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Tim and Barney - Adios!
When the history books are written and the causes of the problems that
we face are discussed and debated one conclusion will be inescapable.
The mortgage Agencies, Fannie Mae and Freddie Mac were central to the
economic collapse of 2008. It would be unfair to blame all our ills on
F/F. There were many bad actors in this show. But I don’t think the
explosion that occurred in 2008 and the crisis in the economy that
ensued would have been anywhere near as severe as it has been had it
not been for the terrible decisions that were made at every level
regarding the D.C. mortgage lenders.
I bring this up because quite frankly I am mad this evening. Two
important things took place today regarding the Agencies. Both of them
upset me. In the fray of a three-day, 5% drop in the market; I think
the implications were lost.
The first came from our gutless Treasury Secretary, Tim Geithner who said of the Agencies future:
"I don't think we're going to be able to legislate that
until that process can start, until next year, because it's just a
complicated thing to get right."
That is not true. The Treasury Secretary has been telling people in the
press for months now that the problems with the Agencies were going to
be addressed in the first half of 2010. As of today that time frame has
been pushed back a year. The reason is politics. The Agencies need the
mother of all bailouts. They have already cost us $100 billion. They
need another $400-500 to write their portfolios to a level that would
make them viable. After this week’s election there is no support for
another big bailout. Geithner knows he can’t go to Congress and say we
have a permanent loss of a half trillion dollars.
Washington has been pounding the table of late saying, “We are going to
get the people’s money back!” They have been beating up all the TBTF’s
with one plan after another to show that they are getting tough. But
when it comes to a problem in their own back yard they conveniently
push it off another year with the excuse that it is, “Just a complicated thing”. That is a shameful statement. Geither has lost any credibility that he may have had left after this move.
The other oracle that spoke today was Congressman Barney Frank. He also said something brilliant. His words:
“His committee will be recommending abolishing Fannie Mae
and Freddie Mac in its current form and coming up with a whole new
system of housing finance.”
I have been studying the Agencies for nearly a decade. I started in the
days of Franklin Raines. I knew he was lying about the books. I wrote
everyone that I could that he was playing fast and lose. I was proven
right. I saw their demise two years before it happened. I know the
history of these two and how they became as powerful as they did and
how they have played a critical role in the housing imbalances that
have brought us to where we are. From my perspective there is no single
person who has been as influential and central to the colossal blunders
at the GSEs as Congressman Frank.
For Mr. Frank to now suggest that his Committee has concluded that what
has been done for the past twenty years was a mistake and that his
Committee would be “Coming up with a whole new system” is galling.
Mr. Frank is right; our system of housing finance is critically broken.
An entirely new one is needed. But Congressman Frank should have
nothing to do with the future of America’s mortgage finance system. His
hands are dirty from the past. He has to accept his share of
responsibility for the blunders that were made.
We need new leadership. It is not clear to me that we can recover from
the mistakes of the past, but what is very clear is that we can’t
repeat the mistakes of the past and have a chance of surviving.
The people of Massachusetts have done the country a favor with the
recent election. They woke us up. They shook the tree. Now those same
citizens have more work to do for the rest of us. They have to vote
Barney Frank out of office.
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What a joke o'Barney Frank... unfortunately you have no credibility!
every trader knows that pyramiding is dangerous and needs strict risk controls. and the big boys did not????
absolutely unreal
You guys are douchebags. Particularly you Messr. Krasting. You are propagating the myth that somehow Fanny and Freddie (who are complicit, but not at the level you pretend) blew up the world economy. You really think it was all due to liberals lending blacks and Mexicans that caused the crisis. C'mon dickw*d, be serious. This crisis is a multiple trillon dollar affair - and you want to blame it on liberal lending policy? Seriously, what kind of pathetic POS would hang the crisis on that? Grow up. Have nots got screwed by the Haves. The people who profiteered (i.e. the banks) were responsible. Grow up moron.
Fannie and Freddie should be abolished.
We do need a whole new system of housing finance -
the free market.
"a whole new system"
Oh my god. That is frightening!
Tim and Barney adios. Don't worry there are plenty of other incompetents to take their place. Then they can be in office for how long before we figure out that they aren't working in the interests of the people. The cycle continues until there is some accountability. Its not a democrat or republican problem its an honesty and integrity problem.
I laughed when I saw the comment on the Miami Medicare fraud by "twotraps" this has been going on for years down here. There are some well respected local HMO operations that do the daily Cuban Coffee runs and bill the shit out of the goverment. This is how it works, they get a 12-20 passenger van and drive around little Havana and pick-up the old people, take them for a coffee and a pastelito (pastry) and then bill Medicare for a $250 doctors visit for each "patient". Been going on for years, no one does anything about it as the HMO's make big political contributions. And people want the government to run healthcare - massive fraud and corruption - more than already exists today.
sorry to be so behind the curve on that issue...seems stupid to carry on taking the govt seriously when our cash goes out the door and no one gives a shit.
Bruce:
Another fantastic and as always enlightening article. Thank you very much for sharing your experienced insight in this sector.
FHA next.....
Throw Barney in jail ...
"But I don’t think the explosion that occurred in 2008 and the crisis in the economy that ensued would have been anywhere near as severe as it has been had it not been for the terrible decisions that were made at every level regarding the D.C. mortgage lenders."
Could you list some examples of the bad decisions made?
First mistake electing an empty suit to the highest
office in the land. Next mistake, him surrounding
himself with empty suits with a few exceptions. Result we are stuck with 3 more years of a man who is increasingly acting like a loose cannon on deck in his desperate bid to retain a shred of credibility. A look back on 2010 I hope
Brown is this years Black Swan for the difference he
made in DC because we sure need it at this point!
My guess everyone who clicked on Obama Dem in the
polling booth did not realize it meant populist
extraordinaire. The whole fiasco is shameful.
First mistake electing an empty suit to the highest
office in the land. Next mistake, him surrounding
himself with empty suits with a few exceptions. Result we are stuck with 3 more years of a man who is increasingly acting like a loose cannon on deck in his desperate bid to retain a shred of credibility. A look back on 2010 I hope
Brown is this years Black Swan for the difference he
made in DC because we sure need it at this point!
My guess everyone who clicked on Obama Dem in the
polling booth did not realize it meant populist
extraordinaire. The whole fiasco is shameful.
What would some scenarios be if Fannie and Freddie get shut down? What are the implications? Who wrote the CDS's to GS?
Has Timmy ever addressed anything of importance? Albeit a new reserve currency, when he slipped and said "we are open to the suggestion of one" I dont think he has. All I ever see him do is make that damn face (raised eyebrows, wide eyes, like he is trying to mesmerize his audience) and say the most stupid shit. fedcaT. dude is totally into it. and that devilish grin. i have always thought of him as little Nicky!
Now he is busted for "managing" (he probably made his own ballcap that says NWO in old English font) the BIGGEST FRAUD IN THE HISTORY OF THE WORLD.
and now Barny wants to ABOLISH the agencies??? well, falls right in line with what I have been thinking...set it up, knock it down. That is the name of the game ladies and gentlemen. SET IT UP AND KNOCK IT DOWN!! make money on the way up, then bring it down (GS demolition squad), RESET BUTTON......and start it all over! "Every 5 to 7 years."-hey Jay, Me Diamond! WTF?!?! and it is so easy for them, now that they brainwashed the public into thinking 'Merican Idol is the thing to do after they get done with their J O B (if they have one).
We must stop this black hole bailout ("but its so complicated"...shut the fuck up timmy!!!!) before we descend into utter chaos. keep buying silver and gold coins, and keep writing your Senators.
Bruce, we appreciate that there is a vast, vast difference between commanding respect and demanding it. Unfortunately for our nation Barney Frank, Tim Geithner and nearly the entire political class of both political parties fails to appreciate this difference to our great national misfortune.
I find it interesting that Barney Frank now wants to get rid of FRE and FNM.
I wonder if Goldman is still holding CDS's on FRE and FNM. How much would Goldman make if they fail?
Remember GM? Obama was going to save them. Yet, let them go into Bankruptcy. Why? In my opinion Goldmans plan was to push Oil to $150. which killed GM because their profit was in the Big Gas Guzzling SUV's, Trucks etc. If Goldman had tons of CDS's on GM they could not let them stay alive to receive a payoff on their CDS's. So, in my opinion Obama let them fail.
Same with FRE, FNM Barney Frank now wants to get Goldman a payday on their CDS's on thoes Companies.
In my humble opinion.
Did anyone see the 60 minutes a while back about Medicare fraud? Its become bigger business than drugs in Miami. It makes me think about the govts. ability to run things.
When was the last time 60 minutes did a special on any major corporation that was being routinely robbed blind....and had yet to do anything about it? We could match the numbers involved with running Medicare (including what is unfunded I guess) and find similar sized corporations, then look for cases where they are bleeding cash or product and apparently unable to stop it. My guess is that you won't find any.
I'm not suggesting we don't need govt. Someone has to make and enforce the rules. Tylenol can't poison their gel caps and banks should not sell derivatives to old ladys...both fall under harming the public health. But can they run the business end of their own institutions?
Tylenol can't poison their gel caps
In our "free market" they can and then they can get away with it. Just like a company can cut fingertips off of little children and still market their goods.
http://finance.yahoo.com/q?s=ggg
Notice the lack of headlines? The company had it removed from Yahoo.
http://www.walletpop.com/blog/2010/01/20/1-5-million-strollers-recalled-...
There is your free market. YOU DO NOT HAVE RIGHTS. The corporations do.
not going to disagree with you. the Tylenol reference was intended to be general in nature about the need for govt to impose the minimum amount of basic rules. As far as govt getting too involved with business....its obviously a debacle. I would contribute to another thread with you about the need to enforce the rules we have, and crack down hard on corporate behavior. Nothing hits home like a ceo in cuffs getting pushed into the back of a car. Its time.
Perhaps cuffs. I am near the point of thinking that a stronger measure should be taken.
Perhaps the Dow 30 should be given a new meaning.
Don’t forget the role the Squid played in helping Fannie hide its losses:
http://atlasshrugs2000.typepad.com/atlas_shrugs/2008/09/obama-taps-fann....
It's long past time to stop accepting and rewarding dishonesty and incompetency, and start punishing them instead.
Scott Brown won Barney Frank's district this time around.
That may give some hope that those very same people will throw this 'toon into the trash as well when his turn comes.
President Paris Hilton has lost any power he had with the Massachusetts election. Do you think any Dem will listen to him now when he tries to force through health reform? Same with the economy. He is clueless and powerless. Volcker would be a good solution, so he will never be head of the Fed.
Lets not forget who (Clinton and a REPUBLICAN congress) gave the housing market a bost with a $500k windfall cap gains tax exclussion on the sale of a principal residence. Of course that was changed to mean lived in for 2 of past 5 years!
Just think what would happen if there was a $500K cap gain exclusion on financial asset sales!
Good - focus on <5% cause factors and ignore primary causes (>50%). It is what the anecdotal-driven media does.
Geez, enough with the partisan politics guys. Sure, Barney is a db. But replacing Boxer with Fiorina is gonna save CA? So Fiorina can do for CA what she did for HP and Lucent? Fiorina is one of the most corrupt and incompetent high-ranking business people on the planet - the Barney Frank of the private sector, if you will.
And if I hear one more moron blame the crisis on the all-powerful Acorn, as if they're some secret illuminati that runs the world. Have you ever met any of these community organizers? And yeah, it was poor people over-extending themselves that crashed the housing market...certainly a part of it, but it was RICH people over-extending themselves that really did us in!
Thanks to Fannie and Freddie and the Fed's too low/too long interest rate policy, we got a credit mania primarily concentrated in the housing sector.
Sadly, most Americans, including this site, while maybe wanting to change a few personnel, very much want more government. Government that has proven itself inept and beyond inefficient (an incredible waste). Government is destroying value. Government is undermining personal responsibility. Hence we are all entitled victims now.
No one seems to want materially less government, they just want a slightly different flavor. Which is why there will be no REAL change. But Americans seemingly prefer more and more government.....which is our undoing.
You presume that the political system is still intact. The Plutarchy is running this flea circus.
Let these agencies die for Christ sake ,America and indeed the west have enough excess houses to last for generations - let us use what little capital we have left to build something productive
Speaking as a foreigner i would sell my gold tomorrow and invest in America if I knew ye were serious about reforming the system but amazingly you continue to make the same mistakes
If America was a strong state again and could stand up to these robber barons and at the same time have limited defined rules You would make China look like Belgium
For God sake stop dicking around.
Din't you mean "dorking" around?
The Dork from Cork. I like it.
Did England, aka Great Britain or the UK ever reform itself after the days of empire? No, they just kept on sliding downhill while frequently changing their name hoping one fraudulent scheme after another would bail them out. The sad truth is that one cannot reform a nation of corrupted people, which is what we are. We no longer have good character.
The only way good character will return is after it is forged in the furnace of very difficult times, and even then it is unlikely as hard times tend to bring on even more draconian and corrupt measures. Did the Russians, after 70 years of slavery embrace the opportunity of freedom when presented with it? No, the chose to cling to the security of being slaves of the state. To the slave, the prospect of freedom is terrifying. The examples of history, at any rate, do not offer much hope. Once a nation goes down, it does not come back up.
Well Noah you could be right about the UK
France did reinvent itself somewhat in the Postwar era as it had been humiliated on the battlefield during the war
It created a elite class of technocrats that were capable and at the same time loyal to the republic - with very little resources it became a heavy hitter in Europe
Now however it has been subsumed into the gue of the Brussels bureaucracy but the investments that it has made over the decades will stand it in good stead for this gathering storm
Hit it square once more. Excellent abservtions.
Great post.
Freedom requires responsibility. That is why most men dread it. -- George Bernard Shaw
Few men desire liberty; most men wish only for a just master. -- Sallust
Until we as a country desire true liberty, instead of "just masters", nothing will change. It's just going to keep getting worse.
A=A.
+1
Thanks for thought from Cork.
bk
When reviewing housing policy in the US could the mortgage deduction from income be gradually eliminated? It distorts the housing asset and further disadvantages the poor.
The poor pay no income taxes. The disadvantages to the poor are beyond the help of income transfers. Socialism and communism being the only true way to make everyone equally miserable.
Are the problems in Haiti, arguably one of the poorest places in the Western Hemisphere, ones of too little money or the people with nothing to do, having ever more children to die of malaria, TB, and AIDS and now earthquakes.
The essential problem with poverty is too much fucking going on with no sense of responsibility of how to raise children. This behavior even an animal will not do.
Sources please, or are you just parroting your grand master?
"The disadvantages to the poor are beyond the help of income transfers. " It is correct.
It is important to understand that the overwhelming majority of "poor" people is not poor by an accident. Unfortunately, very little can be done about it besides of dragging everybody to misery.
Finally, remember the old saying: " The road to Hell is paved by good intentions."
Not true.
Educate the poor without having them go into debt for the rest of their life, education for profit means ignorance for those unable to pay what you demand.
Heal the sick without making it be "The more you pay me the healthier I'll make you"
Don't make people pay 5 to 6x the value of their home over a 30 year period in equal installments.
The problems in Haiti are simply because nobody knows what the fuck to do with their time (besides the giant earthquake). If you're ignorant, what else is there to do but eat fuck shit and sleep?
Change the rules and see how the world changes.
The poor are not seriously pursuing the free education that is offered to them throughout the U.S. They are not passing much less excelling at K-12 education. The cost oof education is not the problem.
The problem is cultural which government can not fix. If you do not have two parents who are willing to kick kids in the ass for not working hard at school, they will not be serious about education. Without education, they will not go on to college and will not get a good job. It starts in elementary school and has precious little to do with the cost of a college education.
What do you say to people who worked hard in school, went to college, and had their good job outsourced to a Vietnamese 14-year old?
Liar. It is true. The higher the poverty the higher the birth rate. When you don't have tv, fucking is the only entertainment you have.
India, Africa, mexico.... Detroit.
Take away my TV and I have a better form of entertainment.
Reading.
I love how standing up for the rights of the poor gets one flagged on these forums. Hah, the revolution here is nothing but the same corruption which the captains of industry promote. How feeble the "educated" masses are in their ability to learn beyond what their teachers tell them.
PS... I'm almost done TD, sorry for the delay, but the data the assumptions are being based upon is all unreliable unfortunately and I found a new series of questions that must be asked.
Immediate payment for apparent short term political benefit and definite long term profit for a select few is revealing the government as a circus. The finger pointing is expected in the nations need to focus anger. I did hear Mr. Frank on tv saying they needed to guard against the potential fire sale of assets.......Like a knife to a gun fight letting congress get involved with business. Would the entire housing situation be better off today if there was a brief, highly uncomfortable period of 'fire sales' to allow a re-pricing of everything where some fail, and some re-enter the mkt?
If Obama wants to do something to actually improve the economy of the USA, there is nothing quite so easy for him to do as to fire Larry Summers.
Larry Summers more than any other person is responsible for the economic disaster of the US economy. A period of excessively low interest rates, starting in the 1990's, led to massive malinvestment. While the US faces other economic problems (unproductive wars, excessive government, etc...), it is the excessively low interest rates that got the ball rolling.
One of Summers' claims to fame (he has others) is his paper on Gibson's Paradox and how the suppression of the price of gold would cause interest rates to fall.
Gibson's Paradox explained: http://www.goldensextant.com/Gibson%27sParadox.html
So, brilliant boy Larry, the shit has hit the fan, and you are up there near the top of the list of causes.
China is dumping its USD from its excess reserves. The USD is going from the world's reserve currency to just another piece of paper with ink.
Larry, did you ever imagine that you could achieve so much as the destruction of your country's economy? Congratulations.
Timmy should be fired, also. But he just another rather uninteresting vampire squid lackey.
As to Barney, it looks like the voters in the People's Republic of Massachusetts are starting to throw off some of their shackles.
Paul Volcker circa 2003 on Richard Syron, the man who presided over Freddie Mac between 2003 until he was fired in 2008.
http://www.nytimes.com/2003/12/08/business/08freddie.html
This year, we in California, have a chance to get rid of Barbara Boxer and put Carly Fiorina in her seat. This is the way we have to beat them; one at a time! It is now time to picki up the ball and run with it as Mass. has showed the way!
I'm not a fan of either party. I'm an independent who has not voted for a R or D for the last several elections. However, Boxer is one of the most independent of the ReDemonThugs. (E.g., she is not supporting Bernanke.)
Fiorina would have been even more wholly-owned and controlled by the lobbyists/FIRE/corporations(or unions)/political party than Boxer is. She would have been a step backward, not an improvement. Fiorina might even be worse in that regard than Feinstein, who votes for whatever is good for Dick Blum (commercial RE, defense contractors, financing, etc.).