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Freddie and Fannie Bailed Out...Nothing To See Here...Please Keep Borrowing/Lending...
From the AP today, re: the bailout of Freddie Mac and Fannie Mae, announced yesterday:
Most mortgage brokers expect Fannie and Freddie's lending standards to remain unchanged under the conservatorship. Over the past several months, the companies have tightened requirements substantially, making it hard for borrowers with any blemish on their credit reports to qualify for a loan.
However, brokers hope the government will eliminate or reduce fees that the pair have been charging lenders to gird against increased credit risk and losses from mortgages they buy. Those rising fees are squeezing out some borrowers because lenders typically pass them along through higher mortgage rates or higher upfront costs.
reason's Jeff Taylor, writing here a couple of weeks ago:
Banks are government sponsored enterprises too, just more competitive and charged with providing capital to the private economy in ways federal regulators and politicians desire. If that is the case, and the past 30 years certainly suggests it is, then recapitalizing the banks is going to take money from the Treasury. Lots of it.
The alternative is to permit market forces to allocate capital from private sources without direction from officials Washington or New York. Not very likely, especially in an election year.
Rhywun|9.8.08 @ 9:05AM|#
What the J-bot said!
I am curious to see how they're going to sell this to the 30% of
America who are renters. I'm guessing "big honking transfer of
wealth from the poor to the rich" won't go over too well.
|9.8.08 @ 9:19AM|#
The alternative is to permit market forces to allocate
capital from private sources without direction from officials
Washington or New York. Not very likely, especially in an
election year. [emphasis added]
My nomination for understatement of the week. And it's only
Monday.
|9.8.08 @ 9:26AM|#
And how many times once the gov't takes over something do they then relinquish control later. This is another step towards facism.
|9.8.08 @ 9:36AM|#
At least the people who put Fannie and Freddie into the ditch
will be held accountable.
That jabbering Trotskyite Cramer is on CNBC saying this is
"Fabulous!".
kinnath|9.8.08 @ 9:55AM|#
Mom: why on earth would you lie about your income, buy more
house than you can afford, and buy it with an ARM loan that will
reset to something you can't pay in a couple of years?
Childish buyer: everyone else is!
Mom: and if everyone else jumps off a bridge, are you going to
also?
= = =
Fuck all the people that bought houses they couldn't pay for. Let
the bankruptcy courts sort it out.
|9.8.08 @ 9:58AM|#
So anonymizer guy had a sex change??
Not intentionally, spamming eventually makes your penis fall off,
your scrotum split along its seams and retract into a leathery
labia as liquefied testicles ooze out to dry on the inner thigh, so
the effect is virtually identical.
♪|9.8.08 @ 10:03AM|#
kinnath,
The house will only go up in value! I can re-finance in a couple of
years! Or better yet, sell it at a higher price but before the ARM
resets and make money! What could go wrong‽
robc|9.8.08 @ 10:07AM|#
I was reading an article announcing this yesterday and every
"bad" thing that was mentioned that would happen if Fannie/Freddie
werent bailed out (or nationalized) sounded like a good thing to
me.
The big one was that this without this, ability to borrow for
mortgages, cars, or general credit would be much harder to get. Um,
and thats a bad thing why?
Loose credit was the problem. Im sure even with a complete
fannie/freddie collapse a person with a good credit history, 20%
down could get a mortgage 2.5 times their real, PROVABLE,
income.
ktc2|9.8.08 @ 10:07AM|#
So if the feds own these two mortgage giants do they not in
effect own all the homes currently financed?
In that case how long before the police figure out how to search
homes owned by the feds with no warrant, etc?
|9.8.08 @ 10:12AM|#
ktc2,
They already do that with federal subsidized housing. Your idea
isn't that much of leap.
|9.8.08 @ 10:31AM|#
Jim "I'm Having A Stroke On National TV" Kramer on the Today
show said something along the lines that taxpayers would think of
themselves as having a stake in the real estate market.
Paying for other people's mistakes is not having a stake in the
real estate market.
gorgonzola\'s foil|9.8.08 @ 10:59AM|#
Wiping out existing shareholders and firing the management is at
least nominally better than giving them a blank check.
This was not done to bail out existing homeowners; this was done to
restore mortgage bonds as a currency sink so that China does not
rapidly devalue the US dollar, so China can continue their export
based economy.
Invisible Finger|9.8.08 @ 11:06AM|#
I love it. Fannie and Freddie are insolvent because of their
lending standards, so the government fix is to make sure the
lending standards remain unchanged.
I also love the reaction of the masses. When Russia siezes control
of private business they're evil, when the US does the same thing
it's a happy day for America.
Get ready for the next round of tax code complications.
|9.8.08 @ 11:16AM|#
So if the feds own these two mortgage giants do they not in
effect own all the homes currently financed?
No, they don't. They have a lien, which is much more limited than
having ownership.
If your local bank president kicked in the door of your house, he
would be guilty of breaking and entering, regardless of whether he
had a lien on your house.
|9.8.08 @ 11:23AM|#
If your local bank president kicked in the door of your
house, he would be guilty of breaking and entering, regardless of
whether he had a lien on your house.
Yeah, but that's the local bank president. We are the Federal
Government, and we only have the best of intentions! We are just
one Law & Order judge away from precedent.
ktc2|9.8.08 @ 11:43AM|#
That's kind of my point.
It may be obviously illegal to anyone who can read, but that has
never stopped the cops, their lawyers and complicit "hang em high"
drug warrior judges from making it legal.
Perhaps some administrative redefining of "federally subsidized" to
include the fed controlled lenders, and viola no need for warrants
anymore in how many millions of homes?
Bubba Bo Bob Brain|9.8.08 @ 11:56AM|#
I don't think the federal government will get away with breaking
down the doors of homeowners just because there's a Fannie Mae lien
somewhere.
But who here thinks that those liens can be used to selectively
apply financial pressure to people with the wrong politics?
ktc2|9.8.08 @ 1:42PM|#
Were talking about the same government that considers
subsistence farming as "interstate commerce" and routinely charges
items/property with crimes to steal it without having to bother
with actually proving anything.
I'd say this is going to happen and soon.
JMR|9.8.08 @ 2:30PM|#
Is anyone else bothered by the size of the failed departing executives' "exit packages" following these failures?
Mike Laursen|9.8.08 @ 3:24PM|#
However, brokers hope the government will eliminate or
reduce fees that the pair have been charging lenders to gird
against increased credit risk and losses from mortgages they
buy.
Isn't that a description of the two companies' raison
d'être?
|9.8.08 @ 9:59PM|#
Technically speaking, Fannie and Freddie are insolvent because of their CAPITAL standards (like, they basically didn't have any) not their lending standards. Their lending standards were significantly better than the market at-large -- they were taking on the relatively GOOD stuff. It's a sign of how bad things have gotten that even those loans are now deeply distressed.
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