How to Shut Down Fannie and Freddie

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    Nov 12, 2010 8:35 AM GMT
    From the Wall Street Journal, November 11, 2010

    This should be interesting to those of you who read postings from a few guys on RJ who claim in the face of facts and logic that Fannie and Freddie, and the Democrats, had no culpability in the economic crisis.

    How to Shut Down Fannie and Freddie
    The Treasury Department can stop rubber-stamping their debt issuance at any time.
    By EMIL W. HENRY JR.
    Mr. Henry, the CEO of Henry, Tiger, LLC, was an assistant secretary of the Treasury from 2005 to 2007.
    http://online.wsj.com/article/SB10001424052748704635704575604570042260954.html?KEYWORDS=Emil+Henry

    Although Fannie Mae and Freddie Mac played a central role in causing the recent economic crisis, they are absent from the reform plans of Congress and the Obama administration. So these two government-sponsored enterprises (GSEs) remain mired in conservatorship, as extensions of the federal government. Bureaucrats now steer the primary provider of secondary market liquidity for our $10 trillion housing finance market.

    The administration has offered many explanations for the delay: Housing finance is complex, says Treasury Secretary Tim Geithner, so he's consulting Congress and has assembled "academic experts, consumer and community organizations, industry participants and other stake holders" to review the matter.

    But the Treasury doesn't need Congress or an academic assessment in order to tackle the most important reform goal: eliminating the GSEs and moving their activities to the private sector. Mr. Geithner himself can immediately reshape the mortgage markets—by withholding his approval of new debt issuances by the GSEs. That's the best way to begin curtailing the GSEs, and it can be done unilaterally.

    Congress chartered the GSEs and in their charters required that the Treasury secretary approve all of their new debt. For decades, the Treasury exercised this duty, and the GSEs submitted each new debt issuance to the department for prior approval.

    But the Clinton administration found this process cumbersome and a strain on Treasury staff. It established a new process that weakened the administrative approval process for GSE securities offerings. This hands-off approach represented an abdication of Treasury's essential oversight powers.

    The bloating and strategic drift of the GSEs began soon thereafter. Within a decade, there were vast failings in Fannie's and Freddie's accounting, corporate governance and risk management—including the cessation of basic disclosure practices such as annual reports. Even after the Sarbanes-Oxley law, which forced public companies to adhere to a new oversight paradigm, the GSEs escaped with minimal scrutiny. Insolvency was a matter of time.

    By the mid-2000s, the GSEs' process of debt approval had devolved to a simple notification of the Treasury, without any formal process of approval. The pace of debt issuance was so rapid that such notifications came to the Treasury weekly, typically on one piece of paper that simply listed proposed issuances without supporting data (such as income statements or balance sheets) upon which to make informed judgments.

    If the Obama administration is serious about addressing the GSEs, it should re-establish a rigorous process to review all GSE debt issuance. That process should require the GSEs to provide Treasury with full financial data and justification for issuances, including statistics that show the creditworthiness of the agencies after each offering. In addition, the Treasury secretary should have to approve all new debt issuances personally.

    The administration should also announce that in 2012 the Treasury will begin to deny a portion of GSE debt issuances with the goal of reducing their debt 50% by 2015 and 100% by 2018. This eight-year period of adjustment would allow the private markets ample time to provide secondary market liquidity.

    There will be a private market ready to absorb the securities currently held by the GSEs. Private companies won't be able to borrow as cheaply as the GSEs could (thanks to their implicit government guarantee), but there will still be plenty of profit left to capture in the market for mortgage securities.

    Large banks may be wary of this solution because the federalization of the GSEs has offered them a stable vehicle for off-loading their mortgages. Policy makers, meanwhile, will worry about impairing the recovery if a private market is slow to materialize. But the alternative is keeping the flawed system whereby liquidity depends upon distorted price discovery, permanent subsidization, and the economic judgments of bureaucrats.

    To allow Fannie and Freddie to exist in any form—even on a smaller basis—would again give them an unfair funding advantage. Buyers of their debt would again pay up for implicit government support. And, once again, we'd have the market distortions, risk-taking and obscene political patronage that caused so much economic chaos.
  • GQjock

    Posts: 11649

    Nov 12, 2010 11:36 AM GMT
    Fannie and Freddie .... Freddie and Fannie ......... ad infinitum

    brought to you by the republican echo chamber

    But Sssssssshhhh ........ there's nothing wrong with all the major banks in America bundling and selling all those mortgages as bonds
    and the rating agencies rubber stamping them as AAA rated when they were infecting and toxifying every bond market across the world

    If it weren't for Fannie or Freddie none of this would have ever happenedicon_rolleyes.gif

    You know .... I'd like to live in your world just for a little while where everything is all Chutes and Laddery and everything gets fixed so easy with a nice little bow
    Fannie and Freddie were one symptom ................ not the problem
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    Nov 12, 2010 2:34 PM GMT
    GQjock saidFannie and Freddie .... Freddie and Fannie ......... ad infinitum

    brought to you by the republican echo chamber

    But Sssssssshhhh ........ there's nothing wrong with all the major banks in America bundling and selling all those mortgages as bonds
    and the rating agencies rubber stamping them as AAA rated when they were infecting and toxifying every bond market across the world

    If it weren't for Fannie or Freddie none of this would have ever happenedicon_rolleyes.gif

    You know .... I'd like to live in your world just for a little while where everything is all Chutes and Laddery and everything gets fixed so easy with a nice little bow
    Fannie and Freddie were one symptom ................ not the problem

    I will make it real simple for you.
    Problems:
    Democrats housing agenda
    Fannie and Freddie lobbying influencing the Democrats
    Fannie and Freddie implementing Democrat housing agenda
    Fannie and Freddie cooking their books, enabling their leaders, esp Franklin Raines to get huge bonuses. Democrats resisted investigations and oversight.
    Actions by the fInancial institutions as you describe above
    Failure of Government to see and take action. John McCain did warn in speech introducing his bill to oversee Fannie and Freddie which died in committee.
    In short - there were several factors, and in terms of the entire mess, neither political party is completely responsible and neither political party is completely blame-free
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    Nov 12, 2010 5:15 PM GMT
    jprichva saidRead Matt Taibbi's piece in the current issue of Rolling Stone.
    Fannie and Freddie were a tiny, tiny part of the problem.


    If that's what you believe, you are intentionally self-deceived. They set a precedent for all of the commercial banks and they held the majority of all sub-prime loans in the country. They were purposely buying bad loans and encouraging banks to make those loans because they were ordered by the government to push into precisely greater subprime lending. The commercial banks were simply doing what was in their best interest -- especially considering that they were guaranteed by tax payer dollars with a nothing-to-lose scenario.
  • MikemikeMike

    Posts: 6932

    Nov 12, 2010 5:17 PM GMT
    sit on your fanny while u blow Freddieicon_idea.gif
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    Nov 12, 2010 11:46 PM GMT
    mocktwinkie said
    jprichva saidRead Matt Taibbi's piece in the current issue of Rolling Stone.
    Fannie and Freddie were a tiny, tiny part of the problem.


    If that's what you believe, you are intentionally self-deceived. They set a precedent for all of the commercial banks and they held the majority of all sub-prime loans in the country. They were purposely buying bad loans and encouraging banks to make those loans because they were ordered by the government to push into precisely greater subprime lending. The commercial banks were simply doing what was in their best interest -- especially considering that they were guaranteed by tax payer dollars with a nothing-to-lose scenario.

    Very good point.
  • GQjock

    Posts: 11649

    Nov 12, 2010 11:55 PM GMT
    socalfitness said
    GQjock saidFannie and Freddie .... Freddie and Fannie ......... ad infinitum

    brought to you by the republican echo chamber

    But Sssssssshhhh ........ there's nothing wrong with all the major banks in America bundling and selling all those mortgages as bonds
    and the rating agencies rubber stamping them as AAA rated when they were infecting and toxifying every bond market across the world

    If it weren't for Fannie or Freddie none of this would have ever happenedicon_rolleyes.gif

    You know .... I'd like to live in your world just for a little while where everything is all Chutes and Laddery and everything gets fixed so easy with a nice little bow
    Fannie and Freddie were one symptom ................ not the problem

    I will make it real simple for you.
    Problems:
    Democrats housing agenda
    Fannie and Freddie lobbying influencing the Democrats
    Fannie and Freddie implementing Democrat housing agenda
    Fannie and Freddie cooking their books, enabling their leaders, esp Franklin Raines to get huge bonuses. Democrats resisted investigations and oversight.
    Actions by the fInancial institutions as you describe above
    Failure of Government to see and take action. John McCain did warn in speech introducing his bill to oversee Fannie and Freddie which died in committee.
    In short - there were several factors, and in terms of the entire mess, neither political party is completely responsible and neither political party is completely blame-free


    Are you Daft Man?
    Democrats Housing agenda?
    Fannie and Freddie?
    When there's a forest fire do you say that only Pine trees burn?

    This was a failure of regulation and lack of oversight on a MASSIVE MASSIVE scale
    Where 50 years of regulatory legislation that was put in place after the Great depression had been systematically chipped away so that it all could come falling down
    Why was there too big to fail????
    Because the doufuses repealed Glass Steigel
    and that gave us Banks that brokered bonds as well
    and insurance companies that guaranteed bonds that were bundled mortgages

    So demonize Fannie and Freddie all you want and tell your little security blanket hogwash stories
    But this meltdown was the Hopefully end result of republican economics

    ............... hey wait aren't we hearing it all over again from the new crop of republicans?????

    icon_rolleyes.gif
  • Posted by a hidden member.
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    Nov 12, 2010 11:59 PM GMT
    GQjock said
    socalfitness said
    GQjock saidFannie and Freddie .... Freddie and Fannie ......... ad infinitum

    brought to you by the republican echo chamber

    But Sssssssshhhh ........ there's nothing wrong with all the major banks in America bundling and selling all those mortgages as bonds
    and the rating agencies rubber stamping them as AAA rated when they were infecting and toxifying every bond market across the world

    If it weren't for Fannie or Freddie none of this would have ever happenedicon_rolleyes.gif

    You know .... I'd like to live in your world just for a little while where everything is all Chutes and Laddery and everything gets fixed so easy with a nice little bow
    Fannie and Freddie were one symptom ................ not the problem

    I will make it real simple for you.
    Problems:
    Democrats housing agenda
    Fannie and Freddie lobbying influencing the Democrats
    Fannie and Freddie implementing Democrat housing agenda
    Fannie and Freddie cooking their books, enabling their leaders, esp Franklin Raines to get huge bonuses. Democrats resisted investigations and oversight.
    Actions by the fInancial institutions as you describe above
    Failure of Government to see and take action. John McCain did warn in speech introducing his bill to oversee Fannie and Freddie which died in committee.
    In short - there were several factors, and in terms of the entire mess, neither political party is completely responsible and neither political party is completely blame-free


    Are you Daft Man?
    Democrats Housing agenda?
    Fannie and Freddie?
    When there's a forest fire do you say that only Pine trees burn?

    This was a failure of regulation and lack of oversight on a MASSIVE MASSIVE scale
    Where 50 years of regulatory legislation that was put in place after the Great depression had been systematically chipped away so that it all could come falling down
    Why was there too big to fail????
    Because the doufuses repealed Glass Steigel
    and that gave us Banks that brokered bonds as well
    and insurance companies that guaranteed bonds that were bundled mortgages

    So demonize Fannie and Freddie all you want and tell your little security blanket hogwash stories
    But this meltdown was the Hopefully end result of republican economics

    ............... hey wait aren't we hearing it all over again from the new crop of republicans?????

    icon_rolleyes.gif

    As I stated it and Mocktwinkie added is what happened. There were some threads back around the August timeframe and Mocktwinkie did the best job of explaining it all. Either you don't understand, or don't want to understand the Democrats' role in the economic crisis.

    Update - Here is the thread:
    http://www.realjock.com/gayforums/1080001/
  • conservativej...

    Posts: 2465

    Nov 13, 2010 4:46 AM GMT
    There is one thing of which I am absolutely certain. If there are to be sub-prime mortgages in the future, they will come from Fannie and Freddie.

    If, and I do say if, conservatives continue to be successful in 2012, the free wheeling days of Fannie and Freddie are doomed.
  • GQjock

    Posts: 11649

    Nov 13, 2010 6:38 AM GMT
    socalfitness said
    GQjock said
    socalfitness said
    GQjock saidFannie and Freddie .... Freddie and Fannie ......... ad infinitum

    brought to you by the republican echo chamber

    But Sssssssshhhh ........ there's nothing wrong with all the major banks in America bundling and selling all those mortgages as bonds
    and the rating agencies rubber stamping them as AAA rated when they were infecting and toxifying every bond market across the world

    If it weren't for Fannie or Freddie none of this would have ever happenedicon_rolleyes.gif

    You know .... I'd like to live in your world just for a little while where everything is all Chutes and Laddery and everything gets fixed so easy with a nice little bow
    Fannie and Freddie were one symptom ................ not the problem

    I will make it real simple for you.
    Problems:
    Democrats housing agenda
    Fannie and Freddie lobbying influencing the Democrats
    Fannie and Freddie implementing Democrat housing agenda
    Fannie and Freddie cooking their books, enabling their leaders, esp Franklin Raines to get huge bonuses. Democrats resisted investigations and oversight.
    Actions by the fInancial institutions as you describe above
    Failure of Government to see and take action. John McCain did warn in speech introducing his bill to oversee Fannie and Freddie which died in committee.
    In short - there were several factors, and in terms of the entire mess, neither political party is completely responsible and neither political party is completely blame-free


    Are you Daft Man?
    Democrats Housing agenda?
    Fannie and Freddie?
    When there's a forest fire do you say that only Pine trees burn?

    This was a failure of regulation and lack of oversight on a MASSIVE MASSIVE scale
    Where 50 years of regulatory legislation that was put in place after the Great depression had been systematically chipped away so that it all could come falling down
    Why was there too big to fail????
    Because the doufuses repealed Glass Steigel
    and that gave us Banks that brokered bonds as well
    and insurance companies that guaranteed bonds that were bundled mortgages

    So demonize Fannie and Freddie all you want and tell your little security blanket hogwash stories
    But this meltdown was the Hopefully end result of republican economics

    ............... hey wait aren't we hearing it all over again from the new crop of republicans?????

    icon_rolleyes.gif

    As I stated it and Mocktwinkie added is what happened. There were some threads back around the August timeframe and Mocktwinkie did the best job of explaining it all. Either you don't understand, or don't want to understand the Democrats' role in the economic crisis.

    Update - Here is the thread:
    http://www.realjock.com/gayforums/1080001/


    Attempting to explain how the earth is flat in 2010 ain't going to cut it
    Stop watching FOX and join the real world
    If you wanna have a real conversation you have to have the tools to come to the party
    Fannie and Freddie didn't bring down Lehman Brothers
    Fannie and Freddie didn't poison the economies of Iceland and Ireland
    Fannie and Freddie didn't create a shell game or bits and pieces of poisoned assets that were sent around the world one hundred times over
    and for you to keep attempting to say other wise really shows how ignorant about the entire process you really are
  • Posted by a hidden member.
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    Nov 13, 2010 10:11 AM GMT
    GQjock said
    socalfitness said
    GQjock said
    socalfitness said
    GQjock saidFannie and Freddie .... Freddie and Fannie ......... ad infinitum

    brought to you by the republican echo chamber

    But Sssssssshhhh ........ there's nothing wrong with all the major banks in America bundling and selling all those mortgages as bonds
    and the rating agencies rubber stamping them as AAA rated when they were infecting and toxifying every bond market across the world

    If it weren't for Fannie or Freddie none of this would have ever happenedicon_rolleyes.gif

    You know .... I'd like to live in your world just for a little while where everything is all Chutes and Laddery and everything gets fixed so easy with a nice little bow
    Fannie and Freddie were one symptom ................ not the problem

    I will make it real simple for you.
    Problems:
    Democrats housing agenda
    Fannie and Freddie lobbying influencing the Democrats
    Fannie and Freddie implementing Democrat housing agenda
    Fannie and Freddie cooking their books, enabling their leaders, esp Franklin Raines to get huge bonuses. Democrats resisted investigations and oversight.
    Actions by the fInancial institutions as you describe above
    Failure of Government to see and take action. John McCain did warn in speech introducing his bill to oversee Fannie and Freddie which died in committee.
    In short - there were several factors, and in terms of the entire mess, neither political party is completely responsible and neither political party is completely blame-free


    Are you Daft Man?
    Democrats Housing agenda?
    Fannie and Freddie?
    When there's a forest fire do you say that only Pine trees burn?

    This was a failure of regulation and lack of oversight on a MASSIVE MASSIVE scale
    Where 50 years of regulatory legislation that was put in place after the Great depression had been systematically chipped away so that it all could come falling down
    Why was there too big to fail????
    Because the doufuses repealed Glass Steigel
    and that gave us Banks that brokered bonds as well
    and insurance companies that guaranteed bonds that were bundled mortgages

    So demonize Fannie and Freddie all you want and tell your little security blanket hogwash stories
    But this meltdown was the Hopefully end result of republican economics

    ............... hey wait aren't we hearing it all over again from the new crop of republicans?????

    icon_rolleyes.gif

    As I stated it and Mocktwinkie added is what happened. There were some threads back around the August timeframe and Mocktwinkie did the best job of explaining it all. Either you don't understand, or don't want to understand the Democrats' role in the economic crisis.

    Update - Here is the thread:
    http://www.realjock.com/gayforums/1080001/


    Attempting to explain how the earth is flat in 2010 ain't going to cut it
    Stop watching FOX and join the real world
    If you wanna have a real conversation you have to have the tools to come to the party
    Fannie and Freddie didn't bring down Lehman Brothers
    Fannie and Freddie didn't poison the economies of Iceland and Ireland
    Fannie and Freddie didn't create a shell game or bits and pieces of poisoned assets that were sent around the world one hundred times over
    and for you to keep attempting to say other wise really shows how ignorant about the entire process you really are

    Your reply is full of nothing but non-sequiturs. Nothing relevant. As I stated in the thread on Bush's book and the Florida recount, your inability to face facts there and continue to spin BS totally destroys your credibility. No point in having political discussions with you.
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    Nov 13, 2010 12:43 PM GMT
    jprichva saidRead Matt Taibbi's piece in the current issue of Rolling Stone.
    Fannie and Freddie were a tiny, tiny part of the problem.

    It feels wrong not to actually comment on a thread about mortgages, foreclosures, and economic policy, but I thought I would just post the link to the article you referenced. It is 8 pages, but much like his piece on Goldman is worth the read.
    http://www.rollingstone.com/politics/news/17390/232611?&RS_show_page=0