Taxpayers picking up the tab again

Posted Sun, 09/07/2008 - 06:03 by standingup
The New York Times leads with a piece on the pending taxpayer bailout of Fannie Mae and Freddy Mac for the second day in a row. Expect more to follow as the official announcement will probably come sometime later today. Today we learn:
The government’s planned takeover of Fannie Mae and Freddie Mac, expected to be announced on Sunday, came together after advisers poring over the companies’ books for the Treasury Department concluded that Freddie’s accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.
But have no fear, the U.S. taxpayer is here!
The proposal to place both companies, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies’ debt might not be repaid. Falling home prices, which are expected to lead to more defaults among the mortgages held or guaranteed by Fannie and Freddie, contributed to the urgency, regulators said. Investors who own the companies’ common and preferred stock will suffer. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives of both companies will be pushed out, according to those briefed on the plan.
How much is the bill on this one? We don't seem to have an exact figure but estimates are in the tens of billions. And if you are wondering just how this happened, again? Please do read the full article for all the details, at least as many as are available at this time. But the last paragraph is one that we need to remember, especially come election time this year.
“We have just had to nationalize the two largest financial institutions in the world because of policy makers’ inaction,” said Josh Rosner, an analyst at Graham Fisher, an independent research firm in New York, and a longtime critic of the government-sponsored enterprises. “Since 2003, when these companies’ accounting came under question, policy makers have done nothing.”
In other words, this didn't have to happen and even if it did, the losses could have been much lower.

Comments

Announcement

by rba - 09/07/2008 - 08:00
has been made - it's "BREAKING" on MSNBC's front page, little less excitement elsewhere. In a parallel universe DOJ is still building cases: Sandy Hodson: Mortgage fraud cases escalate. Note the increase in prosecutions began when they saw the mess coming in 2004. (In the Chron + Reuters articles). What to do? For one thing change the emphasis of the reporting to reflect the amount of both wealth accrued, and losses borne by taxpayers in the "privatize profits, socialize losses" era of conservative rule. You know, that old "accuracy" thang.
A rescue plan passed by Congress in July gave the US government the authority to offer unlimited liquidity to the two companies, and to buy their shares, in order to keep them afloat.
Heads we win, tails the investors lose. If you're keeping score: 52wk Range: 3.53 - 68.60. Given the total amount of mortgages held I'd say the "F" twins will make out like f*cking bandits in the long term. Housing value falls against the paper by about +/- 40% nationally; stock falls 93+. No worries.
GreyHawk's picture

Here's the plan they laid out:

by GreyHawk - 09/07/2008 - 08:06
(via WSJ)

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WASHINGTON -- U.S. federal regulators outlined their takeover of Fannie Mae and Freddie Mac Sunday morning, including control of the firms by their regulator and a Treasury Department purchase of the firms' senior preferred stock. The plan, outlined jointly by the Treasury Department and Federal Housing Finance Agency, also includes a plan for the Treasury to purchase mortgage-backed securities from the firms in the open market, and a lending facility through the Treasury from its general fund held at the Federal Reserve Bank of New York. [...]

_____

The rest of the article is available at the link. Not exactly a new kind of disaster here -- there was the Savings and Loan scandals that you'd have thought these boneheads would learn from...and by "these boneheads" I guess I mean "all of us."

Both sides

by rba - 09/07/2008 - 09:35
of the duopoly participated in the shift of wealth over the past forty years - the purpose of the policies - but I think we've got to tip the scales towards the conservatives. I'll give you the "boneheads-be-we", but only insofar as the information was available, ignored, and reported. (Blogs specifically *excluded*.)

Office of Federal Housing Enterprise Oversight

by luaptifer - 09/07/2008 - 09:36
Ever since I've known of this office, I've wondered if they have actually done any oversight of Fannie Mae and Freddie Mac. What do they do? And how'd Mike Connell get the job of running their website back in 1999? Does George W. Bush get some sort of inside information from this arrangement? Connell has been Bush's IT guru for more than two decades now. It became a GovTech Solutions website after he created the company to launder NewMedia Communications as a 'non-partisan' company while he ran GeorgeWBush.com and RNC.org, and it still runs as a GovTech Solutions client today. You can see some of the pages under development as google captured them using this link: Google - "inurl:govtechsolutions.com" You also can see that www.ofheo.gov runs from the IP address right next door to govtechsolutions.com on Smartechcorp's address space http://www.robtex.com/dns/www.ofheo.gov.html http://www.robtex.com/dns/govtechsolutions.com.html and they're all in the same block of address that runs Connell's technomania.com (though robtex has not apparently updated its cnet data lately) http://www.robtex.com/cnet/64.203.97.html Since taxpayers are now going to pick up the tab for Fannie Mae and Freddie Mac and we've been picking up the tab for OFHEO, I just wonder if there is any significance to the fact that we've also been paying Mike Connell's companies to do the webwork that runs on SmartechCorp's IP space? What does OFHEO do, anyhow? Just wondering, ya know?

"So your party is the only party that can save the country from the mess that your party created?" - attrib. Jon Stewart

So, I just decided, the question is broad enough that I'm

by luaptifer - 09/07/2008 - 09:38
going to repost this comment as a full-blown commentary, if you have answers to these questions, please post in response there as well. Thanks

"So your party is the only party that can save the country from the mess that your party created?" - attrib. Jon Stewart

Any oversight by Office of Federal Housing Enterprise Oversight

by luaptifer - 09/07/2008 - 12:33
was posted here Any oversight by Office of Federal Housing Enterprise Oversight - www.ofheo.gov?

"So your party is the only party that can save the country from the mess that your party created?" - attrib. Jon Stewart

Do you suppose this is a coincidence?

by avahome - 09/07/2008 - 14:10
Prosecutor becomes figure in mortgage mess excerpt:
LOS ANGELES (Reuters) - Thomas O'Brien, the U.S. Attorney for California's Central District, is emerging as a likely prosecutor in criminal cases expected from the U.S. mortgage meltdown....... -snip - His office is already looking into New Century Financial Corp and IndyMac Bancorp Inc (IDMC.PK), according to securities filings by those two mortgage lenders. Countrywide Financial Corp, based in Calabasas, California, is also on his patch. - snip - Seeking justice for victims of the worst banking debacle in a generation could help the telegenic O'Brien, a Republican, launch a political career or at least keep his post under a new U.S. administration. -snip - In an interview, O'Brien would not say whether his office is investigating the mortgage issues, but said his district -- the country's biggest in terms of population -- encompassed a number of potential targets from the financial sector. The Federal Bureau of Investigation probe of the home mortgage industry covers 21 companies, FBI Director Robert Mueller has said.
This is a pretty good read...doesn't give a whole lot of specifics but I get the feeling O'Brien is really pitching himself for bigger things. So what does he know that we don't? And when did he know it? Hopefully Sen. Dianne Feinstein is keeping tabs on him.....

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