The misguided federal policy to concentrate the U.S. mortgage finance industry in two huge government-sponsored entities was underscored again this morning when the Securities and Exchange Commission (SEC) charged six former Fannie Mae and Freddie Mac executives with misleading investors and Congress about the amount of poor-credit-quality mortgages each entity held before they were taken over by U.S. regulators in September 2008. The charges, if true, also make it clear that both Fannie and Freddie were acting as hedge funds that gambled on high-risk investments in addition to their congressionally …
On Friday, December 9, 2011, Representative Dave Camp (R-MI), with several cosponsors, introduced H.R. 3630, the “Middle Class Tax Relief and Job Creation Act of 2011.” The 369-page bill consists of six titles, main elements of which are discussed below. Title I of the bill gets the government out of the way of a pipeline project so the private sector can create some jobs. The bill provides a mechanism for prompt approval of the Keystone XL pipeline project, to allow oil to flow from Alberta, Canada to U.S. gulf coast …
House investigators are alleging a White House double standard in its rhetoric toward executive compensation for large financial institutions. The allegations appear in a report released in advance of a hearing on government-back housing giants Fannie Mae and Freddie Mac. President Obama ramped up the populist rhetoric in 2009 with respect to bonuses for executives at private financial companies, but has been silent on comparably large bonuses for officials at Fannie and Freddie, according to the report, released Wednesday by House Oversight and Government Reform Chairman Darrell Issa (R-CA). The …
Government programs cannot stop the decline in housing prices. The latest evidence of this comes from a study of first-time homebuyers who took advantage of an $8,000 tax credit available between 2009 and September 2010. According to a new study, housing prices in 110 of 157 studied cities have dropped more than the value of the $8,000 tax credit since June 2010. Home prices in six of the 157 cities increased. In short, not only did the $26 billion program fail to stabilize housing prices, but those who took advantage …
Undeterred by the underperformance of several previous efforts at mortgage refinancing, the Obama Administration has announced yet another plan designed to refinance the “underwater” mortgages of homeowners who owe more on their mortgage than their houses are currently worth. However, this version of the Home Affordable Refinance Program (HAMP) has many of the weaknesses of previous versions, and it is unlikely to be any more successful. To matters worse, the cost of the refinanced loans will be borne by Fannie Mae and Freddie Mac, which the government already controls. This …
News reports say that the Federal Housing Finance Agency (FHFA) will sue about 12 major banks in order to recover some of the losses that Fannie Mae and Freddie Mac sustained on mortgage-backed securities the banks issued. The suits will seek to make the banks repay a share of about $30 billion in losses from securities that Fannie Mae and Freddie Mac bought before they essentially failed and the FHFA took them into conservatorship in September 2008. Since any recovered money would reduce the over $150 billion the taxpayers have …
The Washington Post reports that President Obama wants the federal government to continue to have a major role in housing finance, perhaps by creating a new version of Fannie Mae and Freddie Mac. Despite an almost immediate denial of the story by Deputy Treasury Secretary Neal Wollin, the Post’s account is so detailed that it is likely to be true. The story is given extra credence by the fact that it tracks with the Obama Administration’s February comments about the future of housing finance: “As Fannie Mae and Freddie Mac …
U.S. taxpayers were reminded on Friday (and again this morning) that our long national Fannie Mae and Freddie Mac nightmare is far from over. On Friday, Fannie Mae requested another $5.1 billion in aid from the U.S. Treasury to keep its capital at acceptable levels, which would bring the total Treasury bailout of Fannie Mae to $104 billion, with only $14.7 billion being returned in the form of dividends. Then, this morning Standard and Poor’s downgraded Fannie and Freddie from AAA to AA+ following its downgrade of the entire federal …
Four years after home values in America plummeted, fears over America’s housing market remain. In testimony before Congress yesterday, Federal Reserve Chairman Ben Bernanke cited “the continuing depressed condition of the housing sector” as one of the factors behind America’s sagging economy. In response to the poor market, the White House is reportedly considering a repeat of the historically bad decisions that contributed to the mortgage meltdown rather than pursuing a much saner course: eliminating Fannie Mae and Freddie Mac. In a town hall last week, President Obama remarked that “the continuing …
After more than a year of delay, the House Financial Services Committee is finally starting work on legislation that will hopefully end Fannie Mae and Freddie Mac, the two housing finance giants that helped to make the housing crisis worse. Both essentially failed in September 2008 and have been in a conservatorship under control of the Federal Housing Finance Agency since then. Many had hoped that Congress would address these two entities at the same time that it overhauled the financial regulatory system in the onerous Dodd–Frank legislation. But that …
