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December 28th, 2009 6:01 pm ET.
On Christmas Eve, when it hoped no one would notice, the Obama administration lifted the $400-billion limit on bailouts for federal mortgage giants Fannie Mae and Freddie Mac, and showered their executives with $42 million at taxpayer expense. (Earlier, Freddie Mac’s CFO received $5.5 million).
Under the Bush administration, federal regulators took over Fannie and Freddie in the name of stopping their risky practices. But the Obama administration has increased their purchases of risky mortgages in a vain attempt to inflate the economy. Worse, it forced them to run up to tens of billions in losses to bail out deadbeat and at-risk mortgage borrowers, and then tried to conceal those losses, in conduct reminiscent of Enron.
You mean the institutions that actually issue toxic loans will have to back them, not the public? How anti free market that would be.
Not really. Its really a casse where the governamnt not longer encourages such loans by the twemrs previous encouraged when Fannie and freddie were establiched in the first place. It is a end to the send us your bad loan we will take the risk. Remmeebr that 59% of bad loans converted by Fannie again went into forecolsure.What it means is governament policy was flawed ;plain and simple.
Ooh, Barney Frank cannot be happy about this news. I don't trust Obama as far as I could throw him, but if he actually does away with F/F, I'm in full support of that!
Home mortgages ARE private loans. Fannie/Freddie buy the loans from the banks so the bank can have the cash to provide MORE loans. How many home mortgages could a small bank make if they had to use their own deposits?
Home mortgages ARE private loans. Fannie/Freddie buy the loans from the banks so the bank can have the cash to provide MORE loans. How many home mortgages could a small bank make if they had to use their own deposits?
Finally, someone who understands.
The other issue you have with the lack of a GSC to purchase mortgages is that it could lead to the demise of the 30-year fixed-rate mortgage. Bank's cannot justify putting a 30-year fixed-rate asset on their balance sheet without an equivalent funding source to ensure a certain rate spread. In other countries where there's no Fannie/Freddie equivalent, mortgage borrowers are subject to interest rate adjustments throughout the term or may have to deal with balloon payments that must be refinanced, which also involves interest rate risk.
Without a doubt, Fannie and Freddie's standards were lowered too far. Any new GSC that might be created should have higher standards, and the government guarantee should go away altogether (including the implied guarantee of the pre-nationalized Fannie and Freddie) and the GSC bondholders should bear the full credit risk. But for many to insinuate that the federal government is incapable of playing any valuable role in the mortgage business show a complete lack of understanding of how banking works.
Home mortgages ARE private loans. Fannie/Freddie buy the loans from the banks so the bank can have the cash to provide MORE loans. How many home mortgages could a small bank make if they had to use their own deposits?
Far fewer, and house prices would drop like a stone, allowing people who have been hoarding cash to come out from the sidelines. Savers rejoice!
Far fewer, and house prices would drop like a stone, allowing people who have been hoarding cash to come out from the sidelines. Savers rejoice!
The current owners would become landlords and corporations would buy up existing homes for sale and make them rental property. The country would be full of renters.
Home mortgages ARE private loans. Fannie/Freddie buy the loans from the banks so the bank can have the cash to provide MORE loans. How many home mortgages could a small bank make if they had to use their own deposits?
Fractional reserve banking has ensured that banks only use a fraction of their reserves to make loans. F/F just took it to whole new level by gambling with the mortgages. The banks will be just fine without F/F or such, and we will have healthier banks.
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