McCain Letter Demanded 2006 Action on Fannie and Freddie

[The Paperboy]

Sen. John McCain's 2006 demand for regulatory action on Fannie Mae and Freddie Mac could have prevented current financial crisis, as HUMAN EVENTS learned from the letter shown in full text below.

McCain's letter -- signed by nineteen other senators -- said that it was "...vitally important that Congress take the necessary steps to ensure that [Fannie Mae and Freddie Mac]...operate in a safe and sound manner.[and]..More importantly, Congress must ensure that the American taxpayer is protected in the event that either...should fail."

Sen. Obama did not sign the letter, nor did any other Democrat.

Story here

 

[waltky]

They'll probably just come up with one agency to replace the two...

Fannie and Freddie phase-out plan due
February 9, 2011 -- The Obama administration will issue a proposal later this week recommending the gradual elimination of government-sponsored mortgage backers Fannie Mae and Freddie Mac, a White House official said Wednesday.

The highly-anticipated "white paper," which is expected to be released Friday, will include three different options for reducing the role government plays in the mortgage market, the official said. While the paper would mark an important development in the debate over what to do with Fannie and Freddie, a final decision by Congress is not expected any time soon. After being rescued by the government in 2008, Fannie and Freddie have presented a major conundrum for policymakers in Washington.

The problem is that phasing out the two publicly traded companies could raise borrowing costs for homeowners and jeopardize the fragile housing market. At the same time, Fannie and Freddie represent a major liability for taxpayers, who are on the hook for about $150 billion in federal aid the two institutions have received. The issue has become politically charged, with some Republicans blaming Fannie and Freddie for contributing to the recent housing bubble. Democrats argue that the institutions help promote home ownership, especially among low- and middle-income Americans.

Given the political challenges involved and the threat to the housing market, any winding-down of Fannie and Freddie is likely to take place over a period of years. A representative for Fannie Mae declined comment. Freddie Mac representatives did not immediately respond to a request for comment.

The three options in the administration's white paper were outlined in published reports Wednesday. The most conservative of the three options would involve no government role in the mortgage market beyond existing federal agencies, such as the Federal Housing Administration, according to the Wall Street Journal.

MORE

 

[editec]

Sen. John McCain's 2006 demand for regulatory action on Fannie Mae and Freddie Mac could have prevented current financial crisis, as HUMAN EVENTS learned from the letter shown in full text below.

McCain's letter -- signed by nineteen other senators -- said that it was "...vitally important that Congress take the necessary steps to ensure that [Fannie Mae and Freddie Mac]...operate in a safe and sound manner.[and]..More importantly, Congress must ensure that the American taxpayer is protected in the event that either...should fail."

Sen. Obama did not sign the letter, nor did any other Democrat.

Story here

No, regulatory action on Fannie Mae and Freddie Mac would not have prevented that crises, kid.

You have been misinformed.

 

[lehr]

Sen. John McCain's 2006 demand for regulatory action on Fannie Mae and Freddie Mac could have prevented current financial crisis, as HUMAN EVENTS learned from the letter shown in full text below.

McCain's letter -- signed by nineteen other senators -- said that it was "...vitally important that Congress take the necessary steps to ensure that [Fannie Mae and Freddie Mac]...operate in a safe and sound manner.[and]..More importantly, Congress must ensure that the American taxpayer is protected in the event that either...should fail."

Sen. Obama did not sign the letter, nor did any other Democrat.

Story here

mc cain took 21,550 dollars from ferdddie - david asman - fox news reporting oct. 08 = after mc cain got his money - he complained about the bank giving money away

by the way - same report - obama took 126,349 from freddie

 

[rdean]

McCain should know all about financial crisis being one of the Keating Five and all.

 

[waltky]

Dat's a lot of money...

True Cost of Fannie, Freddie Bailouts: $317 Billion, CBO Says
Monday, June 06, 2011 – The Congressional Budget Office (CBO) says the real cost of the federal government guaranteeing the business of failed mortgage giants Fannie Mae and Freddie Mac is $317 billion -- not the $130 billion normally claimed by the Obama administration.

In a report delivered to the House Budget Committee on June 2, the CBO said a “fair value” accounting of guaranteeing the two defunct mortgage companies – known as Government Sponsored Enterprises (GSEs) – was more than twice as high as the Office of Management and Budget had accounted for. “Specifically, CBO treats the mortgages guaranteed each year by the two GSEs as new guarantee obligations of the federal government,” the CBO report said. “For those guarantees, CBO’s projections of budget outlays equal the estimated federal subsidies inherent in the commitments at the time they are made.”

“In contrast, the Administration’s Office of Management and Budget continues to treat Fannie Mae and Freddie Mac as nongovernmental entities for budgetary purposes, and thus outside the budget,” the report stated. “It records as outlays the amount of the net cash payments provided by the Treasury to the GSEs.” The total of those cash payments is $130 billion, and is normally reported as the cost of the bailout of the GSEs to date. However, the CBO said that merely counting the cash payments, and not the cost of federal subsidies granted to the GSEs, obscures their real costs. Essentially, the CBO is accounting for the cost of the federal government guaranteeing the loans bought and securitized by the GSEs.

Currently, Fannie and Freddie rely on explicit federal guarantees to continue to secure below-market financing rates. Because Fannie and Freddie are insolvent, the federal government must make up their losses when the loans they have guaranteed lose money in default. However, the CBO counts not only the amount of federal funds spent to keep the GSEs operating but the cost to the federal government to subsidize the mortgage guarantees issued by Fannie and Freddie. In other words, the CBO counts as a federal spending commitment the subsidy given by the government to the GSEs.

The CBO calls this approach “fair-value” accounting because it treats the federal government’s actions just like the actions of any other market participant, taking into account the market risk of guaranteeing a mortgage. Typically, federal accounting does not do this because it is argued that because the government can print its own money, its risk is zero. The CBO says that even though the government can print money – technically by issuing Treasury bonds – this merely transfers the risk to the taxpayer, who will eventually have to pay off the bonds issued by the government.

More True Cost of Fannie, Freddie Bailouts: $317 Billion, CBO Says | CNSnews.com

 

[flacaltenn]

Editec says....:

No, regulatory action on Fannie Mae and Freddie Mac would not have prevented that crises, kid.
You have been misinformed.

Not misinformed at all. You just want to protect those in Congress (from both parties, but predominately the left) who were pushing Fanny/Freddy to back a higher percentage of subprime loans. Fanny/Freddy packaged more than 1/2 of the single fam home sales in the country. And Congress gave them quotas to fill up to 25% of THEIR share of packaging (see below). That's a large part of the problem.

Had Fanny/Freddie not had several powerful politicians like Barney ("won't cost taxpayer's a nickel") Frank tossing the regulators out of hearings and admonishing them for inciting panic, we could have cool the subprime market and the Alt-A markets down considerably.. Fanny/Freddy was the ultimate sink of a large proportion of those "laundered" loans. To wit:

Fannie's Perilous Pursuit of Subprime Loans - washingtonpost.com

Discussing the company's successes, Mudd said one of Fannie Mae's achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step "toward optimizing our business."

Internal documents show that even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers.

"By entering new markets -- especially Alt-A and subprime -- and guaranteeing more of our customers' products at market prices, we met our goal of increasing market share from 22 to 25 percent," Mudd wrote in a 2006 year-end report to the Fannie Mae board dated Jan. 3, 2007.

In other internal documents, there was a common refrain: One of Fannie Mae's objectives for 2006 was to "increase our penetration into subprime."

Buying Alt-A and subprime mortgages was part of Fannie Mae's effort to meet the challenge. Fannie Mae sought to reap the rewards and protect itself from the downside of the investments through a feat of financial engineering it called its "Risk Transformation Facility," which was meant to transfer the riskiest elements to other investors.

"We engaged in the subprime market, for the first time closing deals to guarantee and securitize subprime loans, with help from the new facility that allows us to sell off the riskiest layers," Mudd wrote. By October, the company had signed $3 billion of such deals.

By March 2007, when Mudd sent the board an update, major subprime lenders were failing, delinquency rates were climbing, and the emerging crisis was impossible to ignore.

The subprime sector "is in partial meltdown," Mudd wrote. He reported to directors that Fannie Mae's investment in subprime mortgage assets totaled about $55 billion.

Mudd told the board that Fannie Mae had run its subprime portfolio through a stress test to determine the losses in a hypothetical scenario that involved a two-percentage-pointrise in interest rates and two years of 5 percent declines in home prices. The resulting prediction: "zero credit losses net of earnings."

Yup -- everything's cool. No losses, no risk.. And these are the GOVT sponsored "loan launderers" with a MANDATE FROM CONGRESS to Increase their sponsorship of subprime loans..

 

[kiwiman127]

Maybe McCainn and the 19 other senators ,should have written the letter sooner. The Housing Bubble started to burst in late 2006.

 

[Mad Scientist]

McCain should know all about financial crisis being one of the Keating Five and all.

Glenn and McCain were cleared of any wrongdoing.