Fannie Mae and Freddie Mac - Mercedes-Benz Forum

Reply
 
LinkBack Thread Tools Display Modes
post #1 of 47 (permalink) Old 09-06-2008, 01:57 AM Thread Starter
CH4S Artist
 
Teutone's Avatar
 
Date registered: Sep 2004
Vehicle: 1985 500SEC, 1991 190E 2.6.
Location: Los Angeles / Hannover Germany
Posts: 33,572
Mentioned: 11 Post(s)
Quoted: 958 Post(s)
Lifetime Premium Member
(Thread Starter)
Fannie Mae and Freddie Mac

Government may soon back troubled mortgage giants

By ALAN ZIBEL, AP Business Writer 13 minutes ago

The government is expected to take over Fannie Mae and Freddie Mac as soon as this weekend in a monumental move designed to protect the mortgage market from the failure of the two companies, which together hold or guarantee half of the nation's mortgage debt, a person briefed on the matter said Friday night.

Some of the details of the intervention, which could cost taxpayers billions, were not yet available, but are expected to include the departure of Fannie Mae CEO Daniel Mudd and Freddie Mac CEO Richard Syron, according to the source, who asked not to be named because the plan was yet to be announced.

Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and James Lockhart, the companies' chief regulator, met Friday afternoon with the top executives from the mortgage companies and informed them of the government's plan to put the troubled companies into a conservatorship.

The news, first reported on The Wall Street Journal's Web site, came after stock markets closed. In after-hours trading Fannie Mae's shares plunged $1.54, or 22 percent, to $5.50. Freddie Mac's shares fell $1.06, or almost 21 percent, to $4.04. Common stock in the companies will be worth little to nothing after the government's actions.

The news also followed a report Friday by the Mortgage Bankers Association that more than 4 million American homeowners with a mortgage, a record 9 percent, were either behind on their payments or in foreclosure at the end of June.

That confirmed what investors saw in Fannie and Freddie's recent financial results: trouble in the mortgage market has shifted to homeowners who had solid credit but took out exotic loans with little or no proof of their income and assets.

Fannie Mae and Freddie Mac lost a combined $3.1 billion between April and June. Half of their credit losses came from these types of risky loans with ballooning monthly payments.

While both companies said they had enough resources to withstand the losses, many investors believe their financial cushions could wither away as defaults and foreclosures mount.

Many in Washington and on Wall Street hadn't expected Paulson to intervene unless the companies had trouble issuing debt to fund their operations.

This summer, Congress passed a plan to provide unlimited government loans to Fannie and Freddie and to purchase stock in the two companies if needed.

Critics say the open-ended nature of the rescue package could expose taxpayers to billions of dollars of potential losses.

Supporters, however, argue the Bush administration had little choice but to support Fannie and Freddie, which together hold or guarantee $5 trillion in mortgages — almost half the nation's total.

Representatives of Fannie and Freddie declined to comment on the government assistance plan.

Treasury spokeswoman Brookly McLaughlin said officials "have been in regular communications" with Fannie and Freddie, but refused to comment saying, "We are not going to comment on rumors."

Concern has been growing that a government rescue of Fannie and Freddie could not only wipe out common stockholders, but also be costly for scores of investment, banking and insurance companies that hold billions of dollars in their preferred shares.

Paulson has been in contact in recent weeks with foreign governments that hold billions of dollars of Fannie and Freddie debt to reassure them that the United States recognizes the importance of the two companies.

The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.

Mudd, the son of TV anchor Roger Mudd, was elevated to Fannie Mae's top post in December 2004 when chief executive Franklin Raines and chief financial officer Timothy Howard were swept out of office in an accounting scandal. Syron was named Freddie Mac's CEO in 2003, replacing former chief Gregory Parseghian, who was ousted in after being implicated in accounting irregularities.

He formerly was executive chairman of Thermo Electron Corp., a Waltham, Mass.-based maker of scientific equipment, served head of the American Stock Exchange and was president of the Federal Reserve Bank of Boston in the early 1990s.

Fannie Mae was created by the government in 1938, and was turned into a shareholder-owned company 30 years later. Freddie Mac was established in 1970 to provide competition for Fannie.

A government takeover could cost taxpayers up to $25 billion, according to the Congressional Budget Office.

But the epic decision highlights the size of the threats facing the housing market and the economy. On Friday, Nevada regulators shut down Silver State Bank, the 11th failure this year of a federally insured bank. And earlier this year, the government orchestrated the takeover of investment bank Bear Stearns by JP Morgan Chase.
AP Business Writers Martin Crutsinger and Jeannine Aversa contributed to this report.

Copyright © 2008 The Associated Press.
Teutone is offline  
Sponsored Links
Advertisement
 
post #2 of 47 (permalink) Old 09-06-2008, 01:17 PM
BenzWorld Elite
 
Jayhawk's Avatar
 
Date registered: Aug 2005
Vehicle: S500/W220/2000
Location: Lawrence, KS (USA)
Posts: 21,652
Mentioned: 0 Post(s)
Quoted: 3 Post(s)
Big mistake, IMO! We/they should just let "Frannie" go under, and wash our hands of those two bad examples of federal "social programs." They should never have created them in the first place. It is those kinds of stupid, liberal, federal, do-gooder programs that create more problems than they solve.

Don't believe everything you think
Jayhawk is offline  
post #3 of 47 (permalink) Old 09-06-2008, 01:38 PM
Cruise Control
 
Zeitgeist's Avatar
 
Date registered: Sep 2004
Vehicle: '87 300TD/'90 300D/'94 Quattro/'89 Vanagon TDI/'01 EV Weekender VR6
Location: Cascadia
Posts: 51,730
Mentioned: 6 Post(s)
Quoted: 1428 Post(s)
Lifetime Premium Member
Creeping socialism...heh heh heh
Zeitgeist is offline  
post #4 of 47 (permalink) Old 09-06-2008, 01:45 PM
BenzWorld Elite
 
slybydesign's Avatar
 
Date registered: Jan 2007
Vehicle: My Two Left Feet
Location: S.D. Cali
Posts: 3,183
Mentioned: 0 Post(s)
Quoted: 0 Post(s)
NWO.......a tasty treat best served cold.

I will say this, I know people right now who are making a killing by this terrible market. Those who restructure home loans, and credit counseling. It is the desperate home owners who are taking the fall and depleting what ever cash on hand to stay above water.






3. Paul Hamm, Gymnast: I owe a lot to my parents, especially my mother and father.

Last edited by slybydesign; 09-06-2008 at 01:48 PM.
slybydesign is offline  
post #5 of 47 (permalink) Old 09-06-2008, 01:49 PM
BenzWorld Elite
 
mcbear's Avatar
 
Date registered: Apr 2004
Vehicle: E500Es
Location: The BlueGrass State
Posts: 29,579
Mentioned: 0 Post(s)
Quoted: 3 Post(s)
Quote:
Originally Posted by Jayhawk View Post
Big mistake, IMO! We/they should just let "Frannie" go under, and wash our hands of those two bad examples of federal "social programs." They should never have created them in the first place. It is those kinds of stupid, liberal, federal, do-gooder programs that create more problems than they solve.
While I agree completely that there should not be a bailout for the financial sector, HOW do you expect the housing sector, and by extension the financial sector to pull out of its downward spiral if Fannie/Freddie are not available to underwrite the hundreds of thousands of home loans that they do?

Borrowing criteria will climb exponentially. The demand side of the equation will reduce dramatically which will further glut the supply side of the housing market. That falling domino will further exacerbate the falling equity ratios which are already at 60 year lows - UNDER 50% for the first time ever. How Much Do People Know About Economics and Finance?

So it is easy to blow off these do-gooder, stupid, liberal, federal programs, but be very prepared for the very real negative fallout that results. It won't be pretty.

McBear,
Kentucky

Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.
mcbear is offline  
post #6 of 47 (permalink) Old 09-06-2008, 03:40 PM
BenzWorld Elite
 
Jayhawk's Avatar
 
Date registered: Aug 2005
Vehicle: S500/W220/2000
Location: Lawrence, KS (USA)
Posts: 21,652
Mentioned: 0 Post(s)
Quoted: 3 Post(s)
Quote:
Originally Posted by mcbear View Post
While I agree completely that there should not be a bailout for the financial sector, HOW do you expect the housing sector, and by extension the financial sector to pull out of its downward spiral if Fannie/Freddie are not available to underwrite the hundreds of thousands of home loans that they do?

Borrowing criteria will climb exponentially. The demand side of the equation will reduce dramatically which will further glut the supply side of the housing market. That falling domino will further exacerbate the falling equity ratios which are already at 60 year lows - UNDER 50% for the first time ever. How Much Do People Know About Economics and Finance?

So it is easy to blow off these do-gooder, stupid, liberal, federal programs, but be very prepared for the very real negative fallout that results. It won't be pretty.
I believe that Frannie is part of the problem--not the solution. If the liberals had never created them, a least 25% of our problems today would not exist.

Don't believe everything you think
Jayhawk is offline  
post #7 of 47 (permalink) Old 09-06-2008, 08:37 PM
BenzWorld Elite
 
mcbear's Avatar
 
Date registered: Apr 2004
Vehicle: E500Es
Location: The BlueGrass State
Posts: 29,579
Mentioned: 0 Post(s)
Quoted: 3 Post(s)
Quote:
Originally Posted by Jayhawk View Post
I believe that Frannie is part of the problem--not the solution. If the liberals had never created them, a least 25% of our problems today would not exist.
Really, what problems would not exist? Insure you include the growth over the past of the financial markets over the past 70 years in your calculus.

You need to look at the leveraged instruments that grabbed freddie and fannie loans, among others and repackaged them as one of the more viable culprits, not the underwriters themselves. You also need to look at the reduction of regulation of freddie and fannie over the past eight years [to let that free market run!!!] as you build you argument for 25%.

As I have been saying for nearly a year, Freddie and Fannie are going to be big players in the failures because they are, both fortunately and unfortunately involved in nearly every mortgage that is written in the US. With that kind of exposure, and with rising delinquencies, their rates of capitulation are higher than other institutions. It is relatively simple math.

Wall Street was allowed to gamble with their equity and Wall Street lost. Then Freddie and Fannie lost, then the Government lost, then the TAXPAYER lost. Dominoes sometimes suck.

And I am not saying they are part of the solution. I am saying they are part of the fabric. If they are removed or reconfigured, the entire fabric of the financial sector, housing sector, banking and mortgage sector are ALL to be reconfigured with much tighter conditions.

McBear,
Kentucky

Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.
mcbear is offline  
post #8 of 47 (permalink) Old 09-06-2008, 09:03 PM
BenzWorld Elite
 
Jayhawk's Avatar
 
Date registered: Aug 2005
Vehicle: S500/W220/2000
Location: Lawrence, KS (USA)
Posts: 21,652
Mentioned: 0 Post(s)
Quoted: 3 Post(s)
Quote:
Originally Posted by mcbear View Post
Really, what problems would not exist? Insure you include the growth over the past of the financial markets over the past 70 years in your calculus.

You need to look at the leveraged instruments that grabbed freddie and fannie loans, among others and repackaged them as one of the more viable culprits, not the underwriters themselves. You also need to look at the reduction of regulation of freddie and fannie over the past eight years [to let that free market run!!!] as you build you argument for 25%.

As I have been saying for nearly a year, Freddie and Fannie are going to be big players in the failures because they are, both fortunately and unfortunately involved in nearly every mortgage that is written in the US. With that kind of exposure, and with rising delinquencies, their rates of capitulation are higher than other institutions. It is relatively simple math.

Wall Street was allowed to gamble with their equity and Wall Street lost. Then Freddie and Fannie lost, then the Government lost, then the TAXPAYER lost. Dominoes sometimes suck.

And I am not saying they are part of the solution. I am saying they are part of the fabric. If they are removed or reconfigured, the entire fabric of the financial sector, housing sector, banking and mortgage sector are ALL to be reconfigured with much tighter conditions.
Frannie covers about 25% of mortgages, and they are by far the most risky of all loans on the market today. If Frannie did not exist, those loans would/could have never been made! That cesspool of loans is a direct result of those two social/welfare programs!

Don't believe everything you think
Jayhawk is offline  
post #9 of 47 (permalink) Old 09-06-2008, 09:11 PM
BenzWorld Elite
 
mcbear's Avatar
 
Date registered: Apr 2004
Vehicle: E500Es
Location: The BlueGrass State
Posts: 29,579
Mentioned: 0 Post(s)
Quoted: 3 Post(s)
Quote:
Originally Posted by Jayhawk View Post
Frannie covers about 25% of mortgages, and they are by far the most risky of all loans on the market today. If Frannie did not exist, those loans would/could have never been made! That cesspool of loans is a direct result of those two social/welfare programs!
I used to think that they only covered risky loans too. Then I realized that they cover much of Prime loans also, although in a different way. I found that out as we sold one house and the new buyer had gold credit yet fannie was involved in a round about way. I asked my banker and she said that all Chase loans, no matter who you are go that way. It is part of their policy. And nearly all the big banks apparently were doing biz this way.

I will find out the whys on Monday [I had not thought of this until the FM/FM story broke on Friday afternoon. I did, however find it odd. More when I know.

McBear,
Kentucky

Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.
mcbear is offline  
post #10 of 47 (permalink) Old 09-06-2008, 09:17 PM
BenzWorld Elite
 
mcbear's Avatar
 
Date registered: Apr 2004
Vehicle: E500Es
Location: The BlueGrass State
Posts: 29,579
Mentioned: 0 Post(s)
Quoted: 3 Post(s)
Quote:
Originally Posted by Jayhawk View Post
Frannie covers about 25% of mortgages, and they are by far the most risky of all loans on the market today. If Frannie did not exist, those loans would/could have never been made! That cesspool of loans is a direct result of those two social/welfare programs!
On the other part of your comment, MUCH of the SubPrime was not due to Freddie/Fannie. Much was due to things like faked applications by mortgage brokers, builders who fudged accounting to sell more houses, Realtors who pushed brokers to "work" deals to make sales and then on the supply side there were the hedge fund guys who were packaging these loans on leverage to reduce their impact, enhance their profitability and hide their true liability.

Add in the failing economy in nearly every sector and the recipe was complete for the high delinquency rates and failure of big banks and underwriters.

Freddie and Fannie, while players in the mess were not the big players. As they became public corporations much of the "social/welfare" aspects of the program vaporized. Unless you consider someone with a 680 credit score getting a $180K house a welfare case. And yes, that is well within fannie thresholds for underwriting.

McBear,
Kentucky

Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.
mcbear is offline  
Sponsored Links
Advertisement
 
Reply

  Mercedes-Benz Forum > General Mercedes-Benz Forums > Off-Topic

Quick Reply
Message:
Options

Register Now



In order to be able to post messages on the Mercedes-Benz Forum forums, you must first register.
Please enter your desired user name, your email address and other required details in the form below.

User Name:
Password
Please enter a password for your user account. Note that passwords are case-sensitive.

Password:


Confirm Password:
Email Address
Please enter a valid email address for yourself.

Email Address:
OR

Log-in











  • Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
     
    Thread Tools
    Show Printable Version Show Printable Version
    Email this Page Email this Page
    Display Modes
    Linear Mode Linear Mode



    Similar Threads
    Topic Author Forum Replies Last Post
    does freddie mac and fannie mae sound like this to anybody?? theboss Off-Topic 2 07-28-2008 12:51 PM
    Fannie Freddie bailout mlfun Off-Topic 22 07-15-2008 12:04 AM
    Another reason I like my Mac ( Not Mac & Cheese) Big"D"inTheMB Off-Topic 22 05-13-2008 12:19 PM
    MAE? Algon The Discount Tire Direct Tire, Wheel, Brake & Suspension 0 09-03-2007 09:50 AM
    Looking for MAE wheels. HELP PLEASE HKRick General Mercedes-Benz 0 10-12-2006 07:52 PM

    Posting Rules  
    You may post new threads
    You may post replies
    You may not post attachments
    You may not edit your posts

    BB code is On
    Smilies are On
    [IMG] code is On
    HTML code is Off
    Trackbacks are On
    Pingbacks are On
    Refbacks are On

     

    Title goes here

    close
    video goes here
    description goes here. Read Full Story
    For the best viewing experience please update your browser to Google Chrome