Another weekend, another bailout...

[mshan]

There is apparently a lot of smart money waiting on the sidelines to swoop in and purchases these bundles mortgages because they aren't worth zero.

Problem is, no one wants to be first, then later either get diluted or completely wiped out when the next series of writedowns take place and new stock has to be issued in order to raise more capital.

I think market felt Treasury needed to come in and establish some sort of bottom so institutions can feel comfortable starting to lend again (I believe LK has written previous that it was the contraction of credit that led to the Great Depression)

It may not been a matter of if, just when, and day after Republican Convention closed was as far away from election day as possible.

 

[smack Down]

Originally posted by: LegendKiller

Originally posted by: smack Down

Originally posted by: Thump553

Originally posted by: smack Down
So the tax payers get to take a bath and paulson gets to keep his pals on wall street happy.
Heck of a job, Paulson

No one has even ventured a guess as to the total cost of these takeovers. It is pretty dependent on what happening in the housing market-if prices continue to slide and foreclosures continue to increase, the taxpayer is going to take a real beating. But if there is a recovery in prices and a lessening in the rate of foreclosure, it's possible the government could even make money off the deal. What the government is getting as collateral, so to speak, is mortgages on a large percentage of US homes (I think something like 50%). These aren't junk subprimes for the most part-good verified borrowers-but they are highly leveraged (no 20% down ones, for the most part).

I don't think think should be characterized as a bailout of Wall Street-there is going to be tons and tons of pain there. More correctly it is an attempted jumpstart/bailout of the US housing market and calming the jitters of outseas megainvestors who currently hold lots of FNM/FRE debt instruments.

No it is a bailout of wall street, and china. Has nothing to do with the housing market which will and should continue to have falling prices and high foreclosures.

What happens if nobody can get mortgages?

Well unless the million of extra homes built disappear then the price will be reduced so that people can afford the homes without signing away 30 years of their life.

 

[theeedude]

This does set some nice precedents. Maybe the government will nationalize the health insurance industry too

 

[Thump553]

Originally posted by: mshan
There is apparently a lot of smart money waiting on the sidelines to swoop in and purchases these bundles mortgages because they aren't worth zero.

Problem is, no one wants to be first, then later either get diluted or completely wiped out when the next series of writedowns take place and new stock has to be issued in order to raise more capital.

I think market felt Treasury needed to come in and establish some sort of bottom so institutions can feel comfortable starting to lend again (I believe LK has written previous that it was the contraction of credit that led to the Great Depression)

It may not been a matter of if, just when, and day after Republican Convention closed was as far away from election day as possible.

The trouble with this theory is both of them were successfully auctioning their bundles every week-any the price was declining (good).

Listening to Paulson's press conference, I got the impression that he felt the companies couldn't meet two diameterically opposing goals without government intervention-those goals being to get on decent financial shape and pump up the US real estate market. My view is he jumped in to pump up the market now, and to protect foreign governments that were buying these debts.

One detail of the takeover that hasn't gotten much publicity is that the US government wrote in a provision that they could buy 79.x% of the stock in the future at a nominal value (supposedly $1 per share). This has the effect of diluting the present shareholders interest in the company and led to a 90% price drop just today, from a level that was already an 85% drop year to date. I don't see what benefit there is to the government by effectively erasing 90% of the shareholders' monies (roughly $6 billion lost today)-and I certainly don't see how that apparently meaningless swipe helps the economy at all.

 

[theeedude]

Originally posted by: LegendKiller

Originally posted by: senseamp

Originally posted by: LegendKiller

Originally posted by: senseamp
So basically Fannie was seized because the government thought it should continue issuing more bad loans to promote home ownership even though it was in danger of losing its shirt on the ones it already issued? So the government is not just in the mortgage business, it is subsidizing mortgages with taxpayer money when it is so imprudent that private company won't do it, and it's seizing that private company to put a capitalist face on this socialist exercise.

giving people who can afford access to homes, access to homes, isn't a horrible thing.

It's when that practice is abused that it becomes a problem.

Well, if they can afford access to homes, they wouldn't need government subsidized loans.
Taxpayer is now subsidizing those loans by accepting risk through Fannie and Freddie.
So these people you claim can afford access to homes can actually only afford it if the taxpayer is taking on some of the risk to reduce the interest rates, not if they pay for their own risk. That is like someone saying they can afford food because they got food stamps.

I would agree that the situation is ideal. I would also agree it shouldn't have ever happened to begin with. However, we must deal with the situation at hand, then follow up to make sure it doesn't happen again.

Reality is a bitch.

Well, if you deal with the situation at hand by giving out more money, then you guarantee that it will happen again. Also, Paulson said he'll expand the balance sheet by $200B going into next year (nice election year timing) and then shrink it at 10% a year after that.
Now if I believed that, it would mean that we would simply delay the crash by a year as we pump money in now, only to suck it out in a year. Of course I doubt the government will ever actually have F&F start weening down their balance sheets. It is firmly in the mortgage business, which means will pump liquidity until prices reach the desired level. Welcome to planned economy in the US of A.

 

[andy04]

Originally posted by: eskimospy

Originally posted by: chrisho
where are the calls to put their executives into jail like Enron?

or do donors to political parties become immune

Why would we put the CEOs in jail? I'm not aware of any evidence of wrongdoing.

If not the CEOs then someone similar at the high ranks who knew that what they were doing will lead to a disaster... I mean ppl like Glen Beck knew about it a year ago... I too feel those CEOs or other ppl up there should be lynched

 

[Craig234]

Sep 8th, 2008 | FARMINGTON HILLS, Mich. -- Barack Obama objected to reports Monday that the ousted heads of mortgage giants Fannie Mae and Freddie Mac may receive lucrative severance packages and asked the Bush administration to ensure their "poor leadership" isn't rewarded.

"Under no circumstances should the executives of these institutions earn a windfall at a time when the U.S. Treasury has taken unprecedented steps to rescue these companies with taxpayer resources," Obama said in a letter to Treasury Secretary Henry Paulson and Federal Housing Finance Agency Director James Lockhart. "I urge you immediately to clarify that the agreement with Fannie Mae and Freddie Mac voids any such inappropriate windfall payments to outgoing CEOs and senior management."

Obama was reacting to a report Monday in The New York Times on a consulting firm's analysis that found departing Fannie Mae head Daniel Mudd stands to collect $9.3 million in severance pay, retirement benefits and deferred compensation under the terms of his employment contract, provided his dismissal is deemed to be "without cause."

Treasury spokeswoman Brookly McLaughlin said Treasury would have no immediate response to Obama's letter.

Obama said Congress explicitly gave the Treasury Department authority to block any severance packages as part of a takeover.

"It would be a gross violation of the public trust to fail to use this authority now, while American taxpayers and American homeowners, already struggling in a weak economy, are being asked to accept an historic intervention to rescue these institutions," he said.

 

[Jhhnn]

Shucks, Craig234, what's a few $10M when the taxpayers are already slurping down a few $100B more of Bush Admin tubesteak?

 

[LegendKiller]

Originally posted by: smack Down

Originally posted by: LegendKiller

Originally posted by: smack Down

Originally posted by: Thump553

Originally posted by: smack Down
So the tax payers get to take a bath and paulson gets to keep his pals on wall street happy.
Heck of a job, Paulson

No one has even ventured a guess as to the total cost of these takeovers. It is pretty dependent on what happening in the housing market-if prices continue to slide and foreclosures continue to increase, the taxpayer is going to take a real beating. But if there is a recovery in prices and a lessening in the rate of foreclosure, it's possible the government could even make money off the deal. What the government is getting as collateral, so to speak, is mortgages on a large percentage of US homes (I think something like 50%). These aren't junk subprimes for the most part-good verified borrowers-but they are highly leveraged (no 20% down ones, for the most part).

I don't think think should be characterized as a bailout of Wall Street-there is going to be tons and tons of pain there. More correctly it is an attempted jumpstart/bailout of the US housing market and calming the jitters of outseas megainvestors who currently hold lots of FNM/FRE debt instruments.

No it is a bailout of wall street, and china. Has nothing to do with the housing market which will and should continue to have falling prices and high foreclosures.

What happens if nobody can get mortgages?

Well unless the million of extra homes built disappear then the price will be reduced so that people can afford the homes without signing away 30 years of their life.

Yes, because we need to utterly destroy all equity in houses, depress prices, and lead to successive default waves for mortgages, which will utterly bankrupt the financial system, and most likely, the world, because over $20TR in wealth being eroded by 50%+ is exactly what's needed to cure the US' problems.

How fucking moronic is that? Bring down the world because you're too tunnel vision, short sighted, and small brained, to realize this isn't a "let them all die" situation.

Because a house should be worth a paycheck, right?

Do you really believe what you're writing, or do you enjoy looking like an idiot?

 

[LegendKiller]

Originally posted by: senseamp

Originally posted by: LegendKiller

Originally posted by: senseamp

Originally posted by: LegendKiller

Originally posted by: senseamp
So basically Fannie was seized because the government thought it should continue issuing more bad loans to promote home ownership even though it was in danger of losing its shirt on the ones it already issued? So the government is not just in the mortgage business, it is subsidizing mortgages with taxpayer money when it is so imprudent that private company won't do it, and it's seizing that private company to put a capitalist face on this socialist exercise.

giving people who can afford access to homes, access to homes, isn't a horrible thing.

It's when that practice is abused that it becomes a problem.

Well, if they can afford access to homes, they wouldn't need government subsidized loans.
Taxpayer is now subsidizing those loans by accepting risk through Fannie and Freddie.
So these people you claim can afford access to homes can actually only afford it if the taxpayer is taking on some of the risk to reduce the interest rates, not if they pay for their own risk. That is like someone saying they can afford food because they got food stamps.

I would agree that the situation is ideal. I would also agree it shouldn't have ever happened to begin with. However, we must deal with the situation at hand, then follow up to make sure it doesn't happen again.

Reality is a bitch.

Well, if you deal with the situation at hand by giving out more money, then you guarantee that it will happen again. Also, Paulson said he'll expand the balance sheet by $200B going into next year (nice election year timing) and then shrink it at 10% a year after that.
Now if I believed that, it would mean that we would simply delay the crash by a year as we pump money in now, only to suck it out in a year. Of course I doubt the government will ever actually have F&F start weening down their balance sheets. It is firmly in the mortgage business, which means will pump liquidity until prices reach the desired level. Welcome to planned economy in the US of A.

I guess it's too reasonable to assume that the GSEs will absorb the market influx of refinencers since nobody else will issue mortgages in that volume, then slack off once the refi influx is over.

Tell me, do you work at a bank? I do, and I see how constrained banks are these days.

It's all a vast government conspiracy.

 

[MadRat]

If the fed did not have the sole monopoly on lending money from the government then you'd not have seen one huge catastrophic event like we did. We need several feds to spring forth from the original just so we can avoid such a monolithic disaster in the future.

 

[LegendKiller]

Originally posted by: MadRat
If the fed did not have the sole monopoly on lending money from the government then you'd not have seen one huge catastrophic event like we did. We need several feds to spring forth from the original just so we can avoid such a monolithic disaster in the future.

This had almost nothing to do with the Fed and would have occured without the Fed.

 

[Jhhnn]

Originally posted by: LegendKiller

Originally posted by: MadRat
If the fed did not have the sole monopoly on lending money from the government then you'd not have seen one huge catastrophic event like we did. We need several feds to spring forth from the original just so we can avoid such a monolithic disaster in the future.

This had almost nothing to do with the Fed and would have occured without the Fed.

Not that I agree with MadRat's conclusions, but Fed policy was just one jaw of the vise used to ruin the GSE's.

Giveaway rates + Admin policy demands for more "affordable" loans created this situation. Greenspan and various Admin figures worked hand in hand to formulate and administer policy.

http://www.washingtonpost.com/...9/AR2008060902626.html

 

[LegendKiller]

Originally posted by: Jhhnn

Originally posted by: LegendKiller

Originally posted by: MadRat
If the fed did not have the sole monopoly on lending money from the government then you'd not have seen one huge catastrophic event like we did. We need several feds to spring forth from the original just so we can avoid such a monolithic disaster in the future.

This had almost nothing to do with the Fed and would have occured without the Fed.

Not that I agree with MadRat's conclusions, but Fed policy was just one jaw of the vise used to ruin the GSE's.

Giveaway rates + Admin policy demands for more "affordable" loans created this situation. Greenspan and various Admin figures worked hand in hand to formulate and administer policy.

http://www.washingtonpost.com/...9/AR2008060902626.html

When it comes down to it, the GSEs were a victim of their own success. They were told to purchase RMBS from the market, to make a market. By whom? First, Clinton, then Bush, who had Congress change the mandate.

The low rates were somewhat driven by the Fed, but mostly driven by the securitization investor market, who crammed down risk-spreads to ridiculous lows.

The Fed isn't the dog that wags the tail, it is the tail, and it has almost no real control over the dog.

 

[The-Noid]

The idea of a 30 year mortgage ruined the industry, get rid of Frannie Mac and go back to 10-15 year mortgages with 20% down. Home ownership should not be an entitlement program in the USA, some people have to rent, get over it.

 

[theeedude]

Originally posted by: LegendKiller

Originally posted by: senseamp

Originally posted by: LegendKiller

Originally posted by: senseamp

Originally posted by: LegendKiller

Originally posted by: senseamp
So basically Fannie was seized because the government thought it should continue issuing more bad loans to promote home ownership even though it was in danger of losing its shirt on the ones it already issued? So the government is not just in the mortgage business, it is subsidizing mortgages with taxpayer money when it is so imprudent that private company won't do it, and it's seizing that private company to put a capitalist face on this socialist exercise.

giving people who can afford access to homes, access to homes, isn't a horrible thing.

It's when that practice is abused that it becomes a problem.

Well, if they can afford access to homes, they wouldn't need government subsidized loans.
Taxpayer is now subsidizing those loans by accepting risk through Fannie and Freddie.
So these people you claim can afford access to homes can actually only afford it if the taxpayer is taking on some of the risk to reduce the interest rates, not if they pay for their own risk. That is like someone saying they can afford food because they got food stamps.

I would agree that the situation is ideal. I would also agree it shouldn't have ever happened to begin with. However, we must deal with the situation at hand, then follow up to make sure it doesn't happen again.

Reality is a bitch.

Well, if you deal with the situation at hand by giving out more money, then you guarantee that it will happen again. Also, Paulson said he'll expand the balance sheet by $200B going into next year (nice election year timing) and then shrink it at 10% a year after that.
Now if I believed that, it would mean that we would simply delay the crash by a year as we pump money in now, only to suck it out in a year. Of course I doubt the government will ever actually have F&F start weening down their balance sheets. It is firmly in the mortgage business, which means will pump liquidity until prices reach the desired level. Welcome to planned economy in the US of A.

I guess it's too reasonable to assume that the GSEs will absorb the market influx of refinencers since nobody else will issue mortgages in that volume, then slack off once the refi influx is over.

Your presumption is that the government's job is to help everyone refinance before it "slacks off," and not protect the taxpayer. If the government wants to help housing affordability, it should be popping these bubbles, not inflating them.

Tell me, do you work at a bank? I do, and I see how constrained banks are these days.

It's all a vast government conspiracy.

Tell me, are you a socialist?
Maybe you should be constrained after handing out money to every tom dick and harry hand over fist. The solution is not to hand out government's money, but to be more careful with the investor's.

 

[Slew Foot]

Originally posted by: Yoxxy
The idea of a 30 year mortgage ruined the industry, get rid of Frannie Mac and go back to 10-15 year mortgages with 20% down. Home ownership should not be an entitlement program in the USA, some people have to rent, get over it.

You can even keep the 30 year mortgage, just institute the 20% down. Give people a reason to stay in their homes, when they can leverage themselves to the hilt with none of their own money, dont be surprised when they walk away in droves. And people are complaining about the 3.5% down payment for conforming loans now :roll:

 

[TheSlamma]

Originally posted by: Yoxxy
The idea of a 30 year mortgage ruined the industry, get rid of Frannie Mac and go back to 10-15 year mortgages with 20% down. Home ownership should not be an entitlement program in the USA, some people have to rent, get over it.

When I saw the 50 year loans coming out of California backed up by the phrase "So people can get into a house they can't normally afford" I blew a gasket.

This trend Americans have of thinking they deserve instant gratification (I want it big and I want it NOW) is shredding this country.

 

[Doc Savage Fan]

Anyone know who was in charge of Congressional oversight on this?

 

[Thump553]

Originally posted by: TheSlamma

Originally posted by: Yoxxy
The idea of a 30 year mortgage ruined the industry, get rid of Frannie Mac and go back to 10-15 year mortgages with 20% down. Home ownership should not be an entitlement program in the USA, some people have to rent, get over it.

When I saw the 50 year loans coming out of California backed up by the phrase "So people can get into a house they can't normally afford" I blew a gasket.

This trend Americans have of thinking they deserve instant gratification (I want it big and I want it NOW) is shredding this country.

Thirty year mortgages have been prevalent for decades. They were nearly universal when I bought my first home in the mid-1970s, and I'm sure they were predominant for quite a bit earlier too. If anything, 15 year (and some 10) mortgages have become slightly more common in the last decade than in the past. Our current problems have nothing to do with the thirty year amortization standard.

Longer amortization loans are pretty uncommon, and they frankly really don't have that much effect on lowering monthly payments. For example, $100k @ 8% for 30 years is $733.46 p&i per month. At 40 years, it's $695.31, at 50 years $629.27. I doubt greatly they will ever catch on. Personally I never seen an amortization period longer than 30 years for a home mortgage in all my years of practice, but that may be because of the state laws where I practiced. I have seen interest only mortgages, but I think that dumb idea has faded away. The interest only ones I've seen either had a balloon in full fairly shortly down the road (five years or so) or switched into an accelerated amortization schedule at that point. Frankly I'd never advise anyone to go interest only except in the rarest of situations.

I think the real issue you meant to address is the decline of the standard 20% downpayment mortgage. Private mortgage insurance (which really started to catch on in the late 1970s) and the growing availability of FHA and VA loans has pushed these along. But given the current real estate crash, I know of plenty of people with 30-50% equity in their home, built up over years, that are either underwater or very close to it.

 

[smack Down]

Originally posted by: LegendKiller

Originally posted by: smack Down

Originally posted by: LegendKiller

Originally posted by: smack Down

Originally posted by: Thump553

Originally posted by: smack Down
So the tax payers get to take a bath and paulson gets to keep his pals on wall street happy.
Heck of a job, Paulson

No one has even ventured a guess as to the total cost of these takeovers. It is pretty dependent on what happening in the housing market-if prices continue to slide and foreclosures continue to increase, the taxpayer is going to take a real beating. But if there is a recovery in prices and a lessening in the rate of foreclosure, it's possible the government could even make money off the deal. What the government is getting as collateral, so to speak, is mortgages on a large percentage of US homes (I think something like 50%). These aren't junk subprimes for the most part-good verified borrowers-but they are highly leveraged (no 20% down ones, for the most part).

I don't think think should be characterized as a bailout of Wall Street-there is going to be tons and tons of pain there. More correctly it is an attempted jumpstart/bailout of the US housing market and calming the jitters of outseas megainvestors who currently hold lots of FNM/FRE debt instruments.

No it is a bailout of wall street, and china. Has nothing to do with the housing market which will and should continue to have falling prices and high foreclosures.

What happens if nobody can get mortgages?

Well unless the million of extra homes built disappear then the price will be reduced so that people can afford the homes without signing away 30 years of their life.

Yes, because we need to utterly destroy all equity in houses, depress prices, and lead to successive default waves for mortgages, which will utterly bankrupt the financial system, and most likely, the world, because over $20TR in wealth being eroded by 50%+ is exactly what's needed to cure the US' problems.

How fucking moronic is that? Bring down the world because you're too tunnel vision, short sighted, and small brained, to realize this isn't a "let them all die" situation.

Because a house should be worth a paycheck, right?

Do you really believe what you're writing, or do you enjoy looking like an idiot?

If that is what happens that is what happens when you make a bad investment. The goverment should not get involved in pumping up the price of your house anymore then they should get involved with pumping up the price of pets.com. If that means some banks go bankrupt so be it as long as tax payers don't have to pay to bailout wall street.

 

[1prophet]

This bailout had nothing to do with saving homes or helping Americans.

Twisting the Treasury's arm
Major foreign investors, including more than 60 countries' central banks, hold more than $1.4 trillion in securities of U.S. agencies such as Fannie and Freddie, and they were getting extremely nervous as the two companies teetered on the edge of insolvency this summer. So were major U.S. financial institutions such as JPMorgan Chase (JPM, news, msgs) and Pimco, prompting the chief investment officer of the latter, Bill Gross, to pen a scathing article last week that warned of a financial "tsunami" if the U.S. Treasury failed to act quickly to guarantee their investments.

In late July, the Financial Times reported that the U.S. Embassy in Kuwait called that country's sovereign wealth fund managers to assure them of the soundness of U.S. agencies' bonds after the Kuwaitis announced they were not planning to buy the bonds in the future. Around the same time, Yu Yongding, a Chinese economist and former adviser to China's central bank, warned that if the U.S. government allowed Fannie and Freddie to fail and international investors were not compensated adequately, the consequences would be ?catastrophic."

He added: "If it's not the end of the world, it is the end of the current financial system."

Over the top? Not really, for U.S. mortgage loans had become the foundation of what Pimco co-CEO Mohammed El-Erian called the "global liquidity factory." If payments were scuttled, trillions of dollars that were borrowed against them in debt derivatives would become worthless, an event that had the potential to bring down countries, not just companies.



The Treasury chief discusses the government's decision to seize the mortgage giants..Now that Paulson has made his play, Americans are exposed to incredible danger. If that sounds like hyperbole, do the math:

Of the $4.7 trillion in U.S. debt already in private hands through last week, $2.4 trillion, more than half, was held by foreign investors. The Paulson plan to take over Fannie and Freddie adds an additional $5.4 trillion to U.S. debt, of which $1.4 trillion is owned by foreigners. Thus Paulson has committed to doubling U.S. debt and increased foreign exposure by around 50%.

This is plainly a troublesome matter on its face and may affect the country's overall sovereign credit rating. Now add to this exposure the likelihood of a sharp rise in demand for funds from the Federal Deposit Insurance Corp. and increased demands from the Federal Home Loan Bank system -- and consider that the U.S. faces slowing tax revenues from falling incomes amid swelling joblessness and recession -- and you begin to understand the size of the risk Paulson is taking in our behalf.

 

[nergee]

Comrades! Be of good cheer! Our glorious party leader will endorse the wealthy
with many goodly bailouts and much party funds. That is all........

 

[ponyo]

Originally posted by: nergee
Comrades! Be of good cheer! Our glorious party leader will endorse the wealthy
with many goodly bailouts and much party funds. That is all........

comrades_bush_paulson_and_bern...te_republic_of_america

 

[dmcowen674]

Originally posted by: nergee
Comrades! Be of good cheer!

Our glorious party leader will endorse the wealthy with many goodly bailouts and much party funds.

That is all........

9-9-2008 Democrats question Fannie, Freddie CEO exit pay

Democrats on Tuesday criticized the multimillion-dollar pay packages awarded to the former chief executives of Fannie Mae and Freddie Mac at a time when taxpayers could foot a massive bill for the companies' bailout.

In a joint letter to Fannie and Freddie's regulator, Senators Charles Schumer of New York and Jack Reed of Rhode Island said the combined pay and bonus packages of about $24 million should be revised.
==================================================

$12 Million to drive a company into the ground.

Where can I sign up?