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News: Fannie-Freddie Overhaul Bill Clears Hurdle
Heads of Senate Banking Panel Sketch Outline of Mortgage-Market Overhaul
By Nick Timiraos | 11 Mar, 2014
Our first glimpses of Johnson-Crapo Bill.
http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-477957/
The top Democrat and Republican on the Senate Banking Committee have reached agreement on the broad outlines of a bill to overhaul Fannie Mae and Freddie Mac and the nation’s $9.9 trillion mortgage market.
The bill will call for replacing Fannie and Freddie with a new system of federally insured mortgage securities in which private insurers would be required to take initial losses before any government guarantee would be triggered.
Fannie and Freddie, which were taken over by the U.S. in September 2008, remain one of the largest unaddressed pieces of the government’s financial-crisis rescues.
The agreement between Sens. Tim Johnson (D., S.D.) and Mike Crapo (R., Idaho) follows closely on the work of a proposal released last year by Sens. Bob Corker (R., Tenn.) and Mark Warner (D., Va.).
“There is near unanimous agreement that our current housing-finance system is not sustainable in the long term,” Mr. Johnson said in a statement. The current arrangement, in which Fannie and Freddie are backing nearly three in five new loans while under government control, is “unacceptable,” Mr. Crapo said. Their proposal “provides a balance between providing broad access to mortgages while protecting taxpayers from losses.”
A key question facing committee leaders: Can they attract enough Democratic support, particularly from more liberal members that have insisted on stronger provisions for affordable-housing subsidies, without driving off Republicans that have already reluctantly agreed to a broad government backstop of home loans? Ten members of the banking committee—five Republicans and five Democrats—had supported the Corker-Warner proposal.
Messrs. Johnson and Crapo, who had initially said they hoped to reach agreement by the end of last year, said they plan to release a full draft of their bill within days and to hold a committee vote within weeks. The product follows months of behind-the-scenes negotiations that involved close collaboration between Republican and Democratic committee staffers.
Their proposal faces an uphill battle. An array of industry and consumer interest groups have already signaled they will resist major changes to the nation’s unique system of financing home loans. Lawmakers on both sides of the aisle—though they disagree sharply over the future U.S. role in housing—could also join together to stall a bill.
Still, the prospect of bipartisan legislation would be significant not only because Washington has been gridlocked on other issues such as immigration and the budget, but also because lawmakers have done little to address the fate of the two mortgage-finance giants since their 2008 takeover.
“It would be a huge step forward for them to come forward with a bill,” said Phillip Swagel, who was an assistant secretary for economic policy under Henry Paulson, who was Treasury Secretary when Fannie and Freddie were rescued. He added: “The details are really hard and really important. That’s the tough part.”
The Obama administration has been closely involved in the product, which reflects key principles set forward by President Barack Obamalast August. Last month, current and former White House officials expressed alarm that more progress hadn’t been made.
Their concern is that, as Fannie and Freddie return to profitability and memories of their role in the housing bust have faded, it will become harder to pass measures strong enough to address the problems that triggered their 2008 rescues.
Meanwhile, hedge funds and other institutional investors that have bought up Fannie’s and Freddie’s stock at discounts will fight to ensure that the government doesn’t dispose of the companies in a way that destroy the value of their shares. They could see a huge payday if Fannie and Freddie are restructured as private entities.
While there is widespread agreement that the status quo isn’t tenable, bipartisan agreement has been slow to build. Conservatives have called for a mostly private market, but centrist Republicans and nearly all Democrats have argued that a federal role is needed to preserve broad access to the 30-year fixed-rate mortgage, which isn’t widely available in other countries.
The Senate framework would allow private entities to purchase an explicit government guarantee to cover catastrophic losses on mortgages issued as bonds from a new guarantor, similar to how the Federal Deposit Insurance Corp. regulates banks and provides deposit insurance to minimize bank runs.
Fannie and Freddie don’t make loans but instead buy them from lenders and package them as bonds. Their middleman role makes more widely available the 30-year fixed-rate mortgage by matching banks and other lenders with investors, such as pension funds that are willing to manage the interest-rate risk associated with long-term, fixed-rate mortgages.
Rather than issuing separate securities with a fuzzy implied federal guarantee as Fannie and Freddie did, the new system would see multiple firms issue a common security in which the government would stand behind the payment of principal and interest to security holders. Those firms would have to fail before the government guarantee would kick in.
When the government took over Fannie and Freddie in 2008, it agreed to inject huge amounts of cash to keep them solvent. In exchange, the government has taken nearly $188 billion in shares of “senior preferred” stock.
By the end of March, both companies will have returned nearly $203 billion to the U.S. in the form of dividend payments. Beginning last year, all of their profits are required to go to the Treasury as dividends, making it impossible for them to rebuild capital. The Treasury Department faces multiple lawsuits challenging those terms.
Many investors have bet that the firms will become so profitable that Congress and the administration will have little choice but to let some value flow back to shareholders. Shares of both companies have traded in recent days at their highest levels since the firms were taken over by the government in 2008.
Write to Nick Timiraos at nick.timiraos@wsj.com
FMCC lagging!! What is this!
Yesss! Bid is up to 5.79. Rocket ship baby.!
Does NO ONE do DD.!!!!! Perry capital is one of the entities suing the govt. richard c. Perry is the head of perry capital and is worth a little north of 1 billion. Its guys like that who get obama in office. Trust me the people with the real money always get what they want in politics.
Look who is filing suit against the govt. Perry capital. Head honcho is richard c. Perry. The man is worth over a billion. Who do you think gets these candidates into office. Guys like perry. Perry and hedge fund managers like him have the control. They will get what they want.
My fAvorite part of italy.. If you dont include the island of capri.
Yes, it would seem. GRPN Is a value buy. It will slowly climb back to $11. Im expecting next earnings to help out.
Based on?
Technicals arent something that should play into FnF. He'll go higher before coming down for a breather
I dont see the point in trying to flip. Ive tried and lost shares. New attitude. Hold strong because longterm it wont matter. Fannnie!!!!!
Buying this dip!
Does freddie mac pretty much go step by step with fannie? In sp correlation.
Talk about support. Nice bra @5.26
RSI is ridiculous. Im not sure how much more she has for today. Support pleeeassse
Its possible but i would not expect anything under 8.25
News out that GE's CEO has spent his entire 2013 bonus on company stock! Thats a major show of confidence for investors.
No one knows and dont EVER take any persons' word for it
On how big of a run up we had, shes holding around 250 steady. Unexpected but impressive.
News?
Found a nice article on future growth. Published 2 hours ago.
http://techcrunch.com/2014/02/27/groupons-stock-rises-following-positive-analyst-comments-about-future-growth/
I obviously want another run but i i will add if it does not.
Itll be interesting if there is a small selloff tomo or not.
Definitely next 2 months we will see 10+. These PTs are going to be placed higher.
Ive really noticed that pattern. The institutions seem to downgrade, load.. Then raise the bar and push it back up.
TSLA version of a pullback... .2%. This stock is a train.
12 would be a beautiful thing.
I own no shares. I think its interesting
Do you know how many us dollars are in circulation? There is only 1.2 trillion in existence. A little over 3,000 per person. So im not understanding why your upset? It is the same as any other currency. I can exchange my us dollars for Canadian currency or euros. Bitcoin is the same as them, your trading your form of currency for the other. Both are technically worthless. They currencies not actually "money"WE ARE OFF THE GOLD STANDARD! If u havent noticed
Im not understanding your question? Theres is "in theory" an unlimited amount of bitcoin in "circulation" sane goes for the us dollar. You can print or create as much as you want. My disclosure also, i do not hold a position in this stock or anything related, just think its cool. I dont plan on getting involved, too crazy at this point, not enough "trust" to hold it steady
Love it.. Hopefully we get carried through the week $GRPN
I would just like to point out that bitcoin can be as big as the world population wants it to be. Bitcoin is a currency as is the US dollar. They are backed by nothing, they are both the same... Fiat currencies. The reason both have value is from the general populations trust and support that it is worth "x". The only thing i know of that is true value is gold. 1 oz buys you the same as it did 1000 or 5000 years ago. Bitcoin has potential, untaxed and its international. People have the power on this one and whether it takes hold. The value of gold never changes.. Its why i dont see it as an investment. It hold the value of your wealth, your buying power remains the same no matter what you sell or buy it for. So my question is......why cant bitcoin become the future?
Im not that big of a douche
Irrelevant... This is a groupon message board.
There is no reason for this to stay under $9 on this bounce
Say it! Say "bounce"!
For the long haul companies it is all about cash flow and we have plenty. As long as they can continue to raise that bar the company will be fine.
They have their own agendas and other peoples in mind when setting pts. I dont pay too much attention. Theyll now position themselves down here and next quarter lift the pts and the cycle continues.
My average is 8.36 and i will not buy more.. Bttr see a rebound to that are this week.