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post #11 of 23 (permalink) Old 07-14-2008, 01:49 PM
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Originally Posted by McBear
--------------------------------------------------------------------------------

The price of failure to REGULATE over the past SEVEN years is going to be staggering. While Bushie wandered through the desert [well, by proxy] Home burned at his own hand. Letting Banks and the Financial Sector run roughshod over the existing regulations and not doing anything to keep them in check, not doing anything to insure that borrowers or stockholders or investors or taxpayers investments were safeguarded is the cornerstone of his Legacy of Failure.

The tools were in place. The regulators were available. The laws exist. The will and the concern and the fundamental understanding just were not there. And again Bushie let this country down.


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Originally Posted by Pcunningham42
You don't think it goes further back than Bush, wasn't Franklin Raines (FNMA) and his colleagues at Freddie Mac cooking the books through out the 90's ?

"Raines, who headed the Office of Management and Budget in the Clinton administration, left Fannie Mae in 2004 after the Securities and Exchange Commission determined that it had used improper accounting. The federally chartered mortgage-funding company later corrected its books, wiping out $6.3 billion of previously reported profit.

District-based Fannie Mae reached a settlement with regulators in 2006, agreeing to pay $400 million.

Announcing the administrative charges in December 2006, OFHEO Director James B. Lockhart III said the former executives "improperly manipulated earnings to maximize their bonuses . . . misleading the regulator and the public." These charges cover 1998 to 2004."

Raines, Federal Regulators Reach Settlement
By David S. Hilzenrath Wash Post.
Yes, the failure to maintain regulations goes back to the Reagan era and was, as I have posted many times before exacerbated by Greenspan's new investment instruments in the late 90's that triggered much of what we are seeing today.

Where the difference begins is in the scale. In the 90s Subprime was a minuscule instrument, but by 2003 it had grown to a level where it was a KNOWN problem and by 2005, when regulators had a chance to put on the brakes, they failed to do so and let it run, many believe because housing growth, and the use of home equity as an ATM was providing the "growth" of Bush's economy. Why would he regulate and manage a runaway train that was providing the numbers for his "growth"?

That is why regulation in the 2003-2006 range was so much different than in the 1980-1990s.

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post #12 of 23 (permalink) Old 07-14-2008, 01:56 PM
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Originally Posted by mlfun View Post
The two institutions were created to promote home ownership through government guarantees, hardly the free market agenda of the right. If anything, right or wrong, Bush is leaning left with this move. There is no free lunch, for example if there is more regulation and limits on the two, would the poor minority citizen be able to afford a house ?
Therein lies the problem. Nobody ever said that "the poor minority citizen" has a right to home ownership. That is why it is called "the American Dream". The problem is Freddie and Fannie don't just underwrite loans for poor. The underwrite loans for pretty much everyone.

Freddie and Fannie acted as a cosigner to secure the banks for $Trillions in Prime and Subprime loans to allow the banks to continue to push paper. The object went from making sound loans to build their banking business to simply selling as many loans as possible, packaging them, taking a slice and bowing out. "Profit at ALL Cost". That is when the paradigm changed and that is why we are here at this point.

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post #13 of 23 (permalink) Old 07-14-2008, 02:07 PM Thread Starter
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Originally Posted by mcbear View Post
Therein lies the problem. Nobody ever said that "the poor minority citizen" has a right to home ownership. That is why it is called "the American Dream". The problem is Freddie and Fannie don't just underwrite loans for poor. The underwrite loans for pretty much everyone.

Freddie and Fannie acted as a cosigner to secure the banks for $Trillions in Prime and Subprime loans to allow the banks to continue to push paper. The object went from making sound loans to build their banking business to simply selling as many loans as possible, packaging them, taking a slice and bowing out. "Profit at ALL Cost". That is when the paradigm changed and that is why we are here at this point.
The loans were sound as long as housing prices go up which is the root of the problem..
every ratings agency assumed that. Put it another way, if prices go up, anyone can
afford a house.
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post #14 of 23 (permalink) Old 07-14-2008, 02:17 PM
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The loans were sound as long as housing prices go up which is the root of the problem..
every ratings agency assumed that. Put it another way, if prices go up, anyone can afford a house.
No financial institution [or any business] can make a SOUND business judgment based on ASSUMED market increases. No economic model in the world allows constant appreciation.

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post #15 of 23 (permalink) Old 07-14-2008, 02:32 PM
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^ So then, I guess I should delete those Excel spreadsheets I was using to plan for retirement....
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post #16 of 23 (permalink) Old 07-14-2008, 03:09 PM
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^ So then, I guess I should delete those Excel spreadsheets I was using to plan for retirement....
Afraid so. But they do look pretty when you see that nice curve heading up on the right.

I had a friend who was going to try day trading. He was going to start with $10,000 and work stocks daily to just get a 1.5% gain a day. He wasn't going to try and get greedy, just work simple numbers. The chart he showed me showed a nice $10,000 to $413,000 in 250 trading days. Simple enough.

It just didn't quite work out like he planned. He still made $90K which was a good ROI [before taxes] but it was not the smooth projection he he was looking for. It seemed so easy.

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post #17 of 23 (permalink) Old 07-14-2008, 03:17 PM
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The liberals among us should be applauding the news today.
--------------------------------------------------------------------
http://www.nytimes.com/2008/07/14/wa...rantee.html?hp
Two years ago, when commercial banks were still jostling for fatter slices of the housing market, the share of outstanding mortgages Fannie and Freddie owned and guaranteed dipped below 40 percent, according to an analysis of Federal Reserve data by Moody’s Economy.com. By the first three months of this year, Fannie and Freddie were buying more than two-thirds of all new residential mortgages.
...
The government was getting something for its protective largess. It was using Fannie and Freddie to pursue the social goal of broader homeownership, particularly among racial minorities.

“When you’re looking at the upside, here’s the government helping people get mortgages and student loans,” said David R. Henderson, a self-described libertarian economist at the Hoover Institution at Stanford University. “The downside is there might be a bailout and then you pay in taxes. These things don’t come cost-free when government gets involved.”
...
During much of Japan’s lost decade of the 1990s, Americans called for an end to its coddling of weak banks. Better to let them keel over, along with the paper tiger companies they sustained. No company was “too big to fail,” Washington said.

Yet here, in the aftermath of a financial crisis brought on by what were once called American virtues — financial engineering and risk management — Washington may bail out Fannie and Freddie for the simple reason that they are too big to fail. If they go down, so do whole neighborhoods. So, perhaps, does the global financial system.

“The thing we have to do now is to make sure that Fannie and Freddie remain solvent and continue to make loans,” Mr. Baily said. “We just don’t have any choice.”
What do "the liberals" have to do with it? Bailing out corporations? Using taxpayer money to screw the taxpayers? Your boys got us into this mess with their whole "regulation is bad" mentality, if those bad ole Democrats had been running things, these banks would have never had gotten away with the shit they have pulled. And while we are at it, let's see what your big bad bogey men in the Soros crowd have to say:



Bloomberg TV Bloomberg Radio Bloomberg Podcasts Bloomberg Press

Fannie Plan a `Disaster' to Rogers; Goldman Says Sell (Update5)

By Carol Massar and Eric Martin

July 14 (Bloomberg) -- The U.S. Treasury Department's plan to shore up Fannie Mae and Freddie Mac is an ``unmitigated disaster'' and the largest U.S. mortgage lenders are ``basically insolvent,'' according to investor Jim Rogers.

Taxpayers will be saddled with debt if Congress approves U.S. Treasury Secretary Henry Paulson's request for the authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, Rogers said in a Bloomberg Television interview. Rogers is betting that Fannie Mae shares will keep tumbling.

Goldman Sachs Group Inc. analyst Daniel Zimmerman said the mortgage finance companies' shares may fall another 35 percent and lowered his share-price estimate for Fannie Mae to $7 from $18 and for Freddie Mac to $5 from $17. Freddie Mac fell 64 cents, or 8.3 percent, to $7.11 in New York Stock Exchange trading, while Fannie Mae fell 52 cents, or 5.1 percent, to $9.73.

``I don't know where these guys get the audacity to take our money, taxpayer money, and buy stock in Fannie Mae,'' Rogers, 65, said in an interview from Singapore. ``So we're going to bail out everybody else in the world. And it ruins the Federal Reserve's balance sheet and it makes the dollar more vulnerable and it increases inflation.''

The chairman of Rogers Holdings, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, also said the commodities bull market has a ``long way to go'' and advised buying agricultural commodities.

`Solvency Crisis'

Rogers, a former partner of hedge fund manager George Soros, predicted the start of the commodities rally in 1999 and started buying Chinese stocks in the same year. He traveled the world by motorcycle and car in the 1990s researching investment ideas for his books, which include ``Adventure Capitalist'' and ``Hot Commodities.''

Billionaire investor Soros said today that Fannie Mae and Freddie Mac face a ``solvency crisis,'' not a liquidity one, and that their troubles won't be the last financial disruption, Reuters reported.

``This is a very serious financial crisis and it is the most serious financial crisis of our lifetime,'' Soros told Reuters in a telephone interview. ``It is an idle dream to think that you could have this kind of crisis without the real economy being affected.''

`Going Bankrupt'

Fannie Mae and Freddie Mac each surged more than 20 percent in pre-market trading today after Paulson moved to stem a collapse in confidence in the two companies that purchase or finance almost half of the $12 trillion in U.S. home loans.

Fannie Mae's market value is now about $10 billion, down from $38.9 billion at the end of 2007. Freddie Mac's market value has shrunk to about $5 billion from $22 billion at the end of last year.

``These companies were going to go bankrupt if they hadn't stepped in to do something, and they should've gone bankrupt with all of the mistakes they've made,'' Rogers said. ``What's going to happen when you Band-Aid and put some Band-Aids on it for another year or two or three? What's going to happen three years from now when the situation's much, much, much worse?''

Paulson's proposal, which the Treasury anticipates will be incorporated into an existing congressional bill and approved this week, signals a shift toward an explicit guarantee of Fannie Mae and Freddie Mac debt.

The Federal Reserve separately authorized the firms to borrow directly from the central bank.

`The Right Thing'

Anyone who says the mortgage-finance companies should be left to fail is ``silly,'' hedge fund manager Barton Biggs said in an interview on Bloomberg Television from New York.

``Fannie and Freddie are way too big and way too big a part of the mortgage system and really the American way of life to say `Just let them go bankrupt,''' said Biggs, a former Morgan Stanley strategist who now runs the hedge fund Traxis Partners LLC. ``The Treasury, in my view, is doing the right thing.''

Washington-based Fannie Mae slid 45 percent last week, while McLean, Virginia-based Freddie Mac sank 47 percent on concern they may require a bailout that would wipe out shareholders.

Former St. Louis Federal Reserve President William Poole last week said in an interview that Freddie Mac is technically insolvent under fair value accounting, which measure a company's net worth if it had to liquidate all its assets to repay liabilities. Poole said Fannie Mae may also become insolvent this quarter.

Rogers said he had not covered his so-called short positions in Fannie Mae and would increase his bet if it were to rally. Short sellers borrow stock and then sell it in an effort to profit by repurchasing the securities later at a lower price and returning them to the holder.

The U.S. economy is in a recession, possibly the worst since World War II, Rogers said.

``They're ruining what has been one of the greatest economies in the world,'' Rogers said. Bernanke and Paulson ``are bailing out their friends on Wall Street but there are 300 million Americans that are going to have to pay for this.''


^^^ yeah, that's a bunch of conservatives alright.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

-President Barack Obama, 1st Inaugural address
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post #18 of 23 (permalink) Old 07-14-2008, 03:25 PM Thread Starter
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What do "the liberals" have to do with it? Bailing out corporations? Using taxpayer money to screw the taxpayers? Your boys got us into this mess with their whole "regulation is bad" mentality, if those bad ole Democrats had been running things, these banks would have never had gotten away with the shit they have pulled. And while we are at it, let's see what your big bad bogey men in the Soros crowd have to say:
These are not private corporations but governmental subsidiaries meant for social programs.
That's my response to your question.
Whether the Democrats will make the same mistakes, well , that's a hypothetical question
isn't it ? Does not really matter but the only thing I can say is this... greed is not restricted
to one party. No one from either was complaining while the going was good.

Last edited by mlfun; 07-14-2008 at 03:47 PM.
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post #19 of 23 (permalink) Old 07-14-2008, 06:10 PM
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Get the gov the hell out of private enterprise & let the damned things fail. Th egov should be regulating trade, not making or guaranteeing it.

Socialists--oopsie!--I mean Demopublicans fuck-up everything they touch.

B

The biggest problems we are facing right now have to do with George Bush trying to bring more and more power into the executive branch and not go through Congress at all and that’s what I intend to reverse.

~ Senator Barack H. Obama
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post #20 of 23 (permalink) Old 07-14-2008, 08:54 PM
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These are not private corporations but governmental subsidiaries meant for social programs.
That's my response to your question.
Whether the Democrats will make the same mistakes, well , that's a hypothetical question
isn't it ? Does not really matter but the only thing I can say is this... greed is not restricted
to one party. No one from either was complaining while the going was good.
These ARE private corporations and NOT government subsidiaries [at least maybe until next week or so]. Fannie Mae went private in 1968. It's only Government hook is that it gets nice rates which it passes through to banks.

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