F & F absolutely must cram back down the toxic mortgages that the banks, etc conned them with.
(but they won't, because it would bankrupt the crammed-downers)
More money down the rabbit hole.........
There is complete bipartisan agreement amongst our elected leaders that this is the taxpayer's sandwich to eat.........
Home prices still predicted to rise 5% a year in San Antonio. Not bad when you can borrow at 3.5%-4%
have Fannie and Freddie been nationalized?http://fortune.com/2015/11/13/fannie...using-finance/
“I just don’t think there’s any precedent for the government nationalizing two privately owned companies in the way that it has,” says Chuck Cooper, an attorney representing the Fairholme mutual fund family and a group of insurance companies that own millions of preferred shares of Fannie Mae and Freddie Mac.
So Fairholme is suing the government, as are several other funds, insurance companies, and tens of thousands of individuals in a dozen or so suits now pending in at least five federal courts across the country. The cases allege that the U.S. government illegally or uncons utionally took, without just compensation, Fannie and Freddie—two Fortune 50 companies. (They rank 17 and 42, respectively, on the 2015 Fortune 500 list.) The money at stake here—$33 billion worth of preferred shares and almost $130 billion in diverted dividend payments—places these cases among the highest-valued lawsuits in history.
“A conservator has one constant accepted responsibility,” says Cooper, of Cooper & Kirk in Washington, D.C., who is handling two of the cases and advising on a third. “That is to rehabilitate the en y under conservatorship. Rehabilitate it. Not to hold it in perpetual captivity to harvest its profits for the benefit of the conservator itself. That’s the very an hesis of a conservator.”
A Revolving Door Helps Big Banks’ Quiet Campaign to Muscle Out Fannie and Freddie
A behind-the-scenes effort of Wall Street banks to take over the mortgage market is driven by advocates who switch between roles in Washington and the private sector.
Seven years after their dubious lending practices helped push the United States economy to the brink of disaster, the nation’s largest banks are closing in on a long-sought goal: to unseat Fannie Mae and Freddie Mac, the mortgage finance giants, and capture their share of the profits in the country’s $5.7 trillion home loan market.
Taking place largely behind the scenes, the movement to take over the mortgage market has been propelled in part by a revolving door between Washington and Wall Street, an investigation by The New York Times has found.
While the big banks’ effort to enshrine their vision into law has failed so far, plans to replace Fannie and Freddie — which have long supported the housing market by playing a unique role as so-called government-sponsored enterprises, or G.S.E.s — are still very much alive. The Obama administration has largely embraced the idea, and government regulators are being pushed to put crucial elements into effect.
A review of lobbying records, legal filings, and internal emails and memorandums, as well as housing officials’ calendars and White House and Treasury visitor logs, illuminates the banks’ effort. Assisting in this work, the do ents show, is a group of high-level housing finance specialists who have moved back and forth between public service and private practice in recent years.
The charge began under Michael D. Berman, who has served not only as chairman of the Mortgage Bankers Association, one of the industry’s most influential lobbying organizations, but also as a senior adviser to Shaun Donovan, who was the secretary of Housing and Urban Development from 2009 to 2014.
Conversely, Mr. Berman recruited David H. Stevens — who was one of the lead architects of the Obama administration’s proposal to phase out Fannie and Freddie — to the mortgage bankers group, where Mr. Stevens is now president and chief executive.
Many in Congress believe Fannie and Freddie contributed to the collapse of the housing bubble,and they still rest on a shaky financial foundation, largely because of actions taken by the Treasury and the companies’ regulator.
http://www.nytimes.com/2015/12/07/bu...er=rss&emc=rss
BigFinance will make all mortgages more expensive AND stop sending F&F's $50B+ annually into the general fund
America is ed and un able.
"Many in Congress believe" ... whatever TF their paymasters pay them to "believe"
http://www.nytimes.com/2015/12/13/bu...laws.html?_r=0A December 2010 memo to Mr. Geithner from Jeffrey A. Goldstein, undersecretary for domestic finance, referred to “the administration’s commitment to ensure existing common equity holders will not have access to any positive earnings from the G.S.E.s in the future.”
It is impossible to predict how the judges overseeing the shareholder lawsuits against the government will rule on the Fannie and Freddie matters. But some investors are hopeful.
Joseph “Woody” Woodruff is a longtime Fannie Mae shareholder who was elected to the state circuit court in Tennessee last year after practicing law for decades.
“The federal government entered into a legal arrangement with the G.S.E.s that contained certain undertakings and fiduciary obligations,” Mr. Woodruff said, stressing that he was speaking as an investor, not as a judge.
“Then it unilaterally rewrote the terms of the relationship and began in a very lawless manner sweeping the profits and transferring them to the Treasury,” he added. “What’s up with that?”
Do ents show that as early as June 2011, more than a year before the profit sweep, the Treasury had been told the companies were improving and that their tax assets could generate significant value.
That discussion occurred in a private meeting with a group of restructuring experts, from Blackstone, the financial services giant, and Skadden, Arps, Slate, Meagher & Flom, a New York law firm.
According to that presentation, Fannie and Freddie were “showing improved financial performance and stabilized loss reserves.” It noted that Fannie and Freddie could build up their capital from “the reversal of loan loss reserves.”
The administration’s dealings with Fannie and Freddie reflect its stated desire to wind down the companies. And for years after their rescue, the companies were political pariahs because of the size of the taxpayer bailout. Some experts say that phasing out the government-sponsored mortgage lenders could ultimately make the housing finance system safer and sounder.
But the administration, by law, cannot put Fannie and Freddie out of business. That job rests with Congress, which would have to revoke the companies’ charters. In the meantime, the 2008 Housing and Economic Recovery Act directs the companies’ conservator to “preserve and conserve” their assets and property.
Two legislative efforts to eliminate Fannie and Freddie have failed to pass in Congress in recent years. During the same period, the Treasury and F.H.F.A. made a series of decisions that have pushed Fannie and Freddie to draw more money from the government’s coffers.
The dividend rate the companies were required to pay in the bailout, for example, was 10 percent — twice that required of the banks receiving money under the $700 billion Troubled Asset Relief Program.
Another disparity: The Treasury provided monetary incentives to the big banks to help cover their costs of modifying borrowers’ mortgages, but Fannie and Freddie received no such funds.
Fannie and Freddie paid another price after the bailout. They had sued many banks over toxic mortgages that were resold to the mortgage giants during the housing mania, and it looked as if they would receive billions of dollars in recoveries. Instead, the money went to the Treasury: $38.5 billion in 2013 and 2014, according to F.H.F.A.
new mortgage bonds transfer risk to private investors:
Fannie and Freddie don't make loans. They buy them from lenders, wrap them into securities and guarantee to make investors whole if the mortgages default.
In practice, that has meant that investors have taken on the risk of losses if interest rates rise, but have left the government with the risk if borrowers default. The new securities—along with other methods Fannie and Freddie use to lay off risk—mean that the government is increasingly transferring that default risk to private investors as well.
The sales are especially notable because issuances of private-label mortgage-backed securities, which also give private investors mortgage exposure, are still moribund.
Considering how politicized Fannie and Freddie have become investors would be nuts to assume that risk.
with hedge funds tanking and stocks, bonds and cash all going more or less sideways, investors will seek better yields wherever they can find them, even if the risk isn't well understood.
15 years of Federal Reserve financial suppression has caused serious malinvestment and will continue to.
Bingo. All sorts of cash is squishing out through the edges.
Yeah, junk bond yields have been stupid low. Bunch of lower tier oil related companies are gonna be defaulting soon and people are gonna be wondering why the they took those risks for sub 10% yields.
there are lots of odd wrinkles in this tale (and even more the Obama Administration wishes to keep private,) but this caught my eye. Matt Taibbi in Rolling Stone:
In fact, it's a little-known subplot of the financial crisis that bailout-era Fannie and Freddie was turned into a kind of garbage facility for other Wall Street ins utions, buying up toxic mortgages that private banks were suddenly desperate to unload.
As early as March of 2008, then Treasury Secretary Hank Paulson was advocating using Fannie and Freddie to "buy more mortgage-backed securities from overburdened banks."
I remember some talk about the the GSEs, who apparently gave the sellers the benefit of the doubt, forcing the sellers to accept getting the toxic assets crammed down throats.
The Fed also took toxic off BigFinance's books, while BigFinance went on to steal Ms of fraudulenty foreclosed homes.
Gretchen Morgenson with the goods:
http://www.nytimes.com/2016/05/22/bu...=tw-share&_r=0When Washington took over the beleaguered mortgage giants Fannie Mae and Freddie Mac during the collapse of the housing market and the financial crisis of 2008, it was with the implicit promise that they would be returned to shareholders after being nursed back to health.
But now, with the unsealing of do ents this week that were produced as part of a lawsuit filed against the government, new evidence is coming to light on how intimately the White House was involved in the Treasury’s decision in August 2012 to keep all the companies’ profits for the government. That move effectively maintained Fannie’s and Freddie’s status as wards of the state.
The newly released do ents go beyond previous disclosures in the case and make clear that the Obama administration never had any intention of restoring Fannie and Freddie, which enjoyed implicit backing from the government before the takeover, to their status as stand-alone en ies.
An email from Jim Parrott, then a top White House official on housing finance, was sent the day the so-called profit sweep was announced. It said the change was structured to ensure that the companies couldn’t “repay their debt and escape as it were.”
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