Fannie Mae and Freddie Mac
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http://www.cbsnews.com/stories/2008/07/23/...in4285043.shtml
How do you feel about American tax dollars paying off the problems that banks acquired by giving out mortgages that people weren't able to pay back?
I feel that this is a terrible, terrible system. Banks have these companies behind them that buy the troublesome mortgages. This gives banks no reason to turn down anyone who wants a mortgage. It's removing the business risk with loaning money. This seems so stupid to me. It's like gambling with other peoples money. You can't lose. -
The money is insured... They don't need to bail out the bank to make sure that people don't lose their savings. They're not bailing them out to help average joes, they're doing it to bail out people who have been making high risk investments so they can continue to make high risk investments. Apparently they aren't that high risk after all...
This kind of behavior would tear our market to pieces if it continued for another 5 years. Hopefully it stops by 1-20-09. -
QUOTE (Tom @ Jul 24 2008, 08:11 PM) <{POST_SNAPBACK}>Instead of whining about it all day. I got my money back by investing my savings into Fannie Mae stocks when they were cheap. Sold it for an extra 10g.
I wrote PA's senators... maybe it will kind of help... -
You don't think this helps out the average joe? Are you serious? If Fannie and Freddie went bankrupt we'd have a worldwide economic disaster. In case you don't know what that means, it means you, the average bloke, would be severly fucked in the short and long run.
The Fed backing up these two companies was needed, not for the rich, but for everyone. You don't let 80% of loans vanish. Think about the ripple effect. -
I might be missing the elephant here, but I do see how it would hurt people to have the companies go under. I don't see how things get better after our government sets a precedent for bailing out companies that should have failed.
I just see a series of events that created a housing bubble involving these companies. They buy loans from the bank. The bank now realizes that they can give mortgages to people with bad credit or who currently already have a mortgage. This creates the ability for people to flip houses quickly and easily. More and more people are flipping houses (thanks to the commercials that anyone who has watched TV has probably seen, "It's so easy, anyone can do it!", "I made $2500 in one day!"). This lowers supply and increases demand. The industry is booming. The price of homes finally gets to the point were no one can pay for the available homes. They try, but people don't make enough money. *Pop*. Now the value of homes has to decrease.
Then I see them begging for help when they had to have known that they took on way too much more than they could handle. They are a private business that deals in RISKY loans. Whose idea was it to buy all the risky loans from the bank. That's asking for your business to fail. Then when it does, you can claim ignorance?
The only people I see possibly prospering in this issue are the people at the top of these companies. Why the hell can they get rewarded for making BAD business decisions. -
Jedd- I think they have been punished in a way. These companies stock prices have been murdered in this mortgage crisis and if they had not agreed to give loans to people who couldnt pay for it then their stocks wouldnt have gone down as much. That means that they should be weary of doing the same thing over again as their stock will be punished and their net worth will go down.
And I think we definitely need to bail Freddie and Fannie out considering they back almost 50% of mortgages in the United States. Actually:
http://www.iht.com/articles/2007/06/05/blo.../bxmortgage.phpQUOTEFannie Mae and Freddie Mac finance about 40 percent of the $10.9 trillion of U.S. residential mortgages. More than $6 trillion of mortgage bonds are outstanding, making it the largest debt market in the world and about 50 percent more than the amount of U.S. Treasury securities. The prices that investors pay for the bonds help determine the rates lenders charge consumers. -
QUOTE (mungo @ Jul 26 2008, 10:58 AM) <{POST_SNAPBACK}>You don't think this helps out the average joe? Are you serious? If Fannie and Freddie went bankrupt we'd have a worldwide economic disaster. In case you don't know what that means, it means you, the average bloke, would be severly fucked in the short and long run.
The Fed backing up these two companies was needed, not for the rich, but for everyone. You don't let 80% of loans vanish. Think about the ripple effect.
No I don't. And I'll tell you why. We're the ones who the government is taking money from to pay these guys back to make sure we still have money to give to them so they can hand it out to these guys so we can have money to give to them so they can hand it over to them. Come ON. MEANWHILE you have every single money guy on the news telling people with >100k in the banks to spread their money around so they can still have it 100% insured. If fannie mae died tomorrow you'd see a small dip in a wide range of stocks that would rebound almost instantly. And what ripple effect are your referring to? The one where when my *retarded* loan *that I shouldn't have been allowed to get* disappears and I lose my house *that I shouldn't be able to afford*? Or the one where my *highly speculative and risky* real estate investments *that have stretched my finances well beyond their means in an attempt to cash in on a volatile market* suddenly tank forcing me to declare bankruptcy and have shitty credit for 10 years?
I like this one the best:
In 50 years we're going to have to start paying back China. This will continue for 2 - 5 generations. If Fannie Mae goes under then it's because they ran their business like retards and don't deserve to be in charge of anybody's money. But we're ensuring that they'll get to keep doing it because of a bunch of economic hype that in reality amounts to a mere blip on the radar. -
I'd also like to point out that when you say that these banks are already punished just because of the stock hit: Their stocks were artificially high due to their lending and speculation practices. They aren't taking a stock hit, their stock actually reflects reality now. Life's a bitch. Now they have a bunch of pissed off investors who want the government to prop up their stock, rather than have to find competant leadership that isn't completely nepotistic bull dookie. Fuck em.
The money that WAS REAL is STILL THERE. The money that WAS FANTASY is DISAPPEARING.
As soon as this error naturally started to correct itself however in jumps our gubmint to make damned sure that our fantasy money would stick around for as long as possible so they can expect a big fat campaign check from the people who this really helps: greedy douches.
/if you are actually seeing a benefit from this, don't think I'm calling you greedy or a douche. You happen to be able to ride the coattails of the greedy douches this nonsense is trying to help.
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I got a reply from Arlen Specter (or someone that works for him). I haven't read it fully, yet. From the first couple paragraphs, it seemed to be a well thought out response. I figured I'd post it.QUOTEDear Mr. Malone:
Thank you for contacting my office regarding the current housing market and the state of the economy. I appreciate hearing from you on these matters.
On July 26, 2008, the Senate voted 72-13 to send the Housing and Economic Recovery Act of 2008 (H.R.3221) to the President, which was signed into law on July 30, 2008 (P.L. 110-289). I supported this legislation, which was enacted in response to the increase in home foreclosures across the country. It includes provisions that seek to stabilize and improve our nation's economy and housing market.
The Act creates a temporary program allowing the Federal Housing Administration (FHA) to insure up to $300 billion in new, refinanced mortgages where the lender has agreed to reduce the principal amount owed to no more than 90% of the appraised value of the home. This new program is expected to help over 400,000 homeowners across the country who are facing foreclosure because their home is worth less than the amount owed. To protect the taxpayer, this program is funded through excess proceeds from fees levied on the government-sponsored entities (GSEs), Fannie Mae and Freddie Mac. As this temporary program is phased out, its funding mechanism will be used for the creation of an affordable housing trust fund that will promote the availability of rental housing for low-income Americans unable to buy homes.
A temporary increase in the conforming loan limit was provided in the Economic Stimulus Act of 2008 (P.L. 110-185), and the Housing and Economic Recovery Act of 2008 permanently increases the limit to $625,500 in high-cost housing markets. A list of markets affected is available online at http://www.ofheo.gov/media/hpi/AREA_LIST.pdf. Increasing the conforming loan limit allows the GSEs and the FHA to reach more homeowners seeking to purchase, refinance or sell a home.
The Act provides additional temporary incentives and protections for homeowners and potential homebuyers. A first-time homebuyer tax credit of up to $7,500 is included in the Act, which serves as the equivalent to an interest-free loan to be paid back over 15 years. Under the new law, lenders must wait at least nine months after the period of a service member's military service before starting foreclosure proceeding. Additionally, lenders may not raise interest rates on mortgages within one year from the time a homeowner returns from active military duty. For those homeowners taking the standard deduction on their 2008 federal income taxes, an additional deduction of $500 for individuals or $1,000 for couples is available. The package also provides states an extra $11 billion in tax-free municipal bond authority to finance low-interest loans to first-time buyers, to construct low-income rental housing, and to refinancing subprime mortgages.
The Act lays out increased oversight of the GSEs to ensure that they have sufficient levels of capital to cover potential losses as a result of defaults in the mortgages that they hold in their portfolio. Unfortunately, it has become necessary for the federal government to be given authority to take an equity stake in the GSEs and to increase its loan authority to the GSEs, if the need arises. This authority, which expires on December 31, 2009, is subject to the federal debt limit.
Again, thank you for contacting me regarding the current housing market and state of the economy. Your views and the views of our fellow Pennsylvanians are of great importance to me. Should you have any further questions or concerns, please do not hesitate to contact my office or visit my website at http://specter.senate.gov.
Sincerely,
Arlen Specter -
I LOVE this: A first-time homebuyer tax credit of up to $7,500 is included in the Act.
If you can pay 20% of your homes price in the down payment, you aren't required to pay for Private Mortgage Insurance (PMI).
PMI can amount to over 40% of your homes value over the life of your mortgage, which is fucked up. So if you're house costs 150k total, you owe 30,000 and another 7.5k would drop that to 22,500 which is manageable for millions more first time homeowners (like who I plan to be in 5 years). Reducing the number of PMI mortgages would go a long way towards setting this housing crisis on the right track IMO. The rest of that seems like lip service. "Look at all we've been doing that won't do much of anything" kind of statements. IDK if the tax credit is just part of that lip service that happens to make sense, but I like it regardless.
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