Obama aims for sharp drop in gov't-backed mortgages

[Joanne98]

Source: Reuters

The Obama administration has plans to reduce the role of government backed mortgages, including Fannie Mae and Freddie Mac to less than 50 percent of the market from a dominant role today, CNBC reported on Friday.

Treasury spokesman Steven Adamske said he could not confirm that figure, though he said the administration does consider the government's current role in housing to be too high.

"We are looking at how to transition from a government having too big a footprint in the marketplace to one that has the private sector playing the dominant role" in the mortgage market, Adamske said in response to a question about the CNBC report.



Read more: http://www.reuters.com/article/2011/02/04/us-usa-housing-idUSTRE70R80420110204

---

If Republicans screw up people's Fannie and Freddie loans there will be a "day of rage" here in the good ole USA!

[Dawgs]

1. "Republicans screw up people's Fannie and Freddie"

Looks like Obama is the one making the cuts.

[DJ13]

2. Obama, Republicans, .......its getting hard to tell the difference

[SammyWinstonJack]

13. It really is.

[pnwmom]

19. The Republicans have vowed to repeal the healthcare bill.

The Republicans opposed repealing DADT.

The Republicans oppose women's right to choose, even in the case of rape, incest, and risk to the mother.

The Republicans are attacking Social Security and Medicare.

The Republicans never support increases in minimum wage.

The Republicans don't believe in global warming.

If you can't tell the difference, you're not paying attention.

[saras]

20. There's a difference between Republicans and nutjob teabaggers

"The Republicans opposed repealing DADT."
Not necessarily - this is a teabagger position shared by some but not all Republicans

"The Republicans oppose women's right to choose, even in the case of rape, incest, and risk to the mother."
Most republicans will own up to this one, though some prefer to conceal it behind other philosophical positions, like applying 'free market' principles to medicine.

"The Republicans are attacking Social Security and Medicare."
As are far too large a number of Democrats.

"The Republicans never support increases in minimum wage."
The AFL-CIO website quotes (but doesn't link to) a study claiming 51% of Republicans support an INCREASE in the minimum wage, as of Oct. 2010. And in 2005 Santorum proposed raising the minimum wage.

"The Republicans don't believe in global warming."
Teabaggers again. Republican businesspeople are planning to make billions off of global warming - it's in their interest that their stupid followers don't believe in it, but the policymakers are acting like they do.

"If you can't tell the difference, you're not paying attention."
I can tell the difference - Obama occasionally says 'progressive' sorts of things, and even supports progressive social causes occasionally, while acting economically like a conservative republican in the large majority of instances.

[Dominic]

21. You are right.

NT

[pnwmom]

23. The majority of elected Republicans took all those positions.

Teabaggers or not.

[enough]

3. They are about to give another great big gift to the banks. Banks will become the new GSEs.

http://www.nakedcapitalism.com/2011/02/wall-street-co-opting-nominally-liberal-think-tanks-banks-lobbying-to-become-new-gses.html

From Naked Capitalism (much more at link):

Wall Street Co-Opting Nominally Liberal Think Tanks; Banks Lobbying to Become New GSEs

snip>

You can read the Fannie/Freddie “reform” plan for yourself. Effectively all this proposal does is move Fannie’s and Freddie’s activities to new private entities that will have bigger loss cushions and and an explicit government guarantee. It thus preserves the incentives that led to their being placed in conservatorship in the first place, namely, socialized losses and privatized gains.

It is takes a wee bit of unpacking to depict accurately the multiple levels of hypocrisy involved in this initiative. First, the banking industry has long attacked Fannie and Freddie for distorting the mortgage market. Now they come hat in had to the government hat in hand wanting to be the GSEs.

Actually, that characterization is too kind. They are pushing for a better deal than the GSE had. They want the new entities, which they call to be fully privatized (they are called “Chartered Mortgage Institutions”, while the GSEs had an ambiguous public/private role that became more private over time, and they want an explicit government guarantee, while the old GSE had an implicit guarantee (actually, their documents declared loudly that they were not government guaranteed, but the reassurance of government officials to important foreign investors led them to demand that the US stand behind the guarantees).

The government would guarantee that in the event of the failure of the CMI investors would continue to receive timely payment of principal and interest on CMI guaranteed mortgage-backed securities that meet product structure, underwriting, and securities structure standards. The government guarantee would be explicit and appropriately priced, and the proceeds would be held in a Catastrophic Risk Insurance Fund.

Now the way the banks profit from all this is covered by a fig leaf. The CMIs would not be owned by originators, save through a “broad based cooperative structure”. Um, given how concentrated the banking industry is now, with 10 banks controlling 70 percent of the deposits in the US, who are we kidding? “Broad based” is likely to mean “little banks take token interests”.

snip>

[ProSense]

5. The problem is the the government got saddled with a lot of bad loans. Still that's

some criticism from Naked Capitalism, and the alternative suggested is questionable:

For instance, we featured a vastly simpler plan here, one from John Hempton, which was later endorsed by Floyd Norris at the New York Times, and it’s actually pro-market as well. Just raise Fannie and Freddie fees gradually over time. That will eventually result in mortgages being priced so that it makes sense for private parties to offer them. Hempton also pointed out (boldface ours):

Every proposal for the government to get out of Fannie and Freddie is in reality a proposal for the government to get out of only a bit of Fannie and Freddie.

For example: if you are a business that likes managing interest rate risk you want Fannie and Freddie out of the interest rate risk management business but you want them to stay in the credit risk management business. You would prefer the government take the risks that you don’t want. And moreover you would prefer they took it at the lowest possible price.

The worst proposal out there (much worse than doing nothing) comes from Phil Swagel and Don Marron. They propose that the government exit the interest rate risk management business (the only business at Frannie that never lost money) and allow ten or so new competitive companies with government guarantees to compete with each other to sell government guarantee of credit risk. That means that credit risk (the risk that blew up the system) will be priced as close as possible to zero with the government wearing the downside. I can’t see that Swagel and Marron learnt anything from the crisis.

Note that the plan the Center for American Progress recommends looks virtually identical to the plan Hempton deemed to be worst. Now that stance may look unprincipled, but it’s a tad more complicated.

<...>

Norris:

<...>

I should note that Mr. Hempton stands to benefit if his idea works out. Presumably it would increase Frannie’s profits while it was raising rates and still writing a lot of insurance, and they might be high enough for long enough to allow it to buy back Uncle Sam’s ownership. If that were to happen, and the profits kept coming, Frannie might be able to pay dividends on preferred shares that were sold long before the crisis erupted. Those dividends are not cumulative, meaning that there are no back payments owed, but simply resuming them would be a windfall for Mr. Hempton, who bought some of those preferred shares for about a penny and a half on the dollar.

That could happen, and probably is more likely than the possibility that I will win the Powerball lottery next week. But perhaps not by much.

The mortgage industry, and much of Wall Street, wants to keep a government guarantee available for nearly all mortgages. It will be interesting to see whether the Obama administration, and the Congress, are willing to seek a way to avoid that.

[madrchsod]

7. yup...the last thing the banks want to do is to assume debt

[Autumn]

4. Is there anything he will not do for these fucking banks?

Christ on a crutch.:banghead:

[ProSense]

6. Have you seen the proposal?

Reforming the two agencies has long been a goal. Still, why do you assume this is a benefit to banks?

<...>

Sources cautioned, however, that changes to the plan could yet be made in the week before its release.

The long-awaited plan to restructure the two agencies, taken over by the government amid the financial crisis of 2008, was required as part of the Dodd-Frank reform bill passed last year.

link

Sounds like people are speculating, again.

[Autumn]

8. I read the links in post #3 . This is what hit me

"You can read the Fannie/Freddie “reform” plan for yourself. Effectively all this proposal does is move Fannie’s and Freddie’s activities to new private entities that will have bigger loss cushions and and an explicit government guarantee. It thus preserves the incentives that led to their being placed in conservatorship in the first place, namely, socialized losses and privatized gains."

I followed the "pink" link to the proposal and read it, therefore my question. I don't do your little "blue" links.

Sounds like people are spinning, again.

[ProSense]

9. "I don't do your little 'blue' links."

The Obama proposal hasn't been released. Thanks for the announcement regarding "blue links."

[Autumn]

11. Your welcome. You asked if I had read the proposal.

I told you I read the one in the link. If you read it it takes you to a PDF. I looked through it.

Now if you read the original OP, which part do you not understand?

QUOTE


The Obama administration has plans to reduce the role of government backed mortgages, including Fannie Mae and Freddie Mac to less than 50 percent of the market from a dominant role today, CNBC reported on Friday.

Treasury spokesman Steven Adamske said he could not confirm that figure, though he said the administration does consider the government's current role in housing to be too high.

"We are looking at how to transition from a government having too big a footprint in the marketplace to one that has the private sector playing the dominant role" in the mortgage market, Adamske said in response to a question about the CNBC report.

Not being sarcastic but I think that pretty well explains it.

[Moosepoop]

12. "Pink" link?

That's odd -- all the links on DU appear blue to me -- that is, until I click on any given one, then it appears pink (actually a kind of pinkish purple) on my monitor. This feature illustrates which threads, links, etc., I have already clicked on and which ones I haven't.

It's a good thing I don't live in fear of "blue" links on DU -- I'd never be able to read anything! ;)

[Autumn]

14. Really? When I went to the links on post # 3 they were pink

LOL, I don't live in fear of blue links, I just don't click on little blue blind links. I consider any blind link to be a waste of my time, I clicked on them a few times but when it went back to that persons post I decided why bother with it, it wasn't worth reading the first time.

[Moosepoop]

15. At least you're not seeing pink elephants

(are you?)

[Autumn]

16. Not yet

Maybe later.

[sendero]

17. With the GSEs doing it.

.... it is an EXPLICIT government guarantee (and Fannie/Freddie is hundreds of billions in the hole right now BTW), if it is a bank at least there is a CHANCE the taxpayers won't be on the hook.

[high density]

24. The fucking banks set these organizations up for failure

by making all these bad loans and then selling them to Freddie and Fannie. The banks will have to take more risk now, and that should make them put the proper due diligence into the underwriting process.

[Name removed]

10. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Bigmack]

18. Why not have ONLY government loans...

for homes..... inspection of the property, checking the finances, lending the money, holding the mortgage... the whole works.

The banks and mortgage thieves have proven they can't handle this thing.... not honest enough... not smart enough.

By agreeing to lend the buyer a certain amount on first homes, a lesser amount on any subsequent houses. With a government evaluation of how much the home is actually worth, speculation and housing "bubbles" would simply not happen.

The banks....? Fuck the banks!

[cali]

22. Gov't, alas, is just as inept.

and yes, frequently, corrupt.

[Bigmack]

25. Social Security is inept/corrupt?...

If Medicare is inept, it's because of the fraud perpetrated by the medical/insurance community. FHA worked pretty well.

Tell you what.... the banksters and the brokesters have had their shot at it for 30 or 40 years... let's give government home loans a try and see how it goes for 30 or 40 years. Then we can compare.

Or we can stick to the system that gives us booms and busts and lines the pockets of the crooks.

[Hawkowl]

26. I'll never vote for Obama again

He is a classical Republican. Not one of the new breed teabagger/neonazis, but of the old Herbert Hoover/Richard Nixon type Republican. He can suck on it if he thinks people are going to turn out the vote for him in 2012.

[amandabeech]

28. Richard Nixon supported the negative income tax.

Taxpayers who didn't make enough money were supposed to get a refund that would put their disposable income at a level that would let them live decently.

Nixon was crooked pond scum, but he wouldn't be allowed in the Republican Party today with his economic views.

Now Hoover was supposed to have been honest, but willing to see Americans starve for economic theories that didn't work then and don't work now--see how the British economy is cratering from the kind of austerity that Obama and his Wall Street friends want to push on us now.

[fascisthunter]

27. Is he a Republican or what?