Fannie Mae-No Politics (FNMA)

[mike_usa]

One of the comments by a reader Piper Drew on

http://timhoward717.com/2014/07/02/bill-to-keep-fannie-and-freddie-alive/#comments

This bill is not news. The bill was first was announced over 6 months ago on January 16, 2014. Since then there has not been a draft made available beyond the original outline. It is old news and it is a failed bill proposal (not even a proposal of any substance) as is the others before it. It is hyped now since there is an activity and news vacuum in Congressional legislative news on housing reform. It was poorly received in January and is poorly received now.

http://himes.house.gov/press-release/delaney-carney-and-himes-announce-housing-finance-reform-proposal-plan-introduce

Delaney, Carney and Himes are not for shareholders and do not understand what has been and is going on or they imagine the public is stupid and/or ignorant and will believe any thing in print. Read what they wrote about GSE shareholders and their unwillingness to vacate the third amendment or to renegotiate the third amendment. They write as if the third amendment was an original deal made with US Government in exchange for some wild guarantee that is simply made up in their minds and has no basis in reality.

http://online.wsj.com/news/articles/SB10001424052702303369904579421143244960198
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David Skeel’s “Now Uncle Sam Is Ripping Off Fannie and Freddie” (op-ed, Feb. 28) argues for a renegotiated agreement between the government and the companies’ shareholders.

We have outlined a housing reform package that creates a new housing finance system including a path for Fannie Mae FNMA +2.04% and Freddie Mac FMCC +1.30% to be sold. But under no circumstances should the government modify its current deal with Fannie and Freddie until Congress passes comprehensive housing-reform legislation.

To do so would be turning the clock back on reform and an injustice to the American people. Fannie and Freddie failed in 2008, and the government stepped in and explicitly guaranteed $4 trillion of debt and obligations and injected $187 billion of equity. Taxpayers assumed a staggering obligation equal to 48 times all annual Social Security payments. In exchange for this unprecedented level of support, the government negotiated a deal that allowed it to ultimately take all of the profits of the companies. Given the extraordinary level of government support, this deal seems fair to us. Now that the companies are profitable and have paid significant sums back to the Treasury, Fannie and Freddie shareholders want to change the deal.

We believe Fannie and Freddie could have a future once we agree on comprehensive reform that creates a stable system and safeguards against abuse, mispricing of risk and financial calamity. But until that future is agreed to by Congress, or unless the Supreme Court were to rule otherwise, those of us in government should stand firmly with the American taxpayer rather than renegotiate the agreement.

Rep. John K. Delaney (D., Md.)

Rep. John Carney (D., Del.)

Rep. Jim Himes (D., Conn.)

Washington
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Caveat Emptor. Time to take a deeper look at what Delaney, Carney and Himes propose in their outline.

Where is there shown an understanding of the conservatorship, the current secondary mortgage market and housing finance?

Where is the private capital coming from? At least 500 billion is required.

They say:

“The Delaney-Carney-Himes housing finance proposal creates a structure that enables the government to significantly expand the availability of capital in the insurance market, while ensuring the mortgage market is open and efficient – with private capital participating in the market and pricing all of the risk.”

What is the structure they are talking about? Not present. Where is the private capital coming from? Who are these companies? The TBTF banks are the only ones with capital of this magnitude and at least 500 billion is required. The TBTF banks have not stepped for CW or JC. They certainly will not step up to these wild promises of the US Government/ taxpayer (Ginnie Mae) to take on 95% of the risk if these insurers back out or fail miserably as they did before.

They say:

“taxpayers will remain on the hook in the event of another downturn in the housing market.”

They will remain on the hook with this explicit 95% Ginnie Mae guarantee they propose. The private sector will game this proposal to death if given the chance to make profits and shift losses to the US Government if they goof up. And does Ginnie Mae have the secondary mortgage market expertise of Fannie and Freddie? No. This is same CW, JC giveaway to the big banks but instead of a FMIC they repurpose Ginnie Mae.

They believe a transition to a private market can happen in less than 5 years and that the disruption to the current housing market is greatly overstated. Are these Congresspersons clothed in their right minds?

The US Treasury guaranteed 200 billion for each GSE. It is ridiculous to state that the US Government explicitly guaranteed $4 trillion of debt and obligations. That is false.

Why is there no serious consideration of the $213 billion paid in dividends to the US Treasury? Over $25 billion more than invested by the US Treasury was taken in.

Delaney, Carney and Himes think the third amendment is a good deal, that is, “the government negotiated a deal that allowed it to ultimately take all of the profits of the companies.”

What sort of negotiation happened? Is this acceptable? Apparently, these three think taking others property is ok as long as it them and the Congress doing the taking. 18 lawsuits challenge that thinking.

They say:

“Now that the companies are profitable and have paid significant sums back to the Treasury, Fannie and Freddie shareholders want to change the deal.”

Change the deal? What deal? There was no deal. Laughable.

Delaney, Carney and Himes among themselves think Fannie and Freddie could have a future. When did three Congresspersons or the Congress as a whole gain the constitutional or statutory rights to confiscate and sell two publicly-traded and shareholder owned companies without due consent of the shareholders? There are no such rights. Who do Delaney, Carney and Himes think they are?

These three emperors have no clothes.