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Interesting opinion poll on CNNMoney. Should subprime borrowers be bailed out? And guess how the results tallied so far:
12% - yes
88% - no
Wonder who those 12% were?
Well, I find it interesting that the problem is barely surfacing and solutions are being floated already.
Fear is a great motivating factor in marking down investments, and greed is a another in marking them up. Wall street is still selling greed.
CNBC record close ticker is another ridiculous look at what is essentially a number, and not even a very representative number.
Gamblers, not investors. That is what made the housing crisis into a crisis is the investors who really didn't have a pot to piss in taking a flyer with exotic mortgages on property they were going to flip.
Well, the music has stopped and the scramble is on for a chair, and hue and cries of no fair ring throughout the land.
Howls of derisive laughter!!!
--
What Fannie and Freddie told me about the American Economic System?
That it is controlled by Bankrupters and Fraudsters of New York City, in particular, and Corporate Crooks, in general. Because they have been the biggest beneficiaries of these institutions and not the low-income folks on whose name these were created. When Americans support govt. programs to help people they are giving a license for fraud to the Financial Crooks.
Everyone involved with pushing debt in America is an evildoer.
American economy is all about FRAUD. Naked and open.
Conducting research on the consequences for debt at the age of 8,
Jas Jain, son of a moneylender and from a family of moneylenders for centuries
Syron said Freddie Mac will buy as much as $20B of mortgages that were to be packaged into bonds to try to help stabilize the subprime loan market (I'm paraphrasing Bloomberg). The folks in Washington are getting nervous and Syron has probably cut a deal with Dodd to keep Treasury out of Freddie's hair.
OK, now we're starting to get the "updates" from Bloomberg:
Syron's offer would effectively guarantee that there is demand from Freddie Mac for as much as $20 billion in new mortgage bonds so long as lenders refinance some of the loans outstanding into more favorable terms for subprime borrowers.
Freddie Mac to Buy $20 Billion in Subprime Home Loans (Update3) - Bloomberg.com
PIMCO: Still renting
PIMCO: Still renting
PIMCO - U.S. Credit Perspectives- 5-2007
[We also should carefully distinguish between those borrowers who can be rescued and those who cannot. I realize such a triage will not be easy or popular, but policy prescriptions such as widespread bailouts or foreclosure moratoriums should be considered only in certain extreme situations. Broad application of such prescriptions could have lasting, unintended consequences that harm the housing finance system in the long term.]
Honestly, I think that is one of the most sensible things I have heard from the powers-that-be since all the "bailout" talk began.
Speaking of rescues
We also should carefully distinguish between those borrowers who can be rescued and those who cannot. I realize such a triage will not be easy or popular, but policy prescriptions such as widespread bailouts or foreclosure moratoriums should be considered only in certain extreme situations. Broad application of such prescriptions could have lasting, unintended consequences that harm the housing finance system in the long term.
Who is going to rescue us (you and me --not the CEOs who have their own built-in rescue that allows them to pontificate as if there was some sort of communal effort here) from irresponsible administration, in particular, from Freddie's close relative, Fannie, whose administration which hasn't posted an annual report for 3 years...which has not prompted the responsible action that would ordinarily delist this (too big to fail...too rotten too) company.
How responsible is this CEO's plug:
policy prescriptions such as widespread bailouts or foreclosure moratoriums should be considered only in certain extreme situations. Broad application of such prescriptions could have lasting, unintended consequences that harm the housing finance system in the long term.
for those "certain extreme situations" when his outfit had been quite happy (do review the compensation packages of these clowns to see what 'happy' means.) to suffer these consequences for more than half a decade. Does he think that this (segmented, minuscule, token, hollow) approach, providing a rescue for these extreme cases, is going to patch things up?...make the world 'whole again'?...or just mask the incompetence, the negligence and frankly, the hypocrisy of these over-paid mouth pieces?
"Well, I find it interesting that the problem is barely surfacing and solutions are being floated already."
I find this interesting too. Congress usually doesn't get involved until the crisis is a cover of a major news magazine. Most of the people I know (and they pay attention to the news) do not appreciate what is happening in the mortgage market. I think Congress is getting more blunt advice than what is being portrayed in the media.
It seems to me that Freddie is more honest than Fannie.
I always had wondered about the reason for two apparently duplicative institutions. Sometimes there is wisdom in inefficiency.
The Freddie CEO is attempting to tell Congress, "Don't do anything too stupid". I bet though the private bankers (top donors to Chuck Schumer) would be squealing and pounding the table for a bailout --- of course this means a bailout of their own mega-geared portfolios foremost, not poor grandma in Duluth, Downey or Detroit.
The Freddie CEO is saying, "OK, I guess we'll have to clean up your toxic waste, but only if you irresponsible and greedy private lenders take a stiff re-edumacation bullet first."
I like him. He'll probably be replaced by a natty-suited bobblehead with a 10x larger comp package.
Jas: What Fannie and Freddie told me about the American Economic System?
That the re-fi bubble was an illusion of economic strength, so that Afghanistan and Iraq will likely spell ruin.
John McLeod, son of a rocket scientist and from a family dedicated to the defense of the Western World
"Congress usually doesn't get involved until the crisis is a cover of a major news magazine."
My theory on this is because it's hitting them where it hurts - their pocketbooks. They don't want to see their home values declining, and they don't want their constituents' home values declining either - not good to have unhappy voters. Money = happy voters. (The big binkie)
Credit card companies have been charging usurious variable interest rates (33% default rates) for a long time, but you don't see anybody up in arms about that. Because we don't really give a flip about whether or not our neighbor is drowning in a sinkhole of debt unless it starts to bring down our home values. Then we have to act.
Okay, I digress... now I promise I'll keep quiet and let the intellectuals have this post back.
So Freddie is guaranteeing there is a market for bonds based on subprime loans.
That is an offer to take $20 billion of worthless paper off the hands of the Japanese and the Chinese. No?
The dollar is beginning to worry the free marketers.
Mr. Syron should go home at night and push on a string for practice.
As a nation, we need to set some limit on the level of risk we are willing to take in order to promote higher levels of homeownership.
In the deathless words of Jane Hamsher, I call bullshit.
"As a nation"? Gosh, Mr. Syron, I sort of thought it was your responsibility to set a limit on risk.
But, I suppose, it isn't the GSE's that are to blame here. I guess that's the message: I'm not to blame.
Hey! We're now on the third version of the Bloomberg story (Update 2):
Syron's program, scheduled to begin in July, would create demand from Freddie Mac for as much as $20 billion in subprime home loans, including refinancings with more favorable terms than existing mortgages. Freddie Mac plans to pursue the program for two to five years, Syron said in an interview.
But by all means let's keep repeating the idea that this is a bailout.
"As a nation"? Gosh, Mr. Syron, I sort of thought it was your responsibility to set a limit on risk.
Arbogast, Syron is the CEO of Freddie Mac. He is not the Mortgage Finance Czar of the U.S. with the unilateral ability to make outfits like Wall Street and the REITs and the bottom-feeders behave themselves. His job is to set a limit on Freddie's risk. Surely there's a useful debate about whether he has or has not done that, but his whole point is that the GSEs cannot make everyone else stop originating junk loans.
Nice headlines on Reuters today
-Dow hits lifetime high-
-Dollar hits 26-year low vs pound-
--
"... from a family dedicated to the defense of the Western World"
You must be a Scot then?
It were the Scots that made Anglo-American Empire possible. English were the masters of the politics of Divide and Conquer, which they played very successfully on Scots too.
After the collapse of the current American political system (before 2030) the world will go back to 1000s of nations and Scotland will be one or more independent nations. America and Canada? Will be divided into 20-200 nations.
Remember what happened after the fall of the Roman Empire? History does repeat.
Looking at the consequences of the American FRAUD, the greatest in history,
Jas
"We also should carefully distinguish between those borrowers who can be rescued and those who cannot."
The obvious answer to that is none of them or they would have got a fixed rate loan in the first damn place.
What's the difference between renting and being a home owner via what is effectively a perpetual mortgage? Well, renting costs half as much right now, and over time housing only appreciates at a marginally higher rate than inflation, so its investment value is debatable. So who exactly benefits from promoting an "ownership society?" I would have to say the builders, realtors, bankers and other corporate entities who service the ownership society, not the owners themselves. Unfortunately the housing myth is so ingrained in American society that I doubt J6P is ever going to realize just how badly he's being duped.
Is $20B enough ?
will this retore the market for MBRS ?
Isn't this what caused the problem to start with with ?
I fail to understand what is going on.
Is this the bailout ? or is this 0.1% of what is needed as the real bailout and therefor amouns to a drop in the buckett ?
Jas,
Syron (to get back on-topic), and Fannie's new CFO Blakely, and Fed's Poole, and AEI's Pollock, and ... are working furiously to dig themselves and us out of this mess. I wish them well. I assert it's not too late, especially should world peace break out sometime before '07 Q3. And that can be done by Washington acting all by itself.
Turbo,
US has a Real estate craze and as long as there is 100% LTV it will continue.
People want all the advantage of "ownership" with zero skin in the game. As soon as there is equity they want "to use it". crazy to do all that on borrowed money.
i think his remark is honest, and straight forward. However how audiance interpretted his words is completely out of his control. but i agree with Tanta the 20 billion program is a bailout
"but his whole point is that the GSEs cannot make everyone else stop originating junk loans."
Nobody can. It is a free country (well, sort of). Passing the loans on (after they were made) to a greater fool is probably also not possible to eliminate. Nor is financial failure.
--
Q: What necessitated the creation of Fannie and Freddie?
The answer might shed light on the American System.
Jas
Jas
As a Scot, I'd like to know what on earth you are talking about. I know we invented antiseptic, anaesthetic, antibiotics, television, telephone, colour photography, the equations that all electrical systems work on, the US Navy, paper money in the west, Stirling engines, beta blockers, and TiVo amongst many other things. Are you simply referring to the prevalence of Scots in the British military over the last 300 years?
--
MadJock,
No. I am a big fan of Scots and their contributions to the modern economics, especially, banking. Scots INVENTED the modern branch banking system. In America, Scots dominated the best inventors (Bell and Morse) and business titans (Gates is a little guy in that pedigree).
I ate my first haggis this year (my neighbor, a 100% Scot, brought the platter).
Jas
From deb above - Honestly, I think that is one of the most sensible things I have heard from the powers-that-be since all the "bailout" talk began. - I agree.
From AllenM above - Well, I find it interesting that the problem is barely surfacing and solutions are being floated already. - Foreclosures and delinquencies were surfacing in Q4 06 - Q1 07, that means the powers that be knew this problem was erupting last fall. Actually they probably knew this was going to happen last summer or spring. They actually have had a lot of time to work on it.
$20 billion = bailout? I think the decimal point needs to be moved at least one point to the right to even be mentioned as a bailout.
--
Forget the bailout. Depression by 2008 will take most options off the table.
The Crooks intervened way before the real crisis and now they wouldn't be able to.
When will Americans get it that govt. can't intervene forever. Whatever level of intervention takes place it will be a non-event and useless.
Are you ready for the Greater Depression? The process has begun.
Jas
The Bailout solves the minor, deliquency, problem.
It does not solve the major problem, which will be people borrowing less.
In fact, if people went bankrupt or got foreclosed, they would probably be back consuming faster than if they get their payments down to a level where they can afford them, but little else.
Jas, you are kind of depressing. And a little hysterical. And what's depressing about it, is that I can't tell if you are wrong.
all of this is making me nervous.... i mean really really nervous...
someone please tell me that the sun will still rise tomorrow as there is a swell coming in....
........
Turbo: "What's the difference between renting and being a home owner via what is effectively a perpetual mortgage?"
1) Rents where I am are not half of mortgages - they're actually pretty competitive
2) I assume you don't have 3 kids?
3) Or a dog?
4) Or blue food coloring all over the beige rug from an Easter egg accident?
I rest my case.
Madjock: "As a Scot, I'd like to know what on earth you are talking about. I know we invented antiseptic, anaesthetic, antibiotics, television, telephone, colour photography, the equations that all electrical systems work on, the US Navy, paper money in the west, Stirling engines, beta blockers, and TiVo amongst many other things."
You forgot really cool bluegrass music!
--
"... I can't tell if you are wrong."
Chances that I am wrong are less than anyone else's forecasts. Why? I have devoted more time to the study of Anglo-American history than anyone else I know of specifically to get guidance as to what lies ahead for the world.
I don't read Adam Smith, Schumpeter, Tocqueville, etc., I study them like a pious Christian studies the Bible.
Most Americans are lazy dupes, e.g., Greenspan in 2005: "I haven't read Adam Smith for 50 years, but it is as fresh today as it was when it was written." This lazy dupe, an American misleader, only read it after 50 years because he was invited to give some lecture celebrating Adam Smith's achievements.
An American suffers from knowledge that he doesnt have! For example, an America teenage girl knows everything!!
Jas
PS: MadJock, Adam Smith is my favorite Scot.
--
"You forgot really cool bluegrass music!"
Is that Scotch or Scotch-Irish? My ex-girlfriend is a born-and-bred Kentuckian with bluegrass musicians in the family (grandparents). She is Scotch-Irish. I wonder what % of Kentucky is Scottish.
Jas
Jas,
Most Americans know all about Smith...you see, she died recently and left a baby that's worth a lot of money...and as it turns out, Larry Bonehead is in fact the father....
--
PS: The term Scot is of Irish origin. The Scoti tribe from Northern Ireland that moved to NW Scottish islands is the source of the name.
Jas
Jas, unfortunately you come across a pompous windbag. There are many erudite holders of doctorates in the crowds you proclaim to. Your intellect doesn't shine among them, despite what you may think.
If you hope to make any impact on your fellow readers, construct cogent reasoned arguments instead of just hurling dramatic conclusions in grenade form. If you don't care about our opinions, why bother posting here?
Jas,
As someone once said..
"Prediction is hard. Especially the future."
--
"Jas, unfortunately you come across a pompous windbag. There are many erudite holders of doctorates in the crowds you proclaim to. Your intellect doesn't shine among them, despite what you may think."
I know very "many erudite holders of doctorates" in America, besides being one myself. I also know how much of history they really know and what kind of history they know. They are BRED to be dupes of the system, i.e., their blind faith in the American system makes it nearly impossible for them to see the root causes of the problems. All of Americas problems are problem with Americans, especially, the educated ones.
Let us start with the Cult of democracy! Oh, democracy can't be a cult? Now, we can talk about built-in prejudices.
Jas
PS: Democracy is totally inconsistent with Judaism and Christianity, not to mention other religions. American belief system is highly inconsistent. Blind faith prevents resolution of contradictions.
PPS: The primary purpose of education in America, and most education thru history, besides training for a job, is brainwashing. A highly educated American is the most brainwashed person on the planet.
PPPS: Success in America requires that one be brainwashed!
--
"Prediction is hard. Especially the future."
That is why I let history be the best guide as to what is most likely to transpire.
Being proven wrong is an occupational hazard for a forecaster. Can't be avoided.
Jas
Jas: "I wonder what % of Kentucky is Scottish."
I don't know how those Scotch-Irish became hillbillies in the Blue Ridge Mtns., but wow, people of great wisdom and great music...
--
Pushing Debt on the population with govt. programs?
Fannie and Freddie are un-Constitutional and are the best example of the moral bankruptcy of America's ruling elite. Maybe HUD, even FHA, can be justified, but Fannie and Freddie can't be.
Bankrupters and Fraudsters, not the American People, have benefited and profited from Fannie and Freddie. Not to mention various interest groups related to housing.
Jas
Who will rescue us from the Fed.
The Dollar Index is now 81.39
Lawmakers in positions of authority in Congress are flatly ruling out the possibility of a government bailout to cover mortgage loans in default.
Sen. Christopher Dodd, chairman of the Senate Banking Committee, while stressing that we want to do everything possible to avoid foreclosures, said I'm not interested in a bailout plan. That may do more harm than good, said the Connecticut Democrat, who is seeking his party's presidential nomination in 2008.
Hate to tell you Christopher but this kind of has a smell of a bailout to me. I just wonder how many of the loans that will get rescued will be the ones still in the lenders portfolio because they can't sell this junk. Any bets?
"What's the difference between renting and being a home owner via what is effectively a perpetual mortgage? Well, renting costs half as much right now, and over time housing only appreciates at a marginally higher rate than inflation, so its investment value is debatable."
You must have been in a hole the last 5 years.
Mortgage professional
I wonder how many of your clients will be in a hole in the next 5 years?
Of course investing in property makes sense for the financially astute but it may not for those who dont understand the costs and risks of the carry.
Tanta, it seems tougher & tougher as the number of commentors geometrically increases to stay on point. AND, stay on point you did with: "But by all means let's keep repeating the idea that this is a bailout."
No bailout is free, but this one has an enormous hidden cost. Offering discounted mtgs. in the Bubble states at this stage of the game will act to support HIGHLY inflated housing prices. The undiscussed result could wekk be that an entire generation of young adults ready to buy into the American Dream could will be priced out of the market. Historically, these have been the ones we've depended upon to actively participate & regenerate communities.
When will we say enough is enough to short-sighted policy "fixes"? Are we never again to consider the costs of these political payoffs on our kids & grandkids? Good job!
"I wonder how many of your clients will be in a hole in the next 5 years"
Not sure what that has to do with a comment that says home appreciation hardly keeps up with inflation so what is the point.