Fannie Mae & Freddie Mac continued.

This blog has had much to say down the years on the housing crisis on both sides of the Atlantic. On Fannie and Freddie, this link is to a few of such postings.

It is good to see that a web site of the calibre of Acting Man has today tuened again to that issue, that posting is linked here.

Housing Crisis remains at root of our ongoing economic disaster!

From time to time this blog returns to the housing disaster which affects almost the entire english speaking world. Our leaders try to ignore it, presumably as they either hope it will go away or convince themselves that inflation will cause it to disappear.

In the past this blog has proposed some suggested cures, but I have now tired of re-posting the various links. A survey from the USA today, however, has such startling facts on the ongoing crisis that I felt it necessary to briefly return to the topic (in spite of all the excitement of the continuing slow-motion collapse of the euro). Here are some of the lowlights:

Only those homeowners under thirty and over fifty are now in the majority in thinking that their home equity will add to their retirement funds.

22.5% of all homeowners with a mortgage are now underwater.

68% reported that if they lost their job they would not be able to continue with their mortgage payments after nine months. Typical unemployment extends to almost 10 months

Americans dumped upon by their own politicians, must now face nothing but almost complete dismay, as European leaders continue to play russian roulette with the world's economy!

Fannie and Freddie, the fundamental failure that has not yet been addressed.

This blog has repeatedly tried to alert its readers to the true depths of disaster represented by Fannie Mae and Freddie Mac for the US economy.

Most recently it has revealed the involvement of President Obama in fuelling the problem the causes of which lie even further in the past. So many powerful people under various administrations have had a hand in running up the horrendous debts, that politics itself has become one of the major impediments to finding a solution.

On Monday on Bloomberg Television's Charlie Rose programme, Gretchen Morgenson was interviewed about her book 'Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon' its co-author is Joshua Rosner.

Any concerned with the similar problems afflicting UK property owners, should try to find time to watch this interview, which lasts about twenty minutes. It is linked from here.

Read a review of the book from the New York Times, (which employs one of the authors,) from here.

Previous posts on Ironies Too on Fannie Mae or Freddie Mac, from here.

Watch Obama admitting he owns the Worldwide Credit Crisis!

As Bernanke's printing presses continue to race and the poorer nation's of the world revolt in response, the following nine minute video shows evidence that US President Obama, now overseeing the trashing of the world's one reserve currency, following in the footsteps of Presidents Carter and Clinton, deliberately forced America's banks into making the unsound loans, the consequences of which are yet to be fully seen. The video clip lasts 9 minutes, watch it through for the real shock comes right at the end, when it becomes clear that all this was known even before Obama was elected!

Fannie Mae 30 year bond yield soars skywards!

Is QEII in the USA about to crash and burn? The jump in yield of the mortgage rate setting Fannie Mae 30 year bond seems to indicate things are going badly awry. Read the LA Times item from here. It is the mortgage debt in Ireland that now is the greatest threat to that nation's survival, officially not even being discussed at the Eurozone Ecofin meeting, read what I blogged and linked on that topic last week, from here. The UK is in the same boat as both Ireland and the USA yet the Coalition Government pretends no such worries or even concerns really exist. Oh Really!

Fannie and Freddie already cost US Taxpayers $135 Billion - UK fails to even start counting their taxpayers' exposure!

Read the really harrowing report from the Wall Street Journal, linked here. Note the huge gaping hole in Osborne's spending cut-backs announced this week. Not one word or even a nod towards the coming UK property price collapse and the disastrous consequences for the British economy!

Fannie, Freddie and Feddie

First heard on CNBC addressed to former Federal Reserve Board member Professor Kroszner, now of the University of Chicago, on Squawk Box today: Fannie, Freddie and Feddie - says it all really!

Ireland's Mortgage Mess - Another warning for the UK

The property price crisis remains the biggest danger§ How many times must we point this out but helplessly look on as the second government in a row does absolutely nothing to address the approaching disaster. A report in the Irish Independent this morning, linked here, details the numbers of mortgagees within the Irish Republic having their mortgage interest payments met by the state, an incredible 17,500 recipients, such policies are not sustainable and merely serve to maintain house prices at their ludicously high levels to the benefit of nobody while steadily eroding the resources of the state! In the USA such numbers appear microscopic, in the two years since the US Federal Government assumed responsibility for the mortgage providers Fannie Mae and Freddie Mac the cost to the Treasury in direct government aid was 150 Billion, that is correct 150 Billion dollars, see Reuters from this link if you do not believe me. Government Ministers who rate their own wealth in the value of their property portfolios, often obtained on the basis of capital gains accrued on mortgages funded by the taxpayer, seem unlikely to be able to grasp this nettle, hence the lack of any plan let alone rational consideration of the true awfulness of the crisis being faced. Such wealth is illusory, grasp that fact and go from there. Exchange rate depreciation and inflation will not cure the problem that exists up and down the country where professionals necessary for the provisions of community services cannot afford the properties in which their families need to live at the salary levels the local communities can afford to pay. This blog has tried to suggest sensible solutions which I have now become tired of linking. State payments to subsidise underwater homeowners is like the squillions paid to the failed banks, waste pure and simple.

House Prices Emergency

Reuters reports that in the UK the house price index had its biggest monthly fall in August since May 2009, read it here. The reality of the crisis now re-appearing will be aggravated by the past government's efforts to keep underwater borrowers, as those with negative equity are sometimes known in the USA, in their home even if unable to meet their mortgage repayments. This category of borrowers will now grow in the UK as the masses of public sector parasites are necessarily shed by a bankrupt state employer. Things are developing faster in the USA where a short term refinancing programme is now being pushed by Fannie Mae, becoming known as an Obama Refi, see this explanatory link which includes the following interesting but alarming fact (with my added emphasis): One of the biggest dangers facing the housing market is the glut of underwater homeowners who could default if their financial situations or home prices worsen. About 11 million borrowers, or 23% of households with a mortgage, were underwater as of June 30, 2010, according to CoreLogic Inc. That number is expected to double next year. The constant stream of encouraging forecasts of stronger economic growth, activity and recovery in the near future presently flowing from the European Commission, the ECB and various former national European Governments, all in direct contradiction of the factual information of deteriorating conditions in the real world can, at the end of the day only make matters worse. If 23% of homeowners are in negative equity today and that number doubles in the coming year to almost half of all homeowners, how many will then become Walkaways sending back their keys? What effect will that have on the still floundering, and in the UK nationalised, banking (so-called) business?

Fannie Mae and Freddie Mac Fellatio!

Yesterday was not just the anniversary of the beginning of The Blitz of Britain by the Germans 70 years ago, no doubt being gleefully drooled over on the next morning by German leaders as the aerial reconnaissence photographs revealed the gruesome details of the death and destruction wrought by Germany's might, just as this morning, no doubt, a new generation in Berlin and Frankfurt relish the economic humbling of the City of London brought about by the humiliation of Britain's Chancellor of the Exchequer, George Osborne, in Brussels yesterday in an event that appears to have deliberately taken place on this hugely significant and bloody anniversary, no indeed, for it also marked the second anniversary of Fannie Mae and Freddie Mac being taken into the custody of the US Government. Does yesterday then perhaps also mark the end of the era of US moral leadership, might and world domination? Fannie and Freddie brought the pride of home ownership to many lower income Americans over many decades. They helped in pulling the country out of the Great Depression of the nineteen-thirties. Has the US Government, Congress, the Federal Reserve or any other body used the past two years to address the underlying problems of these two grossly over indebted mortgage suppliers? It appears not. In fact the very opposite has been the case. Over the past two years these now government controlled institutions have been the major supplier or underwriters of most of the new mortgages recently issued, therefore merely compounding their underlying problems, read a Bloomberg report from here, tellingly titled "Subprime 2.0 Is Coming Soon to Suburb Near You: by Edward Pinto". The housing crisis, such as that in the US and in Britain is the main underlying economic crisis on both sides of the Atlantic and it appears for the entire english speaking world, yet neither the US nor the UK Governments will face up to that fact. Solutions have been regulary suggested from this blog. Most recently David Cameron and Nick Clegg have been urged to return their property portfolios to the state from which they have indirectly been drawn. Other Cabinet Ministers would be wise to follow suit so that they can address the economic disaster in which the country now lies with clear eyes and from a sensible starting point. A man is worth more than the value of his home or the marque of his car. Economic might when misused can be overcome by ordinary people pulling together, that was the lesson of The Blitz. We can overcome this economic mess by grasping the fact that homes have values because they are secure, situated near schools and jobs priced at a wage which makes them affordable. Bricks and mortar torn down and resold with flat screen TVs or used modern kitchen gadgetry in an environment where no building is taking place have little value at all. Look round your possessions at home today, what are they really worth and if mortgaged to a typical bank, building society, or even Fannie or Freddie ------ what could these failing institutions obtain for their supposed secured assets when society has no hope?

Fannie Mae finally de-listed from New York stock market.

The creation of Fannie Mae as part of Roosevelt's New Deal in 1938, read here, was designed to solve the problem of the Great Depression of the 1930s. Regular readers of this blog will be aware that the later mishandling of the liabilities of these companies is what I believe caused to sub-prime crisis itself leading to the the recent recession. Good news then that the pretense that they continued as viable entities up to yesterday has at last ended. More worryingly is the fact that the huge bulk of new mortgages issued in the USA this year have (in combination with various veteran associations) been issued by Fannie Mae and Freddie Mac.

Fannie Mae losses now at 200 Billion Dollars

Note this particular horror from the CNN Report linked here: Government influence: Fannie Mae said it imposed a moratorium on foreclosures for most of the quarter. But that failed to stop foreclosures from increasing, compared to the prior quarter. The company said it acquired 25,374 single-family homes through foreclosure in the first quarter of 2009, compared to 20,998 in the fourth quarter, 2008.

Freddie Mac CEO Quits

After only six months of "conservatorship" the Chief Executive of the huge US mortgage lender has had enough. The CNN report of the resignation is linked here. As this blog has frequently pointed out the seeds of the present Crash may be partly found in the creation of the federally subsidised mortgage lenders for low income US families, known as Fannie Mae and Freddie Mac, which served (together with the industrialisation required to mount WWII) to drag the western world out of the Great Depression. The loans made by these organisations were never properly carried on US Government books and the situation was further compounded when greater quantities of such lending were undertaken in recent years in what has been called the sub-prime crisis. We are therefore trying to grapple with the results of decades of irresponsible lending, will the next CEO last any longer?

Fannie Mae assets down $21billion losses $29 billion

Bloomberg reports on the continuing Fannie Mae mess, linked here. One explanation: Forrest Gump Explains Mortgage Backed Securities Mortgage Backed Securities are like boxes of chocolates. Criminals on Wall Street stole a few chocolates from the boxes and replaced them with turds. Their criminal buddies at Standard & Poor rated these boxes AAA Investment Grade chocolates. These boxes were then sold all over the world to investors. Eventually somebody bites into a turd and discovers the crime. Suddenly nobody trusts American chocolates anymore worldwide. Hank Paulson now wants the American taxpayers to buy up and hold all these boxes of turd-infested chocolates for $700 billion dollars until the market for turds returns to normal. Meanwhile, Hank's buddies, the Wall Street criminals who stole all the good chocolates, are not being investigated, arrested, or indicted. Mama always said: "Sniff the chocolates first, Forrest".

Trying to understand Fannie and Freddie?

An interesting interview, that could make you very angry, is linked here. A quote for the flavour: Nearly all real estate experts are in agreement that for the next year or two, many of today’s homeowners will find themselves locked into where they are now living. Their situation is much like medieval serfs were tied to their land. They can’t sell, because the market price won’t cover the mortgage they owe, and they don’t have the savings to pay the difference.

CONservatorship- Fannie and Freddie

Only the first three letters speak the truth, the following is from the Telegraph report, linked here: The plan, devised by bankers from Morgan Stanley and agreed to by officials at the US Treasury, will see the pair placed under federal control, a move that could end up costing American taxpayers tens of billions of dollars.

Under the terms of a conservatorship, which is best thought of as a pre-packaged bankruptcy, existing shareholders in both companies will effectively be wiped out, rendering their equity almost worthless, but, importantly, the pair will be able to continue functioning as the government stands behind their debt.

The complex bail-out was presented to executives from Fannie and Freddie on Friday afternoon by senior Treasury officials in Washington D.C.

Five trillion increased indebtedness heads for the US

As this blog forewarned last March, here, the next Tsunami to crash against the West's economies will come with the quaint sounding names of Fannie Mae and Freddie Mac. These 'government backed'/ 'not really government backed' financial institutions holding trillions of the lower income mortgage debt of the US housing market typify the kind of murky financial practises that have now brought us to the brink of Phase II of the credit crunch. As I blogged earlier this month, here, only a restoration in the belief in the dollar can supply relief - summed up - that means "sound money" folks! Read Fannie and Freddie hit the skids from the Wall Street Journal Blogs, here. UPDATE on 22/8/08 View this interview on YouTube from Bloomberg with Harvard's Marty Feldstein from Jackson Hole, here.

Fannie Mae and Freddie Mac

Hang on! AND not for the high winds. Now when we talk trillions I begin to get confused, but I believe 4.9 trillion dollars comes out as: 4,900,000,000,000,000,000 This from the Houston Chronicle:

While the government isn't obligated to assist Fannie or Freddie in a financial emergency, many on Wall Street believe it would bail them out if there is a collapse. The idea that they are "too big to fail" enables the two companies to borrow relatively cheaply by issuing top-rated securities backed by mortgages.

Fannie and Freddie hold or guarantee around $4.9 trillion in home-loan debt, though under a 1992 law they are required to hold in reserve only a fraction of what is mandated for commercial banks.