banks had to be state chartered, and there were limited interstate banks. But after the 1980s you had those walls fall down, and groups like Chase swallow up huge numbers of banks. So now the collapses are all the more dramatic.
We need to have all 50 states pass their own deposit insurance for banks operating entirely in-state.
Wall Street has dominated the United States too long- a bunch of unelected dictators. If this "Irish solution" works, then a similar one can rescue individual states that don't want to follow Wall Street down the rabbit hole.
I wonder if Defazio and the gang on the Hill have been appraised of the situation. The Bank or Ireland has US operations.
Something like a Tobin tax of 5-10% on cash transfers to foreign domiciled banks would tame the tiger. Matathir in Malaysia used a similiar measure to prevent capital flight during the Asian Economic crisis.
America has to borrow and tax more, just to pay off the interest on the money we already (over) borrowed. If you cut through the crap, and go back to simple basics, all economists agree that the first thing an individual should do to get their finances back into the black, is to pay off their credit cards, and get out from under paying the interest each month. The U.S. is no different. Instead of solving the problem by borrowing hundreds of Billions more, and assuming Billions more in interest, our first priority should be to pay off our loans, and stop paying all that interest on loans !!!
Fannie Mae and Freddie Mac are both banking institutions that originally started by an act of Congress when big government was conceived to be the ultimate answer to our economic ills. Although owned by private stockholders, Fannie and Freddie remain very different from private sector companies.
These banking institutions played a dominant role in the housing market by buying up mortgages and reselling them to investors. With approximately 5 trillion dollars of investment portfolios, Freddie and Fannie owned or guaranteed about 50% of the U.S. mortgage market - these banks have simply become too large to fail.
For years, financial experts, economists, and regulators warned Congress that both institutions were growing too large and lacked sufficient capital to protect itself against losses. Since 2001, the Bush Administration issued 34 warnings about the need to reform Fannie Mae and Freddie Mac before it caused substantial economic turmoil in the financial markets.
In April of 2001, the Bush Administration first red flagged Fannie and Freddie stating that "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."
On September 11th of 2003, Treasury Secretary John Snow recommended to the House Financial Services Committee that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.
The new agency was a recommendation from the Bush Administration for the serious regulatory overhaul in the housing finance industry. The plan was an acknowledgment of two things. First, more oversight was necessary for both institutions that have managed to accumulate over 1.5 trillion dollars in outstanding debt - averaging a 20% increase in residential debt per year. And second, the supervisory system in place did not have the tools to deal effectively with the size, scope, and complexity of Freddie and Fannie as evidenced by irregularities that went unnoticed by current regulators. The Administration's recommendation was strongly opposed by Congressional Democrats and National Association of Home Builders who thought that tighter regulation Fannie and Freddie would reduce their commitment to financing low-income and affordable housing.
In response to the Bush's regulatory overhaul proposal, Barney Frank, a ranking Democrat on the Financial Services Committee, defended Fannie and Freddie saying, "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, 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 saying, "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."
In October of 2003, Fannie Mae discloses $1.2 billion accounting error.
In November of 2003, the Bush Administration upgraded their warning to a "systemic risk" that could extend even beyond the housing market. In a July report written by external investigators concluded that Freddie Mac manipulated its accounting to mislead investors, and other critics pointed out that Fannie Mae did not adequately hedge against rising interest rates.
In November of 2003, Council of the Economic Advisers, Chairman Greg Mankiw, argued that "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." And in order to do such, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE."
In February of 2005, President Bush's Budget again emphasizes the risk posed by the explosive growth of the GSEs and their sub-par levels of capital. The Budget called for the creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator.
In February of 2005, Alan Greenspan suggested that Congress limit the growth of Fannie and Freddie saying, "Enabling these institutions to increase in size - and they will once the crisis in their judgment passes - we are placing the total financial system of the future at substantial risk."
In April of 2005, Treasury Secretary John Snow called for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system."
In April of 2005, Chairman Alan Greenspan told the Committee on Banking, Housing, and Urban Affairs, U.S. Senate,
The strong belief of investors in the implicit government backing of the GSEs does not by itself create safety and soundness problems for the GSEs, but it does create systemic risks for the U.S. financial system as the GSEs become very large. Systemic risks are difficult to address through the normal course of financial institution regulation alone and, as I will stipulate shortly, can be effectively handled in the case of the GSEs by limiting their investment portfolios funded by implicitly subsidized debt . . . When these institutions were small, the potential for such risk, if any, was small. Regrettably, that is no longer the case. From now on, limiting the potential for systemic risk will require the significant strengthening of GSE regulation and the GSE regulator . . . The GSEs will have increased facility to continue to grow faster than the overall home-mortgage market; indeed since their portfolios are not constrained, by law, to exclusively home mortgages, GSEs can grow virtually without limit. Without restrictions on the size of GSE balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for homeownership.
In April of 2005, Democrat Senator Chuck Schumer said, “I think Fannie and Freddie have done an incredibly good job and are an intrinsic part of making America the best-housed people in the world…. if you look over the last 20 or whatever years, they’ve done a very, very good job.”
In May of 2005, Senator John McCain stated,
For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay. I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.
In May of 2005, Senator McCain co-sponsored the legislation for more regulation on Fannie Mae and Freddie Mac, however it was blocked by democrats including Sen. Chris Dodd, Rep. Barney Frank, and Sen. Chuck Schumer. In fact, these three democrats are the same men who are now blaming the free market and the republicans for a lack of federal regulation as the cause of today's economic crisis.
In June of 2005, Deputy Secretary of Treasury Samuel Bodman highlights the risk posed by the increasing GSEs and subsequently called for reform. He said, "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System."
In August of 2007, President Bush calls upon Congress to push through a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options."
In December of 2007, President Bush warns Congress to pass legislation reforming GSEs, saying "These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I've called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon."
In March of 2008, President Bush calls on Congress to "move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages."
In April of 2008, President Bush urges Congress to "modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes."
On May 3rd of 2008, Bush pleads with Congress to make legislation before Fanny and Freddie start to collapse. In his radio address, Bush says, "Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans."
On May 19th of 2008, Bush pleads with Congress again with his radio address saying, "The government ought to be helping credit-worthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator."
On May 31st of 2008, Bush makes yet another radio address saying, "Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans."
In June of 2008, Bush told Congress, "We need to pass legislation to reform Fannie Mae and Freddie Mac."
In July of 2008, Congress finally passed a reform bill addressing Fannie Mae and Freddie Mac only after it became clear that the institutions were failing.
On September 30th of 2008, Congressman Artur Davis of Alabama (featured in the youtube video defending Fannie and Freddie) issued an apology on Fox News saying,
Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong.
His plan to deal with the crisis would start with a ``discounted cash-flow analysis'' of distressed instruments that are clogging the financial system. The government would guarantee the assets, paring back the support as principal and interest payments were made, he said.
Liquidity Boost
``That should take care of the liquidity problem because if they have a government guarantee at a specified level they should trade just like cash,'' O'Neill said.
He likened his solution to the Treasury's decision Sept. 19 to guarantee domestic money-market funds for a year to try to stop a run on what traditionally have been among the safest of investments.
To replenish capital in banks, the government should make 20-year loans to institutions and charge 2 percentage points above the government's borrowing rate, he said. Regulators could count the loans as part of the banks' capital base, he added. Paying the premium would give banks an incentive to retire the government loans faster, he said.
Read he entire article, anyone who gets fired by Bush has some credibility in my opinion.
I just noted that the quick fix suspension of the mark-to-market was proposed in place of the Paulson bail out, not with it.
Yes, now I realize what everyone is talking about how bad this is....
It's supposed to be a temporary "either/or" not together as a proposal.
I think this will make Paulson dumping on the US taxpayer worthless assets even worse for I suspect banks can now claim they are worth way more than they have any potential to be.
God. What s corporate lobbyist wet dream this all is.
I personally think the mortgages are fake money- with no real value behind them at all. As in, worth 0 cents on the dollar.
They're worth nothing, the banks are worth nothing, is the safest way to treat *ANYTHING* that comes out of the corporate propaganda machine right now.
Shorting a stock is basically betting the value will go down.
Shorts have been in existence for ever along with puts in options.
It's not a programming error but in terms of the uptick rule, there are timing issues due to so many trading systems and the conflict when trades come in at the exact same timestamp. Uptick and so they were claiming the differential of time was really zero plus clogged up execution times thus not needed (ha ha ha).
Think about trillions of packets with trades coming in from all over the world and there are also delays in the network...
they have to deal with the timing of those execution arrivals and it's not like regular stocks these have pricing effects, the purchase had a backwards verification on a trade.
But that can be solved easily, more they wanted the ability to stop any limits on short selling. (institutions).
To sell what you don't own to begin with? It seems to me that would be a basic error checking on any broker's server. Are we saying our computer programmers are stupid enough to allow this?
(e) PREVENTING UNJUST ENRICHMENT. In making purchases under the authority of this Act, the Secretary shall take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section, including by preventing the sale of a troubled asset to the Secretary at a higher price than what the seller paid to purchase the asset. This subsection does not apply to troubled assets acquired in a merger or acquisition, or a purchase of assets from a financial institution in Conservatorship or receivership, or that has initiated bankruptcy proceedings under title 11, United States Code.
This section “probably indicates that JPMorgan Chase can sell the troubled assets of WaMu to the US government and make windfall profits,” notes market analyst Richard Suttmeier. “Same for Citigroup with regard to Wachovia’s troubled assets. Other future deals as well. That is a direct bailout of Wall Street on the back of taxpayers.”
Even another one pointing to some sort of RTC/RFC/HOLC mechanism.
and we're arguing about it. Clearly it will enable much less transparency but others are arguing it will enable a loosening of the credit crunch. I think they should compromise, temporarily do a lift and re-evaluate...but don't make it permanent.
I see both sides but my concern is stopping Paulson yet not causing a stock market panic in response.
That is hitting the nail on the head squarely! The housing market due to flipping of properties has over-inflated the market values beyond belief, creating a bubble that was destined to burst. No consideration was given to the effects this greed would have when it did!
I like this proposal! At least it is a starting place to address the mammoth problem that will hurt all of us in some way regardless of what it done....but let's not act in haste!
Looks like things are heating up on the hill. Tension flaring, and whining and pouting. Let's just send them all to daycare and be done with it. I'm interested to know why no one is commenting on the new SEC guidance that's in play.
"This new SEC guidance, which apparently is going to be addressed today by the Financial Accounting Standards Board, undoubtedly will have a positive effect on the balance sheets and income statements of the banks and other lending institutions from what they would be under ‘mark-to-market’ rules. This is because company managements will have more latitude when deciding whether or not to write down." Source
"The $700 billion bailout would have added to our existing unbearable load of national debt, trade deficits, and the cost of paying for the war. It would have been a disaster for the American public and the government for decades and maybe even centuries to come.
Here is a very quick explanation of the $700 billion bailout within the context of the mechanics of our monetary and banking system:
The taxpayers loan money to the banks. But the taxpayers do not have the money. So we have to borrow it from the banks to give it back to the banks. But the banks do not have the money to loan to the government. So they create it into existence (through a mechanism called fractional reserve) and then loan it to us, at interest, so we can then give it back to them.
Confused?
This is the system. This is the standard mechanism used to expand the money supply on a daily basis not a special one designed only for the "$700 billion" transaction. People will explain this to you in many different ways, but this is what it comes down to.
The banks needed Congress' approval. Of course in this topsy turvy world, it is the banks which set the terms of the money they are borrowing from the taxpayers. And what do we get for this transaction? Long term debt enslavement of our country. We get to pay back to the banks trillions of dollars ($700 billion with compounded interest) and the banks give us their bad debt which they cull from everywhere in the world.
The globalization of the debt puts the United States in the position that in order to repay the money that we borrow from the banks (for the
Under the failed $700 billion bailout plan, Wall Street's profits are Wall Street's profits and Wall Street's losses are the taxpayers' losses. Profits are capitalized. Losses are socialized."
I have excerpted section for brevity, but the message is clear: contact everybody who has a vote in Congress and JUST SAY NO!
you can argue for or against but the real point is to pass something is place of the Paulson plan, loosen up the credit markets immediately and not give away $1 trillion dollars.
I mean what is the difference is you have an over-inflated asset on the banks balance sheet versus Paulson going on a shopping spree with taxpayer money handing over our money for a way over-inflated asset?
Sure it's potential Enron 2 but if it's temporary could any Enron equal $1 trillion dollars?
What if those mortgages are indeed only worth 20 cents on the dollar? I'm much more incline to believe the market over these bankers.
Another reason I don't like it is that it makes it impossible to actually know how much these securities, and banks, are worth. It's the uncertainty that is killing the market more than anything, and this "bailout" only perpetuates the problem.
I don't like this proposal at all. It looks like Enron accounting to me.
banks had to be state chartered, and there were limited interstate banks. But after the 1980s you had those walls fall down, and groups like Chase swallow up huge numbers of banks. So now the collapses are all the more dramatic.
We need to have all 50 states pass their own deposit insurance for banks operating entirely in-state.
Wall Street has dominated the United States too long- a bunch of unelected dictators. If this "Irish solution" works, then a similar one can rescue individual states that don't want to follow Wall Street down the rabbit hole.
remember there is the "help me I've fallen and can't get up" admin topic for these things. ;)
didn't mean to double post to Instapopulist.
This situation could be very, very bad.
I wonder if Defazio and the gang on the Hill have been appraised of the situation. The Bank or Ireland has US operations.
Something like a Tobin tax of 5-10% on cash transfers to foreign domiciled banks would tame the tiger. Matathir in Malaysia used a similiar measure to prevent capital flight during the Asian Economic crisis.
America has to borrow and tax more, just to pay off the interest on the money we already (over) borrowed. If you cut through the crap, and go back to simple basics, all economists agree that the first thing an individual should do to get their finances back into the black, is to pay off their credit cards, and get out from under paying the interest each month. The U.S. is no different. Instead of solving the problem by borrowing hundreds of Billions more, and assuming Billions more in interest, our first priority should be to pay off our loans, and stop paying all that interest on loans !!!
Fannie Mae and Freddie Mac are both banking institutions that originally started by an act of Congress when big government was conceived to be the ultimate answer to our economic ills. Although owned by private stockholders, Fannie and Freddie remain very different from private sector companies.
These banking institutions played a dominant role in the housing market by buying up mortgages and reselling them to investors. With approximately 5 trillion dollars of investment portfolios, Freddie and Fannie owned or guaranteed about 50% of the U.S. mortgage market - these banks have simply become too large to fail.
For years, financial experts, economists, and regulators warned Congress that both institutions were growing too large and lacked sufficient capital to protect itself against losses. Since 2001, the Bush Administration issued 34 warnings about the need to reform Fannie Mae and Freddie Mac before it caused substantial economic turmoil in the financial markets.
In April of 2001, the Bush Administration first red flagged Fannie and Freddie stating that "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."
On September 11th of 2003, Treasury Secretary John Snow recommended to the House Financial Services Committee that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.
The new agency was a recommendation from the Bush Administration for the serious regulatory overhaul in the housing finance industry. The plan was an acknowledgment of two things. First, more oversight was necessary for both institutions that have managed to accumulate over 1.5 trillion dollars in outstanding debt - averaging a 20% increase in residential debt per year. And second, the supervisory system in place did not have the tools to deal effectively with the size, scope, and complexity of Freddie and Fannie as evidenced by irregularities that went unnoticed by current regulators. The Administration's recommendation was strongly opposed by Congressional Democrats and National Association of Home Builders who thought that tighter regulation Fannie and Freddie would reduce their commitment to financing low-income and affordable housing.
In response to the Bush's regulatory overhaul proposal, Barney Frank, a ranking Democrat on the Financial Services Committee, defended Fannie and Freddie saying, "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, 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 saying, "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."
In October of 2003, Fannie Mae discloses $1.2 billion accounting error.
In November of 2003, the Bush Administration upgraded their warning to a "systemic risk" that could extend even beyond the housing market. In a July report written by external investigators concluded that Freddie Mac manipulated its accounting to mislead investors, and other critics pointed out that Fannie Mae did not adequately hedge against rising interest rates.
In November of 2003, Council of the Economic Advisers, Chairman Greg Mankiw, argued that "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." And in order to do such, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE."
In February of 2005, President Bush's Budget again emphasizes the risk posed by the explosive growth of the GSEs and their sub-par levels of capital. The Budget called for the creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator.
In February of 2005, Alan Greenspan suggested that Congress limit the growth of Fannie and Freddie saying, "Enabling these institutions to increase in size - and they will once the crisis in their judgment passes - we are placing the total financial system of the future at substantial risk."
In April of 2005, Treasury Secretary John Snow called for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system."
In April of 2005, Chairman Alan Greenspan told the Committee on Banking, Housing, and Urban Affairs, U.S. Senate,
The strong belief of investors in the implicit government backing of the GSEs does not by itself create safety and soundness problems for the GSEs, but it does create systemic risks for the U.S. financial system as the GSEs become very large. Systemic risks are difficult to address through the normal course of financial institution regulation alone and, as I will stipulate shortly, can be effectively handled in the case of the GSEs by limiting their investment portfolios funded by implicitly subsidized debt . . . When these institutions were small, the potential for such risk, if any, was small. Regrettably, that is no longer the case. From now on, limiting the potential for systemic risk will require the significant strengthening of GSE regulation and the GSE regulator . . . The GSEs will have increased facility to continue to grow faster than the overall home-mortgage market; indeed since their portfolios are not constrained, by law, to exclusively home mortgages, GSEs can grow virtually without limit. Without restrictions on the size of GSE balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for homeownership.
In April of 2005, Democrat Senator Chuck Schumer said, “I think Fannie and Freddie have done an incredibly good job and are an intrinsic part of making America the best-housed people in the world…. if you look over the last 20 or whatever years, they’ve done a very, very good job.”
In May of 2005, Senator John McCain stated,
For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay. I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.
In May of 2005, Senator McCain co-sponsored the legislation for more regulation on Fannie Mae and Freddie Mac, however it was blocked by democrats including Sen. Chris Dodd, Rep. Barney Frank, and Sen. Chuck Schumer. In fact, these three democrats are the same men who are now blaming the free market and the republicans for a lack of federal regulation as the cause of today's economic crisis.
In June of 2005, Deputy Secretary of Treasury Samuel Bodman highlights the risk posed by the increasing GSEs and subsequently called for reform. He said, "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System."
In August of 2007, President Bush calls upon Congress to push through a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options."
In December of 2007, President Bush warns Congress to pass legislation reforming GSEs, saying "These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I've called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon."
In March of 2008, President Bush calls on Congress to "move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages."
In April of 2008, President Bush urges Congress to "modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes."
On May 3rd of 2008, Bush pleads with Congress to make legislation before Fanny and Freddie start to collapse. In his radio address, Bush says, "Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans."
On May 19th of 2008, Bush pleads with Congress again with his radio address saying, "The government ought to be helping credit-worthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator."
On May 31st of 2008, Bush makes yet another radio address saying, "Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans."
In June of 2008, Bush told Congress, "We need to pass legislation to reform Fannie Mae and Freddie Mac."
In July of 2008, Congress finally passed a reform bill addressing Fannie Mae and Freddie Mac only after it became clear that the institutions were failing.
On September 30th of 2008, Congressman Artur Davis of Alabama (featured in the youtube video defending Fannie and Freddie) issued an apology on Fox News saying,
Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong.
with a series of recommendations. Frankly he has a point and Bernie Sanders said to pay for the bail out with the ill gotten gains of CEOs.
I'd say thar's some pretty strong words! Beyond these explicatives what does he think should be done?
Bloomberg:
I just noted that the quick fix suspension of the mark-to-market was proposed in place of the Paulson bail out, not with it.
Yes, now I realize what everyone is talking about how bad this is....
It's supposed to be a temporary "either/or" not together as a proposal.
I think this will make Paulson dumping on the US taxpayer worthless assets even worse for I suspect banks can now claim they are worth way more than they have any potential to be.
God. What s corporate lobbyist wet dream this all is.
Especially if we're fooling ourselves by trying to keep a bankrupt currency alive with more fake money.
I personally think the mortgages are fake money- with no real value behind them at all. As in, worth 0 cents on the dollar.
They're worth nothing, the banks are worth nothing, is the safest way to treat *ANYTHING* that comes out of the corporate propaganda machine right now.
Shorting a stock is basically betting the value will go down.
Shorts have been in existence for ever along with puts in options.
It's not a programming error but in terms of the uptick rule, there are timing issues due to so many trading systems and the conflict when trades come in at the exact same timestamp. Uptick and so they were claiming the differential of time was really zero plus clogged up execution times thus not needed (ha ha ha).
Think about trillions of packets with trades coming in from all over the world and there are also delays in the network...
they have to deal with the timing of those execution arrivals and it's not like regular stocks these have pricing effects, the purchase had a backwards verification on a trade.
But that can be solved easily, more they wanted the ability to stop any limits on short selling. (institutions).
To sell what you don't own to begin with? It seems to me that would be a basic error checking on any broker's server. Are we saying our computer programmers are stupid enough to allow this?
Fox Business.
Even another one pointing to some sort of RTC/RFC/HOLC mechanism.
and we're arguing about it. Clearly it will enable much less transparency but others are arguing it will enable a loosening of the credit crunch. I think they should compromise, temporarily do a lift and re-evaluate...but don't make it permanent.
I see both sides but my concern is stopping Paulson yet not causing a stock market panic in response.
That is hitting the nail on the head squarely! The housing market due to flipping of properties has over-inflated the market values beyond belief, creating a bubble that was destined to burst. No consideration was given to the effects this greed would have when it did!
I like this proposal! At least it is a starting place to address the mammoth problem that will hurt all of us in some way regardless of what it done....but let's not act in haste!
"That wasn't even a transparent fig leaf"
Looks like things are heating up on the hill. Tension flaring, and whining and pouting. Let's just send them all to daycare and be done with it. I'm interested to know why no one is commenting on the new SEC guidance that's in play.
"This new SEC guidance, which apparently is going to be addressed today by the Financial Accounting Standards Board, undoubtedly will have a positive effect on the balance sheets and income statements of the banks and other lending institutions from what they would be under ‘mark-to-market’ rules. This is because company managements will have more latitude when deciding whether or not to write down." Source
Dennis Kucinich explains how this tar baby works:
"The $700 billion bailout would have added to our existing unbearable load of national debt, trade deficits, and the cost of paying for the war. It would have been a disaster for the American public and the government for decades and maybe even centuries to come.
Here is a very quick explanation of the $700 billion bailout within the context of the mechanics of our monetary and banking system:
The taxpayers loan money to the banks. But the taxpayers do not have the money. So we have to borrow it from the banks to give it back to the banks. But the banks do not have the money to loan to the government. So they create it into existence (through a mechanism called fractional reserve) and then loan it to us, at interest, so we can then give it back to them.
Confused?
This is the system. This is the standard mechanism used to expand the money supply on a daily basis not a special one designed only for the "$700 billion" transaction. People will explain this to you in many different ways, but this is what it comes down to.
The banks needed Congress' approval. Of course in this topsy turvy world, it is the banks which set the terms of the money they are borrowing from the taxpayers. And what do we get for this transaction? Long term debt enslavement of our country. We get to pay back to the banks trillions of dollars ($700 billion with compounded interest) and the banks give us their bad debt which they cull from everywhere in the world.
The globalization of the debt puts the United States in the position that in order to repay the money that we borrow from the banks (for the
Under the failed $700 billion bailout plan, Wall Street's profits are Wall Street's profits and Wall Street's losses are the taxpayers' losses. Profits are capitalized. Losses are socialized."
I have excerpted section for brevity, but the message is clear: contact everybody who has a vote in Congress and JUST SAY NO!
you can argue for or against but the real point is to pass something is place of the Paulson plan, loosen up the credit markets immediately and not give away $1 trillion dollars.
I mean what is the difference is you have an over-inflated asset on the banks balance sheet versus Paulson going on a shopping spree with taxpayer money handing over our money for a way over-inflated asset?
Sure it's potential Enron 2 but if it's temporary could any Enron equal $1 trillion dollars?
What if those mortgages are indeed only worth 20 cents on the dollar? I'm much more incline to believe the market over these bankers.
Another reason I don't like it is that it makes it impossible to actually know how much these securities, and banks, are worth. It's the uncertainty that is killing the market more than anything, and this "bailout" only perpetuates the problem.
I don't like this proposal at all. It looks like Enron accounting to me.
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