Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Questions for all, because I don't know
Is this churning any indication that weak hands have been shaken out in the $3 range?
Maybe retail that is still holding are less willing to sell?
Are we all waiting for dividends? Sorry that one is my pipe dream
Understood. I just hate articles like these that try to relieve people from individual responsibility. If an adult gulped a teaspoon of nicotine...well that is natural selection or thinning the herd. Any parent should be responsible to keep it out of their child's hands as if it were alcohol or even draino. These lib rags annoy me.
repost: READ THIS
http://www.wstreet.com/member/commentary.asp?con_id=32085
Typical new York slimes article. They want bigger government which means more regulation. The bright side is that the liquids are now ordered by the barrel according to the slimes. this means that demand is way up. I don't see demand going any other direction.
Varney and co. schedule. check this link. biggest drama
http://www.wstreet.com/member/commentary.asp?con_id=32085
3/24/2014 6:50 AM
Biggest Drama Since Lehman
Market Commentary
By Charles Payne, CEO & Principal Analyst
Question of the Day
There's a lot at stake. What should happen to the fate of Fannie and Freddie?
Remain Public with all profits funneled to the federal government
Remain Publicly traded with normal returns to investors
Unwind and create private competition
Hosting Varney & Co 11:00 AM- 1:00 PM
The great Fannie Mae heist continues to be one of the most intriguing stories not told in the press. Consider all the moving parts:
•Government Bailout
•Printed Money
•Forced Out Competition
•Housing Recovery
Consider all the players:
•Individual Investors
•Federal Government
•Federal Reserve
•Taxpayers
•US Economy
There are parts of the bond market and parts of the Federal Reserve that I still find quite perplexing; especially actions by the Fed that I cannot wrap my mind around. The fact is that of all the experts opining on the Fed, I bet 1% honestly understands the inner workings, and they never give us all of their information. It is like members of a secret society protecting their turf, even those that have left in disgust or frustration. So, we continue to get the most basic explanations regarding the Fed and policies like, (QE) Quantitative Easing.
What we know is there have been three rounds of QE, each with its own idiosyncrasy, though they have all shared the same stated goal of jump-starting the economy.
QE1, November 25, 2008 to March 2010, announced it would pump $500.0 billion into the banking system hoping to lower mortgage rates. By the end of the program, the Fed owned $1.25 trillion of mortgage- backed securities and $175 billion in agency MBS and the 30-year rate drifted to 5.0% from 6.25%.
QE2 was launched from November 3, 2010 to June 30, 2011, and $600.0 billion of long- term US Treasury debt was purchased to further pressure short- term rates, which sparked an increase in money supply, and assisted the housing market. Mortgage rates decline from 4.80% to 4.35%.
QE3 is the most misunderstood version of extraordinary measures taken by former Fed, Ben Bernanke, pumping in $85.0 billion a month in purchases split between US Treasures and agency MBS. This did little for mortgages, and dipped from 3.75% to a low of 3.75%, but has been ending higher and seems out of the grip of the Fed.
I keep going back to the fact that the Fed has been buying agency MBS as the most compelling part of this scenario. (No, the Fed has not been buying stocks and in fact, the Fed does not really "print" money, as its purchases are made with accounting gimmicks and use of credits.) QE3 began September 13, 2012, not too long after Fannie Mae took its last drawdown out of the pool of $200.0 billion in the first quarter of 2012. That final dip into the bailout pot sent the total to $116.1 billion in taxpayer funds.
A couple of weeks ago, Fannie Mae made another payment bringing the total to $121.1 billion. Yes, the American taxpayer has been repaid, but how the heck did fortunes of Fannie Mae reverse so quickly?
How many companies in the world have been able to generate $121.0 billion in cash in the past eight quarters?
From what I can discern, the Fed was buying mortgage- backed securities that originated from government- sponsored entities, largely Fannie Mae, which has been a boon for them to dump certain junk while keeping better and quality assets. Sure, the housing market has improved and delinquencies are easing. However, there are parts of the equation that no one can explain as free market. Of course, the so-called free market is missing that key component of competition, as this administration have forced many players out of the space, leaving fresh originations for single-family mortgages all to Fannie Mae.
A component of many deals involving Fannie Mae paper is the obligation, or an option to buy back after 24 months, the non-performing mortgages. We could see large chunks of payouts because of this, but in the meantime, it has been remarkable. But in the process, there is even less competition in the mortgage arena, and the Fed has begun to wind down this (final) version of QE. The hunch is jobs will materialize and wages will begin to head higher. Sparking that elusive virtuous cycle:
The biggest winner would be Fannie Mae, but who would get to enjoy this cash machine?
(Note: Japan invented quantitative easing, added even more bells and whistles, and with the election of Shinzo Abe, they might see a turnaround after two lost decades and 15-years of deflation. Finally, wages are up in Japan for first time in 22 months, coinciding with inflections in production and retail sales. )
Why Fannie Mae is an Amazing Asset
The Great Fannie Mae Heist is about money and power...plain and simple. It has become a money machine and everyone wants to control it. The composition of mortgages is a critical reason Fannie Mae is poised for a brighter future.
History of Housing Boom
During the Clinton administration there was a reiteration of the Community Reinvestment Act that pressured lenders to make dangerous loans. The risk was eased somewhat when Franklin Raines changed the rules at Fannie Mae, allowing it to become a buying of junk mortgage- backed securities. The stage was set.
The housing boom began in 1998; but ramped up as the US stock market melted down. By 2003, the dynamics of loans offered began to change dramatically, as traditional mortgages and lending standards would have derailed the boom.
Sub-Prime mortgages were 4.5% of the total, (subprime backed by MBS 1.4%) and in 1994, grew to 20.1% and 16.2% respectfully, by 2006.
Alt-A (alternative) loans were less than Prime, but greater than sub-prime. These loans were 98.7% fixed in 1998, and by 2004, 64.3% were adjusted with several different versions. By 2007, the industry saw that it was in trouble and began to ask for more documentation -demand for FICO scores above 741, which surged, while fixed rates bounced back to 27.6%. It was too little, too late.
Growth of Mortgages
2001 through 2003
2003 - 2006
Agency
95%
-60%
Sub-Prime
94%
94%
Alt- A
54%
340%
Declining Risk at Fannie Mae
Back to reality for Fannie Mae, which has seen a strong rebound in Fixed-rate mortgages?
Composition
2013
2007
2006
2005
Fixed
97.6%
90.1
83.4
78.7
Adjusted
2.4%
9.9
16.6
21.3
Alt-A
1.3
16.7
21.8
16.1
Sub-Prime
-
0.7
0.7
0.0
Interest Only
0.2
15.2
15.2
10.1
Negative Amortization
-
0.3
3.1
3.2
Key Risk Products
Fannie Mae Risk Asset Profile
Unpaid Mortgage Principal
Negative Amortization
Interest Only
FICO <620
FICO >620
<660
Alt A
Sub-Prime
2008
$17.3
212.9
123.0
256.1
292.4
8.4
2013
$6.4
80.7
74.3
155.0
131.3
4.2
Fannie Mae Risk Asset Profile - % of Total Loan Losses
Unpaid Mortgage Principal
Negative Amortization
Interest Only
FICO <620
FICO >620 <660
Alt A
Sub-Prime
2009
2.0%
32.6
8.8
15.5
39.6
1.5
2013
0.8%
18.7
7.0
15.7
26.0
-0.2
Improving Housing Market
I think home prices bounced back too quickly, but as they settle and rates inch higher, there should be a greater sense of urgency from fence sitters. If the housing market gains Main Street traction, we could see a couple of fantastic years of growth and orderly price improvement.
Source: Fannie Mae
Either $0.00 or $30.00
Fannie Mae share price, which climbed from $0.09 to a recent high of $5.44 has struggled of late, plunging to $3.55 at the close Friday. The reason for the plunge is a proposal announed by Tim Johnson (D-SD) and Mike Crapo (R-ID) to unwind government sponsored enterprises (now in conservatorship) to allow the private sector into the mortgage arena. These entities would have the explicit backing of the government on loans paid for and through a FDIC type of arrangement.
It's a toss-up as to how this all unwinds, but members of the powerful Senate Banking Committee, including Elizabeth Warren, who opposes the unwinding.
In the meantime, there is a serious battle brewing over how much current shareholders in Fannie Mae (and Freddie Mac, together with its counterpart should receive, as a total of more than $200 billion, covering the $188 billion in bailout was paid.
Investors want their share of profits, but I read where one Congressman said these GSEs should pay 50 times the bailout, covering for risks taken by taxpayers.
I am not sure how it is all going to shake out, but a friend says that the short interest on Fannie Mae is rocketing like nothing he has ever seen since the Lehman days. The stock is "hard to find," so shorts are paying hefty premiums because they see this stock going to ZERO. On the one hand, bulls see entities too big to dismantle, eventually sharing profits with shareholders, making this stock worth at the very least $30.00 a share.
This is a drama to watch...the implications are amazing from government reach and manipulation, to shareholders rights, to lower rates and the role of the Federal Reserve.
Stay tuned!
interesting new article
http://www.cuna.org/Stay-Informed/News-Now/Washington/GSE-limits-must-be-part-of-total-reform-package,-CUNA-urges/
Washington
GSE limits must be part of total reform package, CUNA urges
WASHINGTON (3/24/14)--Housing finance reforms must be considered in a comprehensive way, not broken out as piecemeal changes, the Credit Union National Association warns in a comment letter to the Federal Housing Finance Authority.
Last year that agency proposed a plan that could gradually reduce maximum loan limits by more than 4% for loans eligible to be purchased by Fannie Mae or Freddie Mac.
"As you know, Congress is currently actively looking at a number of ways to reform the housing finance system," CUNA President/CEO Bill Cheney wrote to FHFA Director Mel Watt, a former member of Congress. "Any legislation to reform the housing finance system will establish a system that may last for decades, and Congress should have the opportunity to address loan limits as part of a comprehensive package...We recommend that FHFA not take any action on loan limits as conservator of the (government-sponsored enterprises) until Congress first acts."
The GSEs are of crucial importance to credit unions that sell and service mortgage loans. In 2012, credit unions originated $123 billion of first mortgages, or about 6.5% of the total mortgage origination market. Although credit unions traditionally are portfolio lenders, the number of credit union loans sold has almost doubled from 2009 to present, to an average of 52%.
Cheney wrote that CUNA believes the new housing finance system should apply a reasonable conforming loan limit that adequately takes into consideration local real estate costs in higher cost areas.
Under the plan, the current statutory maximum loan limit for one-unit properties would decline from $417,000 to $400,000. The FHFA said the loan purchase limit would be reduced by the same percentage in other parts of the country, including high-cost areas in the contiguous states where current limits are set at $625,500. Those loan purchase limits would be set at $600,000, according to the FHFA.
The CUNA leader went on to say that it is "an open question" as to whether FHFA even has the legal authority to lower loan limits without a statutory change.
"In section 1124 of the Housing and Economic Recovery Act of 2008 (HERA), Congress modified the charter acts for the GSEs to set forth a requirement that loan limits be adjusted annually to reflect housing prices. However, in setting $417,000 as the baseline for single-family residences, Congress required that loan limits not be adjusted downward."
Comments were due March 20.
just saw this. don't know why it says March 24.
http://newtelegraphonline.com/us-housing-bill-would-cut-mortgage-access-for-minorities/
US housing bill would cut mortgage access for minorities
March 24, 2014 12:44 am | By: Our Correspondent | No Comments
A Senate proposal to overhaul the US housing finance system would make mortgages more expensive and less available, especially in minority communities, a coalition of consumer advocates and civil rights groups warned last Friday.
A draft bill to wind down government- run mortgage financiers Fannie Mae and Freddie Mac, released earlier this month by the leaders of Senate Banking Committee, according to Reuters, would replace the companies with a new industry-financed agency.
The agency would provide a government backstop for mortgages, but only after private creditors shouldered 10 per cent of any losses. The main concern expressed by the coalition was that the bill would fail to provide adequate access to credit and make housing affordable for all creditworthy borrowers, including nonwhites and families with modest incomes and lower wealth.
“The legislation would widen the existing wealth gap and lock out the very borrowers the market needs to operate in a healthy manner,” the groups said in a joint statement.
Seven groups signed on to the statement: The Leadership Conference on Civil and Human Rights, National Council of La Raza, National Fair Housing Alliance, National Urban League, Center for Responsible Lending, National Coalition for Asian Pacific American Community Development, and the NAACP.
“The bill lacks provisions to ensure that the housing finance system is fair and non-discriminatory,” the groups said. Some leaders of the coalition joined top White House officials on Wednesday to discuss the draft legislation put together by the committee’s Democratic chairman, Tim Johnson, and its top Republican, Michael Crapo.
The Obama administration worked heavily over the last couple of months with both Johnson and Crapo on their bill
Categories: Business.
Tags: Access, Bill, housing, minorities, Mortgage, and US.
This may be news but I think it also may be an old article rehashed.
http://originatortimes.com/fannie-mae/senates-fannie-mae-wind-down-plan-faces-high-hurdles/
Indusrty News for Mortgage Professionals
Senate’s Fannie Mae Wind-Down Plan Faces High Hurdles
by admin on Sunday, March 23rd, 2014 | No Comments
0
A bipartisan U.S. Senate plan to dismantle Fannie Mae (FNMA) and Freddie Mac must clear many political hurdles in a short time if it is to become law, leaving narrow chances of a housing-finance overhaul being enacted this year.
Senate Banking Committee leaders said the proposal, which they plan to release later this week, would replace the two U.S.-owned mortgage financiers with government bond insurance that would kick in only after private capital suffered severe losses.
It will be left to the courts to decide how investors in Fannie Mae and Freddie Mac are treated as the two companies are wound down, Mike Crapo, an Idaho Republican who co-wrote the bill, said today in an interview on Bloomberg Television. Investors including Perry Capital and Fairholme Capital Management are suing the U.S. to challenge an arrangement in which all the companies’ profits go to the Treasury.
“They have filed suit right now in order to challenge the way that the current conservatorship is managing the current profitability of Fannie Mae and Freddie Mac and we are not necessarily going to dictate the outcome of that,” said Crapo, who co-wrote the measure with Banking Committee Chairman Tim Johnson of South Dakota. “That will be a decision that’s made in the courts.”
Support Uncertain
It remains unclear whether the bill can gain the support it would need in the next four months, before lawmakers’ attention shifts to midterm elections. A Democratic Senate aide said leadership is currently unenthusiastic about legislation that would eliminate the companies.
“It’s possible, but it’s certainly not probable,” said Mark Calabria, a former aide on the Senate banking panel who now directs financial regulation studies at the Cato Institute, a Washington-based research organization that supports free markets. “You’re looking at maybe a 10 percent chance of a bill getting to the president’s desk.”
Pressure from the White House, lawmakers and other advocates who want to eliminate Fannie Mae and Freddie Mac is mounting as the companies return to profitability more than five years after they were bailed out by taxpayers. The bill’s fate may determine how soon the nation’s system of financing home loans is changed from one in which most of the risk is borne by taxpayers into one where private capital suffers the first losses.
Investors’ Take
“I do think we’re going to pass this bill out of the Senate,” Senator Bob Corker, A Tennessee Republican, said on CNBC today. He said the Senate Banking Committee plans to hold a drafting session in early April. “I’m really pretty upbeat about it,” he said, without saying why.
If the measure doesn’t pass this year, lawmakers must begin work all over again with the start of the new legislative session in January.
The bill’s dim prospects failed to allay fears among investors, triggering a two-day sell-off of stock. Fannie Mae shares plunged 12 percent to $3.54 at the close of trading yesterday, after tumbling 31 percent March 11. Shares were up more than 10 percent today to $3.92 at 10:20 a.m. New York time, and the stock is up from $3.01 on Dec. 31, and 29 cents a year ago.
Freddie Mac (FMCC) fell 17 percent yesterday to $3.36, a day after after dropping 27 percent. Its shares were up more than 11 percent today to $3.74.
Obama Support
The Johnson-Crapo bill, based on legislation that gained wide backing from members of both parties on the banking panel last year, was written with input from the administration of President Barack Obama and is the most likely vehicle for an overhaul. Still, it isn’t yet clear whether a majority of Democrats on the Banking committee will sign on.
The bill requires 10 percent private capital in advance of any kind of government guarantee, so “it’s a big step away from where we are today,” Corker said on CNBC.
Democratic senators on the panel including Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio have said they want to ensure any measure guarantees affordable loans for most buyers and provides funds for rental housing for the poor. Others in their party including Chuck Schumer of New York, Robert Menendez of New Jersey, Jeff Merkley of Oregon and Jack Reed of Rhode Island have yet to signal which way they’re leaning.
‘Bipartisan’ Discussion
“My sense is the basic proposal had a lot of merit,” Reed said in an interview. “I just want to look at what they’re specifically proposing.”
Getting approval from the committee will be central to moving forward on an overhaul, said Julia Gordon, director for housing finance and policy at the Center for American Progress, a Washington advocacy group with ties to the Democratic Party.
“It is important that a bill get out of committee so a framework for discussing this in a bipartisan way is established,” she said in a telephone interview. “If you don’t have a framework for discussing this in a bipartisan way, you’re not going to get anywhere.”
Another question is whether Senate Majority Leader Harry Reid, a Nevada Democrat, will expend political capital in an election year to bring the measure to a vote of the full Senate.
Democratic Reservations
Reid has expressed reservations about winding down Fannie Mae and Freddie Mac because the companies ensure that homebuyers are able to get affordable fixed-rate mortgages. The two firms provide liquidity to the housing market by buying loans from lenders and packaging them into guaranteed securities.
The Senate’s Democratic leadership remains lukewarm on the proposal and there is little enthusiasm for taking up the issue this year, said a Senate Democratic aide who spoke on condition of anonymity.
Still, Crapo and Johnson say they are hoping Reid will agree to move forward with their bill. “I have not had a discussion with him about that specifically but I believe Harry would be willing to work with us on this,” Crapo said in an interview.
In the Republican-led House of Representatives, a bill that would almost entirely privatize the mortgage market, written by Financial Services Committee Chairman Jeb Hensarling, hasn’t yet gained enough support for a vote of the full chamber.
House Bill
That could change if the Senate passes the Johnson-Crapo bill, said Corker, who co-wrote the measure that the new legislation is based on.
“If we show we can move a bill over here I think the House is then going to begin to look at what they might do to move closer to what to what the Senate is going to take action on,” he said in an interview.
Whether or not it’s enacted this year, the bill is likely to be the blueprint for an eventual overhaul, Ed Mills, an analyst at FBR Capital Markets Co. in Washington, said in a telephone interview.
“It remains a long shot this year, but this is going to be one of those things you can’t count out until the final gavel comes down on this Congress,” he said.
To contact the reporters on this story: Clea Benson in Washington at cbenson20@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net; Cheyenne Hopkins in Washington at chopkins19@bloomberg.net
To contact the editors responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net; Jodi Schneider at jschneider50@bloomberg.net Anthony Gnoffo, Gregory Mott
Does anybody have information on the superstar? I just found this ticker and I am trying to research. Is this vapor pen patented by mlcg with new technology? Did they purchase a patent? did they purchase trademark or distribution and marketing rights from some other manufacturer? Their web site only has a picture and a caption saying coming soon. I read the pr but there must be more info somewhere. Thanks in advance
It sounds like you have not considered the possibility that these plaintiffs have the resources and time to play in the big game with the federal government and that stalling will probably be counter productive in the long run. Plaintiffs will not run out of money or time but the judge will run out of patience with defendant's lawyers. I foresee the fed's lawyers shooting their selves in the foot (feet) time and again trying to stall until some form of a bill to wind down FnF can be put to a vote in congress. Maybe somebody out in Ihub land has answered this question already. Can the judge order some form of injunction against the fed taking any(wind down)action against FnF until court proceedings (the whole trial)are over and such wind down action may only take place and is (solely dependent) upon an unfavorable outcome for FnF in the trial?
along with your analysis may I add that I predict some shorting while others may buy and hold therefor FNF could fluctuate between price points here to for unknown during normal trading hours. Damn we could be politicians !!!
New article moneynews. I hope I did it right.
http://www.moneynews.com/Robert-Feinberg/Capuano-Freddie-Fannie-mortgage/2014/03/20/id/560660/
Thanks navy . My smart phone is too smart for me to understand
New value walk article this morning. I can't post it. Can somebody else post it. Perry capital vs. Traesury
Tomorrow's strategy... same as yesterday's. HOLD TIGHT' don't let em go !
Nice close $3.35
FNF and Sweeney sittin in a tree.....
That 200 million dollar aircraft has been hangared and parted by now. Look for it's electronics and avionics on Ebay.
This document from Judge Sweeney is probably just the first piece of information that turns fnf around. The government starts by pissing her off. I love it !!!
Thanks
There is a new value walk article. I cant post. I am on my phone. It is worth a read.
I am long with a substantial amount. At least for me. The daily swings don't make me sell but they freak me the hell out. Still holding, still queasy but determined as ever to see this to the big board and maybe even dividends.
Yes, brave the storm. There is a rainbow and a pot of gold on the other side. Congressional bluster can't sink the SS FNF. (Or we gone with the ship). There I beat the bashers to that last part.
Which article?
Ask Dror !!!
INCONCEIVABLE !!!
I am either going to be well off or I will die at work. I bought more fmcc twice today. Sold some others that are up just to get the powder. I need a drink and probably a shrink !
Bought more on the DIP. Now I am out of powder. Holding tight. I want to have a toast.
Thank you
exposing my ignorance here but that is a long trade day. I had no idea. thanks
thx bdaddyay
Obit, do you know what time locally (eastern time) that the Germany market closes? thx
I have not heard of this guy but I read his blog today. His post is a little lengthy but he has several good points and historic numbers. A lot of it I have read about on this forum so consider it a recap as opposed to redundancy. It is important.
Sunday, March 16, 2014
Um, Get Back to Me in 2017
Musings over Fannie and Freddie
Corker (R-Tenn.)-Warner (D-Va.),
Johnson (D-S.D.)-Crapo (R-Idaho)
(Today’s blog is lengthy but has good content.)
Nobody should perceive my Fannie and Freddie vehemence and strong feelings as thoughtless opposition to the Corker-Warner cum Johnson-Crapo bills. (“Insiders” say the J-C bill will be circulated today or tomorrow.)
But, once F&F repay $187 Billion to the federal government with a bonus "$$cherry$$" on top, I believe an restructured version of the current Fannie and Freddie based system—with the two separated from their federal patronage and allowed to keep their earnings as a future capital base--offers a more hopeful, equitable, fair, efficient, and better commercial and consumer option than that in the new legislative proposals.
The latter are rife with unnecessary macro changes, forced business relationships, as well as uncertainty, and give monstrous mortgage market power to the TBTF banks that already have too much.
I’ve documented the disparate treatment of F&F by Republican and Democrat administrations, yet so few people seem to acknowledge the violence done to our mortgage finance system—as well as to the financial regulatory system--by the very people who would be the major beneficiaries of Corker-Warner-Johnson-Crapo, the nation’s largest commercial banks.
Fannie and Freddie grief for buying the bank-created private label mortgage crap, but who has gone after the big banks for issuing $2 Trillion of near worthless mortgage backed securities—outside of the Fannie/Freddie systems, with bogus ratings and flimsy bank corporate guarantees—and peddling them worldwide, thus making the 2007 US residential downturn an international financial debacle.
Fannie and Freddie Versus the Big Banks
Compare:
Total GSE mortgage debt outstanding year end 2007, $4.8 trillion, which engendered $194 billion in losses, a 4% loss rate. (Source Laurie Goodman.)
F&F’s combined loan loss provisions 2008-2013: $194 Billion.
Private Label (non-F&F) total mortgage debt outstanding year end 2007: $2.2 trillion, which engendered $864 billion in losses (including $150 billion of synthetic CDOs, which financed no housing at all), total losses of 39%. (Source Philadelphia Federal Reserve. Thanks DF for your assistance.)
Banks generated roughly half the securities amount securities as F&F, but produced 10 times the losses.
Fannie and Freddie, together, were helped with $187 Billion in taxpayer’s funds—all of which, plus an additional $20 Billion or so, will get paid back by the end of this month.
The banks and others took down $750 Billion (3/4 Trillion) in federal Troubled Asset Relief Program (TARP) money and as far as I can see, invested most of it in overnight Treasury securities and Fed funds, a practice known as “arbitraging.”
Yes, it strengthened bank bottom lines, since it boosted bank earnings over the past few years, but the recipients did very little lending for business or home ownership.
Neither the Bush nor Obama teams extracted any reciprocal bank investment in return for the cash.
Yet, Fannie and Freddie—as government controlled automatons have held up the nation’s mortgage finance system since 2008, facilitating hundreds of billions in mortgage lending-- would be destroyed in these Senate proposals (and Hensarling’s House bill), while the banks get new federal mortgage bond insurance to cover any of their future uncovered losses.
If anyone needs any additional commentary on absence of the institutional integrity of those who would most benefit from the Senate proposals, the Federal Deposit Insurance Corporation (FDIC) said last week it is suing 16 large US and foreign banks for their roles in manipulating the London Interbank Borrowing Rate or LIBOR. That crucial and heavily utilized index has been the standard for virtually all US adjustable rate mortgages (ARMs), and thousands of other US and international financial contracts.
http://www.usatoday.com/story/money/business/2014/03/14/fdic-sues-us-banks-over-libor/6427563/
Cry foul all you want but those are the same guys to which the Senate is racing to give control of our country’s primary and secondary mortgage markets.
Let’s Reward the Really Bad Guys
So, the guys who get the C-W goodies just have been hit by FDIC for screwing around—to their own benefit not consumers—with a key mortgage index.
They’re the people to whom the Senate in Corker-Warner, cum Johnson-Crapo would give the family jewels and Grandpa’s ranch.
I have a question for the financially naive who complain that Fannie and Freddie “made too much money putting families into home ownership and deserve to be punched out by the Congress”--do you think the banks will create loans for free, especially now if they get the federal golden handshake of insurance on their mortgage bond losses?
If so, in what financial and economic world do you people live?
The media suggest that across the board in Congress, every open wants private capital making loans and covering losses. But capital is not really private when Uncle Sam stands behind it, no matter how far back, since that fact impacts the price of credit and the risk “private capital” is willing to take.
Sorry, but the dirty little secret which so many ignore is that all federal depositories (those which offer checking and savings accounts) benefit from a huge federal financial subsidy, the federal deposit insurance which protects the first $250,000 in virtually every account in a US bank.
And what do the banks pay for that working capital? Well, it’s their smallish FDIC insurance premium plus the 1% or less they give you for your checking or savings money. That’s what their working capital costs. The FDIC fund protecting those deposits is about one eight the size of the deposits outstanding.
Just how “private” is the banks money? Consumers put money in banks only because, once again, Uncle Sam guarantees it. So, please stop the crocodile tears for the banks and the excoriation of Fannie and Freddie. If anything the working capital for both sides is draped all in red, white, and blue.
The WSJ Man
The unfailingly exceptional Nick Timiraos in a weekend WSJ column lays out three possible options for the future US mortgage market. See below.
http://blogs.wsj.com/economics/2014/03/15/what-can-take-the-place-of-fannie-and-freddie/tab/print/
His third—some sort of F&F revival with limitations (the “Maloni scheme”) doesn’t seem to be his favorite, but it is the one which I believe makes the most sense, can be achieved the fastest, and can be shaped to exorcise all of the demons which people conjure when someone says “Fannie Mae or Freddie Mac.”
Most GSE complaints have long been remedied with post 2008 regulation.
Part of the problem on Capitol Hill is that their current legislative contortions invoke some unnatural acts, fitting square pegs into round holes, relying on those who’ve shown themselves to be unreliable or wanton thugs (just look at the billions of dollars in federal fines, for a variety of sins the banks have paid in the past two years), and Congress failing to see the virtues of past systems.
You can reduce, what most policy makers claim they want to eradicate, i.e. Uncle Sam is being on the hook for mortgage market losses.
What you cannot do wish away the “Too Big to Fail” (TBTF) phenomenon, unless the President and policy makers in both parties and both sides of the Hill force the TBTF institutions to slim down (much as they have forced F&F to slim down).
Yet, they are gutless when it comes to the big banks.
Make the financial behemoths smaller, increase their capital and voila, much of the problem disappears.
Let me close reiterating something I’ve written before. Don’t look for any major mortgage market reform/restructuring until the White House, the Senate and the House are controlled by the same political party, the soonest being in 2017 following the next presidential election.
Until that situation occurs D’s and R’s can offset the other’s political leverage.
Then we have the courts………. (Timiraos, who the WSJ is moving from the GSE and related issues beat to a broader task in Washington, last week wrote about that lawsuit situation, too). See below.
http://blogs.wsj.com/moneybeat/2014/03/14/why-courts-not-congress-hold-keys-to-fannie-freddie-investors-fate/?mod=wsj_valettop_email
More Gifts for the Begging Big Banks
The excellent reporting staff at Inside Mortgage Finance last week reported on the wasteful, unnecessary, stuck in the mud, “will someone please kill me?” Common Securitization Platform (CSP) project, which Mel Watt’s predecessor maced Fannie and Freddie into supporting and creating.
This is the scheme, involving a narrow purpose, Delaware registered corporation—which F&F are to support—with a reported $200-300 million budget and 300 planned employees, living in new Bethesda, Maryland offices. The CSP has yet to have a top person (nobody seems to want the job), a board, or any action plans, but does have a new board room.
The CSP was Ed DeMarco’s wet dream to force F&F to succor and pay for an “independent” underwriting platform which Ed planned to give to mortgage originators, hoping that that F&F would be long gone and the big banks could have the product free.
Can you say “clusterf_ _ _ and boondoggle” class?
Why do the banks need more Uncle Sam paid for and gift wrapped emoluments? Why does anyone need a third underwriting platform when F&F each have their own which function, are state of the art and can be used by any lender who hopes to securitize loans with the two?
Corker and Warner (and we presume Johnson and Crapo) already designate all F&F assets--including their operations systems--will go to Uncle Sam when the two perish or are euthanized?
Come on, Director Watt, kill this unneeded vestige of a former Director DeMarco, whose priorities were different from yours; save that $300 million for the taxpayers.
Hensarling Wouldn’t, Would He?
One of the better stories last week is that Senate Majority Leaders Harry Reid doesn’t want a Johnson-Crapo bill going to the floor because it would mean his politically vulnerable Democrats would likely be forced to vote for it, setting themselves up for their November GOP opponents beating them over the head for approving new federal mortgage market largesse. Smart man, Harry!
But, purely for the political gamesmanship involved, would the House R’s lull the Senate into a vote first by passing their Hensarling bill--rooted in the 19th century, where only banks would be there for mortgage lending—dangle the hope of making changes in a joint conference, just to get the vulnerable Senate D’s to vote on something?
I don’t think Hensarling is that smart, but someone in the Speaker’s office might be.
“Caution Will Robinson/Harry Reid!”
To President Obama (sigh), repeat, often, don’t trust the Russians, the Iranians, or the Syrians.
Maloni, 3-16-201
Another column that I found this morning. I am posting a lot this a.m. I guess I keep thinking about Fannie.
Fannie Mae profits push taxpayers into black on housing bailout
Fannie Mae profits push taxpayers into black on housing bailout
By Margaret Chadbourn 57 minutes ago
.View photoThe Fannie Mae headquarters is seen in Washington November 7, 2013. REUTERS/Gary Cameron
By Margaret Chadbourn
WASHINGTON (Reuters) - Fannie Mae said on Friday it would soon send the U.S. Treasury a dividend of $7.2 billion that will make taxpayers whole for the 2008 bailout of the mortgage-financing giant and its sibling company Freddie Mac.
Unlike other companies rescued during the financial crisis, however, the firms will remain under government control until Congress or the courts decide their fate.
"It's good news for taxpayers that Fannie Mae is profitable and sending dividends to the Treasury," Fannie Mae President and Chief Executive Officer Timothy Mayopoulos said on a call with reporters. "But I don't think that our profitability should be interpreted as a reason for delaying housing finance reform."
In announcing the payment, Fannie Mae said it posted net income of $6.5 billion for the three-month period that ended December 31, its eighth straight quarterly profit. It said it expects to remain profitable for the foreseeable future.
For 2013 as a whole, its net income was a record $84.0 billion. That compares to its previous record profit of $17.2 billion a year earlier.
Both Fannie Mae and Freddie Mac benefited last year from a recovering housing market that lifted home prices and kept a lid on loan defaults. Their return to profitability allowed them to reverse write-downs of certain tax-related assets, which led to large one-time windfalls.
The duo, which own or guarantee 60 percent of all U.S. home loans, were seized by the government at the height of the financial crisis as mortgage losses threatened their solvency.
Officials felt they could not let the companies collapse because their role in the housing system was too important: providing liquidity to the mortgage market by buying loans from lenders and repackaging them as securities for investors.
They also feared a failure to honor the guarantees the companies made on loans would lead to an even deeper crisis.
The bailout terms for the companies force them to turn over their profits to the Treasury in the form of dividends on the controlling stake the government took when it bailed them out. They cannot repurchase the government's share.
MILESTONE REPAYMENT TO TAXPAYERS
Before returning to the black last year, Fannie Mae had suffered five years of losses totaling $164 billion, and it had drawn $116.1 billion in taxpayer aid.
Freddie Mac, which lost $94 billion between 2007 and 2011, was supported by $71.3 billion in bailout funds. The company has yet to report fourth quarter results, but has already paid $9 million more in dividends than it received in aid.
Fannie Mae's dividend payment next month means the two companies, after a combined bailout of $187.5 billion, will have paid back about $192.5 billion in dividends. This excludes any payment Freddie Mac may still announce.
Fannie Mae's latest payment marks a milestone of sorts, but it also provides a reminder of how Congress has long postponed a decision on what to do with the two companies.
To avoid having to ever rescue them again, the Obama administration and lawmakers on Capitol Hill have vowed to revamp the housing finance system and do away with Fannie Mae and Freddie Mac as they are currently constituted.
The Senate is working on a bipartisan bill that would ensure there will be a government backstop for the market in times of crisis, an approach favored by the White House. A Republican-backed bill in the U.S. House of Representatives would limit federal mortgage guarantees more sharply.
"Housing reform has always been a heavy lift, but as we move from a climate in which the focus is on the great harm these institutions have done to the economy to one in which it is on the increasing sums they bring to the Treasury, it is a good bit heavier," said Jim Parrott, a senior fellow at the Urban Institute and former senior adviser on President Barack Obama's National Economic Council.
While last year's dividend payments are not expected to be matched this year, the companies are likely to keep paying billions to the Treasury unless there is a sudden downturn in the housing market, Congress shutters them or lawsuits challenging the dividend requirement are successful.
Hedge funds, including Perry Capital LLC and Fairholme Funds Inc., have sued the government. They argue that if profits are being returned to taxpayers, the government's stake should shrink. This would benefit private shareholders who would see the value of their shares rise.
Indeed, the sizable profits have led some big investors to pile into the companies' stock on speculation they could be spun off again as private firms - an outcome that does not have support on Capitol Hill or at the White House.
In a separate suit, low-income housing groups are seeking enforcement of bailout terms that demand some of the profits go into a government trust fund for affordable housing initiatives.
The litigation is expected to drag out for years, as is the congressional effort to remake the housing finance system.
Putting an end to Fannie Mae and Freddie Mac would likely increase the cost of taking out a mortgage, even though the White House insists that any reforms retain some government role to preserve easy access to the 30-year loans that are a staple for middle-class buyers.
(Editing by Chizu Nomiyama and Bernadette Baum)
http://news.yahoo.com/fannie-mae-pro...4--sector.html
More Bloomberg b.s. about fnf. I pulled this off of Japan News.
Taxpayers deserve Fannie Mae, Freddie Mac windfalls
Clip to Evernote
in
Share
.
10:56 pm, March 16, 2014
Paula Dwyer / Bloomberg
Congratulations, taxpayers! Fannie Mae and Freddie Mac, the mortgage-finance companies whose September 2008 bailout set off a financial fireball, just repaid you in full. You even made a small profit from your $187.5 billion loan.
The companies are throwing off torrents of cash as once-debased assets recover value in the housing revival. So more payback is coming, right?
Not necessarily. Hedge funds, mutual funds, insurance companies and other Fannie and Freddie shareholders are suing to stop the U.S. from using the profits to enhance taxpayer returns.
The Treasury Department, some of the country’s leading constitutional lawyers claim, has no legal right to reward taxpayers ahead of shareholders. That’s chutzpah. If the government owes a duty to anyone, it is the American taxpayer.
OK, that’s not exactly a legal analysis. It is, however, a financial one, rooted in one of capitalism’s basic principles: Those who risk the most deserve to reap the highest returns.
Taxpayers took on enormous risks—$5.4 trillion in debt and mortgage guarantees, to be precise—when Treasury Secretary Hank Paulson placed Fannie and Freddie into conservatorship. By doing so, he put taxpayers behind the companies’ loan guarantees and made sure that, even though the private sector was abandoning the mortgage business, homebuyers could still get loans.
Under the deal, Fannie and Freddie shares kept trading (even after they were delisted), but holders ceded all rights to the U.S. government, which received just shy of 80 percent of the stock. The government also got an annual dividend equal to 10 percent of what each company borrowed from the U.S., plus $1 billion. The two were so mired in losses ($109 billion in total, more than their combined earnings in the prior 37 years) that they sometimes had to borrow from the Treasury to pay the annual dividend—to Treasury!
To end that farce, the U.S. in 2012 changed the terms of the arrangement by imposing a “net-worth sweep,” in which it took every dollar of profit as its dividend. By depriving the companies of earnings, though, the U.S. also made it impossible for Fannie and Freddie to repay their government loans. It also deprived shareholders of dividends.
This is what the lawsuits are all about. More to the point, they are about Fannie and Freddie’s $133 billion in 2013 earnings. The companies won’t keep up that pace of profitability, but they are expected to earn about $179 billion more over the next decade.
That’s a big pot of money. To get their hands on it, the plaintiffs claim the U.S. essentially nationalized Fannie and Freddie when it amended their conservatorship. The plaintiffs also claim that documents from 2008, when the companies were seized, suggest that the U.S. would eventually return them to shareholders.
That’s nonsense. No one involved in managing the 2008 crisis had a clue what would become of Fannie and Freddie, or whether they would ever be profitable again. If anything, the consensus was that the companies should never be allowed to revert to publicly traded companies in which shareholders get all the upside in the good times and taxpayers all the downside when the bubble bursts. Freddie Mac, in quarterly filings, even warns that the U.S. Treasury is “committed to protecting taxpayers and ensuring that our future positive earnings are returned to taxpayers as compensation.”
Hedge fund Perry Capital and others nevertheless claim that, as long-suffering shareholders, they deserve their share of those profits. Perry bought its shares for pennies in 2010, after Treasury failed to exercise rights to purchase them, speculating that it could make a bundle once housing prices rose and the companies exited conservatorship. Treasury, however, outsmarted the bottom feeders with the net-worth sweep. Now the investors want the legal system to hand them the windfall they had hoped for.
The plaintiffs make much of a 2010 memo to then-Treasury Secretary Tim Geithner, in which an undersecretary implies that the U.S. intended all along to deny stockholders any future earnings in the companies.
Why is this surprising? Before the housing bubble popped, shareholders benefited from an implicit government guarantee of Fannie and Freddie’s liabilities. Equity holders never warned that the rise in housing prices couldn’t last, that Fannie and Freddie were dangerously overleveraged, or that the companies should have more capital to absorb potential losses.
The U.S. doesn’t have totally clean hands. It didn’t nationalize Fannie and Freddie outright because that would have meant placing $5.4 trillion in obligations on the government’s books. Had it done so, the outcry from fiscal hawks, not to mention the debt-ceiling fisticuffs, would have been insufferable.
The U.S.’s pragmatism in the face of a crisis doesn’t erase the fact that Fannie and Freddie exist today solely because taxpayers for years covered their losses. The lawsuits are a distraction from the real debate the U.S. should be having: What should be done with Fannie and Freddie now that they are profitable again?
I found this from yesterday. Sorry if it was already posted but I have not seen it.
Saturday, March 15, 2014
Stocks DD Opines: What Ralph Nader, Berkowitz and Ackman need to do now!
Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article
GSE shares went down on senate proposal to "wind down" GSE. Politicians are enthusiastic to get their names behind "reforms" without clearly understanding the root cause and the option to fix the root cause. No surprise. Here is what Ralph Nader, Berkowitz and Ackman needs to do without wasting any time:
Why NO BIG BANG Reform is needed ? Risky, Untested and NOT Required?
1. Publicly put the ROOT Cause for the 2008 Crisis - it seems like our politicians are suffering from amnesia.
The point to prove is 2008 Downturn was a ONE-TIME event created by wrong incentives where players who wrote the Mortgage never bothered about Underwriting quality and these front-end mortage salesman were happily satiating the demand of mortgages from so-called "investment banks"(eg: Bear sterns) . These "investment banks" could magically hold these Mortgages with less than 2% capital. Here is a frontline investigative story on that. Such a dramatic housing downturn event will NOT happen as reforms have been done to fix root cause. Investment banks don't exist and now they are all bank holding companies regulated with 10% capital ratio. As the GSE's post 2009 portfolio indicates, the underwriting quality has improved by leaps and bounds and the controls(loan-to-value ratio, credit worthiness check on the borrower, etc) taken by market players will ensure it remains that way.
2. Articulate the minimal reform needed
GSE Proposal to be restructured using "public utility model" and the Government's "implicit" role in such a scenario.
3. Publicly prove by Sensitivity Analysis that "public utility model" is sufficient to ensure GSE will be well capitalized at all times in future.
By sensitivity analysis using 30 year home price fluctuations, 30 year delinquency and 30 year foreclosure rates prove that Government's role or capital would NOT be needed and the capital generated by GSE will be self-sufficient to endure the next trough in the economic downturn. Remember the post-2009 portfolio is historically the best quality portfolio that GSE's have had and also remember the multi-decade profitability of GSE (from 1986-2008 -link).
Estimate the capital that GSE would have by 2018, if the Net Sweep agreement is revoked and the taxpayers get the 10% dividend. If at all needed, raise some more equity capital by means of issuing preferred shares.
Any unwarranted reform - Risky and may endanger the affordability of 30 year fixed mortgage instrument or the instrument itself.
4. Without the regulated public utility model and the implicit Govt backing, the agency MBS would get expensive and the 30 year Fixed mortgage (the most unique thing in American housing market) will get expensive. Nobody knows how MBS investors around the world would perceive if the implicit Govt backing on Agency-backed MBS no longer exists.
If the 4 points are done, I believe it may convince lawmakers to NOT act radically on GSE and endangering the affordability of 30 year mortgage and putting in something that is risky and untested.
Also, articulate the equity value for Shareholders (Govt and Private) in this scenario that legitimately belongs to the Shareholders.
The Rule of Law in America
5.a Lastly, leave it to the Supreme court to decide the Fairness/legitimacy of 2012 amendment a.k.a net sweep agreement at the time when GSE were already Profitable and they were in no dire straits to get capital. If they really needed capital, they could have approached the capital markets and gotten capital at much lower cost to shareholders than the draconian Aug 2012 agreement.
5.b. Also, remember any Congressional reform on GSE that is NOT in the best interests of private shareholders and turnabout from the "quasi-govt/private" nature of GSE or the status quo will also be challenged in the Courts. Lets remember this is America(Not a banana republic) and Government can't whimsically change rules midstream.
If you like to receive free updates on stocks directly to your email inbox, click on the subscribe via mail icon situated on the top right of this blog.
Posted by Stocks DD at 6:13 AM 1 Comment
Email This
BlogThis!
Share to Twitter
Share to Facebook
Share to Pinterest
Labels: Ackman, berkowitz, fannie mae, FMCC, fnma, raplha nader
I just found this on you tube. Nela Richardson Bloomberg government
It seems that Jonathan R. Lange is looking for a pay out of his own. I know that drivel like this article in Baron's can drive the stock price down. I have seen it before with Baron's because they are a widely read publication. Drive by readers accept this type of article as real journalism regardless of the author's disregard of the facts and the author's refusal to print what we all know after just a little bit of research. The content (or lack of content)in this article is evidence that the author is just another type of paid basher. When the time comes for big investors to change the perception of FNF I am sure the hedge fund managers that own FNF will pay these hacks some cash to author favorable articles.