William Poole, former president of the Federal Reserve Bank of St.
Louis, talks about Standard & Poor’s proposed downgrade of Fannie
Mae and Freddie Mac bonds, June’s durable goods and new homes data
released today, and the outlook for legislation to aid the hobbled
mortgage market.
click for video
00:00 Possible S&P action on Freddie, Fannie bonds
01:00 Economic indicators of durable goods report
02:28 Housing bill; Fannie, Freddie lobbying
04:15 Need for Fannie, Freddie to be private firms
05:11 Access to Fed discount window; oil prices
06:54 "Balancing act" of Fed on inflation, economy
07:52 Lobbying restrictions; credit rating position
09:44 Market consequence of Fannie, Freddie fall
11:09 Paulson "back-stop" plan "essential"
Running time 12:11
Source:
Poole Says Fannie, Freddie Should Be Private Firms: Video
Bloomberg, July 25 2008
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQ7jJmiYZgNY
http://business.theage.com.au/business/nab-sends-a-bleak-message-to-the-world-20080725-3l3z.html
It is about what other bankers DO about their investments in US mortgages.
Privatization is not a feasible proposition for years. Until the housing market steadies and the new govt regulator gets their ratios right which btw could mean their morgage book is bigger than ever because at the moment they are almost the only game in town. One of the reasons the right, as personified by the WSJ ed page, are so apoplectic about the bailout is that they see their chances of killing off F/F as GSE’s going away probably forever. Those with any financial savvy at all (WSJ ed) can’t quite bring themselves to say the govt should allow them to fail because they have a fair understanding of the consequences so they burble about “receivership:” do they mean nationalization, it’s not clear. The total right wing idiots (eg. ex pitcher Bunning and Bonehead Boehner) have no idea what they are messing with as apparently Paulson is pointing out privately. I’d say it will be a cold day in hell when F/F are privatized.
The huge size of the bailouts is still only leaking out through the MSM. They will wait til the bill is signed to suddenly discover the magnitude of the risk to the taxpayer.
Last week, Ron Paul did a video that was pretty straightforward and accurate, but he’s considered a crackpot.
Surprisingly, CNBC published something showing how much has already been put up, before the F/F bailout. It soft pedalled the risk, wasn’t headlined and has already been pushed off the home page:
‘Stealth’ Housing Bailout: It’s Bigger Than You Think
The article linked below points out the problem with the latest talking points by Kudlow, et al, about the alleged rise in home sale prices. It describes how lenders are still playing games and the recent practice of sellers putting up the down payment to get idiot financing on unrealistic loans. The giving the buyer the first three payments is a nice touch. Lets the deal become “cold and old” and the seller gets his money out of escrow before the loan goes bad. I’ve seen a number of other articles over the last couple of months describing how developers have been putting up the required FHA down payments to get houses sold to people who are probably going to default; for a mere few percent haircut, the developers get these white elephants off their balance sheet and on to ours. $625,000 house on a street wrecked by subprime loans?
An interesting note from FT.com pointing out how much influence Goldman is having/has had over our Treasury:
The (further) Goldmanization of US Finance
No wonder Goldman has made out so comaratively well. But, I suppose it’s better than the (further) Bear-Stearnsization of US Finance.
The government should keep its hands off F&F. At the point that their insolvency prevents them from selling MBS, the government should yank their charters to package MBS and transfer it to new startups, either public or government corporations. F&F would cease to guarantee their MBS and go into runoff.
Mike in NOLA:
“The huge size of the bailouts is still only leaking out through the MSM.”
The amounts involved are relatively small in the context of Federal spending and some of the fantastic estimates are either hyperbole by chicken littles or chicken littles with a political axe to grind. It was quite simply the “Least bad” option. I don’t like it but it was the only thing they could do. Some of the doo dads like the foreclosure buyups by the states was chump change. That there was even consideration of vetoing the entire bill because of this chickenshit is testament to the talking too that must have been handed out by Paulson. He probably threatened to resign.
touche:
“At the point that their insolvency prevents them from selling MBS, the government should yank their charters to package MBS and transfer it to new startups, either public or government corporations. F&F would cease to guarantee their MBS and go into runoff.”
I thought the attachment to hara kiri was a uniquely Japanese phenomenon.
John,
I do disagree and believe that the magnitude is being minimized to get the bill passed. Paulson sounded a lot like administration officials trying to get the Iraq war authorization. They claimed they didn’t intend to use it, but it was good for showing we meant business. Paulson’s testimonry about having a “bazooka in your pocket,” despite bringing Mae West to mind, was much the same.
I think he bill itself contains a big clue that’s seldom mentioned. Despite numbers like $25-300B being bandied about, it raises the debt ceiling by $800B.