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Fannie, Freddie Not Included in 0bama's New Financial Regs

hypocritexposer

Well-known member
Fannie, Freddie Were at Center of Crisis But Are Not Included in 0bama's New Financial Regulations
CNSNews ^ | June 19, 2009 | Matt Cover

Posted on Friday, June 19, 2009 11:29:49 AM by Mr. Mojo

(CNSNews.com) - Fannie Mae and Freddie Mac, the two government-run mortgage giants, are absent from the Obama administration’s sweeping new financial regulations, despite the fundamental role played by both organizations in the financial system’s collapse.

Testifying before the Senate Banking Committee on Thursday, Treasury Secretary Tim Geithner said that the administration’s new regulations were only meant to address the most fundamental issues of the recession

“The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans,” said Williams. “They were forced to by the heavy hand of government.”
 

Tex

Well-known member
hypocritexposer said:
Fannie, Freddie Were at Center of Crisis But Are Not Included in 0bama's New Financial Regulations
CNSNews ^ | June 19, 2009 | Matt Cover

Posted on Friday, June 19, 2009 11:29:49 AM by Mr. Mojo

(CNSNews.com) - Fannie Mae and Freddie Mac, the two government-run mortgage giants, are absent from the Obama administration’s sweeping new financial regulations, despite the fundamental role played by both organizations in the financial system’s collapse.

Testifying before the Senate Banking Committee on Thursday, Treasury Secretary Tim Geithner said that the administration’s new regulations were only meant to address the most fundamental issues of the recession

They still have a ways to go. I hope they don't stop short.

Tex
 

MsSage

Well-known member
“The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans,” said Williams. “They were forced to by the heavy hand of government.”
HellllllOOOOOOOO and we want MORE heavy handed government?
 

TSR

Well-known member
hypocritexposer said:
Fannie, Freddie Were at Center of Crisis But Are Not Included in 0bama's New Financial Regulations
CNSNews ^ | June 19, 2009 | Matt Cover

Posted on Friday, June 19, 2009 11:29:49 AM by Mr. Mojo

(CNSNews.com) - Fannie Mae and Freddie Mac, the two government-run mortgage giants, are absent from the Obama administration’s sweeping new financial regulations, despite the fundamental role played by both organizations in the financial system’s collapse.

Testifying before the Senate Banking Committee on Thursday, Treasury Secretary Tim Geithner said that the administration’s new regulations were only meant to address the most fundamental issues of the recession

“The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans,” said Williams. “They were forced to by the heavy hand of government.”

A little explanation? 2nd paragraph- Geithner's quote. I think I know who he is. 3rd paragraph-Williams quote, Who is Williams? What's his first name/position? Did I miss something?
 

hypocritexposer

Well-known member
Fannie, Freddie Were at Center of Crisis But Are Not Included in 0bama's New Financial Regulations
CNSNews ^ | June 19, 2009 | Matt Cover

Posted on Friday, June 19, 2009 11:29:49 AM by Mr. Mojo

(CNSNews.com) - Fannie Mae and Freddie Mac, the two government-run mortgage giants, are absent from the Obama administration’s sweeping new financial regulations, despite the fundamental role played by both organizations in the financial system’s collapse.

Testifying before the Senate Banking Committee on Thursday, Treasury Secretary Tim Geithner said that the administration’s new regulations were only meant to address the most fundamental issues of the recession.

“We considered a full range of options and decided that now is the time to pursue the essential reforms,” Geithner said. “Those that address the core causes of the current crisis, and that will help to prevent or contain future crises.”

Those “essential reforms” include the establishment of a new Financial Oversight Council to coordinate between banking regulators and watch for systemic risk; new powers for the Federal Reserve to supervise all systemically important firms; a new National Bank Supervisor to oversee all federally chartered banks; and new powers to allow the federal government to wind down any failing financial institution.

Absent from Treasury’s 88-page proposal were any new regulations for the government-run mortgage companies Fannie Mae and Freddie Mac, two organizations widely cited as being at the heart of the country’s fiscal problems.

The absence of either Fannie or Freddie is notable, because the two companies once owned or controlled nearly $6 trillion worth of home and commercial mortgages, nearly half of the total U.S. mortgage market – and both companies were pioneers of the now infamous sub-prime mortgages that caused the mortgage market to implode late last year.

In analyzing the mortgage crisis, economist Walter E. Williams has written: “Starting with the Community Reinvestment Act of 1977, that was given more teeth during the Clinton administration, Congress started intimidating banks and other financial institutions into making loans, so-called sub-prime loans, to high-risk homebuyers and businesses.

“The carrot offered was that these high-risk loans would be purchased by the government-sponsored enterprises Fannie Mae and Freddie Mac. Anyone with an ounce of brains would have known that this was a prescription for disaster but there was a congressional chorus of denial,” he added.

“The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans,” said Williams. “They were forced to by the heavy hand of government.”


During Geithner’s Senate testimony, he admitted that both Fannie and Freddie played a central role in the financial crisis, telling Sen. David Vitter (R-La.) that the two government-sponsored enterprises (GSE) were a “core part” of the country’s financial woes.

“Absolutely,” Geithner said. “Fannie and Freddie were a core part of what went wrong in our system.”

Geithner explained that the administration did not have the time to come up with coherent regulations regarding Fannie and Freddie because of its other legislative priorities.

“We did not believe that we could have, in this time frame, lay out a sensible set of reforms to guide and determine what their future will be,” said Geithner. “We didn’t think it was an essential thing to do just now, but we do believe it is an essential thing to do.”

Geithner said that at some point in the future the role of the GSEs would have to be “fundamentally reexamined.” He described the problem as one of government “exiting” the private housing market.

“Our challenge with Fannie and Freddie, and this is true about the government’s role in the housing market more generally, it’s more a challenge for exiting, what the future should be,” said Geithner.

“We have to fundamentally rethink what the appropriate role of the government is in the future [because] we did not get that right [in the past],” said Geithner. “It’s more about the questions we face about how the government gets out of and dials back and reverses these extraordinary actions we’ve been forced to undertake.”

Despite the recognition that the federal government needed to figure out how to wind down the billions of dollars it has invested in both private firms and in Fannie and Freddie, Geithner admitted that the Obama administration had yet to come up with such an exit strategy.

“To be honest,” Geithner told Sen. Mel Martinez (R-Fla.), “We have not designed yet the full details of the process we think will be helpful in exploring all alternatives.”

Geithner did promise to work with Congress and other federal agencies in trying to solve the Fannie and Freddie fiasco, promising some type of proposal in early 2010.

“Treasury will coordinate the process,” he said. “We will consult, not just with this committee but with your counterparts in the House, and we’ll try to consult broadly in the markets and in the academic community as we think through broad options. I think it would be reasonable for us to bring forward recommendations and options in the first half of next year.”
 

Tex

Well-known member
hypocritexposer said:
Fannie, Freddie Were at Center of Crisis But Are Not Included in 0bama's New Financial Regulations
CNSNews ^ | June 19, 2009 | Matt Cover

Posted on Friday, June 19, 2009 11:29:49 AM by Mr. Mojo

(CNSNews.com) - Fannie Mae and Freddie Mac, the two government-run mortgage giants, are absent from the Obama administration’s sweeping new financial regulations, despite the fundamental role played by both organizations in the financial system’s collapse.

Testifying before the Senate Banking Committee on Thursday, Treasury Secretary Tim Geithner said that the administration’s new regulations were only meant to address the most fundamental issues of the recession.

“We considered a full range of options and decided that now is the time to pursue the essential reforms,” Geithner said. “Those that address the core causes of the current crisis, and that will help to prevent or contain future crises.”

Those “essential reforms” include the establishment of a new Financial Oversight Council to coordinate between banking regulators and watch for systemic risk; new powers for the Federal Reserve to supervise all systemically important firms; a new National Bank Supervisor to oversee all federally chartered banks; and new powers to allow the federal government to wind down any failing financial institution.

Absent from Treasury’s 88-page proposal were any new regulations for the government-run mortgage companies Fannie Mae and Freddie Mac, two organizations widely cited as being at the heart of the country’s fiscal problems.

The absence of either Fannie or Freddie is notable, because the two companies once owned or controlled nearly $6 trillion worth of home and commercial mortgages, nearly half of the total U.S. mortgage market – and both companies were pioneers of the now infamous sub-prime mortgages that caused the mortgage market to implode late last year.

In analyzing the mortgage crisis, economist Walter E. Williams has written: “Starting with the Community Reinvestment Act of 1977, that was given more teeth during the Clinton administration, Congress started intimidating banks and other financial institutions into making loans, so-called sub-prime loans, to high-risk homebuyers and businesses.

“The carrot offered was that these high-risk loans would be purchased by the government-sponsored enterprises Fannie Mae and Freddie Mac. Anyone with an ounce of brains would have known that this was a prescription for disaster but there was a congressional chorus of denial,” he added.

“The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans,” said Williams. “They were forced to by the heavy hand of government.”


During Geithner’s Senate testimony, he admitted that both Fannie and Freddie played a central role in the financial crisis, telling Sen. David Vitter (R-La.) that the two government-sponsored enterprises (GSE) were a “core part” of the country’s financial woes.

“Absolutely,” Geithner said. “Fannie and Freddie were a core part of what went wrong in our system.”

Geithner explained that the administration did not have the time to come up with coherent regulations regarding Fannie and Freddie because of its other legislative priorities.

“We did not believe that we could have, in this time frame, lay out a sensible set of reforms to guide and determine what their future will be,” said Geithner. “We didn’t think it was an essential thing to do just now, but we do believe it is an essential thing to do.”

Geithner said that at some point in the future the role of the GSEs would have to be “fundamentally reexamined.” He described the problem as one of government “exiting” the private housing market.

“Our challenge with Fannie and Freddie, and this is true about the government’s role in the housing market more generally, it’s more a challenge for exiting, what the future should be,” said Geithner.

“We have to fundamentally rethink what the appropriate role of the government is in the future [because] we did not get that right [in the past],” said Geithner. “It’s more about the questions we face about how the government gets out of and dials back and reverses these extraordinary actions we’ve been forced to undertake.”

Despite the recognition that the federal government needed to figure out how to wind down the billions of dollars it has invested in both private firms and in Fannie and Freddie, Geithner admitted that the Obama administration had yet to come up with such an exit strategy.

“To be honest,” Geithner told Sen. Mel Martinez (R-Fla.), “We have not designed yet the full details of the process we think will be helpful in exploring all alternatives.”

Geithner did promise to work with Congress and other federal agencies in trying to solve the Fannie and Freddie fiasco, promising some type of proposal in early 2010.

“Treasury will coordinate the process,” he said. “We will consult, not just with this committee but with your counterparts in the House, and we’ll try to consult broadly in the markets and in the academic community as we think through broad options. I think it would be reasonable for us to bring forward recommendations and options in the first half of next year.”

The market was not forced to make bad loans but they were a large part of the problem and a part of big taxpayer bail outs. The "free market" in that case was too large to fail and the Bush administration and later Obama stepped in. Williams is STUPID!!!

There were some policy decisions by lawmakers that allowed for a certain amount of "riskier" loans and politicians should be held accountable for that.

The whole Wall Street failure, for the most part, was free enterprise. Much of it was because of the loans THEY underwrote, not Fannie and Freddie. If this was just a Fannie/Freddie crash, we Wall Street would not have failed. This is SPIN!

Williams, whoever he or she is just doesn't want to believe that free enterprise makes mistakes. It does all the time and is part of the process. The too big to fail is another failure by big government that allowed the "most efficient" but not risk averse companies buy the market place and small banks with those profits and put the whole system at risk which ended up being called.

Tex
 

Tex

Well-known member
Sandhusker said:
If Fannie and Freddie had not been buying the crap loans, there would not of been any crap loans. Simple as that.

I don't know about that. I saw American General buying and selling crap loans for their own portfolio and then securitize them with other people's money way before all of this in the early nineties. It became a problem when they securitized them and sold them on Wall Street. Wall Street saw this kind of thing as a new profit center and got in the biz themselves. They pushed the originators hard for biz.


The risk premiums were rarely disclosed to the ene buyers hiding the risk. Mortgage backed securities MBSs almost sold themselves but the risk was not disclosed well to "investors".

Tex
Tex
 

Sandhusker

Well-known member
Tex said:
Sandhusker said:
If Fannie and Freddie had not been buying the crap loans, there would not of been any crap loans. Simple as that.

I don't know about that. I saw American General buying and selling crap loans for their own portfolio and then securitize them with other people's money way before all of this in the early nineties. It became a problem when they securitized them and sold them on Wall Street. Wall Street saw this kind of thing as a new profit center and got in the biz themselves. They pushed the originators hard for biz.


The risk premiums were rarely disclosed to the ene buyers hiding the risk. Mortgage backed securities MBSs almost sold themselves but the risk was not disclosed well to "investors".

Tex
Tex

The risk was considered minimal because they were backed by a government entity.

There's always going to be crap peddled on any market to anybody who doen't do their due diligence. But in this case, just look at the volume that went through Freddie and Fannie.
 
A

Anonymous

Guest
Sandhusker said:
Tex said:
Sandhusker said:
If Fannie and Freddie had not been buying the crap loans, there would not of been any crap loans. Simple as that.

I don't know about that. I saw American General buying and selling crap loans for their own portfolio and then securitize them with other people's money way before all of this in the early nineties. It became a problem when they securitized them and sold them on Wall Street. Wall Street saw this kind of thing as a new profit center and got in the biz themselves. They pushed the originators hard for biz.


The risk premiums were rarely disclosed to the ene buyers hiding the risk. Mortgage backed securities MBSs almost sold themselves but the risk was not disclosed well to "investors".

Tex
Tex

The risk was considered minimal because they were backed by a government entity.

There's always going to be crap peddled on any market to anybody who doen't do their due diligence. But in this case, just look at the volume that went through Freddie and Fannie.

But the story of how we got here is partly one of Mr. Bush’s own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.
From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.

He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

But Mr. Bush populated the financial system’s alphabet soup of oversight agencies with people who, like him, wanted fewer rules, not more.

http://www.nytimes.com/2008/12/21/business/21admin.html?_r=2
 

Sandhusker

Well-known member
Strange how you bring Bush into the story, but refuse to acknowledge his efforts to rein in Fannie and Freddie WITH MORE REGULATIONS.
 
A

Anonymous

Guest
Sandhusker said:
Strange how you bring Bush into the story, but refuse to acknowledge his efforts to rein in Fannie and Freddie WITH MORE REGULATIONS.

And the Times shows how out of it the administration was:

Among the Republican Party’s top 10 donors in 2004 was Roland Arnall. He founded Ameriquest, then the nation’s largest lender in the subprime market, which focuses on less creditworthy borrowers. In July 2005, the company agreed to set aside $325 million to settle allegations in 30 states that it had preyed on borrowers with hidden fees and ballooning payments. It was an early signal that deceptive lending practices, which would later set off a wave of foreclosures, were widespread.
Andrew H. Card Jr., Mr. Bush’s former chief of staff, said White House aides discussed Ameriquest’s troubles, though not what they might portend for the economy. Mr. Bush had just nominated (CEO) Roland Arnall as his ambassador to the Netherlands, and the White House was primarily concerned with making sure he would be confirmed.

“Maybe I was asleep at the switch,” Mr. Card said in an interview.


Yes, that Ameriquest after they’d been nailed for screwing borrowers.

And Karl Rove bigfoots one of the administration’s Cassandras:

Brian Montgomery, the Federal Housing Administration commissioner, understood the significance… When he arrived in June 2005, he was shocked to find those customers had been lured away by the “fool’s gold” of subprime loans. The Ameriquest settlement, he said, reinforced his concern that the industry was exploiting borrowers.
In December 2005, Mr. Montgomery drafted a memo and brought it to the White House. “I don’t think this is what the president had in mind here,” he recalled telling Ryan Streeter, then the president’s chief housing policy analyst.

It was an opportunity to address the risky subprime lending practices head on. But that was never seriously discussed.
More senior aides, like Karl Rove, Mr. Bush’s chief political strategist, were wary of overly regulating an industry that, Mr. Rove said in an interview, provided “a valuable service to people who could not otherwise get credit.” While he had some concerns about the industry’s practices, he said, “it did provide an opportunity for people, a lot of whom are still in their houses today.”

The White House pursued a narrower plan offered by Mr. Montgomery that would have allowed the F.H.A. to loosen standards so it could lure back subprime borrowers by insuring similar, but safer, loans. It passed the House but died in the Senate, where Republican senators feared that the agency would merely be mimicking the private sector’s risky practices — a view Mr. Rove said he shared.

Looking back at the episode, Mr. Montgomery broke down in tears. While he acknowledged that the bill did not get to the root of the problem, he said he would “go to my grave believing” that at least some homeowners might have been spared foreclosure.


It finds that Bush killed a compromise that would have resulted in greater oversight of Fannie and Freddie:

Mr. Falcon lacked explicit authority to limit the size of the companies’ mammoth investment portfolios, or tell them how much capital they needed to guard against losses. White House officials wanted that to change. They also wanted the power to put the companies into receivership, hoping that would end what Mr. Card, the former chief of staff, called “the myth of government backing,” which gave the companies a competitive edge because investors assumed the government would not let them fail.
By the spring of 2005 a deal with Congress seemed within reach, Mr. Snow, the former Treasury secretary, said in an interview.

Michael G. Oxley, an Ohio Republican and then-chairman of the House Financial Services Committee, had produced what Mr. Snow viewed as “a pretty darned good bill,” a watered-down version of what the president sought. But at the urging of Mr. Card and the White House economics team, the president decided to hold out for a tougher bill in the Senate.

Mr. Card said he feared that Mr. Snow was “more interested in the deal than the result.” When the bill passed the House, the president issued a statement opposing it, effectively killing any chance of compromise. Mr. Oxley was furious.

“The problem with those guys at the White House, they had all the answers and they didn’t think they had to listen to anyone, including the Treasury secretary,” Mr. Oxley said in a recent interview. “They were driving the ideological train. He was in the caboose, and they were in the engine room.”


And the Times calls out another Bush administration “Brownie”, James Lockhart, a prep-school pal who he put in charge Fannie and Freddie’s regulator, OFHEO:
Throughout that spring and summer, he (Thomas) warned the White House and Treasury that, in the stark words of one e-mail message, “Freddie Mac is in trouble.” And Mr. Lockhart, he charged, was allowing the company to cover up its insolvency with dubious accounting maneuvers.
But Mr. Lockhart continued to offer reassurances. In a July appearance on CNBC, he declared that the companies were well managed and “worsts were not coming to worst.” An infuriated Mr. Thomas sent a fresh round of e-mail messages accusing Mr. Lockhart of “pimping for the stock prices of the undercapitalized firms he regulates.”

Mr. Lockhart defended himself, insisting in an interview that he was aware of the companies’ vulnerabilities, but did not want to rattle markets.

“A regulator,” he said, “does not air dirty laundry in public.”

When the history books are written, it will be Wall Street, not George W. Bush, that is the key culprit in creating this mess. Bush’s role, along with those of his predecessors, was as enabler, allowing the beast to run amok with little or no attempt to rein it in.

http://www.cjr.org/the_audit/post_150.php?page=all&print=true

http://www.nytimes.com/2008/12/21/business/21admin.html?pagewanted=1&_r=2&adxnnlx=1245471383-zhVJD4jotDjF3v8m/WBZpA
 

Tex

Well-known member
Let us not forget that there will always be sub prime lending. There are always people with less credit worthiness that still want to borrow and people who will take the risk, at a price, to lend them the money, whether it be a mother in law, a friend, a pawn shop or some other money lender.

The problem was that the higher costs and risk premiums were pocketed on one side by the originators and then they were securitized by Wall Street who ignored the risks. The break between the link of between risk and reward was achieved and ultimately we had market failue because of it.

Yes, Fannie and Freddie was forced to do it somewhat through political actions but the private market did the same thing on their own. Fannie and Freddie managers raked in millions in bonuses and the portfolios of loans were of less and less quality.

Government investment in Fannie and Freddie this way did not MAKE Wall Street do the same thing. They did it on their own because they were greedy and wanted the business. They could get an AIG to insure this and other risks and so went on to rake in "profits" while undermining the financial system.

Fannie and Freddie as well as Wall Street profits that came from this riskier and riskier scheme should just be paid back. That is my biggest lament in all of this. Too much big money invested unwisely was bailed out by the taxpayer. We should have let the market sort out the bad money and bad traders and managers. I didn't see enough of that happening, perhaps because they were running the fed and buying or having bought off politicians.


Tex
 
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