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bitmasher's picture
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4 Big Mortgage Backers Swim in Ocean of Debt

NY Times is running a piece on the state of four big government "borrowers". Fannie, Freddie, GMAC, and AIG.

http://www.nytimes.com/2009/12/17/business/17wards.html?pagewanted=1&_r=...

Mr. Geithner said the actions meant that taxpayers were “now on track to reduce TARP bank investments by more than 75 percent.” That means that of the $245 billion awarded to banks, more than $185 billion is either recovered or about to be.

But that is just a fraction of the money that the four troubled debtors have received or may still get. Together, they have been offered nearly $600 billion, and that lifeline could climb to nearly $1 trillion if the commitment to Fannie and Freddie is doubled, as some predict.

I like this one too:

Fannie Mae recently warned, for example, that it could not pay the dividends it owes the Treasury, so “future dividend payments will be effectively funded with equity drawn from the Treasury.”

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Re: 4 Big Mortgage Backers Swim in Ocean of Debt
bitmasher wrote:
I like this one too:

Fannie Mae recently warned, for example, that it could not pay the dividends it owes the Treasury, so “future dividend payments will be effectively funded with equity drawn from the Treasury.”

Yeah, me too.

Try that with your personal Bank and see what happens !!

Also this statement that appeared in the paragraph right above the above quote

"....where they have to draw new money from the government just to keep up with their existing government debts."

That is like writing a check and depositing it to cover a check you wrote earlier.

Who makes up these rules? Think

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4 Big Mortgage Backers Swim in Ocean of Debt

Who makes up these rules? Democrats.

Ever known somebody that viewed the world through emotion tinted, touchy feely glasses and who shopped with abandon and whose solution to maxed credit cards was to just get another card?

That's who's running the country now.

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4 Big Mortgage Backers Swim in Ocean of Debt

Who makes these rules? I don't think there is really any rules these days, just a lot of people in the government playing triage trying to figure out how things got so screwed up. In the mean time they are throwing (or should I say printing and throwing?) money at fannie/freddie/aig in order to prevent the housing market from really going into a tail-spin. Saving the housing market has become almost like an entitlement program, although I don't think any politician wants to frame it in such words.

I think the problems of today are a culmination of financial tinkering that goes back nearly a century. I'll point back to this article from nearly a year and half ago.

http://online.wsj.com/public/article/SB121642367125066615-4K_l2jdjmxrSAZ...

Some choice excerpts:

I have another theory, and that is that the old populists actually won. This is their financial system. They had demanded paper money, federally insured bank deposits and a heavy governmental hand in the distribution of credit, and now they have them. The Populist Party might have lost the elections in the hard times of the 1890s. But it won the future.

By and by, the lefties carried the day. They got their government-controlled money (the Federal Reserve opened for business in 1914), and their government-directed credit (Fannie Mae and the Federal Home Loan Banks were creatures of Great Depression No. 2; Freddie Mac came along in 1970). In 1971, they got their pure paper dollar. So today, the Fed can print all the dollars it deems expedient and the unwell federal mortgage giants, Fannie Mae and Freddie Mac, combine for $1.5 trillion in on-balance sheet mortgage assets and dominate the business of mortgage origination (in the fourth quarter of last year, private lenders garnered all of a 19% market share).

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Re: 4 Big Mortgage Backers Swim in Ocean of Debt

GMAC gets more money. $3.8 Billion. Its not "really a loan" though because we are all (those that pay taxes) buying a 56% stake in the company. Collectivism Comrades! The government has four board seats! WOW, maybe we can put it in the constitution that those seats have to be generally elected. I mean if we own 56% of the company, shouldn't a government of The People get to decide who gets to sit on The People's companys board?

http://www.nytimes.com/2009/12/31/business/31gmac.html

Here's a mind trip for you. You own a house that has a lien held by GMAC. The fed takes taxes from you, "lends" it to GMAC, which they then foreclose on you, because you are not paying your crappy sub-prime loan (which you probably shouldn't have been in anyway because the loan officer lied about the money you made), and then fire sale the house to someone else for real cheap so GMAC can make their books look better so they can pass a "stress test" and get rid of "toxic assets". Then GMAC shows a profit in Q1 2010 and the government trumpets that they have succeeded at something.

Actually its probably a bit more complicated. They take the taxes from you, to pay the interest on the loan (T-Bills) from the Chinese for the additional $3.8 Billion to give to GMAC. So really they are taking the taxes from you to give to the Chinese, so the Chinese can buy more T-Bills. You might say, well why do those Chinese keep buying the T-Bills? The reason is to keep the exchange rate of one dollar to right around 0.146 CYN. If the CYN/Dollar rate goes up then Chinese stuff won't be cheap any more then you fellow comrades won't buy Chinese stuff as often. Gordian knots anyone? Anyone?

This certainly isn't capitalism, its not even communism (its more efficient), or socialism (you would have kept your house). This is a Rube Goldberg machine that burns money for the sake of burning money.

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Re: 4 Big Mortgage Backers Swim in Ocean of Debt

I guess I missed this one since the story came out on Christmas Eve.

Treasury Removes Cap for Fannie and Freddie Aid
http://www.nytimes.com/aponline/2009/12/24/business/AP-US-Mortgage-Giant...

Quote:
The Treasury Department said Thursday it removed the $400 billion financial cap on the money it will provide to keep the companies afloat. Already, taxpayers have shelled out $111 billion to the pair...

bs

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