U.S. Considers Takeover of Two Mortgage Giants

[HuskyCaucasian]

Via the NYTimes:

Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are 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, people briefed about the plan said on Thursday.

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The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.

 

Under a conservatorship, the 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.

 

I cant even begin to tell you how icky his makes me feel.

[Texsox]

Too big too fail. It would cripple the economy if the US allowed them to fail. But none of their officers and senior management should come out of this with any sort of bonus, golden parachute, etc.

[mr_genius]

Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are 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, people briefed about the plan said on Thursday.

Skip to next paragraph

 

The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.

 

Under a conservatorship, the 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.

 

All horrible ideas.

[StrangeSox]

I love the idea of paying for a bunch of other people's horrible decisions. Nothing like tax-payer bailouts for everyone!

 

And I think you're kidding yourself if you think senior management is going to walk away with nothing.

[Cknolls]

Too big too fail. It would cripple the economy if the US allowed them to fail. But none of their officers and senior management should come out of this with any sort of bonus, golden parachute, etc.

 

 

Like James Johnson, Franklin Raines, and Jamie Gorelick? The latter two should be prosecuted like the Enron boys for the accounting tricks that occurred on their watch.

[Cknolls]

Freddie is likely to get approval to register with the SEC and raise $5.5 billion.... and the stock is UP $1.14 now. F***ing insane. The SEC is not allowing shorting in these 19 stocks so they can raise capital and dilute their shareholders. It is pretty apparent the FED cares not a lick about the shareholders of these companies. The credit markets are NOT BUYING IT, and they are usually more realistic about deteriorating fundementals. The stock market is emotional. As I have been saying in here for quite a while, it is only a matter of time for nationalization of FNM and FRE.

[southsider2k5]

That is just depressing. Can you imagine having to go through government red tape to buy a house? The process already sucks enough, this would be horrible.

[Balta1701]

That is just depressing. Can you imagine having to go through government red tape to buy a house? The process already sucks enough, this would be horrible.

Hmmmm....

 

 

Extra couple forms to fill out complete meltdown of our banking and financial system leading to global recession.

 

[southsider2k5]

Hmmmm....

 

 

Extra couple forms to fill out complete meltdown of our banking and financial system leading to global recession.

 

A couple of extra forms? HA! Now that is funny.

 

We are talking about the federal government here. The same groups who brings you things like passports, social security, welfare, medicade, and all of those "couple of extra forms" offices that are so effecient and clean. I'd be willing to bet that a government run agency for this stuff would double the average time required to close on a house.

[Balta1701]

A couple of extra forms? HA! Now that is funny.

 

We are talking about the federal government here. The same groups who brings you things like passports, social security, welfare, medicade, and all of those "couple of extra forms" offices that are so effecient and clean. I'd be willing to bet that a government run agency for this stuff would double the average time required to close on a house.

You know, I really do consider this argument fascinating. Take a look where we are now. We're in a gigantic mess triggered by lax regulation of the mortgage industry. We're about to have to pump probably hundreds of billions of public dollars in to these organizations to bail them out because of the fact that we didn't regulate this process well enough. And we're really still in the first part of the bursting of this bubble...it's probably going to take years to fully recover if it ever actually does.

 

And yet...you're more scared of government bureaucracy, this scary thing that gets unpacked off in the distance as something that's worse than what we already have in every single case...than you are of the mess that's already been created. That's just a point of view I can't subscribe to...I just can't point at the implosion of a huge swath of the economy leading to gigantic government bailouts and think...."Well, at least it doesn't take twice as long to close on a house because the government isn't involved".

 

If it would have prevented the mortgage bubble from growing and bursting...I don't see how doubling the average closing time is that much worse than the economic chaos we're seeing now.

[southsider2k5]

You know, I really do consider this argument fascinating. Take a look where we are now. We're in a gigantic mess triggered by lax regulation of the mortgage industry. We're about to have to pump probably hundreds of billions of public dollars in to these organizations to bail them out because of the fact that we didn't regulate this process well enough. And we're really still in the first part of the bursting of this bubble...it's probably going to take years to fully recover if it ever actually does.

 

And yet...you're more scared of government bureaucracy, this scary thing that gets unpacked off in the distance as something that's worse than what we already have in every single case...than you are of the mess that's already been created. That's just a point of view I can't subscribe to...I just can't point at the implosion of a huge swath of the economy leading to gigantic government bailouts and think...."Well, at least it doesn't take twice as long to close on a house because the government isn't involved".

 

If it would have prevented the mortgage bubble from growing and bursting...I don't see how doubling the average closing time is that much worse than the economic chaos we're seeing now.

 

The problem with Fannie and Freddy now is that the government is psuedo-involved in the first place. Its literally the worst of both worlds. The government already oversees the banks, and how did that work out? We don't regulate this stuff well enough because we let a bunch of guys who are literally taking money from these very same companies decide what their rules should be. Tell me how giving these guys more power to decide what to do with things is going to make it better. Hell there are government agencies right now that are in funding crisis's. I fail to see how making this fully governmentally controlled would make things better anyway. We have let the social security, medicare/cade bubbles go on for how long and we STILL haven't fixed them, but they are going to be on top of the housing bubble? I don't see this as accurate at all.

 

I can't think of one agency that is so well run by the government that it would inspire confidence in me that they could do any better than the private sector has done with the governments "help". Thinking just of the housing sector, do you think people would be rushing to buy bigger houses if they knew that the closing was going to be the nightmare process of say citizenship? Do you really think that will help the housing sector rebound?

[jackie hayes]

Is there anybody who thinks Fannie and Freddie are not too big?

 

It's not a position against private banking. I like the idea of making them fully public, but part of the reason I like that is because I see them becoming much less important in that scenario. You cut out shareholder interests, and you get them back to their original purpose -- providing limited injections of liquidity into the mortgage market. The private sector (properly regulated) gradually takes over much of the business Fannie and Freddie currently do, and the government stops subsidizing Fannie and Freddie shareholders.

[Rex Kickass]

A couple of extra forms? HA! Now that is funny.

 

We are talking about the federal government here. The same groups who brings you things like passports, social security, welfare, medicade, and all of those "couple of extra forms" offices that are so effecient and clean. I'd be willing to bet that a government run agency for this stuff would double the average time required to close on a house.

 

Given that a passport is actually the definition of proof of citizenship, there should be some red tape involved to getting one. Still, the process - compared to what other countries require - is pretty painless. The processing times have gotten reasonable again as well since Congress decided to fund the office to employ more than a couple hundred people to process them.

[southsider2k5]

Is there anybody who thinks Fannie and Freddie are not too big?

 

It's not a position against private banking. I like the idea of making them fully public, but part of the reason I like that is because I see them becoming much less important in that scenario. You cut out shareholder interests, and you get them back to their original purpose -- providing limited injections of liquidity into the mortgage market. The private sector (properly regulated) gradually takes over much of the business Fannie and Freddie currently do, and the government stops subsidizing Fannie and Freddie shareholders.

 

I'd love to see the government get out of the mortgage business all together. Fully privatized would be a dream.

[kapkomet]

I'd love to see the government get out of the mortgage business all together. Fully privatized would be a dream.

IMO, all the cross pollination of all the different agencies involved in everything is one of the problems that led to this "bubble burst" anyway.

 

And one more thing:

 

You CANNOT have an economy sustained on money chasing money, and that is what we've seen for a while now. Eventually, it has to collapse.

 

[Texsox]

You CANNOT have an economy sustained on money chasing money, and that is what we've seen for a while now. Eventually, it has to collapse.

 

How about an economy sustained by the government borrowing money and giving it to the citizens?

[southsider2k5]

How about an economy sustained by the government borrowing money and giving it to the citizens?

 

How many of the nearly 3 million government employees are you looking to fire?

[Texsox]

How many of the nearly 3 million government employees are you looking to fire?

As many as we cannot afford, or raise taxes to pay for them.

 

 

How many trillions of dollars in debt are you willing to take on? But I'm a conservative and this spend spend spend stuff and have someone else pay for it just doesn't sit well.