Mar 24 2010

The Morning After the Horse Left HCR, Repubs Badger Timmy For the Barn

(10 am. – promoted by ek hornbeck)

Today is Tuesday, March 23, 2010.

2 days after the U.S. House of Representatives abdicated any responsibility in legislation, other than signing off on what the House of Lords the Senate wanted, and voted on a Sunday, no less, for the President’s Private Company Health Insurance Bailout bill, they set their eyes upon the next public asset to be dismantled and privatized.

This morning President Barack Obama signed the Senate version of the bill into law, with mandates to purchase private insurance, an excise tax on people’s insurance policies themselves,  but with no Public Option and reconciliation yet pending in a Senate, with Kennedy’s son and widow watching.  Let it be said for history that the President was wrong, this was not quite the version of the bill that the late Sen. Ted Kennedy of Massachusetts wanted, because his  would have given people a guarantee of something for their new taxes – a Public Option of buying into Medicare or a very Medicare like program.  Reid took it out of the Senate’s, Pelosi took it out of the House’s, and the President’s email chain fought against it in the trenches all summer, because they “didn’t have the votes.”  

Wall Street, being always one step ahead of the hapless consumer, having witnessed this in July of 2008 :


NY Times 7/12/2008  Woes at Loan Agencies and Oil Price Spike Roil Markets

http://www.nytimes.com/2008/07…

Investors, meanwhile, snapped up debt issued by those companies, and the insurance premiums on those securities dropped sharply on the view that they would be protected by a government takeover.

Freddie Mac stock has lost 47 percent of its value in the last week alone. Fannie Mae shares have fallen 45 percent during that period. Both companies’ shares are trading at their lowest levels in nearly two decades.

Senior Bush administration officials are already considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, according to people briefed about the plan.

Under a conservatorship, shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee – which could be staggering – would be paid by taxpayers.

The government officials said that the administration had also considered calling for legislation that would offer an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies.

Doesn’t hesitate.

The article also mentions that Lehman Brothers stock was falling hard and default was anticipated (now we know more about that Lehman, and how Timmy liked to watch  http://washingtonindependent.c… see Geithner’s NY Fed Took Trash Off Lehman’s Hands 3/22/2010 )  and that oil price per barrel had shot up another $5 to $147.    President Dubya Bush said that his Treasury Secretary Henry Paulson and Chair of the Fed Reserve Ben Bernanke “will be working this issue very hard.”

Boy Howdy did they ever. He got that part right.  TARP & the EES Act of 2008 had the Treasury printing the green stuff as fast as they could.  http://en.wikipedia.org/wiki/T…  http://en.wikipedia.org/wiki/E…   And the government ended up taking over Fannie and Freddie.  The Republican Party has been having fits of vapors and hysteria about it ever since.

So the President got his signing ceremony for “health care reform” after all, this bright and cheery post Spring Equinox morning, and meanwhile, there’s that 5 trillion Fred ‘n Fannie dollar obligation sitting there. (think of it as yet another leftover hangover from Bush, Cheney, Rumsfeld, Paulson, & Bernanke ).

The House Financial Services Committee Hearing, Tuesday, Mar 23, 2010 topic: Fannie Mae and Freddie Mac:

Enter Timmy, Treasury of the Secrecy, er, Secretary of the Federal US Treasury, and Congressman Barney Frank, (D, MA) Slayer of Dragons.  

Fannie and Freddie Need to Be Changed….. But We Don’t Know How

http://www.huffingtonpost.com/…

quoted in reverse order, to make the point:


……  but the administration doesn’t have any concrete plans, Geithner said.

…..  In short, the current model of private shareholders supported by an implicit or explicit taxpayer guarantee is unsustainable and likely to be changed, Geithner said. The question is when and how much.

Geithner argued that no one would say “we can afford to live with [the current] model going forward.”

But while there is a “quite strong” economic and public policy case for keeping some form of government guarantee as part of the nation’s housing finance system, it can’t be the one the nation’s has today or has had for the last decade, he added.

Democrats are split. “We have to figure out the best way to wind down Fannie Mae and Freddie Mac,” said committee Chairman Barney Frank of Massachusetts. Much of what replaces the current system will be private, and not government mandated, he added.

Republicans on the panel want to dismantle Fannie and Freddie within five years, arguing that the government-backed firms cost taxpayers too much with little to show for it — hundreds of billions in taxpayer losses for a housing finance system rife with moral hazard issues and a crowding out of private companies from the market.

This was so bipartisanshipthingee that the Wall Street Journal was trying to backtrack it in January, quoting a Standard and Poor report that said they had trouble imagining how private companies could pick up the slack of offering low cost funding for 30 year fixed rate mortgages.  

How to Scare the Markets, By Rep. Barney Frank


http://online.wsj.com/article/…

A top House Democrat on Friday (this was in January 2010)  said his committee was preparing to recommend “abolishing” mortgage-finance giants Fannie Mae and Freddie Mac and rebuilding the U.S. housing-finance system from scratch.

“The remedy here is….  as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance,” said Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee.

His comments initially rippled through bond markets on concerns that the government might pull away from the mortgage market. Many believe that’s unlikely and that any revamp would include continued government involvement. The government took over the companies in September 2008 as loan losses mounted.  

Now for the humor bonus quotes today, from Bloomberg.com

http://www.bloomberg.com/apps/…

U.S. Treasury Secretary Timothy F. Geithner called for an end to the “ambiguity” over the government’s involvement in Fannie Mae and Freddie Mac….

The cost of government backing is likely to lead to “substantial losses on the inherited commitments of these two institutions,” Geithner said. “It’s very hard to judge what the scale of losses are.”

As government-chartered companies, Fannie and Freddie benefited from what investors perceived to be an implicit government guarantee of their debt and mortgage securities. Geithner said this structure created a “fundamental misalignment of interests” that often encouraged Fannie and Freddie to focus on shareholder gains over their public mission to help homeowners.

“Promoting and maintaining stability in the housing market is critical to achieving economic recovery and sustainable long- term growth,” Geithner said.

Facepalm.

implicit government guarantee of their debt and mortgage securities.

Hey, chumps, we were only kidding you about the regulations !  It was, like, a concept, ya know ?  that housing bubble and financing other things….   Who knew that the war was going to go on longer than Vietnam ?

Ambiguity ?  Maintaining stability in the housing market ? After millions of foreclosures, at the rate of a third of a million of them a month,  nearly a million every quarter ?  Excuse me, but do any of these DC bureaucrats have any concept of what the ***** fracking hell has been going on out here in Reality World for the past 3 years ?  Do they really think an under regulated private bank will do this even better ?

http://www.bloomberg.com/apps/…

http://money.cnn.com/2009/10/1…

I hope they don’t realize that every foreclosed household means the family moved out of their old house, rather perturbed, very likely, that the new administration didn’t think this was an issue worth doing much about, after all, and that they therefore just lost a voter in that district.  Because I would hate for the leftist “fringe” blogs to notice something before the the Political Professionals did, it being an election year.  

5 comments

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  1. ….  I bet that somebody is upset that there was a cuss word.

     

    • TMC on March 24, 2010 at 16:20
    • #

    which was supposed to save homeowners from foreclosure is a flop:

    Home loan modification program oversold: watchdog

    (Reuters) – A U.S. program aimed at helping struggling homeowners avoid foreclosure has been oversold by the Treasury Department and is likely to be a failure when it wraps up in 2012, a report from the watchdog overseeing the $700 billion bank bailout said on Tuesday.

    Even if the loan modification program ends up with 1.5 million to 2 million homeowners with new, more-favorable terms on their loans, “the program will not be a long-term success if large amounts of borrowers simply re-default and end up facing foreclosure anyway,” the report said.

    snip

    As of January, there were 5.6 million homeowners who were 60 days or more behind on their payments. That means about 400,000 more people fell behind on their payments from January to February, compared to about 50,000 who received a permanent modification in that same period.

    Approximately 2.8 million homeowners received foreclosure filings just in 2009, and millions more are expected in 2010, with some estimates predicting that the number will eclipse the already staggering 2009 number, the report said.

    Here comes the second round of recession

    • TMC on March 24, 2010 at 16:53
    • #

    Home sales show market struggling to find footing

    (Reuters) – Sales of newly built homes fell for a fourth straight month to a record low in February, but another rise in new orders for durable goods offered hope that the economic recovery remained on course.

    The Commerce Department said on Wednesday sales of new single-family homes fell 2.2 percent to a 308,000 unit annual rate from 315,000 units in January. Markets had expected sales to edge up to a 320,000 unit annual pace.

    snip

    The data came on the heels of report on Tuesday showing existing home sales fell for a third straight month in February while the supply of houses on the market jumped.

    Sales have barely responded to the extension and expansion of a popular tax credit, which boosted purchases in the second half of 2009, raising concerns over the fragile housing market’s recovery just as a key pillar of support is being dismantled.

    The Federal Reserve will end purchases of mortgage-related securities next week, which had lowered the cost of home loans to record lows.

    Where I live the housing market is only responding because of the foreclosure market.

    Island home sales surge, but so do foreclosures

    STATEN ISLAND, N.Y. — Property closings and home-sale contracts on Staten Island have spiked 20 percent compared to last year and sales prices are up; however, foreclosures continue to rise, tamping down some of the good news on the borough’s real-estate front.

    Sandy Krueger, chief executive officer of the Staten Island Board of Realtors (SIBOR) said several factors have bumped sales here for the first two months of the year. He cited a first-time home buyer credit of up to $8,000, record low mortgages, “pent-up” demand and increased activity in the foreclosed-home market.

    snip

    One expert cautioned against reading too much into SIBOR’s data.

    Jack Nyman, director of the Steven L. Newman Real Estate Institute at Baruch College, said his research actually shows a slight dip in housing prices on Staten Island in March compared to January and February.

    snip

    All together, there were 2,361 mortgage foreclosures here in 2009. That figure represented a jump of more than 400 from the 1,954 foreclosures filed in 2008 and substantial leap of almost 960 filings from the 1,403 new foreclosures reported just four years ago, according to Advance reports.

    “We see no diminution in [foreclosure] court cases,” said Margaret Becker, lead attorney with the Homeowner Defense Project of Staten Island Legal Services in St. George. “We’re still on the upward swing. The projection is that foreclosure filings will increase to 2011.”

    While, as noted in the second article, the National Board of Realtors thinks that the continued rise in the cost of existing homes is “optimistic” is “nice”. But what happens when, as reported in the first article, the Federal Reserve ends the purchase of mortgage-related securities that have kept mortgage rates at record lows?

    Basically, the housing market is still bad, Obama has done nothing to force banks to modify mortgages to bail out Main St.. Meanwhile, the White House and the Democrats are still courting “destuctionist” Lindsay Graham on just about everything from Guantanamo to Banking Regulation.

  4. ….  but when I’m rooting around the net for other things and come back, and can’t find it on the recent diary list, my first reaction is usually “dayam, where did I put that ? ”  

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