Debate between ItGoesTo11 and mish on the FOOL board.
IGT11:
"Citi, JPM i.e. the large money center banks will pick up FRE/FNM assets for a song under the auspices of "privatization" ...
Mish:
That is correct of course but.....
I do not think C will be granting 105% loans to credit strapped customers either.
So yes, there will be some risk mitigation."
Mish
IGT11:
At the risk of appearing to defend Stalin vs. your Hitler ...
I respectfully disagree(love the board - just think you are missing the big picture on this one).
Call a mortgage broker. Ask them for their most aggressive mortgage program that Citi will buy. Then ask if it meets Freddie/Fannie guidelines. Answer , it doesn't. While the large banks send the majority of their production to FRE/FNM, the really toxic stuff is either held in their retained portfolio(the spreads are huge!) or securitized through the Asset-backed Securities market(ABS). The asset-backed market is the wild west of real estate finance, it packages all the stuff that FNM/FRE won't buy(LOL!!!). Citi consistently leads the league tables in production of this garbage ... I'm talking about Jumbo Sub-Prime high LTV paper, Mobile Home mortgages, Scratch-and-Dent mortgages, Second/Third/Fourth Trust Mortgages, No Asset/No Documentation Loans etc.
Look, the fix is in. I read the OFHEO report which you posted. The Feds want the removal of Raines and Howard(the brain). Then they can put a patsy in at FNM like they did at Freddie. Isn't it interesting that after the big to-do at Freddie Mac last year, last week they decided that ousted Freddie Mac Chairman could keep his $50M and faces no charges?????? Objective was met, move on to FNM.
Also, it's not Demublicans versus Republicrats. It's New York Money Center Banks(Federal Reserve Owners) vs. these Washington DC area mortgage upstarts that got too big for their britches!
The fix is in. The "implicit" government guarantee of these two jokers will be replaced by the explicit government guarantee of the Money Center Banks .... member FDIC. Isn't interesting that while this story is getting all the press, the pending increase of FDIC insurance goes un-noticed?????
Rep. Ron Paul speaking before the House Of Representative
“Don't Expand Federal Deposit Insurance”
-- snip --
Mr. Speaker, HR 3717, the Federal Deposit Insurance Reform Act, expands the federal government's unconstitutional control over the financial services industry and raises taxes on all financial institutions. Furthermore, this legislation could increase the possibility of future bank failures. Therefore, I must oppose this bill.
I primarily object to the provisions in HR 3717 which may increase the premiums assessed on participating financial institutions. These "premiums," which are actually taxes, are the premier sources of funds for the Deposit Insurance Fund. This fund is used to bail out banks who experience difficulties meeting their commitments to their depositors. Thus, the deposit insurance system transfers liability for poor management decisions from those who made the decisions to their competitors. This system punishes those financial institutions which follow sound practices, as they are forced to absorb the losses of their competitors. This also compounds the moral hazard problem created whenever government socializes business losses.
…
Government subsidies lead to government control, as regulations are imposed on the recipients of the subsidies in order to address the moral hazard problem. This is certainly the case in banking, which is one of the most heavily regulated industries in America. However, as George Kaufman, the John Smith Professor of Banking and Finance at Loyola University in Chicago, and co-chair of the Shadow Financial Regulatory Committee, pointed out in a study for the CATO Institute, the FDIC's history of poor management exacerbated the banking crisis of the eighties and nineties. Professor Kaufman properly identifies a key reason for the FDIC's poor track record in protecting individual depositors: regulators have incentives to downplay or even cover-up problems in the financial system such as banking failures. Banking failures are black marks on the regulators' records. In addition, regulators may be subject to political pressure to delay imposing sanctions on failing institutions, thus increasing the magnitude of the loss.
The presence of deposit insurance and government regulations removes incentives for individuals to act on their own to protect their deposits or even inquire as to the health of their financial institutions. After all, why should individuals be concerned with the health of their financial institutions when the federal government insures their deposits?
Finally, I would remind my colleagues that the federal deposit insurance program lacks constitutional authority. Congress' only mandate in the area of money and banking is to maintain the value of the money. Unfortunately, Congress abdicated its responsibility over monetary policy with the passage of the Federal Reserve Act of 1913, which allows the federal government to erode the value of the currency at the will of the central bank. Congress' embrace of fiat money is directly responsible for the instability in the banking system that created the justification for deposit insurance. (emphasis mine)
The fix is in, follow the money!
11
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Hmmm did I lose?
Mish |
