask that you look back and see the Criminals (Democrats) deny anything was wrong with Fannie & Freddie. At a 2004 hearing see Democrat after Democrat covering up and attacking the regulations to protect Fannie Mae and Freddie Mac (their Cash Cows) that are now destroying our economy because the Democrats let them cheat. When anyone tried to investigate Fannie or Freddie they were Demonized as Racists that didn't want the Underclass to be able to get Home Loans! The government coruption story contineus below the video



Unlimited access to bailout funds through 2012 was “necessary for preserving the continued strength and stability of the mortgage market,” the Treasury said. Fannie and Freddie purchase or guarantee most U.S. home mortgages and have run up huge losses stemming from the worst wave of defaults since the 1930s.

“The timing of this executive order giving Fannie and Freddie a blank check is no coincidence,” said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. He said the Christmas Eve announcement was designed “to prevent the general public from taking note.”

Treasury officials couldn’t be reached for comment Friday.

Why couldn’t they be reached? Because it was Christmas. The announcement was designed to put them out of reach, just as it was designed to keep the news out of reach from the general public. No one can seriously argue that Treasury and the White House woke up early on Christmas Eve and suddenly discovered a reason to lift the caps on the Fannie/Freddie bailout, after all. This had to be in the works for weeks. However, as the Wall Street Journal also reports, the White House had a deadline for acting unilaterally:

The Treasury removed the cap on the size of available bailout funds by amending agreements it reached with the companies in September 2008, when the government seized control of the agencies under a legal process called conservatorship. The agreement allowed the Treasury to make amendments through the end of the year, without the consent of Congress. Changes made after Dec. 31 would likely involve a struggle with lawmakers over the terms.

What reason would the White House need to lift the caps, anyway? Of the $400 billion authorized by the previous bailout, Treasury has only used $111 billion of it, almost evenly split between Fannie Mae ($60 billion) and Freddie Mac ($51 billion). The WSJ quotes an analyst from Credit Suisse as saying that the larger lending market would find the expansion of the Treasury commitment “reassuring,” but having almost $300 billion left in a line of credit should be pretty darned reassuring on its own. And if a larger commitment was needed, the White House could have set a new limit rather than uncap it altogether.

It looks as though Obama wants to use Fannie and Freddie as proxies for more social engineering and wants to prepare for them to take more losses as a result. That would be the only reason to completely uncap the commitment to cover its losses. After all, the bailout was supposed to help put the two GSAs back into the black, and at the rate they have used that bailout (assuming no improvement), we wouldn’t have to worry about exceeding caps until 2012. I’d bet that the Obama administration retools its foreclosure prevention programs to have Fannie and Freddie buy up the paper and forgive parts of the principal on the loans, and have taxpayers eat the losses on a massive basis.

The above actions would preserve and strengthen the government’s involvement and control over the country’s housing finance system and make it harder to reintroduce substantial private sector involvement later on. They would also continue distortions in the marketplace leading to who knows what unintended consequences. Finally these steps would do nothing to deleverage the housing finance system, a key step in returning it to any degree of normality.


The Community Reinvestment Act (C.R.A.) was the tool used to force Banks to Make Bad Loans!

3 comments:

mau said...

all THE DEMOCRATS ARE SKUMBAGS PLEASE NAME -1- WITH ANY ETHICS PLEASE

PFFV said...

True all the Democrats and most Republicans have sold out common sense, morals and values for power and or money. We need to clean house in 2010 & 2012! Vote for the most conservative candidate regardless of party affiliation and we will send the message! Keep in mind there may be a 3rd party (Tea Party) that could be the answer as well...take care.

Anonymous said...

WASHINGTON CALLING: SEND MORE MONEY!