FedUpUSA

Archive for the ‘Freddie Mac’ Category

Aw, Boehner has his panties in a wad!

House Speaker John Boehner said he and fellow House Republicans oppose Senate legislation to extend through February a payroll tax cut and long-term unemployment benefits and will push to continue the measures through 2012.

Congress should “stop, do our work and extend for one year,” Boehner said on NBC’s “Meet the Press” today. He said a two-month addition creates uncertainty for employers as they budget for 2012. A “reasonable, responsible” compromise could be reached, he said, and suggested a formal conference committee between the House and the Senate to resolve differences between the two chambers.

What work is that John?

In all sobriety, you do realize how The Senate proposes to pay for this tax reduction, right?  They have added to Fannie and Freddie a fee increase.  That’s right — those very “middle class tax cuts” will be paid for by people  in the middle class who buy or refinance houses.  See, the rich don’t buy small houses, they tend to buy big houses — ones that don’t qualify for Fannie and Freddie financing.  And the poor don’t buy houses at all.

So this little game amounts to nothing more than sticking of the hand in one pocket and moving a $20 to the other.  Wow man, you got a tax cut!  (Just so long as you don’t notice that we robbed you of the same money at the same time!)

It’s worse, of course.  The Fannie and Freddie surcharge doesn’t sunset when the tax does.  In fact, it doesn’t sunset at all.  So in addition to taxing you to give it back (a worthless exercise) The Senate is further cementing these two broken GSEs into the Federal Government policy system and is creating a forward slush fund that I’m sure they’ll find some use for down the road.

Isn’t that special?  I knew you’d like it.

For me, the most significant development from the Fed’s announcement is a change in policy where the Fed will re-invest proceeds of maturing MBS securities in new issues of Agency MBS paper. Prior to today, the Fed re-invested principal repayments in Treasury bonds.

I wrote about the possibility of a mega mortgage ReFi by Fannie and Freddie (here and here). I (and many readers) pointed to an obvious flaw in the ReFi story. If a Trillion or so of mortgages were rapidly prepaid, then who would buy all of the new (much lower coupon) mortgage paper?

Now we have the answer. The Fed will put the new MBS paper back on its Balance Sheet, $ for $. There will still be many bondholders outside of the Fed who will get prepaid much faster than they had assumed. Most of that is in pension/bond funds. No one cares about them.

I think that Treasury will announce the plans for a Mega Refi in the not too distant future. It could come this weekend or next week. Obama will wait just enough time after the complex Fed decision so that 99% of all people don’t connect these two dots.

In that 1% will be Republicans. They are going to be mad as hens tonight that Bernanke ignored their last minute plea not to play more monetary games. The authors of that letter, McConnell, Boehner, Kyle and Cantor are really going to be peeved. Not only did the Fed step further on the gas, they greased the skids for an Administration’s plan to ReFi mortgages.

It’s not at all clear that the Fed’s latest move are going to accomplish a thing. I’m not sure that the Big ReFi is going to be such a success either. But that doesn’t matter.

What’s important about this is that the Republicans will respond. They will not give Obama another leg up with his one-year stimulus program. Any chance of that went up in smoke with the Fed’s VERY political decision on MBS today. Can you say, “Collusion”?

This is a real circus now. In this one the bears aren’t dancing. They’re fighting. The claws are out and it’s going to get bloody.

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Oh boy, and then the taxpayers – that’s you and I – bailed out both firms, and in fact we continue to right now, with Geithner, under Obama’s direction, continuing to pour in the cash.

The first sign of what would ultimately become a $3 billion fraud surfaced Jan. 11, 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else.

But did Fannie tell anyone, like, for instance, The FBI?

Nope.

Fannie Mae officials never reported the fraud to law enforcement or anyone outside the company. Internal memos, court papers, and public testimony show it sought only to rid itself of liabilities and cut ties with a mortgage firm selling loans “that had no value,” as Smith, the former vice president of Fannie Mae’s single family operations, said in a 2008 deposition.

Just dump it off on someone else, right?  And who else?  Well, that would be the other GSE, who they also didn’t tell….

Taylor Bean would have collapsed in 2002 “but for the fraud scheme,” according to prosecutors. It also survived because Freddie Mac began picking up the company’s business within a week of Fannie Mae’s cutoff, Jason Moore, Taylor Bean’s former chief operating officer, said in an interview.

Isn’t that nice?

Oh yeah, and this little charade factored into the Colonial Bank collapse too.

But all of it would have ended immediately had the government’s sponsored enterprises done what they had an obligation to do – turn over evidence of criminal lawbreaking to the authorities.

They did not and as a result serious financial harm was done – and now we, as taxpayers, get to pay for it.

Oh, and both Fannie and Freddie?  They’re still in business, now 80% owned by Treasury.  That’s you and I, who were bent over the table not just once, not twice, but each and every day this crap is allowed to continue and these firms are not shut down and the parties responsible for this intentional malfeasance remain free without prosecution.

Incidentally, Geithner and Obama, by supporting these firms, are both personally responsible for this crap continuing, and you, the taxpayer, being repeatedly screwed.

The Market-Ticker

OK, how much is this one going to cost us all?

Bank of America Corp., the biggest U.S. lender by assets, paid $2.8 billion to Freddie Mac and Fannie Mae after the U.S.-owned firms demanded the company buy back mortgages they said were based on faulty data. The bank rose as much as 5.6 percent in New York trading.

So BAC pays out $2.8 billion.  What was and is the loss that was potentially going to be shoved up their tails on this deal?

This, incidentally, does not cover servicing problems, which means it’s arguable that if transfers weren’t made it won’t cover that either.  This remains an unknown.

AGAIN: How much money is the taxpayer on the hook for as a consequence of this arguably unlawful allocation of Federal (that is, tax) money from the government to BAC on a “present value” or even “reasonably-foreseeable loss” basis – without a bill originating in The House?

In this video, Chairman Ted Kaufman of the TARP Congressional Oversight Panel introduces the COP December report “A Review of Treasury’s Foreclosure Prevention Programs.”  The full report is available online here.

After two years of such reports, all of which have been varying levels of fail, we are no further along in the process of solving this crisis.  Let us not forget that two years after the beginning of the Savings and Loan Crisis, we have more than 1,000 convictions for fraud.  These convictions weren’t just bit players, they were the executives, presidents, vice presidents and board members.

So far, this time, we have nothing.  It certainly isn’t due to lack of evidence of the massive fraud.  On FedUpUSA alone, we have the official expert testimony of William K. Black, Elizabeth Warren, Janet Tavakoli, Chris Peterson and Adam J. Levitin, just to name a few.  Across the country there have been numerous court rulings at the Appellate level and above which confirm the enormous fraud.

So we are left to ask:  Why have we not STOPPED THE LOOTING AND STARTED THE PROSECUTING?

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