11 {{ upvoteCount | shortNum }}
11 {{ upvoteCount | shortNum }}

really big bailouts - FDMC-FNMA

by Kay King
8 replies
  • OFF TOPIC
    • |
No matter what talking heads told us - from the moment Paulson guaranteed FreddieMac and FannieMae - it's been only a matter of time until the US bailed out those "institutions". Looks like today may be the day.

From the day they were guaranteed they couldn't fail because they could tap our tax money...there was no incentive to do anything to improve or to raise new capital.

To me - this is an important political and financial topic in the US. It is also a topic where the voice of the public might have some effect on the outcome. The only practical way for the government to "bail" FNMA and FDMC - is to buy out the stock at rock bottom pricing - and sell off the mortgages held - and close down these two boondoggles.

Yes - eliminate them instead of pouring billions after billions into private investor pockets. The profit to investors in a government takeover should not be a consideration! Without FEDERAL funds - these two companies will fail and investors will lose all. It is imperative to save the mortgages as failure to do so would be catastrophic to the economy.

Encourage small lenders and small mortgage companies to buy and HOLD mortgages again as they used to - before the big companies began selling off mortgage paper anywhere and everywhere to generate stockholder profits with no restrictions on how these financial instruments may be sold.

Government may be right to bail out these two mortgage holders - but once acquired, they should be phased out and closed down.

kay
  • Profile picture of the author myob
    Indy, can we have your valued opinion on this?
    {{ DiscussionBoard.errors[85564].message }}
    • Profile picture of the author Kay King
      That will be interesting, as always - but at some point US citizens need to think for themselves on this one.

      We are the ones who will live with the consequences.

      Sal - what do you think on this?

      kay
      Signature
      Saving one dog will not change the world - but the world changes forever for that one dog
      ***
      Dear April: I don't want any trouble from you.
      January was long, February was iffy, March was a freaking dumpster fire.
      So sit down, be quiet, and don't touch anything.
      {{ DiscussionBoard.errors[85576].message }}
      • Profile picture of the author myob
        We are too stupid. Indy has captured the hearts and minds of all Americans, but he has let us down by not warning us about FDMC-FNMA. What should we think? What should we do? Indy!
        {{ DiscussionBoard.errors[85604].message }}
        • Profile picture of the author Kay King
          Interesting - people outside the US keep telling you that you're too stupid to understand what goes on in YOUR country - and you believe it?
          Signature
          Saving one dog will not change the world - but the world changes forever for that one dog
          ***
          Dear April: I don't want any trouble from you.
          January was long, February was iffy, March was a freaking dumpster fire.
          So sit down, be quiet, and don't touch anything.
          {{ DiscussionBoard.errors[85611].message }}
          • Profile picture of the author HeySal
            Actually Kay - what I think is that this is the most major sign that we have become a Fascist country that we should need. In a free republic a government with a real money system wouldn't even start to go there other than to say "sorry for the tough luck"..

            Investors lose billions - yep, tough. Many of those investors are people that knew nothing about what they were doing when they bought homes way too expensive for them on a balloon payment - and they did so during a 20 year stagflation. I'm not bleeding for anyone who will invest a hundred thou to a quarter of a mil on the bet that stagflation will suddenly go away and their wages will rise - and apparently they didn't bother to get the least tad of economic education before investing those crippling sums.

            Here's an example of their idiocy - how many people know they have to ask for and purchase the simple surface rights to their home? Very few homes include simple surface rights if you don't specify that you want them. That money goes directly to central bank to pay for the bankruptcy against our country. But instead, that information is kept relatively under cover and most people (a VAST majority) do not purchase these rights. Any corporation who decides they want YOUR property can purchase those rights and you are screwed. That surface rights purchase pays off the portion lien on America - until we pay that property lien , we are going to be in debt.
            Otherwise all we are paying is interest and no principle. The banks and government and major corps KNOW that - um...so why don't WE?

            And what of the stock holders? Now if I buy stock in a company and it goes under, I do not expect my money back. That's the stock market - you win some, you lose some.
            Of course the banks are just as culpable of running this scam as Fannie so maybe we SHOULD take those down too.

            The answer is not to bail out greedy and ignorant consumers - or the companies that ran the scams.
            The answer is to abolish the FED - Central Bank, and to bring back metal backed currency. It may cause some immediate turmoil at first, but will level everything out quickly. IF we don't get rid of the FED we are being aligned for financial slavery and it's just going to keep getting worse. Those people at the top aren't making mistakes - they know EXACTLY what they are doing. Don't be fooled by their feigned innocence in the matter.
            Signature

            Sal
            When the Roads and Paths end, learn to guide yourself through the wilderness
            Beyond the Path

            {{ DiscussionBoard.errors[85654].message }}
            • Profile picture of the author Kay King
              Here's an example of their idiocy - how many people know they have to ask for and purchase the simple surface rights to their home? Very few homes include simple surface rights if you don't specify that you want them.
              Every home I've bought myself or sold as an agent - were "fee simple". That term is in my contract and in other contracts I've seen. In a fee simple sale, surface and mineral rights are included in that sale. It is the commonly used type of sale for personal real estate - at least in every state I've lived in. May be different in other states.

              The problem with FNMA and FDMC are not directly from risky mortgages - but the trickle down from that original problem that has now affected many traditional mortgages held by those who DID qualify for them. One side effect of the current crisis is that mortgage money has dried up. FannieMae and FreddieMac have been the only companies actively funding new mortgages in past months partly because they are based on guaranteeing the mortgage and were adequately capitalized. If allowed to fail, the result would be disastrous.

              In June, reports were that both companies had adequate capital even after recent losses. The government statement about a bailout - combined with the financial standards board making public the "possible" future change in accounting rules that would require FNMA and FDMC to add 10s of billions of dollars in caplitalization - resulted in the current bailout. Investors have sold out, driving stock down drastically (both are down about 80+% from a year ago). If there is a conspiracy here - the place to look is in the timing of the government announcement and the motives of the financial standards board....and who was behind the timing and the leaks.

              Abolishing the Central Bank may be an answer somewhere down the road - but not to this problem.

              There is enough blame to go around on the mortgage crisis. Lenders looking for ever higher profits were unregulated and allowed to issue high risk loans.....buyers were buying homes they knew they could not afford but believed lenders who said they could do it. Lenders then bundled up the bad loans and sold them off again and again to investors worldwide - and no oversight agency saw it as a problem.

              A year ago this was confined to subprime loans - but that is no longer the case and so far the end isn't in sight.

              kay
              Signature
              Saving one dog will not change the world - but the world changes forever for that one dog
              ***
              Dear April: I don't want any trouble from you.
              January was long, February was iffy, March was a freaking dumpster fire.
              So sit down, be quiet, and don't touch anything.
              {{ DiscussionBoard.errors[86038].message }}
              • Profile picture of the author espacecadet
                Banned
                [DELETED]
                {{ DiscussionBoard.errors[86272].message }}
                • Profile picture of the author Kay King
                  FNMA and FDMC guarantee the mortgages - not profit. Because of that, lenders who wanted to use either of them had to follow their guidelines for qualifying buyers - and as often happens there was not a lot of oversight and some lenders found ways around the restrictions, including falsifying qualifying info from buyers.

                  For example, if a loan was made under FNMA or FDMC guidelines (which might include a hefty Private Mortgage Insurance fee added to the payment for those with low down payments) - and if the loan is sold by FNMA or FDMC and then defaults....the amount of the mortgage is paid by FNMA or FDMC.

                  I found a rather good background on the two at

                  What Are the Origins of Freddie Mac and Fannie Mae?

                  What's fascinating is wondering what changed in a month or two that caused a "line of credit from the government" which has not been used....to a full takeover. Something odd in that woodpile.

                  kay
                  Signature
                  Saving one dog will not change the world - but the world changes forever for that one dog
                  ***
                  Dear April: I don't want any trouble from you.
                  January was long, February was iffy, March was a freaking dumpster fire.
                  So sit down, be quiet, and don't touch anything.
                  {{ DiscussionBoard.errors[86365].message }}
                  • Profile picture of the author espacecadet
                    Banned
                    [DELETED]
                    {{ DiscussionBoard.errors[86477].message }}
                    • Profile picture of the author myob
                      You bet. Some people will be making a lot of money. Basically, it's a $200 billion infusion of tax payors' dollars that is expected to help reverse a prolonged housing and credit crisis. FDMC-FNMA lost about $14 billion combined so far, and will be losing a lot more as defaulted loans mount. The market depends on investors to buy these mortgages with a good return on investment and without fear of a market collapse. Without investor confidence, there would be no market for these instruments so the government has in essence guaranteed these debts.

                      That is the reason the government is stepping to reassure investors in buying these debts of FDMC-FNMA. They are not interested in owning these companies; they will returned to private investors in a couple of years. Of course there will be tighter regulations from now on for qualifying for loans as it should have been.

                      The same thing happened in the late 1980's and early 1990's with the Savings and Loan crisis, which cost tax payors about $160 billion. This industry is now highly regulated and monitored by the government. We will see the same thing happen with banks when all the dust clears.

                      I made a lot of money in the 1980's with cheap houses, and I am buying as much property as I can right now. There are a lot of bargains with vacant houses and rising foreclosures. And, it's going to happen again in about 15-20 years. You can take that to the bank.
                      {{ DiscussionBoard.errors[86613].message }}

Trending Topics