TJ, I seem to have a faint memory of you saying something about these two companies a few years ago. They seem to be lining up, along with HOV, TOL etc as though they read your plan and have some time ago decided that it was an excellent idea.
Not wanting to be left out, politicians are getting in on the plan too, as planned, preordained, predicted, expected and inevitably, to make things better, or more likely worse.
Sometimes I wonder whether we really do have free will or are just doomed, or blessed, to follow preordained paths. For example, I couldn't help but think of you when I saw this, I suppose I could have chosen not to read it, but I was impelled by a mysterious force - a morbid and fearful curiosity about what turn of the drama is being prepared.
biz.yahoo.com
< Saturday March 1, 5:11 am ET
By Marcy Gordon, AP Business Writer
Some Analysts See Danger in Allowing Fannie, Freddie to Grow As Their Mortgage Losses Mount
WASHINGTON (AP) -- Loosening the regulatory reins around Fannie Mae and Freddie Mac gives them the freedom to play a bigger role in trying to stabilize a worsening housing market.
The danger, some analysts say, is that the government-sponsored mortgage titans will become saddled with too much financial risk.
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Fannie and Freddie this week reported fourth-quarter losses totaling $6.1 billion and predicted multibillion-dollar losses throughout 2008. Yet despite their financial troubles and the shakiness of the U.S. housing market, the government is making it easier for Fannie and Freddie to take on additional home-loan debt, something the companies have sought for months.
First they won the right -- as part of a bipartisan economic stimulus package -- to buy and guarantee mortgages above the traditional $417,000 limit. Then -- as a reward for filing timely financial statements following multibillion-dollar accounting scandals -- the companies were freed of a combined $1.5 trillion cap on their mortgage-investment holdings. Their regulator also raised the possibility of relaxing a mandated capital cushion Fannie and Freddie must keep in reserve.
While members of Congress and the Bush administration are hopeful these changes will enable Fannie and Freddie to help stem the housing downturn, some financial experts believe it is irresponsible to encourage the No. 1 and No. 2 mortgage finance companies to grow at this point in time.
Asked about the potential risks from being allowed to expand, the companies point to their mortgage portfolios currently being tens of billions below the now-expiring $746 billion limit. Without an easing of the risk capital level, they say, it is difficult for them to purchase as many mortgages as desirable to help the market.
"We have consistently shown that we operate in a very safe and prudent manner," said Freddie spokeswoman Sharon McHale. Fannie spokeswoman Amy Bonitatibus declined to comment.
Nobody is suggesting that Fannie and Freddie are on the verge of failure anytime soon. Some on Wall Street are even cheering the companies' efforts to gain market share at a time when smaller lenders are retreating.
That said, there is concern among some experts that they have grown too large and could endanger the financial system if they were to totter or fail.
"Neither of these organizations has enough capital to cover their risk, and they know it," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics, a firm based in Torrance, Calif. "I'm concerned about solvency for these entities."
Congress created Fannie during the Depression and Freddie in 1970 to keep money flowing into the home-loan market by buying up mortgages and bundling them into securities for sale to investors worldwide -- thereby making home ownership affordable for low- and middle-income Americans.
Today the companies hold or guarantee around $4.9 trillion in home-loan debt, though under a 1992 law they are required to hold in reserve against risk only a fraction of what is mandated for commercial banks.
While the Treasury Department isn't obligated to assist Fannie or Freddie in a financial emergency, there is a perceived notion on Wall Street that the government would bail them out in the event of a collapse. The idea that they are "too big to fail" enables the two companies to borrow relatively cheaply on global markets by issuing hundreds of billions of dollars in top-rated ... continued... >
Mqurice
PS: Edit... then I decide to click back upstream and while I was typing that, you were writing the word "ordained" as though there was a reverberation in the cosmic fabric. I'm not sure now which was preordained and which was ordained. But there is a lot of ordinance being ordered. Such as this $35bn air force airborne refueling system. Where are they wanting to do all that flying and what for? People seem to be planning all sorts of interesting things: biz.yahoo.com |
