The Fannie And Freddie Bailout, In 10 Easy Links
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IT IS VERY DISAPPOINTING TO KNOW THAT ONCE AGAIN WE THE TAXPAYERS OF AMERICA HAVE TO TAKE THE BURDEN OF ANOTHER FINANCIAL BAILOUT TO A INSTITUTION THAT WAS SUPPOSED TO BE MANAGED TO THE ETHICAL PRINCIPLES OF DOING GOOD BUSINESS. I MYSELF WAS TELLING MY FAMILY AND FRIENDS ABOUT THE WAY REAL ESTATE COMPANIES AND BANKING INSTITUTIONS WERE ALLOWING PEOPLE WHO COULD NOT AFFORD THE PROPERTIES THEY WERE BUYING. THIS WAS ABOUT 3-4 YEARS AGO. NOW WE ARE ALL SURPRISED ABOUT THE SITUATION THE REAL ESTATE AND MORTGAGE INDUSTRIES ARE IN? THE GOVERNMENT KNEW ABOUT THESE LOANS COMING DUE, AND WAS HOPING THE PEOPLE WHO PURCHASED THESE PROPERTIES WOULD BE ABLE TO HANDLE THE NEW PAYMENT BECAUSE EVERYONE IS SUPPOSED TO IMPROVE THEIR INCOME. BUT AS WE ALL KNOW THIS DID NOT HAPPEN AND PROPERTIES DROPPED IN VALUE, OIL SHOT-UP PAST $140.00/BARREL, DROP IN EMPLOYMENT, AND SO ON, AND SO ON. I WOULD LIKE FOR SOMEONE IN THE MORTGAGE AND REAL ESTATE INDUSTRY TO ANSWER THIS QUESTION; WHY DID YOU MOVE AWAY FROM A PRACTICE OF ALLOWING ONLY PEOPLE WITH 10-20 PERCENT DOWN, AND GOOD CREDIT RATING TO PURCHASE A HOME? IT'S A SIMPLE QUESTION BUT NO ONE HAS ASKED THEM. THEY ALLOWED FOR THESE PEOPLE TO PURCHASE A HOME WITH ONLY 3-5 PERCENT DOWN AND SHADY CREDIT SCORES. IT SEEMS TO ME THAT THEY SHOULD BE THE ONES TO HAVE TO PAY FOR IT AND THAT WE THE TAXPAYERS NOT PAY A DIME FOR SOMETHING THEY KNEW WOULD OCCUR. ALSO, BECAUSE THE BANKING INDUSTRY IS FEDERALLY INSURED, I GUESS THEY ALSO KNEW THEY WOULD GET BAILED-OUT. I WISH I WENT TO THIS SCHOOL SO I TO CAN LEARN TO GET PAID FOR MAKING BIG-BIG MISTAKES AND THEN BE ABLE TO LOOK YOU IN THE FACE AND SAY YOU NEED TO PAY ME SERVICE CHARGES WITH THAT TRANSACTION. JUST ONE DIVORCED MAN, SINGLE FATHER OF 3 DAUGHTERS OPINION.LATE.
Dear NPR, I've been folling this issue with interest but there are still some basic concepts that elude me. Was the over-issuing of mortgages like what national leaders did when not regulated - just print more money? When a government prints more money, it is bargaining that it's reputation of creditworthiness will bolster the street value of the bills. We know that is only a short term solution.
In the case of mortgages, a mortgage is like a dollar bill, and financial institutions wanted "more money" i.e., more mortages to play with, so they simply "printed more."
If this analogy is not quite right, plese correct it to show me what's really going on.
The lack of regulation, given that I can understand what's going on, indicates that names should be named, and policy's promoted by honchos like Alan Greenspan should be condemned.
Edith Johnson
Jakarta, Indonesia
Interestingly, the CEO's of both Fannie and Freddie netted *bonuses* of over $3 million last year as they drove the companies down the drain. This is obscene; the government should recall those bonuses!
Amen to Dave Klassen's comments above. There are many, many out there who made money on these loans without having to bother with collecting the payments. They loaned the money in the full knowledge that THEY would never have to collect a dime of the money back. Deregulation and the current administration's desire to redirect tax money to their friends have proven a costly combination to the American taxpayer.
Why is there so little interest in examining the parallels between the past savings & loan scandal; and the federal bail-out that followed; which happened near the end of the old G.H.W.Bush administration, and the present mortgage market scandal and federal bail-out now happening: at the end of the G.W.Bush administration.
Is it possible that neither president actually understood the need for carefully-regulating our credit system? Or were both simply surrounded by too many corrupt-scoundrels?
It is time to seriously look at solid and functional regulation. We hear so often that "free markets" will cure all, and that regulation only hampers these markets. Time and again, these "free markets" fail us - Savings & Loan, Energy (Enron), Mortgages, Credit Cards(?), health care - essentially due to greed, corruption, ignorance and the demonizing and complete absence of intelligent and forceful regulation. "Free Markets" are never free - they simply favor some over others. It is time to polish the word "regulation" and put it in its rightful place, hand-in-hand and side-by-side with Free Markets to balance them.
HOVV is this take over going to affect the mortgage rates ? for those of us ready to re-mortgage? is it better to take a month to month mortgage and VVait for lovver Rates if any?
There are people responsible for this, and at several levels. First and foremost are the crooked managers and greedy consumers who willingly assumed huge amounts of risk that they knew they could never repay, and got rewarded for that.
Second, are the elected representatives (senators and representatives) who created Fannie and Freddie to push the pedal to the metal and drive rates lower, to get a happier voting public.
Finally, there is the public that voted in these clowns and will in all likelihood continue to keep them in office, well-fed and obscenely compensated for wrecking the nation.
There is a solution, merely vote against incumbents, regardless of party, each and every time you vote.
Otherwise, the people should be happy with their lot -- after all, they are responsible for it.
I understand the need to provide stability to this market and to bail out the Chinese Central Bank, but why do the Republicans always spout that they are the Party of less government and then do the exact opposite. As a SMALL shareholder of Freddie I get clobbered, the Chinese get saved, and the Republicans get away with more BS about what they stand for...
You keep using the grandiose appellation "share holders" in describing those who lose money in the "Fanny/mac" bailout. What about we simple 401K working class pensioners, what do we stand to lose? Give us a figure to think about when we vote.
Cal Gardner
Richmond, Virginia
You keep using the grandiose appellation "share holders" in describing those who lose money in the "Fanny/mac" bailout. What about we simple 401K working class pensioners, what do we stand to lose? Give us a figure to think about when we vote.
This is indeed very sad. The is socialism for Corporations and Wall Street. No safety net for the hardworking tax payers. Golden Parachute for the CEOs of Fanny and Freddy ... everyone else you are on your own.
This just adding fuel to the fire. Now home prices are going to move higher once again and become even more unaffordable for the working class (.. this tax payers ...). Home flippers will recover their money and the working class will be left holding the bag. Now everyone is in the soup.
The issue that the loose lending standards and low interest rates have push home prices to unsustainable levels. This state of home pricing will not be fixed by this action. Housing prices must correct or they threatens to destroy the quality of life of all middle class working Americans for this generation and all future generations. This action will probably might make it easier of Secretary Paulson's kids to buy a house not my kids.
Why not let the chips fall where they may. For people holding the mortgage backed securities of Fanny and Freddy .... Caveat emptor !!!!
l read today that the CEO of Freddie Mac and CEO of Fannie Mae will be let go" with $9 million and $13 million respectively. If I make poor decisions in my business and it fails then my income reflects this. Why are taxpayers funding these Bonuses?
Taxes and death are shared by all. But not home ownership. It is reserved for a minority. Yet, the gov't has decided that all taxpayers should share in the bad business of the nation's banks.
I think it is worth mentioning that the complexity of some of the mortgage loan agreements is a contibuting factor to the problems faced by the average home owner. Many of these agreements share similarities to credit card agreements with multiple conditions buried in the fine print in favor of the mortgage companies. One can take the "buyer beware" argument, but some semblance of fair play should also govern the ethics of the lender. It is this kind of "screw them if you can" attitude that nearly drove our country into a socialist revolution during the Great Depression. I would just suggest to the small percentage of companies out there who act with this irresponsible attitude that there is eventually a price to be paid.
Voting against incumbents isn't going to solve anything. It's a matter of educating the public and motivating people to become interested in what is going on. Maybe this crisis will encourage people to become more invested in politics and their government, maybe more people will take the time to get to know the policies and principles of government officials and candidates. There needs to be discussion throughout this country- from the cafe to the corner office and from the street corner to the school house- about governmental policies and regulation, about candidates and elected officials. People need to get educated. Our ignorance is what is killing us.
The GOP is taking advantage of that ignorance. Sarah Palin is being used as a political tool in order to avoid talking about what really matters and instead to direct the conversation to what matters least. The mobilization of the religious right is a brilliant campaign move but it certainly isn't a democratic one.
If you weren't facing foreclosure last week, you could be in danger now.
The news media is hailing the bailout as the savior of the economy. But let me ask the question that no one else seems to be asking... WHERE IS THE MONEY COMING FROM?
The recent government bailout of Fannie Mae and Freddie Mac is not designed to protect the homeowner, but to support Mortgage-Backed Securities by pledging public dollars. In plain language, the government's plan is to use taxpayer's money to support the damaged mortgage giants, and will sell MBS's on the open market to the highest bidder. Taxes could go up on everything across the board, making it impossible for those living on a fixed income or barely surviving paycheck to paycheck to climb out of the hole.
Yesterday on CNBC, Treasury Secretary Henry Paulson said "we obviously don't know" when asked how much the takeover could end up costing taxpayers. He said that will depend on how quickly the housing market turns around.
If the housing market continues to decline, this could mean tens of billions of dollars to John Q. Homeowner -- money that is already stretched to the limit by increased food costs, rising gas prices, and declining house values.
Despite the optimism caused by a global stock rally, it could take a long time to work through that process given all the issues facing housing at the moment: the severe decline in home prices, increased foreclosures dumping more homes on an already overstuffed market, and the unemployment numbers.
Meanwhile, as Fannie and Freddie executives walk away with huge severance packages, the homeowner struggles to make ends meet.
shareholders of Fannie/Freddie were blindsided. They should not have done it over the weekend.
I worked for FHLMC (Freddie Mac) in 1988 and for the RTC (Resolution Trust Corporation) from 1991 to 1993. Previously, I traded mortgaged-backed securities in NYC for a couple of investment banks. One of my favorite quotes during that time came from a colleague at the RTC. As we were selling mortgage assets from banks in 'conservatorship', he said about the investment bankers and traders, "Here come the vultures for a second helping!" What amazes me is how these entities and people how run and manage them, get away with creating the very problem while making money doing it and then get to make more money cleaning up the mess that they had first created? How much money did the CEOs make when they ran FNMA and FHLMC and how much were they given when they were fire? And why instead are they not jailed or at least made to pay back their compensations that were based on profits that were not real?
Anyone who listens to "The Giant Pool of Money" (see link #3 above) can see that the loans that are causing the trouble were a fraud and a cheat to begin with. No honest and competent lender would have made them.
And if the true nature of those loans had been made clear, no investor would have bought them or bought packages or derivatives based on them. Who would buy a security backed by a scam mortgage issued during a bubble? Yet somehow the loans ended up in packages bought by investors all over the world.
If a reporter for "This American Life" radio show could find out what a scam these mortgages were, why didn't the rest of the investment world know about it?
The real question is: Exactly who hid the risk and how did they hide it? And who was supposed to be monitoring this market and preventing such a scam from mushrooming into a massive explosion that almost stops the world's credit markets?
Until these questions are answered and effective laws and regulations are passed, we can look forward to more of the same.
Unfortunately, looking back at prior adverse outcomes of programs poorly or illegally directed such as our Savings & Loan problems of the past do not remedy the current problem. Our current crisis seems to have its' roots in concept that Americans have an "entitlement" to home ownership that has no consitiutional basis. Congress mandated the aggressive lending practices that are now the essence of the underlying problems of this years' crisis.
Next years' crisis will probably be how to fund the Social Security deficit. That acturial deficit has been created by prior congress' wanted to create entitlements for cadres' of recipients who were not contributors to the system. That is a failure of our congress to properly account for programs they wish to initite. If they want to fund specific entitlements, specific funding needs to be put in place from contemporary and not future budgets.
I would urge all readers to contact their congress persons to encourage responsible (without excessive) involvement of government and further a restoration of responsible lending practices that built the stable portion of our mortgage lending industry prior to the mandation of excesses by congress.
if US Govt takes over f&f, then would it be Obama who 'evicts' the non-paying "home owners" if elected?
I guess I need a tutorial ... while there is speculation on the part of stock holders aren't the real speculators those that bought mortgage-backed securities? why are stockholders the ones to take the first and biggest hit? how is this not a bail out when holders or mortgage-backed securities are going to get their money whole?
I'm sure my numbers are off a bit, however:
- The US economy, specifically its GDP, is around $12-13 Trillion in size, annualized
- Our pre-existing National Debt stands at around $10 Trillion or so
- With these announced takeovers, the US Government (read: the taxpaying public) assumes Fannie's and Freddie's debt obligations of around $5 Trillion
Adding these numbers, $10 Trillion + $5 Trillion = (~ $15 Trillion) in aggregate debt, to our approximate GDP, and you get a liability exceeding the assets of around $2-3 Trillion.
I'm not an economist, but doesn't this action place the Sovereign Government of the United States into insolvency? Read: the US in now technically bankrupt.
While it is true that the US has never defaulted on an sovereign obligation, it IS true that printing more money to pay off this debt while result in an economic death spiral that will only hasten this Country's already eroded position on influence in the World.
I understand the conservatorship issue.
What I don't understand is the continuous parade of Victim Stories the papers are wallowing in.
These 'Victimized Borrowers' willfully signed a dotted line to get at an easy Quarter of a Million dollars in their Bank acct-- That's what $200 to $300 thousand dollars is: A Quarter of a Million!
and they hoped that there were no strings attached!
And now all we hear are cries of 'Victim' and "Oh Woe is Me". They WILLFULLY borrowed more money than they ever had any intention or ability to pay. And it is THEIR fault that their families are being put in the street.
FORECLOSE THEM! They can rent an apartment.
I'm sure my numbers are off a bit, however:
- The US economy, specifically its GDP, is around $12-13 Trillion in size, annualized
- Our pre-existing National Debt stands at around $10 Trillion or so
- With these announced takeovers, the US Government (read: the taxpaying public) assumes Fannie's and Freddie's debt obligations of around $5 Trillion
Adding these numbers, $10 Trillion + $5 Trillion = (~ $15 Trillion) in aggregate debt, to our approximate GDP, and you get a liability exceeding the assets of around $2-3 Trillion.
I'm not an economist, but doesn't this action place the Sovereign Government of the United States into insolvency? Read: the US in now technically bankrupt.
I realize that the US has never defaulted on its sovereign debt, however, printing money to pay off these obligations only contributes to this country's ongoing economic death spiral that will only contribute to this Country's already eroded influence in the World.
Note to Dodd--
The time to QUESTION the Fed's lies about Fannie would have been before you crammed this open check legislation down the throats of the TAXPAYERS!!
You knew good and d@#$ well that Paulson was outright lying about the condition of the GSEs, and you knew it was all going to get dumped on the very people you are sworn to represent!!
How dare you try to question it now, when nothing can be done!!
I will be voting EVERY single incumbant out of office in the next election with the exception of Bunning and Paul who were the only two with the morals to stand up to this horrific bail out!!
It is easy to vilify the banking industry but there are also plenty of individuals I know who signed on the line knowing that they were commiting fraud since they were already in debt over their heads when they borrowed the money in the first place. The idea that remorgaging your home at 125% of its value to pay off delinquent credit cards that you were paying 25% interest on was a financial train wreck that the entire financial industry kept kicking down the road until it finally landed on the tax payers door step. There is no surprise in this news, just a repeat of history.
The U.S. needs an effective and efficient secondary market to provide liquidity, expand homeownership and keep mortgage rates low. The problem at Freddie and Fannie was mainly caused by good old American "greed".To increase sales and bigger compensation, the companies started buying below grade "A" paper. The regulators and board of directors were aspleep at the wheel. The mortgage crisis did not happened overnight, it started several years back, but now one was looking while the players were making big money. Runing the companies as a short-term business instead of looking at the long-term investment they were making and possible consequenses. Everyone was making big money that was involved in getting us where we are today: Fannie, Freddie, MBS investors,mortgage orignators, Wall St., relators, and yes, the homeowner getting into a house they could not afford or qualify for. Why, because everyone assumed they were passing on the risk for the high risk loans to someone else...until the party ended. I would like to see some of the money recovered from prior CEOs and officers at both Fannie & Freddie that got outrages salaries and compensations while they were destroying and disrupting the whole morgage industry. And don't forget the others, Wall St. firms selling the securies backed by low grade loans and the big originators that sold the loans to Fannie and Freddie. The large investors should also take a hit, you don't buy risky securities with high yields and not expect some losses. We need people with high ethics and more accountability to run Fannie/Freddie.
This bailout will be larger than we are being told. The result will be inflation that The Fed will not be able to control. This is a non-partisian issue. ALL our govt is at fault - for almost two decades politicians of both parties have been bragging about how, under their party's leadership (whether that be Executive or Representative), more people own homes than ever before. Both presidential candidates support the bailout.
Fannie Mae Chairman Stephen Ashley, ex-Chief Executive Officer Daniel Mudd and two other former executives were accused in a shareholder lawsuit of misleading investors about the mortgage company's finances.
The suit, which was filed yesterday in Manhattan federal court by investor John Genovese, seeks class-action, or group, status and unspecified damages. It alleges securities fraud violations.
The U.S. government seized control of Fannie Mae and Freddie Mac Sept. 7, after the biggest surge in mortgage defaults in at least three decades threatened to topple the companies making up almost half the U.S. home-loan market. Fannie tumbled 90 percent to its lowest since 1982 in New York Stock Exchange composite trading yesterday.
Genovese claims in the lawsuit the executives misled investors from November 2007 to Sept. 5 about whether Fannie had adequate capital. The lawsuit doesn't name the Washington-based company.
``Defendants failed to properly account for the company's impaired investments, as doing so would have negatively affected Fannie Mae's net worth,'' according to the complaint.
Fannie Mae spokesman Jason Lobo didn't return a call seeking comment.
The other defendants are former Chief Financial Officer Stephen Swad and ex-Chief Business Officer Robert J. Levin. Mudd was replaced as part of Paulson's plan and will remain as a consultant in the transition period.
The government takeovers bring Fannie, formed after the Great Depression and spun off in 1968, and Freddie, created in 1970, back under the government's fold. It's the biggest step yet in officials' efforts to grapple with a yearlong credit crisis that has caused more than $500 billion of losses and writedowns.
The case is Genovese v. Ashley, 08-cv-7881, U.S. District Court, Southern District of New York (Manhattan)
This is really great that all the CEO for Fannie and Freddie are getting a great severance pay package, while most right to work states only give their employees a customary two weeks pay. How unfair! It is obvious that this a moral hazard issue where they bear all the profits, but none of the risks while passing it on to all us. This is not capitalism.
It was obvious that the5 0% increase in housing prices in the last few years was fulled by total reckless lending practices that was backed up by the liquidity that Fannnie and Freddie provided. So much for the argument that they make housing more affordable-not so-more money only creates inflation. Alas, not all is lost, the Chinese will get their money from all the MBS they bought, and we can continue feeding our dogs the poison they sell to us.
Humm! It seems we have two fronts to fight the idea and the real.
The idea is that a free market by inference should be a fair market. After all we hear and have heard that markets should be "free and fair" by pundent and politicians alike when the US faces unfair trade rules from other nations.
The real is that "human nature" dictates that survival and social advancement is by its very nature unfair and at best regulated in order to be fair.
I agree there is a solution and some in this blog had mention son very courageous things. However, regardless if you like McCain/Palin or not that it may be time to have the courage to challenge parties from inside out and outside in and have the voices of 300 million Americans ring out just as they did over 230 years ago when they thursted for freedom from unfair taxation and unjust rule.
Peaceful change is something our nation has known every 4 years for that time since our independence. My only concern is do those who live with our borders understand this and do the ever growing number of independent voters see it as their responsibility to make sure that as long as we have a 2 party system that they have the ultimate responsibility to push for 3 things:
- A balanced congress whose members are pushed to work across the political divides or suffer removal be elections that remove "status quo".
- A willingness to not jsut restructure corporate debt, but personal debt is a way that both benefits business and the individual consumer.
- 3rd the capacity to think with the words of Thomas Jefferson "...common defense..." in mind. Meaning that rich or poort, north or south, black - white or otherwise shaded that failure of this nation is not an option. and, if we choose it as an option then we have failed to be to the world the unltimate source of hope as a new generation leaps us forward.
Finally, I remember the commmets of my father as he admonished when he said ". . . Son you cannot go where you going unless to know where you have been. . . . ." Somehow we know that were we have been is not where the Red, White and Blue wants to really go!
Thank goodness we have gotten rid of those Welfare Queens everyone was so hopped up about a decade or two ago. Imagine the mess we'd be in if single moms were still getting free bananas. Welfare Kings do so much more for our economy--
If I recall, Freddie and Fannie were both Federal Agencys and suported public lenders. When did the Agencys become private entities? Another government program to support public financial institutions was stolen by the super Rich. That has happened in other area as well. We no longer have much to say in how our country is being ruled.
I am no economist, so I wonder just WHO is getting 'bailed out' here. Is it the investors? Are they getting paid for what they think their stock in Fannie and Freddie are worth? If you invest in the stock market as a 'free market', you are free to get rich if your stocks are well placed, or lose your shirt if you make poor investments, to my limited understanding. Yet it seems like we are allowing poor investments to be rewarded. So are we bailing the Chinese 10%, as well as the other 90% investors' money? This stinks a little of corruption in my opinion. It appears to be the rich bailing out the rich in the guise of protecting the readily available home loan for the ever shrinking middle class. I agree with Rob regarding the not so free 'free market'.
I was talking with a friend of mine (a CFA) who said he had been talking with his contacts at Goldman, Credit Suisse, etc., months ago. They had all expressed grave concerns about the viability of Fannie and Freddie. It wasn't hard to deduce that with mortgages defaulting at a record pace, that someone would be left holding the bag. Well, who had the biggest bag? Fannie and Freddie. It's not rocket science. Connect the dots. (Just two dots involved, so it's a simple exercise in logic.) Yet Chris Dodd is shocked that Secretary of the Treasury Paulson would exercise the authority he asked for just a couple of months ago. (And why would he be asking for the authority?) How "out of touch" can you get?! By the way, did you know that Moody's and S&P were paid to rate the CDOs created by Wall Street Firms from those bundled mortgages? $1 Million a pop. Now, if you were in a competition to rate these financial instruments for that kind of money, do you think you'd be tempted to engage in bad behavior? And where was the SEC? The Administration? Congress? Hello? Is anybody home?!
I am sickened by how much money the CEO's were paid as they were kicked out. They should be required to pay back some of the pay they received over the last several years while the the mortgage market burned.
I don't have a problem with the government taking over Fannie Mae and Freddie Mac. If they didn't (as has been pointed out) we would be in far worse shape. I do have a very large problem with the fact that there were so many corrupt people contributing to these circumstances. They should be prosecuted, not paid millions more.
Thanks to those for putting
this "story" together: as disheartening as it is--again.
The forum for citizenship you are providing is a heartening antedote.
This bailout will help ease the housing glut by lowering the mortgage interest rates for citizens who are losing their homes. We could give provide 4% financing for 5 years for any house currently in foreclose. I bet that would clear inventory quickly, raise housing values in boarded up neighborhoods and speed general recovery. Banks could get this bad real estate off their books freeing up capital. The federal government lends money to banks at 2% interest every day in order to promote commerce. The glut in houses for sale is a major injury to the economy that can be repaired.
The housing crisis is partly the fault of the federal government. Greenspan kept interest rates too low for too long, artificially inflating the price of housing. The federal government (taxpayer) now has to help clean it up with this bailout.
It is not fair the the taxpayer has to take the risk of guaranteeing mortgages for $4-5 trillion in real estate. Once this crisis is over in 2-10 years, the government should get out of this business for good. Slice Fannie and Freddie into regional companies like they did to Ma Bell, and sell them to the private sector.
Furthermore, the mortgage interest deduction should be phased out or limited to $200,000. It is admirable to help a young family afford their first small home, but with budget deficits and huge national indebtedness taxpayers should not subsidize luxury homes with tax breaks.
...BOTH sides of the aisle are responsible for this mess. Lets not forget Franklin Raines: First Black Head of a Fortune 500 Corporation - CEO of Fannie Mae from 1999 - worked as CLINTON'S WH Budget Director, made bonuses at Fan Mae (with 2-cohorts) of $115 million - government sued him and won - recovered a paltry $3-million paid for by Fannie Mae's insurance carrier. The judgement allowed Raines and the other two executives to "keep the bulk of their riches. In 2003 alone, Raines's compensation was over $20 million. IMHO, I don't think there will be any relief from the greed, deceit and lack of charactor from those in Washington. The only remedy I see is secession for my State! What a scary word!
Dear NPR: There has been plenty of talk about the potential cost to taxpayers within the context of shoring up financial systems and the economy. But many Freddie/Fannie stockholders will be assuming huge losses that will be written-off that in turn will translate into reduced corporate tax revenues which is a form of cost to taxpayers. Is there any analysis of these write-off costs in comparison to other bailout scenarios? For instance, what if the government "bailed" out investors to the tune of what the writeoff would amount-to with the condition that the remaining losses could not be written off? Wouldn't such a scenario be a wash in terms of the cost to taxpayers while mitigating losses and thus the impact to financial systems and the economy?
It seemed to make sense to some powerful people that it was logical that housing in some parts of the country would appreciate at double digits annually, while middle-class family income was virtually stagnant.
I think that links that your links should also include Long Term Capital Management. It isn't about real estate but it is about too "too big to fail." The justification for the salvaging of Fannie and Freddie is similar, with the twist of government sponsorship.
Should The US government bail out American corporations?
Does corporate America share its profits with the tax payers? The answer is absolutely not.
Do they share the profits with their employees? The executives are paid millions.
The US Government should bail out all corporations large and small is that right? The answer is no. If it is a viable business, they can raise the money from investors, if not, let them close shop.
If the government decides to bail them out if should be at a cost (like shares in the company) where the government will make money and have a say in running the company. Even better have a public referendum where the voters decide.
Carmakers want money from the government; the financial institutions want money - where does it stop?
It is about time corporate America should learn they have to stand on their own feet. Where is corporate America financial responsibility?
They claim the government is abusing its financial responsibility; it seems Corporate America is no better. They also go to their workers to take a pay cut, is that fair? It seems the little guys are the ones that always pay the price for corporate financial abuse and miss-management.
Other corporations in the world are not asking to be bailed out - they go out of business.
Jay Draiman
PS
The corporate barracudas have no conscience they will step on anyone, stab anyone in the back and fudge the numbers to climb up the corporate ladder and receive the hefty bonuses.
As family values have declined in the last half a century so has corporate integrity and honesty, it seems that corporate America will do almost anything for the buck ($) no holes barred.
What a shame that corporate America has sunk so low.
The government is no different, honesty and integrity is a foreign language, they only serve the special interest groups. (We all know why).
What happened to the American people who placed their trust in the government? (The public officials they voted for).
We are faced constantly with another corporate or governmental scandal of wrongdoing. When is the American public going to wake up and demand an honest government and honest corporate America? Americans wake up before it is too late.
Jay Draiman
I am really scared that the recent takeovers of now AIG, IndyMac, Freddie, and Fannie are signs of a movement towards socialism. I have posted a blog with other information about this takeover. Someone please tell me it is not as bad as it sounds!
http://averagepolitics.wordpress.com/2008/09/17/government-takeover-of-banks-is-this-socialism/
Start by thanking the "Clinton Years, 8 years of peace and prosperity"...Not only did his cronies get rich from this mess that he gave a wink and a nod to so more Americans could own homes but remember that the first attack on American soil since WWII happened on Bill Clinton's watch with the first bombing of the World Trade Center..HE DID NOTHING ABOUT THAT EITHER! We need reformers in Washington, not self-centered narcissists and Texas cowboys. Vote McCain-Palin...Let's shake up Washington once and for all!
Considering that for years Senator Dodd was fighting oversight of Freddie and Fannie, I'm wondering if it wouldn't be prudent for the Democrats to replace him as Chairman of the Committee. The heads of Fannie and Freddie have rolled. Now it's time for Frank and Dodd to go find other work. They've failed in their job as representatives of the taxpayers.
From the 2003 NYT article:
"''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a s1/4ommittee that oversees the companies. ''Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.''
Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said."
