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interesting post on UK rail
it think the difference is that there was a strategic plan to nationalize rail service (today it's hybrid, uber regulated, but also with private companies like Virgin rail service). They knew they had to pay shareholders, it was planned. I think there are those that will argue that F&F were bankrupt, or would be without saving them, and thus they can leech them down without compensation. if spinning them out as private entites takes place, it will have to require compensation, or slow release back to private shareholders like AIG.
we'll see.
University of Colorado- Romney wins:
Big implications for fannie and freddie on who takes office. Does a Romney win change anyone's investment thesis? Most of the talk has been around status quo after the election. Anyway, the possibility of a change grows stronger. The republicans hate F&F, but I am hoping that if they take power the rule of law will be respected by a private equity investor President.
http://www.colorado.edu/news/releases/2012/10/04/updated-election-forecasting-model-still-points-romney-win-university
Updated election forecasting model still points to Romney win, University of Colorado study says
October 4, 2012 •
Social Sciences
An update to an election forecasting model announced by two University of Colorado professors in August continues to project that Mitt Romney will win the 2012 presidential election.
According to their updated analysis, Romney is projected to receive 330 of the total 538 Electoral College votes. President Barack Obama is expected to receive 208 votes -- down five votes from their initial prediction -- and short of the 270 needed to win.
The new forecast by political science professors Kenneth Bickers of CU-Boulder and Michael Berry of CU Denver is based on more recent economic data than their original Aug. 22 prediction. The model itself did not change.
“We continue to show that the economic conditions favor Romney even though many polls show the president in the lead,” Bickers said. “Other published models point to the same result, but they looked at the national popular vote, while we stress state-level economic data.”
While many election forecast models are based on the popular vote, the model developed by Bickers and Berry is based on the Electoral College and is the only one of its type to include more than one state-level measure of economic conditions. They included economic data from all 50 states and the District of Columbia.
Their original prediction model was one of 13 published in August in PS: Political Science & Politics, a peer-reviewed journal of the American Political Science Association. The journal has published collections of presidential election models every four years since 1996, but this year the models showed the widest split in outcomes, Berry said. Five predicted an Obama win, five forecast a Romney win, and three rated the 2012 race as a toss-up.
The Bickers and Berry model includes both state and national unemployment figures as well as changes in real per capita income, among other factors. The new analysis includes unemployment rates from August rather than May, and changes in per capita income from the end of June rather than March. It is the last update they will release before the election.
Of the 13 battleground states identified in the model, the only one to change in the update was New Mexico -- now seen as a narrow victory for Romney. The model foresees Romney carrying New Mexico, North Carolina, Virginia, Iowa, New Hampshire, Colorado, Wisconsin, Minnesota, Pennsylvania, Ohio and Florida. Obama is predicted to win Michigan and Nevada.
In Colorado, which Obama won in 2008, the model predicts that Romney will receive 53.3 percent of the vote to Obama’s 46.7 percent, with only the two major parties considered.
While national polls continue to show the president in the lead, “the president seems to be reaching a ceiling at or below 50 percent in many of these states,” Bickers said. “Polls typically tighten up in October as people start paying attention and there are fewer undecided voters.”
The state-by-state economic data used in their model have been available since 1980. When these data were applied retroactively to each election year, the model correctly classifies all presidential election winners, including the two years when independent candidates ran strongly: 1980 and 1992. It also correctly estimates the outcome in 2000, when Al Gore won the popular vote but George W. Bush won the election through the Electoral College.
In addition to state and national unemployment rates, the authors analyzed changes in personal income from the time of the prior presidential election. Research shows that these two factors affect the major parties differently: Voters hold Democrats more responsible for unemployment rates, while Republicans are held more responsible for fluctuations in personal income.
Accordingly -- and depending largely on which party is in the White House at the time -- each factor can either help or hurt the major parties disproportionately.
In an examination of other factors, the authors found that none of the following had a statistically significant effect on whether a state ultimately went for a particular candidate: The location of a party’s national convention, the home state of the vice president or the partisanship of state governors.
The authors also provided caveats. Their model had an average error rate of five states and 28 Electoral College votes. Factors they said may affect their prediction include the timeframe of the economic data used in the study and that states very close to a 50-50 split may fall in an unexpected direction due to factors not included in the model.
“As scholars and pundits well know, each election has unique elements that could lead one or more states to behave in ways in a particular election that the model is unable to correctly predict,” they wrote.
All 13 election models can be viewed on the PS: Political Science & Politics website at http://journals.cambridge.org/action/displayJournal?jid=PSC.
Contact:
Peter Caughey, CU-Boulder media relations, 303-492-4007
David Kelly, CU Denver media relations, 303-315-6374
beats me...decent-ish volume thought...especially when we know a few of us collectively own 2% of one of the series (FMCCT?)
problem is, there is no bad bank. delinquency rate is below 4% well ahead of industry average and credit loss reserves are being reversed.
this was a scenario for four years ago when toxicity of the mortgage portfolio was unknown and it might make sense to wall off the "bad bank". no point in it now.
just pay back the govt and get on with it.
everyone watch the debates! FNF depends on the election!
must run....
between you and me, we hold over 1.8%...it could be more if I sold 14,500 shares of CCK and bought CCT, but I'd actually reduce my RV.
If just 70 more people have the same position, it's no wonder the shares are stuck!!!!!!! that is easily the case from what I can ascertain. I would even be willing to bet on the basis of this back of the napkin analysis that some hedge funds had upwards of 10% of the entire series.
the government has requisitioned all profit and even positive net worth to prevent the building of capital.
ok, fair, but what to do once enough money has been witheld to pay back the taxpayer? with no motivation from congress, that is why I am hanging on. I envision release from conservatorship someday.
will be a long payback, and currently, if you don't speculate like I am, the Treasury has effectively taken all profit and capital until such time it changes its mind.
that is the scary piece. I believe the amount of speculators will grow as profits surge in the coming quarters. I don't believe this is the short term bottom. however, I think the top will be limited for a few years now. and frankly, if the decision is made to "kill them" or nationalize, the bottom could still be zero.
plenty of reason for non-holders to stay on the sideline and wait for very different news...
more news: mortgage prepayments soar
bad for investors like american capital agency (AGNC), but good for overall health, declining default rates, etc.
for those that may not still be watching yahoo headlines:
http://www.bloomberg.com/news/2012-10-03/u-s-mortgage-prepayment-rate-reaches-highest-level-since-2005.html?cmpid=yhoo
Mortgage Prepayment Rate Reaches Highest Level Since 2005
By Heather Perlberg and Jody Shenn - Oct 3, 2012 6:58 PM CT
Chris Rank/Bloomberg
A housing development in Atlanta, Georgia.
Mortgage prepayment rates have soared to the highest in seven years as homeowners take advantage of the lowest borrowing costs on record to refinance.
Enlarge image U.S. Mortgage Prepayment Rate Reaches Highest Level Since 2005
Borrowing costs for typical 30-year fixed-rate loans have declined from last year’s high of 5.05 percent, according to Freddie Mac surveys. Photographer: David Paul Morris/Bloomberg
Home loans were repaid in August at a pace that would erase 25 percent of the debt in a year, according to Lender Processing Services Inc. (LPS), a Jacksonville, Florida-based data provider that tracks 40 million mortgages.
The cost of 30-year loans dropped to 3.4 percent last week, helping push refinancing applications to a three-year high, after the Federal Reserve said it will buy $40 billion of mortgage securities per month to stimulate the economy. That followed government efforts to increase refinancing with new rules designed to expand eligibility and reduce costs.
“There should be a lot of opportunity for people to refinance,” Herb Blecher, senior vice president at LPS Applied Analytics said in an interview. “The interest rate environment is favorable even for folks who refinanced recently to get a new loan.”
Prepayment speeds also reflect borrower defaults and debt retired in home sales, which increased in August to a two-year high as the housing market showed signs of recovery.
Refinancing applications climbed almost 20 percent last week to the highest since April 2009, leaving this year’s average pace 56 percent greater than in 2011, according to a Mortgage Bankers Association index released today.
Repeat Refinancing
Borrowing costs for typical 30-year fixed-rate loans have declined from last year’s high of 5.05 percent, according to Freddie Mac surveys. That’s spurred a wave of repeat refinancing activity. Prepayment speeds in August rose the most among loans made last year, climbing 23 percent, LPS data show.
Mortgage bond investors monitor prepayment rates as they influence returns. Bondholders risk losses when buying debt for more than 100 cents on the dollar as the value can be erased when homeowners take out new mortgages too quickly to repay existing debt. With debt trading below face value, returns increase when repayments accelerate.
Prepayments on loans to underwater borrowers have risen the fastest this year, climbing 65 percent for homeowners who owe at least 20 percent more than their property value, according to LPS.
President Barack Obama’s administration has helped fuel gains in refinancing this year by making it easier for borrowers with Fannie Mae and Freddie Mac loans without home equity to qualify and by reducing costs for homeowners with older Federal Housing Administration loans.
Purchases of previously owned homes increased 7.8 percent in August to a 4.82 million annual rate, the most since May 2010, the National Association of Realtors said Sept. 19.
To contact the reporters on this story: Heather Perlberg in New York at hperlberg@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net
news from the grassroots: august sales up 20%
KC area housing market shows signs of steady improvement
New figures show more houses are being sold, inventories are shrinking and prices are going up.
By DIANE STAFFORD
Realtor Kirk Andersen had an eager buyer for a Kansas City house that had been on the market at 59th and Oak streets for only two days.
Somebody squeezed in an offer ahead of his client.
He had another buyer for a house at 97th Street and State Line Road that had been on the market for five days.
There, too, someone beat his client to the offer table.
Those actually aren’t tales of real estate woe. They’re signs that the area housing market is continuing its slow improvement from the depths of the recession.
New figures from the Kansas City Regional Association of Realtors show there were 20 percent more home sales in August 2012 than August 2011.
Equally important, for-sale inventory continued to shrink, as it has done regionally for the last four months.
The improved Kansas City market reflects national trends. CoreLogic, a business analytics service, said Tuesday that home prices nationwide, including foreclosed properties, were up 4.6 percent in August compared to 12 months earlier.
The price jump was the biggest year-over-year increase since July 2006 — a sure sign of a healthier residential market.
“We’re lighting fires under buyers, because the good houses are going quickly,” said Andersen, who is with Coldwell Banker. “This hasn’t happened for a long time. Within the last five or six weeks, we started to feel a real difference. We looked around and said, ‘Wow, things have changed.’?”
Although the market is recovering, it still trails the prerecession level of five years ago.
According to the Realtors Association, there were 236 new and 2,491 existing homes sold last August compared with 555 new and 2,533 existing homes sold in August 2007. The average sale price of a new home did increase to $311,262 in August compared to $291,053 in August 2007, but the average price of an existing home was $161,129 five years ago compared to $154,476 in August.
Still, the housing market has been gaining strength for about a year, said Mike Frazier, chief financial officer at Reece & Nichols, which has about 35 to 40 percent of the local market share.
“Anything under $400,000 is moving all across the metro area,” Frazier said, noting that the average Reece & Nichols sale price moved up to $180,000 in August from $150,000 in January. “That’s the sign of a transitioning market.”
Of course, some housing stock is moving faster than others. Hot pockets include north of the Missouri River in the Park Hill School District, especially for families that are shopping with schools in mind.
For DINKs — double income, no kids — and first-time home buyers, houses in Brookside, Waldo, Prairie Village and old Leawood are moving fast.
The quickest movers generally are in the $140,000 to $250,000 price range, agents said.
Steve Banks, a Realtor serving as this year’s president of the regional association, tallied the signs of housing market health: More properties are selling, the for-sale inventory is down, and the average sale price is creeping higher.
“Somewhere between five and six months of inventory has been determined to be the point at which the market is balanced, favoring neither buyers nor sellers,” said Banks, who is with Re/Max.
The supply calculation — measured by taking the inventory and dividing it by the 12-month average of the number of sales — is shrinking toward the balance point.
The association’s data for August set the Kansas City area supply at 6.4 months, which favors buyers. That means sellers have to get their houses in shape and price them competitively with comparable properties in the neighborhood, agents said.
It doesn’t do to just stick a sign in the front yard. Properties need to be “show ready” to get several offers.
Pricing properties right doesn’t mean fire sale prices. The CoreLogic report said year-over-year prices, excluding bank-owned and short-sale properties, rose 4.9 percent. In Missouri, the gain was 4.2 percent for nondistressed housing, while Kansas reported a 4.5 percent boost, CoreLogic reported..
From a mortgage lender’s point of view, the housing affordability index is at an all-time high.
According to Jim Nutter Jr., president of Kansas City-based James B. Nutter and Co., “unbelievably super-low interest rates combined with the price of housing payments” make buying a house as affordable as ever.
“It’s not as difficult as people think,” Nutter said. “Credit scores are higher than two years ago. If you feel comfortable about your job situation, it’s a great time to buy. There’s certainly less foreclosure action and lower delinquency rates. All around — pretty good signs.”
Nutter said the housing market data was pumping up the psychology of home buying: “We’ve gone from ‘We don’t want to do that right now’ to ‘We’ve got to do that now.’?”
Frazier, with Reece & Nichols, said there were two other reasons to believe that the recent improvements had legs.
“We’ve outperformed last year every single month this year,” he said. “That’s surprising, given it’s an election year, which usually is an off year in real estate. And our showings for September are up 10 percent over 2011. That’s a further-out indicator than sales, and that’s looking strong.”
Kansas City area housing market
Year-over-year improvement by several measures
August 2011 August 2012
Average existing home sale price $151,089 $161,473
Average new home sale price $303,611 $311,262
New and existing home sales 2,282 2,727
New and existing home inventory 16,477 13,658
Pending contracts 1,837 1,962
Source: Kansas City Regional Association of Realtors
Read more here: http://www.kansascity.com/2012/10/02/3845454/kc-area-housing-market-showing.html#storylink=cpy
1.5%! Crikey!
shorts are mostly down
as most of you know, I try to keep the board updated on short sales. I only track my stocks:
FMCKJ, up from early september, but still down from august:
714,071 (europa: that's 714.071 to you LOL) short out of 240 million outstanding
FMCKI, no change: 3,313 out of 20 million
FMCCK, ZERO! 100% DROP: 0 shares out of 5 million outstanding
FMCCT: 2,500 shares out of 5 million outstanding
http://www.otcmarkets.com/stock/FMCCK/short-sales
who sold $500 of CCT?
Which one of you is that desperate??? 20cent drop
actually beta, it has been discussed. i believe actual Freddie officers are on the record on this point...don't have time to google it now, but I'm pretty sure it is out there.
i've got a day job wooden. i don't have the ability to spend the time ramping up a shareholder campaign. nor the money to buy significant advertising. hearing what it costs for small ads in poorly circulated parenting magazines made me puke (my wife had to research the possibility for the infant toys she designed). i do not have the bucks to make anything significant happen.
that's why I lobbied for starting a non-profit to collect from all of us and coordinate the spending. I don't have the time to set that up given the risk that it goes nowhere. given the moeny i have at stake, it would be well worth it if there are any retirees on this board, or anyone with lobby experience and knows how to set up a fairtax.org or similar type entity.
i do not know more than I'm saying!
wooden, caught that comment in one of your posts. I have a dialogue with one hedge fund manager that is equally "deer in the headlights" with the 75% drop day....unless you have a pipe to the washington BSD's, you don't know anything.
who you talking to 4 cents? tough to tell on this new format.
i was not offended...just warning that I'm not sure this is the best place for electioneering. post whatever you like. i just hope the board doesn't denigrate into partisan politics because at least 30% of the country will not like the message that you posted, f-bombs aside (which I could care less about...i played baseball, rugby, have a foul-mouthed English brother-in-law...i've heard worse)
i've worked in the senate and the british house of commons. republican and conservative parties respectively.
i might have tipped my hand in politics, and some of you no doubt have guessed...but I have stayed away from outright electioneering on this venue.
I think we all should or it could get nasty. it already is nasty and it is leaving me sick. whatever happened to respectful disagreement of ideas and respecting the will of the voter?
i propose we agree to leave politics out of this site except to discuss implications of elections, which is fair ground to comment. outright campaigning? not so sure on that note....
http://www.housingwire.com/content/mba-multifamily-and-commercial-originations-jump-25-2q
MBA: Multifamily and commercial originations jump 25% in 2Q
Posted by kpanchuk on 9/27/12 at 9:50am
Loans tied to commercial real estate are performing quite well with originations in the commercial/multifamily segment up 25% in the second quarter from last year, the Mortgage Bankers Association said Thursday.
Originations also grew 39% from the first quarter.
The segment is doing well enough for Freddie Mac to offer its first structured pass-through certificates backed by LIBOR-based, floating rate multifamily loans with five- and seven-year terms.
Freddie is offering about $1.1 billion in K certificates, which will price on the week of Oct. 1.
Meanwhile, outstanding debt in the segment fell by $10.4 billion, or 0.4%, in the second quarter as more balances on CMBS loans, CDOs and ABS transactions declined, the MBA said.
The delinquency rates on commercial and multifamily debts tied to life insurance companies, Fannie Mae and Freddie Mac remained low while late payments on bank-held commercial loans declined outright.
Loans tied to CMBS structured transactions have higher delinquency rates driven by REOs and foreclosures in the loan pools.
"This deal is the next step toward our goal of offering the broadest array of financing options to our borrowers and the investor community," said Mitch Resnick, vice president of multifamily capital markets for Freddie Mac. "Earlier this month we announced our first fully-wrapped K-series transaction and today our first floating rate security is being marketed. We've settled 31 deals totaling more than $36 billion in collateral since the program's inception in 2009."
kpanchuk@housingwire.com
Google+ will take time. they update the code daily, so it is under constant improvement. i see more activity because my circles include a lot of geeks, and they are gravitating first.
for now, facebook is the 800 pound gorilla.
my theory is that there is a pimple faced nerd ready to launch a new social network that will kill everything out there now because he wants a site without mom and dad on it....
and for the ladies on the board...i smirked when I saw one, but out of respect, I never bought one of those sexist things. i will admit they were funny in a SNL, Monty Python, juvenile sort of way. so many came out, it got old pretty fast.
i wondered who would catch on...beware those that don't post links!!! glad we have a spot where we can do that again.
it was a real rumor in the late 90s in the Mountain West, I didn't pull the story from where the sun don't shine.
it was a fun rumor. have no idea if he has a daughter or where she went to school...but it was rumored on campus at Colorado State that she was at CU at the same time we were at CSU.
those shirts were really freakin popular
i would, but i deleted my facebook profile last year due to security fears.
funny enough, I do trust google. long track record, better engineers. i would join a Google + (or "Circles") page
big Johnson t-shirt photos:
https://www.google.com/search?q=big+johnson+shirts&hl=en&safe=off&prmd=imvnso&tbm=isch&tbo=u&source=univ&sa=X&ei=m2RkUMzyN8eq2gX2lIDoCQ&sqi=2&ved=0CC0QsAQ&biw=1025&bih=455
what a great governor...make of big johnson!
actually, my college roomate was from Albuquerque and he said he was a pretty fine govna. and his daughter was smokin hot and our age at the enemy school, university of colorado. never met her...
that is all i know about the Big J
johnson was also the creator and made his fortune on the "Big Johnson" cartoon t shirts popular with teens and college students in the 90s
i thought we had a translation issue and he was cheering on the author/article....Germans can be pretty big hockey fans and may indeed shout "Sieve, sieve, sieve!" as i do at times, probably reading too far between the lines!
1. Sieve
Any goalie that allows many goals to be scored by an opposing team, thus causing his team own team to lose the game.
i have heard it cheering on the offense, but i now see it is actually insulting the goal tender. HE is the sieve which the puck gets through....
glad we cleared that up! nothing to discuss on F&F, so why not...
europa:
is that a hockey reference? which Americans at a hockey match say in french, actually: sieve? I know my english wife calls a net used in the kitchen a sieve.
not quite clear on your net, net, net
if any hockey fans out there, please do correct me if I am wrong...i always assumed that yelling "sieve" was cheering the home team to put the puck i the net. I've been to more than 50 professional games, and that is probably the one thing that eludes me! that's what I get for not growing up with the game and becoming a fan at 14 years old.
jackson county baby, Independence, home of Harry Truman! i am sitting in the sacred county as I type! (though a good 15 miles west of the actual site, I'm about 20 blocks from Kansas)
LOL
if it is so special, I have wondered why they opened their first temple just last year????? 150 years to get a temple in one of their most sacred places????
Full Romney Plan -- finally, some politician speaks!
http://www.mittromney.com/sites/default/files/shared/housing_white_paper.pdf
ROMNEY IS OUR GUY!! -- WSJ
Romney Proposes Housing-Market Plan
He said he would "reform" Fannie Mae and Freddie Mac, FMCC +1.92% the government-controlled mortgage giants. That's a contrast with other Republicans who say they want to eliminate the firms, and the White House, which says it wants to eventually wind them down.
"The politicians should have realized that when you interfere with the market—as they did with Fannie Mae, Freddie Mac, and with their homeownership initiatives—bad things can happen," Mr. Romney said in a statement.
http://online.wsj.com/article/SB10000872396390444032404578010730044504690.html?ru=yahoo&mod=yahoo_hs
aliases...i know what you were saying:
joe...yeah, i get it, you have let people know who you are.
that's cool
what i was trying to say was that if you want to influence washington, you cannot do so without real names and addresses. they will not respond to online petitions or forwarded emails etc., etc. I worked in DC in 1999 for a Senator. Every card, letter or email with a name and address from the home state was entered into a data base, tracked by name, content, issue area of concern. some got form letters back, the more interesting and thoughtful submissions actually got personal letters back drafted by aides that were specifically assigned to that issue area (tax, defence, transportation, healthcare, banking, what-have-you).
anything anonymous, apparently forged, or did not match with a known database of residents was disregarded.
anonymous lobbying won't work. that's what I was trying to say. if you want to get a group of organized shareholders to really get something done, you need real names because real names mean votes. and votes keep the scumbags in office.
joe stocks....i'll still use your alias if ok...that's what you post under.
for me, this site works just fine for anonymous idea gathering. i will not give up my real name and details (for many reasons, personal reasons that may not affect others...I don't even have a facebook account) unless the organization is real, organized, and has a specific mandate and is regulated in a way that I can verify.
otherwise, I am VERY protective of my online identity. i ran a software company for four years and am very familiar with the internet, data, network security, etc. if I hand over personal details, there must be a legal framework in place to protect it, and the data base that hosts it should be disconnected from the internet.
joe stock: if you want to organize and fight politicians, you need real names, not aliases.
hence why I suggested a real and registered and regulated lobby group, like fairtax.org. that will give shareholders some comfort that they are protected, kept anonymous (from the rest of the world, not the lobby group) and the group will have to have articles of organization, perhaps a board of directors that will have to unveil themselves to each other, and government filings of accounts will have to be made, as well as reporting to members on expenditures of funds. i'd even propose yearly audits. if anyone has CNBC and has seen American Greed, you know why I would insist on audits
if it is on the world wide web, europa, others should find us that are not on message boards...we want the institutionals, we need to find out who the top ten shareholders are, etc. etc.
the data will all have to be kept private though because nobody will want to disclose.
what I have proposed as a modest working framework will not be easy, and I don't have time. I'm working my but off on three M&A transactions at once. I can help guide with suggestions if anyone takes up the torch.
I think the prospect of success is a long shot too. but with search engine optimization, and getting a "real" and professional presence with security and trust, you just might get some big whales to unzip their fly...but I doubt it. frankly, if you get 200 retail shareholders to sign up, this isn't going anywhere. and frankly, I think that would be a HUGE number to come forward and organize themselves by even next summer!
if someone is a better marketer out there though and knows how to get the word out, and someone else can do the IT, lock it down, keep the database of names and addresses and keep it secure, something could get organized. it could happen.
getting the shareholders together:
i think setting up a secure website with a trusted admin where contact info can be submitted (but who knows how to verify if the new member is a shareholder?!?!) and then a platform developed whereby the members could indeed vote on the issues. members should state percentage of preferred vs. common and freddie vs. fannie.
quick ideas during the work day to get juices flowing.
again, verification that the shareholders are real...who knows?
maybe someone should legally set up a political action committee or lobby group under the IRS code and only someone that donates a small, but significant portion, of money will be allowed to join. the money could be used to fire off signed petition cards with voters' addresses to politicians and start getting voices heard.
the number one grassroots campaign I am aware of (and has been getting some modest traction despite the almost impossible goals it has) is www.fairtax.org
model after that, or something like it?
thanks for saving me the time looking!
stop ihub spam in mailbox??
anyone know???
excellet post europa
my thoughts exactly.
i'm going to head to Bronte's blog and see what the comments are for the recent post about his 80% loss.
the comment section is usually very articulate too.
Conservative proposing recapitalization??
http://www.redstate.com/2012/09/21/government-finds-new-ways-to-perpetuate-the-bailouts-of-fannie-freddie/
Government Finds New Ways to Perpetuate the Bailouts of Fannie & Freddie
By: Ben Howe (Diary) | September 21st, 2012 at 08:17 AM | 1
RESIZE: AAA
The cost of the bailouts seems never-ending and more of the mounting evidence that it didn’t work, like a bailout recipient laying off 16,000 workers this year, continue to make the news.
Tied to the root cause of the financial meltdown of 2007-2008, are mortgage giants Freddie Mac & Fannie Mae in light of their penchant for bundling sub-prime mortgage securities in the years preceding the collapse. Since those dark times, they have continued to be the recipients of multiple bailouts and government assistance even as taxpayers and critics pleaded for an end to their long overdue folding.
The government however, seems determined to screw taxpayers just a little more on the way down.
On Aug. 17, 2012, the Treasury Department announced it was changing the terms of its bailout agreement with Freddie & Fannie in a way that will shrink the holdings of the two mortgage giants more quickly and will require payment to the government of all quarterly profits the companies earn.
Here’s the translation: the government is pretending that they are helping the taxpayers out by taking all of the profit generated by Freddie & Fannie, rather than continuing with the fixed 10% dividend that had been written into the tax bailout. Instead, they are guaranteeing that we won’t get paid back nearly as much from the bailouts as we could’ve been.
CATO explains better than I could:
The problem is that the Government Sponsored Enterprises (GSE) have never had a year where their profits would have covered the dividend payments, so while we can debate if the taxpayer will recover anything from the GSEs, shifting to just collecting profits definitely means the taxpayer’s potential recoupment is lower.
The deal is really geared towards protecting debt holders over the taxpayers that funded the bailouts.
It reduces the ability of FHFA to place Fannie or Freddie into a receivership, under which FHFA could impose losses on creditors. Under Section 1145 of the Housing and Economic Recovery Act, FHFA has the discretion of appointing a receiver if one the GSEs displays an “inability to meet obligations,” which would include dividend payments. By essentially taking away that lever from FHFA, Treasury has greatly reduced any chance of a receivership. Sadly, I believe a receivership was the only thing that would force Congress to also deal with Fannie and Freddie. Treasury’s actions have been a massive win for the broken status quo.
Basic business sense also guarantees that this will wind Freddie & Fannie down as we had hoped, but in a way that guarantees minimal ability to create substantial dividends to the taxpayer or the opportunity for independence from the government. Basically, by bleeding the companies of every bit of their profit & capital, their opportunity to grow out of needing bailouts is dead.
Some in Congress, like Rep. Spencer Bachus, are sounding the alarms on the issue:
…rather than announcing steps to wind down Fannie Mae and Freddie Mac, the Administration opted to create a permanent, off-budget source of funding for housing that it will control.
It’s a confusing topic but the takeaway is this: the government just figured out a way to extend government control of and guarantee dependence from one of the largest players in the mortgage industry by ensuring they’ll never become solvent or independent.
Ask GM how the stigma of government control has worked out for their business and sales.