It’s a favorite government trick to announce bad news on a Friday afternoon, so it appears in Saturday’s paper, the least likely edition to be read. By Sunday and Monday, it’s old news. The Obama Treasury just went one better, announcing on Christmas Eve that they were uncapping the amount they believe will have to be invested in Fannie and Freddie. The Bush Treasury first estimated the government-sponsored enterprises’ (GSEs) losses at $100 billion each. The Obama administration, which has been using the GSEs to stabilize the housing market by reducing their underwriting standards, upped the ante to $200 billion each. Now the administration has thrown in the towel completely, and dropped a large lump of coal in each taxpayer’s stocking—it won’t even try to estimate the total losses of Fannie and Freddie.
http://blog.american.com/?p=8757

But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/24/AR2009122401588.html?hpid%3Dtopnews&sub=AR

GMAC, the ailing financing arm of General Motors, is set to receive around $3.5 billion in government aid, ABC News has learned. The funds would be the third infusion of federal support for the troubled lender.

The latest government aid would bring the total federal assistance for GMAC to $16 billion when combined with the $12.5 billion that the lender has already received dating back to December 2008. Due to its prior cash infusions, the government already owns 35 percent of GMAC.
http://abcnews.go.com/Business/Politics/federal-bailout-gmac-financial-services-receive-government-aid/story?id=9449537

12/31/2009 12:10:30 AM

*sigh*

12/31/2009 12:28:49 AM

This is a total non-surprise.

12/31/2009 2:21:47 AM

If the company that owns the title to your house goes under, what happens? I assume it is sold off to repay any debts, but what happens if no one wants to buy your debt? Would the gov. then claim it and try to collect on it or what?

IIRC, Freddie and Fannie control 50% of all home mortgages in the US, right?

12/31/2009 3:09:26 AM

Don't forget Sallie!

message_topic.aspx?topic=543951

12/31/2009 8:31:07 AM

Yeah, this should surprise no one. The government might as well buy up all the bad loans and debts at this point. Just pay it all off, since government spending can allegedly bring us back to prosperity.

My question is why are the CEOs of these companies making millions of dollars? They're government employees at this point. They should be getting paid less than the President.

12/31/2009 8:39:44 AM

Quote :

"They should be getting paid less than the President."

So ridiculous it's beyond words.

12/31/2009 8:44:37 AM

What I said is ridiculous? These companies are basically arms of the government, man. The only time it's okay for CEOs to be making that much money is when the company actually makes profit.

12/31/2009 8:47:24 AM

^ So no federal government employee--direct or indirect--should make more than the president? And I guess by that logic, no state employee should make more than the governor and so on?

Sweet Jesus.

12/31/2009 8:50:51 AM

No head of a government branch or department should be making more than the President, no. I could see paying a government employee more than that if they actually provide a service that is worth that much in the private sector, but come on...running a company into the ground isn't worth millions of dollars a year anywhere.

12/31/2009 9:01:19 AM

^ So, you really have no retort, right? Just bullshit.



[Edited on December 31, 2009 at 9:11 AM. Reason : Why haven't you bitched about coaches' salaries? Is it only CEOs' salaries that anger you?]

12/31/2009 9:06:54 AM

Honestly don't care, would rather be paying for this shit than paying for Predator drones and fucking F-22s.

12/31/2009 9:09:27 AM

Quote :

"Why haven't you bitched about coaches' salaries? Is it only CEOs' salaries that anger you?"

I don't care what private companies are paying their employees. That's none of my business, and I don't there's anything wrong with CEOs making a lot of money. The problem is that the people running these GSE's are now being paid with public money. That makes it my concern.

12/31/2009 9:18:21 AM

^ And you still haven't made a compelling case--or really any case--in support of your assertion.

12/31/2009 9:37:48 AM

Quote :

"The government might as well buy up all the bad loans and debts at this point."

Wasn't this the point of TARP?

12/31/2009 9:45:39 AM

Quote :

"And you still haven't made a compelling case--or really any case--in support of your assertion."

How haven't I? Would Fannie and Freddie be afloat if it were not for the endless flow of government money? Use your brain, dude. Read the OP. These are zombie lending institutions. They should have gone bankrupt, and the government started pumping money into them. They aren't making a profit, and the employees in these lending institutions should not be receiving exorbitant salaries.

Get it through your head that Fannie and Freddie aren't private institutions. They're operating on public money. You know this.

Quote :

"Wasn't this the point of TARP?"

Well, it wasn't to buy up all of the bad debt, just some of it. But, if we really believe that the government can paper over these bad loans, why not just paper over all malinvestments? There couldn't possibly be any bad consequences.

[Edited on December 31, 2009 at 10:31 AM. Reason : ]

12/31/2009 10:30:18 AM

Hooksaw seems to be drunk. I think it's a perfectly valid point that the executives of FNE and FRE salary wouldn't exist were it not for the taxpayer. They should be paid a modest wage and have incentives that pay out when the company returns to profitability. After failing to find someone that wants to touch the bottomless hole of shit with a hazmat suit and a 10 ft pole, maybe the public would realize just how bottomless that pit is and put a stop to the crap.

12/31/2009 7:34:35 PM

Quote :

"I don't care what private companies are paying their employees."

d357r0y3r

*Sigh* Are the coaches of Army, Navy, and Air Force "private" employees? And should all state employees be paid less than the governor? That's "public money," too--doesn't this make it your concern?

1/1/2010 8:59:42 AM

Are there state employees getting paid more than the Governor?

Are there federal employees getting paid more than the president? Is not $400k a year enough to put it above any federal employee? If not, then why the fuck not? What bureaucrat receiving health and pension for life needs to be paid that friggin' much to boss around his fellow citizens?!?!

1/1/2010 10:18:07 AM

^^ Do the Academy football programs bring in enough money to cover their operating expenses unlike Fannie and Freddie? That's kinda the point, that no one would have a problem paying a government suit a fair salary if they produced results like the private industry.

1/1/2010 10:35:53 AM

Coaches salaries are only partially paid by public funds, most of it is paid for by boosters and athletic clubs (like the WPC) plus other sources like radio shows.

[Edited on January 1, 2010 at 1:15 PM. Reason : ^ Actually probably not. Only about 20 football programs actually make a profit]

1/1/2010 1:15:20 PM

The point was, the total cost to the taxpayer pays for the sports programs pales in comparison to FNE and FRE.

Hookslaw is just being argumentative for some obtuse reason.

1/1/2010 1:19:45 PM

Quote :

"And should all state employees be paid less than the governor? That's 'public money,' too--doesn't this make it your concern?"

And there's this:

For feds, more get 6-figure salaries
Updated 12/11/2009

Quote :

"The number of federal workers earning six-figure salaries has exploded during the recession, according to a USA TODAY analysis of federal salary data. Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted. Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector."

http://www.usatoday.com/news/washington/2009-12-10-federal-pay-salaries_N.htm

[Edited on January 1, 2010 at 2:33 PM. Reason : .]

1/1/2010 2:29:15 PM

Has nothing to do with this thread.

1/1/2010 2:46:18 PM

man, I love getting these obama-bucks

1/1/2010 8:34:08 PM

so for those of us who have good credit and can pay their loans because we aren't fucking morons, is there any legit way to cash in on this?

1/1/2010 10:54:28 PM

No, but if you have a history of bankruptcy and no job then you can get a mortgage for a $200k house, which you can then live in rent free while Fannie and Freddie, whose insurance was the only reason the bank will gave you the loan, pay to cover your loan. But you must know where to go, because many banks don't have access to Fannie and Freddie nowadays, you need to find a politically connected bank to make your loan.

1/3/2010 11:51:54 AM

Look, the loan standards from the GSEs is still entirely too lax, but they aren't that bad. There are reports out there that loans have been put back to brokers in recent months if they have been that bad.

Still, it's really a sad situation that 3.5% down is still allowed after loans similar to that helped poop on the economy.

1/3/2010 12:38:46 PM

Having government backed loans just distorts the fuck out of the market. It's the same with school tuition. How could schools charge 10, 20, 30k a semester for school if the government wasn't backing the loans? They wouldn't be able to. Most people couldn't go. The same goes for houses. The goal was to increase the number of homeowners in this country, but that didn't happen. We have a bunch of homeborrowers. People that aren't planning to pay off their house for 15 or 30 years. That's ridiculous. Homes should be a lot cheaper, and they will become cheaper. Of course, government backed loans are just part of the problem - the fact that the banks could borrow money from the Fed for basically free fucked things up, as well.

You know, I say it all the time, but prices in a normal economy should go down. You look at anything that isn't subsidized by the government in some way, and it gets cheaper. Then the government gets involved, in an attempt to make the good more "accessible" to the average American, and it starts going up in price 5-10% a year. That's not something that would happen in a free market.

Quote :

"so for those of us who have good credit and can pay their loans because we aren't fucking morons, is there any legit way to cash in on this?"

Not really, man. If your house is worth less than it was when you bought it, it's probably not going to go back to that price. Best thing you can do, in my opinion, is try to sell it and cut your losses - then start renting.

[Edited on January 3, 2010 at 1:30 PM. Reason : ]

1/3/2010 1:28:07 PM

If your house is worth less than you still owe on it, then like the rest of America in that situation, you should stop making payments. They won't manage to foreclose on you for perhaps a year of rent-free bliss.

At least, that is according to the statistics: if you are trying to predict foreclosure, all the variables you would normally expect, such as loss of employment, balloon loans, prior bankruptcy, none of them correlate very much with foreclosure. The #1 determinant of whether a loan will become delinquent is whether the mortgage is for more money than the house is worth. So, yes, greed has caused all this, and the best method of keeping greed in check is liberty: lift government restrictions against recourse mortgages so banks can sue mortgage holders for their losses. Canada has them, so we should be more like Canada in this respect.

1/3/2010 2:27:48 PM

Quote :

"lift government restrictions "

We did, we told banks they didn't have to value the loans at current market prices, they can value them at whatever they want. How is this not anything but more of the same deregulation that helped get us in this mess to begin with?

1/3/2010 4:18:58 PM

Do wha? I don't see how the restriction you are talking about helps anything, since the bank's creditors know the rules changed and therefore will act accordingly. In effect, that change has allowed the banks to lie to the public (we are well capitalized!!! believe us!) but the net-effect is nothing: their creditors will still put them in bankruptcy when it serves them.

Which makes an odd point: the only rule changes that get implemented nowadays are those that make the problem worse. Those that would help prevent such problems in the future, such as getting rid of the GSEs or restoring recourse to the nation's mortgages, do not.

1/3/2010 5:54:51 PM

Quote :

"In effect, that change has allowed the banks to lie to the public (we are well capitalized!!! believe us!) but the net-effect is nothing: their creditors will still put them in bankruptcy when it serves them."

Of course, but the effect of the deregulating of mark to market means that they'll be able to pay their creditors back, so your comment doesn't make any sense. At all.

1/3/2010 6:05:33 PM

Facts not in evidence. The change occurred after the crisis and like I said, creditors are not stupid, they will know the books are cooked and discount them accordingly. So far the only people fooled by that regulatory change are taxpayers bailing out what are now government enterprises, which now no longer need to report to Congress their real solvency, only unlike creditors, congressmen enjoy being lied to

1/3/2010 6:43:14 PM

Quote :

"Facts not in evidence"

Horseshit, just look at Citi's stock price if you want evidence.

What do you mean "fooled"? The change was FAVORABLE to the creditors, the fact that the junk stocks went up as much as everything else out there means the regulatory change is already discounted. The real hiding is being done at the Fed, remember, back before the crisis got real shitty you were a huge fan and said they moderated recessions and this one would be mild. Remember that?

1/3/2010 7:51:17 PM

I don't see how you think changing mark to market would fix a cash-flow crisis. Like I said, creditors are not stupid, they will not lend you more money just because your now cooked books claim you are solvent.

And I am still a big fan of the federal reserve. Or do you prefer the gold standard?

And forgive me for not being able to accurately predict the future. That said, this recession is still not worse than before the great moderation. But like I'm sure I would have said back then, moderate recessions depend on low regime uncertainty, something we did not have this time around. Not since the 1930s has Washington so interfered with the rules of the system.

1/3/2010 8:36:25 PM

Quote :

"I don't see how you think changing mark to market would fix a cash-flow crisis."

What cash flow crisis? The banks are making money hand over fist thanks to 0% FFR.

1/3/2010 8:44:02 PM

Yes - "money." Why is it that only the banks can borrow at 0%, by the way? Let's just let everyone borrow free money. Then everyone's balance sheets can make it seem like they aren't bankrupt.

Oh, that's right. We can't trust the people to be responsible with their money. But the banks? They know what they're doing. And I almost forgot the other implication: since it's free money, everyone would borrow from the Fed. It'd be stupid not to. Then we'd have inflation. But uhh, since the banks know to not take too much money...we're good. Unless they gave out a bunch of bad loans or something.

Oh, shit.

[Edited on January 3, 2010 at 9:20 PM. Reason : ]

1/3/2010 9:13:57 PM

Strategic default on mortgages will grow substantially over the next year, among prime borrowers, and become identified as a serious problem. The sense that ‘everyone is doing it’ is already growing, and will continue to grow, to the detriment of mortgage holders. It will grow because of a building backlash against the financial sector, growing populist rhetoric and a declining sense of community with the business world. Some people will take another look at their mortgage contract, and note that nowhere did they swear on the bible that they would repay.
http://blogs.wsj.com/economics/2010/01/05/2010-predictions-from-shiller-blinder-rajan-and-more/

1/5/2010 1:46:23 PM

Quote :

"Not really, man. If your house is worth less than it was when you bought it, it's probably not going to go back to that price. Best thing you can do, in my opinion, is try to sell it and cut your losses - then start renting. "

im all good, i just want some free money

1/5/2010 2:02:19 PM

Quote :

" What cash flow crisis? The banks are making money hand over fist thanks to 0% FFR."

Meh, not entirely true. Larger banks with trade desk, who can leverage cheap money and TARP (Citi, GS,etc) used in trading operations made good money last quarter but the smaller community banks, which are the vast majority of banks, are not making that much. They are still writing off bad loans and trying to clean up balance sheets. Those smaller banks that received TARP are having trouble finding people who want loans right now. Most are hunkering down and weathering the storm, ie living within their means.

1/5/2010 3:10:57 PM

Quote :

"would rather be paying for this shit than paying for Predator drones and fucking F-22s."

not I, the best way to gain more money/resources is to either take them from someone else, or further exploit and protect what you have.

money to lenders does neither of these

1/5/2010 3:46:31 PM

And you would be wrong. Money comes off printing presses and resources are bought off the world market. Invading a foreign country in no way gains you either. If we conquered Canada we would still be paying for oil, all that would change is which capitalists our money goes to, American or Canadian.

1/5/2010 6:43:02 PM

The money doesn't even really come off the printing presses, these days. You think they printed a trillion dollars and gave it to the banks? No, they just wired it over from the Fed's imaginary bank account. At least in Zimbabwe and Weimar Germany they were limited by how fast they could print the cash and get it into circulation. The fact that 1,000,000,000,000,000 BennyBux are a click away is the scary part.

1/5/2010 7:02:40 PM

Quote :

"Meh, not entirely true. Larger banks with trade desk, who can leverage cheap money and TARP (Citi, GS,etc) used in trading operations made good money last quarter but the smaller community banks, which are the vast majority of banks, are not making that much. They are still writing off bad loans and trying to clean up balance sheets. Those smaller banks that received TARP are having trouble finding people who want loans right now. Most are hunkering down and weathering the storm, ie living within their means."

Any time I've said "the banks" in this thread, it's been in reference to the TBTFs. I'm mostly playing devils advocate here. I generally agree with the conservative viewpoint in this thread about these banks and I'm not happy with how they have been bailed out, but I kinda laugh at the fantasy land of the libertarians in here. You use an example of the removal of mark to market regulation and it just flies over heads and claimed as a bad thing (omg, because a government entity did it) when the reality is the investors in these companies are quite happy it was removed. When that argument fails, we just retreat into an "well, government intervention in the first place caused all the mess".

1/5/2010 9:11:44 PM

Quote :

"You know, I say it all the time, but prices in a normal economy should go down. You look at anything that isn't subsidized by the government in some way, and it gets cheaper. Then the government gets involved, in an attempt to make the good more "accessible" to the average American, and it starts going up in price 5-10% a year. That's not something that would happen in a free market."

Clearly you have never heard of the concept of "inflation." Prices shouldn't "go down" normally, as there is no reason for them to do so. The only reason they would go down is that the value of the good has decreased or the cost associated with making the good has gone down.

1/5/2010 10:30:22 PM

Oh, I've heard of inflation. You probably think of inflation as increase in prices, and deflation as a decrease in prices. I would say that inflation is the expansion of the money supply, and deflation is a contraction of the money supply, which usually results in an increase/decrease in prices. The more dollars you have in circulation, the less each individual dollar is worth, i.e. its purchasing power goes down.

You're looking at prices, and not the thing that determines prices: the value of the currency. If the money supply is relatively stable, prices should go down. So, deflation, in the way that you would define it. That isn't a bad thing. The purchasing power of the currency should go up, because there aren't more dollars in the economy, but value is being added into the economy, due to work being done and goods being produced. There are more goods and services "chasing" the same amount of currency, meaning that the demand goes up, and the value of the currency can only go up as a result.

[Edited on January 5, 2010 at 10:46 PM. Reason : ]

1/5/2010 10:46:17 PM