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Barney Makes Hash
Barney Frank (D. Mass) is head of the very powerful House Financial
Services Committee. Barney is the Rainmaker for the country’s mortgage
agencies, Fannie and Freddie. He was the Don that blessed everything
that happened for years. Without him these two dead ducks would not be
the disaster they are today. And Barney Frank has no clue how our
system works. He proved it several times on Friday.
He started with a stupid comment in the WaPo: "People who
own Fannie and Freddie debt are not in the same legal position [as
those who own] Treasury and I don’t want them to be. ”. During
the day he tried to backpedal away from this dangerous assertion. But
he really stuck his foot in his mouth in an interview with Maria
Bartiroma.
At several points in the interview Frank makes clear his view that
mortgage securities issued by either Fannie and Freddie prior to the
September 2008 (conservatorship) were tainted and there was no
certainty that these would be paid in full.
When Maria pushed him on this ridiculous position she asked him what
should the foreign central banks, who have been long term holders of
Agency paper do, he responded, “Who will they sell it to? Themselves?”
Is Mr. Frank suggesting there is no liquidity in aged mortgage paper
guaranteed by the Agencies? If there is a shortage of liquidity he may
be responsible for it.
These comments prove that Congressman Frank has no clue what he is
talking about. There is no basis for a different treatment of Agency
securities based on issue date. There has been no bankruptcy that would
establish seniority on new issues of debt.
As part of the QE effort the Fed has purchased a boatload of agency
paper that was issued prior to conservatorship. Does Mr. Frank believe
that this is money good and the original holders are out in the dark?
Who might be the holders who own Agencies from prior to 8/08? A lot of
US bond funds, a ton of widows and orphans and yes, a few big foreign
central banks. Barney F. wants to screw that audience?
For myself, I would love to see that this gets blown out of
perspective. I hope that China or some other Asian central bank says, “Sorry, too much confusion. We vote with our feet now. Bye, Bye”.
I hope that Geithner is forced to contradict his pal Barney. I hope the
mortgage market spread against Treasuries backs up about 25BP as a
result of this foolishness.
That is unlikely to happen. The reality is no one listens to Barney
Frank. They know he is just blowing smoke so he can look like he is
playing tough to his audience back in Massachusetts.
We need a wake up call. Maybe a big blip in the mortgage market would
do it. We need to get rid of the likes of Barney Frank. He led us into
this mess. He is still mucking things up. And he is still running the
show and setting the policy for the future.
We got rid of the fat cats from the private sector financial
institutions that caused all our problems. We got rid of the fools who
ran Fannie and Freddie into the ground. Now it is time to get rid of
the politicians that pulled all of the strings and made/let it happen.
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When you're right, you're right even if it's not politically correct. I DON'T want FANNIE/FREDDIE debt to be equal to Treasury debt either!! Who might want it otherwise? That's right, people who own that debt & want MY TAXES TO PAY THEM OFF FOREVER!!! And, excuse me I thought it was Bushy the Bungler & the Bankster crew that started it all, Barney doesn't have anything like that sort of power. Novel concept; the losers rewriting history.
Agreed, Barney did the taxpayer a favor yesterday. He is a hero.
I am not sure how much old Fannie/Freddie paper might be subject to this. The total is 6 trillion. The pre 8/08 number has to be 5-10% (that is a guess, I would love to get a handle on it if someone has a better guess). So that would put the amount of bonds that have 'cloud' over them at $300-600B. That is a big number. Bigger than Greece. Bigger than lots of countries external debt.
If you had a blow up that big (we will not) it would pretty much be the end of things for awhile. Do you think the US can sell $2T of new bonds every year for the next ten after taking a walk on $500b of IOU's?
For what it is worth I do not think it is legally possible to do what Frank suggests. This debt is parri passu. It is all one as far as right to repayment. (Any lawyer out there want to chime in on that thought?)
bk
The pre sept 08 amount out there is well over 50% of outstanding balance. Barney is in panic mode. As much as I hate him he is not dumb. Barney must know that the ultimate price tag for the GSE +FHA will be well over 400b - possibly made worse by all the debt forgiveness programs out there. It is all being swept under the rug until they pass health care. They cant tell the American people the truth about the real cost because it will kill their agenda.
Admit it Bawnee, you play "Calvinball"!
He wants to "pay off people". Hey, tell me something I don't know Bawnee.
Bawnee talks about swimming naked. Gross. He is sooooooo smart, but has to quote Buffett? Frank is a schill! A pawn! A patsie!
Avoid the Hydra?! Bawnee, all you do is the Hydra's bidding. Fool.
I received a Fast Money Doug Kass interview when I hit the link.
Frank on Fannie, Freddie & FinReg:http://www.cnbc.com/id/15840232?video=1432846164&play=1
He is following the program just like 98% of our politicians. Total incompetence as usual. They don't read any legislation and vote not according to integrity or patriotism, but according to their parties, lobbyists, leverage, and self serving interests. Fire them all. Start with barney and keep going right down the line. On top of all that we are paying those self-serving, self righteous bastards.
+10
I watched this yesterday. Simply unbelievable. This is the United States of America. How dare you buffoons ( Barney Frank, George Bush on and on…) destroy it and its reputation. Very sad.
Is this April Fools, or what? I thought the people posting on this blog actually knew something.
Read "I and my select friends are personally out of pre September 2008 paper."
The Treasury wants bondholders to behave as though this debt was federally guaranteed. However, it wants to avoid saying so at all costs.
So Frank wasn't on-message with The $5 Trillion Lie. It's frankly infuriating that more attention is being paid to his - technically factual - statement than to the massive prevarication that underlies it.
Agreed, I think Barney did us a favor by bring the uncertainty into the open.
Yes he did. the Fannie and Freddie situation should have been dealt with for good in Sept 2008. It is important that the dialogue be had regarding their status. What he did was positive.
interesting that the facing page of fannie/freddie prospectus has in bold print the disclaimer about not being full faith and credit of the usa.......
Bruce, with all due respect,
"We got rid of the fat cats from the private sector financial institutions that caused all our problems."
Who? The same people are still running the show.
Agreed, and why do you think all of the mountains of fraud involved has never been prosecuted (Dick Fuld on and on…), because these clowns running our country are complicit.
You don't go to jail for failure and bad judgement. You go to jail because you broke the law. The Enron boys went to jail. Madoffs in the clink. Dozens of guys who broke the law are now doing time.
Dick Fuld was a jerk, but he did not break any laws. Read Paulson's book. He spoke with Fuld 3 times a day for months. Lehman was overleveraged with bad paper so it went down. Shit happens.
So I don't buy into the idea that all involved should go to jail. I just think that anyone with stink on their hands should be out of the decision making loop. Barney has stink hands and he is still calling the shots.
Barney is an idiot but I don't see jail time in his future.
A lot of what happened was stupidity, arrogance, greed and limited options available at the time. Hindsight... sigh.
I subscribe to the Watergate comparison. It's the lying that is going to get people.
Bernanke has broken the law by buying agency MBS.
The FHFA have broken the law by allowing f/f to buy 125ltv paper without credit enhancement.
They will never be prosecuted unless there is a regime change.
I see selective bailouts as a violation of the equal protection clause of the US Constitution.
Bernanke has broken the law by buying agency MB
There is lots and lots of leeway under the emergency provisions portion of the 1913 Act.
Until someone sues the Fed on this point, they can interpret as they see fit and they are doing so.
Massachusetts: Man up and get rid of this fat turd. You did it once, finally shucking the Kennedys, now finish it off.
It is up to the good people of Mass to get rid of this fool. It is so shocking that after all this time he still does not know what he is talking about. Frank, Pelosi, Reed are the poster children for the imposition of term limits.
FYI Barney - older MBS often trade at a PREMIUM to newer MBS due to their better prepayment characteristics and shorter amortization schedules in a steep yield curve. In fact, because MBS is a TBA/cheapest to deliver market, they can not trade cheap to TBA because they are always deliverable into the TBA (often new MBS price). People of Mass - do not vote this pathetic old/lying piece of crap back to congress.
Still Clueless After All These Years
http://www.businessinsider.com/barney-frank-has-no-clue-what-hes-talking...
Another one of Barney's blow jobs
Let's clear this up....once and for all....
............................
Bankruptcy is a very common event these days....
Bankruptcy means that there is extreme hardship or difficulty in meeting financial obligations....
The idea of bankruptcy is to allow for the restructuring of an entity such that its obligations are more likely to be met....
.............................
My friends....the USA is bankrupt....
The polys susch as Frank have been causal in the bankruptcy of the USA and are playing the semantic legal dance.....
With or without blithering idiots like Frank living in denial...as well as Brown the clown acting similarly in the UK....The USA has to....it is not a choice...HAS TO restructure itself.....such that it can pay its promises in some form...rather than no form....
..............................
USA status....
THe current status is that the current populist lameduck govt. is kicking the restructuring can down the road....
........................
Over 40% of overall purchasing power from debt and equity sources has been deleted from the economy....
It will not come back in its previous form....
In addition...Monetization would only dilute the 60% that remains.....
Govt. cannot and does not create wealth.....In the case of the USA...small business creates wealth....
Now write this down....
Short term tax allowances will not act as a solution....which has been proven many times over....Being a populist ice cream promiser....is even more harmful because of the false premise that it is....
................................
The main issue at hand is how to create a rather sudden build of of small businesses that will rise sustainably....
This is very simple....
Choose A or B ....my friends....
a) Current tax structure
Very soon....will move individual and corporate taxes at the $250,000 level upwards towards 50% ....and even more when one considers all state and local taxes....and when the new VAT taxes are added....even higher....
These taxes are simply tacked onto prices....and the $250000 mark is the mark of the very small business segement that creates over 90% of the jobs....and 90% of innovation in the USA....
b) 15% Consumption tax ...to be collected at point of sale ...for tangible consumable goods....all of them....
Other changes...the Fed lobbyist system would be replaced by township to state mandates per citizen vote by category....
The citizenry elects what % of the 15% is spent on whatever they choose....
.............................................
In 10 years ....
The tax take from b) would be many times that of a).....
In 50 years ....the b) economy would be exponentially larger than a).....
b) offers proper restructuring.....and would enable any individual shopping at WalMart to buy US goods....
.......................................
The bottom line is b) is fas better than a) could ever be....and its is the sheer act of hubris.....self denial....and outright corruption....that b) is not fully prescribed....
Otherwise the USA will move in perpetual bankruptcy....
The USA is already bankrupt....only accounting denial gimics suggest otherwise....
Now.....must be allow itself to restructure....
Gimme a break, Mr. Drama Queen,
The USA is not 'bankrupt' (cash flow impaired, maybe)
Do you realize all 'assets' of the United States government, technically have zero valuation? Think about it...the Interstate Highway System, aircraft carriers, satellites, IP/research patented at all national labs, ports & harbors, national parks, mineral rights, even the gold in Ft. Knox, etc, etc....all zero valuations. And why is that, genius?
Because for the most part, the US govt's accounting system is on a cash basis (very limited accrual accounting overall, maybe 2-3%). Nearly everything is treated as 100% sunk cost.
You do have a point, but does that mean we have to sell our country? Handing California over to to China has been discussed several times. Russia can drill in ANWR. Japan can have our Navy, once we can no longer afford to protect them. I'm sure the Sauds will love to take over our bases in the Middle East. Would this settle the debt?
Germany is asking Greece to sell some of its islands...and we should sell many of our foreign military bases, they create resentment among locals, like in Okinawa, thereby making us less safe, and not having bases in every single corner of the world (I guess we are getting AfricaCom now too) might make us think twice about foreign wars, have more military based at home could help us defend our borders better - say like being able to find a few more fighter jets to scramble when someone hijacks airplanes in our airspace or say being able to defend and secure our borders and have lots of military available for re-purposing in case of a natural disasters such as earthquakes in SA...and the govt money spent on foreign military has little ripples in US economy, much of the soldiers salaries get spent in foreign country, local construction and service jobs go to foreigners...if we cashed in on the real estate we own in foreign countries and brought many of our soldiers home (some estimate we have 2000 military outposts thru out the world) we would be safer and our economy would be better for it..
If, as most people seem to be, we are honestly concerned about spending, why is it only social spending, financial backing of Fan and Fred are brought up in these dicussions, and hardly ever military spending. If govt is wasteful, surely the biggest govt org, the pentagon is wasteful too. Just as we might say we have to get smarted about how we spend our Medicare dollars or operate Soc Security, shouln't we examine DoD in same manner, looking for expensive things that may do little to us more safe...
Uhhh... what do you think are the odds that the US government will not only balance its books but pay back the debt already incurred? How is it going to resolve the billions of dollars in underwater mortgages? What about all the derivatives?
You mention US "assets", how are the Treasury holders going to collect on those assets? The US is bankrupt. A collapse is coming and it's just a matter of time. Do yourself a favor and plan for it. Pretending it's merely a cash flow problem... please.
450,000 Americans declare each quarter. This number is increasing.