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How The Government Will Eliminate Fannie & Freddie (In One Simple Chart)

Tyler Durden's picture




 

On Sunday, Senate lawmakers unveiled the 442-page plan that will eliminate the mortgage-finance giants; replacing them with a new system in which the government would continue to play a potentially significant role insuring U.S. home loans. The Johnson-Crapo bill would, as WSJ reports, construct an elaborate new platform by which a number of private-sector entities, together with a privately held but federally regulated utility, would replace key roles long played by Fannie and Freddie.

 

 

Via WSJ,

Fannie and Freddie don't make loans, but instead buy them from lenders, package them into securities, and sell those bonds to investors. They guarantee to make investors whole if loans default, attracting a diverse range of investors to the U.S. mortgage market.

 

...

 

The Senate bill would repurpose the firms' existing regulator as a new "Federal Mortgage Insurance Corp." and charge the agency with approving new firms to pool loans into securities. Those firms could then purchase federal insurance to guarantee payments to investors in those bonds. The FMIC would insure mortgage bonds much the way the Federal Deposit Insurance Corp. provides bank-deposit insurance.

 

Mortgage guarantors would be required to maintain a 10% capital buffer against losses and to have that capital extinguished before the federal insurance would be triggered. Those private firms, which could include banks or insurance companies, would issue a single security through the government-regulated platform. Different components of Fannie and Freddie could be sold to seed both new guarantors and the mortgage-securitization platform.

Market impact:

Shares of the firms' common stock dropped sharply last Tuesday, when lawmakers announced that they had reached agreement on broad outlines of the bill. Still, several large investors have said that they're invested for the long haul, either because they believe Congress isn't likely to reach agreement or because they believe courts will invalidate the government's ability to seize all of the firms' profits as dividend payments.

 

If courts rule that the government overstepped its authority in revamping the bailout terms, Fannie and Freddie would be allowed to retain any profits after paying a 10% dividend to the government—currently around $12 billion annually for Fannie and $7 billion for Freddie. A court win would increase prospects for shareholders to enjoy returns in any liquidation of Fannie and Freddie because the companies would again be able to retain profits.

For now, it seems, the market believes the bill (or some form of it) will be enacted...

 

Still confused? Here is Acting-Man's Ramsey Su to explain it all (and destroy some hope)...

No Opportunity Necessary,  No Experience Needed

Freddie and Fannie are back in the limelight.  This time, the plan is coming from Senate Banking Committee leaders Tim Johnson (D., S.D) and Mike Crapo (R., Idaho).

Here are the bios of Johnson and Crapo, two lawyers with not a trace of experience in real estate finance and housing matters.  They represent Idaho (pop 1.6 million) and South Dakota (pop 0.8 million) with a combined population of about half a Phoenix (pop 4.3 million).  Neither State played any role in the subprime bubble.  Johnson/Crapo simply do not possess even the most basic qualifications for the job.

It is not my intention to belittle Johnson and Crapo but here are the circumstances.  At issue is the failure of the two mortgage giants that resulted in placing them under conservatorship for over five years so far.  On one side are all the lobbyists, trying their utmost to mold political decisions to their clients' best interest.  Hedge funds are salivating and suing the government to give them more money for reasons that I cannot understand.  On the other side of the table are these two Senators who are supposed to look out for the public good and somehow come up with a system that can replace the agencies.  Judging by their resumes, would you hire these two men to fix the agencies? Do you think they possess the knowledge and skills to comprehend the complexity of the mortgage industry and the secondary market for securitized products?

 

Inner Contradictions

Giving the Senators the benefit of the doubt, I read the proposed plan.  It is full of political jargon with objectives that are mutually exclusive.  On the one hand, they want to protect taxpayers but they also want to provide financing with downpayments as low as 3.5% while making sound loans at low cost only to qualified buyers using the CFPB qualified mortgage guidelines, blah blah blah ……..  For a second there, I thought Franklin Raines (long the mouth piece/CEO who took down Fannie) had returned.  

 

Protect taxpayers from bearing the cost of a housing downturn. 
• Promote stable, liquid, and efficient mortgage markets for single-family and multifamily housing. 
• Ensure that affordable, 30-year, fixed-rate, prepayable mortgages continue to be available, and that affordability remains an important consideration. 
• Provide equal access for lenders of all sizes to the secondary market. 
• Facilitate broad availability of mortgage credit for all eligible borrowers in all areas and for single family and multifamily housing types. 

What exactly are Freddie and Fannie today?

They are two duplicating agencies that package real estate mortgages under a set of underwriting guidelines.  These packages are resold on Wall Street as agency MBS (mortgage backed securities).  For a fee, the agencies guarantee these securities.  Since the agencies are under the conservatorship of the US Treasury, this guarantee is practically as good as any other Treasury debt.  

 

Are Freddie and Fannie profitable?

If you read the headlines, they are supposedly making money hand over fist.  They are returning hundreds of billions of "profits" to the Treasury.  But how can anyone determine what is "profit"?  The agencies are essentially insurance companies, collecting a premium to guarantee about $4.5 trillion of debt.  However, there are no insurance commissioners nor guidelines as to what they need to reserve against potential claims.  

 

Then what should be the amount of reserves?

Well, that is a question with no answer.  If you treat the agencies as insurance companies, which they are, then it is possible to calculate the needed reserves, bigger ones for the subprime and high LTV loans, smaller ones for low LTV and prime borrowers, etc.  However, how can an insurance company reserve for government intervention, especially the retroactive type?  For example, the administration is touting that about 2 million mortgages have been modified through various fixes under the Making Home Affordable Program.  Who paid for this?  Furthermore, the agencies are now holding these modified loans that actually do not meet present underwriting guidelines.  This is a high risk portfolio with high LTV and most likely subprime borrowers.  One hiccup in the economy and they will all return to the delinquency pool.  What if FHFA, under Mel Watt, decides to launch principal reduction programs, who will pay for those?

 

A Great Business Model

Back to the "profits", as long as real estate prices appreciate, default risk will remain low and the agencies are home free.  If real estate prices stall, or decline, then the agencies simply ask the Treasury to fund their losses.  What a great business model!  No wonder hedge funds who bought the agency stocks at bankrupt prices are clamoring for the return of these "profits".

The agencies have monopolized the mortgage market, commanding a 90% market share during the last few years.  The remaining 10% are going to jumbo loans and non-mainstream programs that have little effect on the overall market. 

 

Not Charging Enough

What should be the cost for the agencies to insure the mortgage industry?

Whatever the agencies are charging, they are not charging enough.  This is evidenced by the fact that no one in the private sector is willing to step up and compete.  There is not a single mortgage program that offers financing to the masses that is not agency conforming, not from the too-big-to-fail banks, not from the small regional banks.  Why bother when you can originate loans and collect fees, while letting let the agencies rubber stamp them with an iron clad guarantee backed by the US taxpayers. 

 

The Fed

Let us not forget the Federal Reserve.  Under QE3, the Feds purchased $788 billion of agency MBS last year and $105 billion so far this year ending March 8.  As of March 12, the Fed holds $1.57 trillion of agency MBS on its balance sheet.  

If the agencies are privatized, are the Feds still authorized to hold these loans on their balance sheet?  Can the Feds continue to purchase originations?  Would the Senators' plan neutralize the Fed and render one of its favorite manipulation tools useless?  How much higher would mortgage rates be if the Fed were out of the picture?

Chris Whalen provided an excellent analysis on Zero Hedge that may be a little too technical but it highlights some of the screw-ups that have led to the agencies' demise.  It is about to get worse.

 

Details

In closing, I am attaching the "Details of the Agreement on Housing Finance Reform" below.  What I see is at least 2,000 pages of regulations, expecting a miracle fix that even Moses may have trouble performing.

Details of the Agreement on Housing Finance Reform 

Outlined below are some of the details of the agreement that Chairman Johnson and Ranking Member Crapo have reached that will form the basis of a bipartisan housing finance reform text: 

Start with S.1217 as the base text and generally maintain its overall architecture. 
Wind down and eliminate Fannie Mae and Freddie Mac. 
Promote a smooth and stable transition from the old system to the new system by providing specific benchmarks and timelines to guide Federal Mortgage Insurance Corporation (FMIC) and market participants. 
Transfer appropriate functions to the modernized, streamlined and accountable FMIC, modeled in part after the FDIC including its regulatory authority. 
Mandate 10 percent private capital, up front, and create a mortgage insurance fund for the system to protect taxpayers against future bailouts. 
Create a member-owned securitization platform that will issue a single, standardized FMIC-wrapped security, and permit private label securities to be issued in a manner that encourages standardization and improved market liquidity. 
Establish a mutual cooperative jointly owned by small lenders to ensure institutions of all sizes have direct access to the secondary market so community banks and credit unions are not at the mercy of their larger competitors when Fannie Mae and Freddie Mac are dissolved. The small lender mutual cooperative would provide a cash window for individual eligible loans, and small lenders could retain servicing rights. 
Provide clear rules of the road for servicers that choose to participate in the FMIC system. 
Maintain a vibrant multifamily market by building upon successful risk-sharing mechanisms and products and providing access to a broad range of markets. 
Require strong underwriting standards that mirror the definition of “qualified mortgage”, and set down payment requirement at 5 percent (with a short phase-in) except for first-time homebuyers at 3.5 percent. 
Facilitate the broad availability of credit for eligible single-family and multifamily borrowers, monitor consumer and market access to credit, and provide market based incentives and transparency to serve underserved areas. 
Eliminate affordable housing goals and establish transparent and accountable housing-related funds that would focus on ensuring there is sufficient decent housing available. The funds are NOT paid for with tax dollars, but through a small FMIC user fee (10 basis points) that only those who choose to use the system pay. 
Allow current conforming loan limits to be maintained so that mortgage credit continues to be available in high cost areas. 
Maintain broad liquidity in the To-Be-Announced (TBA) market and direct FMIC to take into account the impact of new products on the TBA market.

Addendum: The Bill Has Been Published

The bill discussed above can be accessed here (pdf, 442 pages)
 

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Tue, 03/18/2014 - 15:29 | 4564718 becky quick and...
becky quick and her beautiful mouth's picture

all your houses are belong to us.

Tue, 03/18/2014 - 15:39 | 4564768 So Close
So Close's picture

Debt = Slavery  Period

Tue, 03/18/2014 - 15:43 | 4564793 negative rates
negative rates's picture

Published but not agreed too.

Tue, 03/18/2014 - 18:22 | 4565389 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

With a name like Crapo what could go wrong?

Wed, 03/19/2014 - 06:08 | 4566790 Squid-puppets a...
Squid-puppets a-go-go's picture

more evidence that the financial weapons of mass destruction of 2009 are to be enshrined and elevated rather than scrapped and outlawed

Tue, 03/18/2014 - 16:27 | 4564949 Unknown User
Unknown User's picture

It’s worse, the taxpayers will insure their crap.

 

"Two Tens for a Five"

http://youtu.be/f7pMYHn-1yA

 

Tue, 03/18/2014 - 15:41 | 4564781 Hippocratic Oaf
Hippocratic Oaf's picture

Here we go, all over again.

Just tell'em it's AAA...........why should they believe any different?

Tue, 03/18/2014 - 16:29 | 4564984 whoisjohngalt11
whoisjohngalt11's picture

Brought to You by crapo and friends/(Johnson-Crapo bill)

Tue, 03/18/2014 - 15:31 | 4564726 Son of Captain Nemo
Son of Captain Nemo's picture

The Johnson-Crapo bill...

Does that losely translate into"Dick-Shit"?

Tue, 03/18/2014 - 15:35 | 4564752 NotApplicable
NotApplicable's picture

Depends.

Tue, 03/18/2014 - 15:39 | 4564770 Jonas Parker
Jonas Parker's picture

Nothing loose about the translation at all...

Tue, 03/18/2014 - 15:58 | 4564869 rqb1
rqb1's picture

Yes.  There is no way this passes.  The judge has already ruled for discovery.  This is just a smoke screen for ws to pick up shares at lower prices. 

 

Tue, 03/18/2014 - 15:31 | 4564730 Sleepless Knight
Sleepless Knight's picture

Everything the government touches turns to shit. Why would I expect anything different this time?

Tue, 03/18/2014 - 16:44 | 4565055 0b1knob
0b1knob's picture

"privately held but federally regulated utility"

Just like Fannie and Freddie?  Who would be stupid enough to buy it?  Oh well, pension funds still buy GM bonds.   They will never learn.

Tue, 03/18/2014 - 15:32 | 4564732 Stoploss
Stoploss's picture

What could possibly go wrong???

Tue, 03/18/2014 - 15:33 | 4564737 bpj
bpj's picture

more like were're going to cornhole you

 

Tue, 03/18/2014 - 15:33 | 4564738 bpj
bpj's picture

more like were're going to cornhole you

 

Tue, 03/18/2014 - 15:34 | 4564745 TheFreeLance
TheFreeLance's picture

You knew they'd try to re-inflate the meta-bubble sooner or later, likely in an off-year election cycle to maximize contribs. But this is just breathtaking.

Tue, 03/18/2014 - 15:35 | 4564751 Quantum Nucleonics
Quantum Nucleonics's picture

That Fannie and Freddie continue to exist is purely an Enron-esque accounting gimmick.  If they were dissolved, all their debt would flow to the government's balance sheet.  That's exactly why Iceland and Ireland ended up needing bailouts.  Now that the government has clawed back its bailout cash, more or less, they can be wound down without anyone in government taking responsibility for anything that went wrong.  Anyone that bought Fannie or Freddie stock and thought the government wouldn't shank them at first opportunity deserves to lose every penny.

Tue, 03/18/2014 - 16:14 | 4564930 rqb1
rqb1's picture

They wont shank the Carlyle group and they will lose in court. 

Tue, 03/18/2014 - 15:38 | 4564753 The Econ Ideal
The Econ Ideal's picture

 

The continued gov't guarantee (even if it is "only" of the MBS sold to investors) does not eliminate moral hazard or TBTF. Get the gov't out of the mortgage markets. 

 

Tue, 03/18/2014 - 15:43 | 4564790 Rainman
Rainman's picture

Too late now. Banksters won't lend mortgage money to low score muppets without a 100% Uncle Sugar backstop. The real money is made in the trading markets . No losses....and the outcomes are controlled.

Tue, 03/18/2014 - 16:00 | 4564884 JR
JR's picture

IOW, the globalists that control America’s government can continue to put subprime buyers into US housing and the US taxpayers will be forced to guarantee the loans. IOW, wealth transfer from the middle class to the lower classes and the upper classes -- and more to come with DC plans for amnesty: bringing the total of Mexicans in America to 83 million.

Tue, 03/18/2014 - 15:36 | 4564755 GoldSilverWolf
GoldSilverWolf's picture

More likely to happen is the Putin-Jinping proposal.

Tue, 03/18/2014 - 15:38 | 4564761 buzzsaw99
buzzsaw99's picture

Let's see if I have this right. The agencies won't hold the mortgages anymore, the banks will. So the agencies have hardly any revenue coming in during good times but a HUGE potential insurance liability in the coming great depression 2? great plan, the bankers win again.

Tue, 03/18/2014 - 16:12 | 4564918 JR
JR's picture

The American economy is going to collapse. The Fed’s objective is to save the banking system; not you.

John Williams Massive Dollar Selloff in 2014 Game Over | USA Watchdog Report (video) 

Published on Mar 10, 2014

“John Williams of Shadowstats.com has a grim view of 2014. He says, It's really going to be a currency panic . . . that the fundamental selling pressure is real.” He says there’s a 95% chance of hyperinflation in 2014, probably beginning in the first half of the year. It’s already baked into the cake…

http://www.youtube.com/watch?v=QuDoGFwtCRA

Tue, 03/18/2014 - 15:39 | 4564773 KidHorn
KidHorn's picture

I don't see how this system is much different from the old system. Either way, the gov't will be stuck guaranteeing a lot of bad loans in order to keep housing prices propped up.

Tue, 03/18/2014 - 18:28 | 4565413 bh2
bh2's picture

The more it changes, the more it stays the same.

Tue, 03/18/2014 - 15:42 | 4564787 Pig Circus
Pig Circus's picture

What the fuck ever. So the banks take the loss but we know that Dodd-Fag provide for bail-ins. So the saver who is currently getting screwed with .00000001% on his savings will soon get screwed again.

Tue, 03/18/2014 - 15:46 | 4564791 NOTaREALmerican
NOTaREALmerican's picture

As long as house prices are kept high I'm good with whatever Big-Gov scam they create.

Tue, 03/18/2014 - 16:21 | 4564952 pods
pods's picture

And you say you are not a real amerikan.  

That is as amerikan as apple pie and drone delivered wedding presents.

pods

Tue, 03/18/2014 - 18:24 | 4565401 yellowsub
yellowsub's picture

It's pretty much a repeat of the last crisis, those still putting down 3.5% would not be able to weather any type of down turn because their non existant savings.

 

Tue, 03/18/2014 - 15:46 | 4564806 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Communism comradz!

Tue, 03/18/2014 - 15:48 | 4564820 NOTaREALmerican
NOTaREALmerican's picture

Crony Capitalism, actually.   But the results are the same.   Actually, there's no other system possible, it's the same one used everywhere on the planet.  The smart-n-savvy people make deals to screw the dumbasses.   What other system would exist?   The nice people don't get screwed?

Tue, 03/18/2014 - 19:49 | 4565697 johny2
johny2's picture

i would say exactly opposite is the case.

it is often less smart who get together and take away a produce of the smarter by force. It is possible that humans are species that instead of evolving, are de-evolving as shown by the fact that many monkeys seem less likely to be fooled by the same tricks repeated so many times.

Tue, 03/18/2014 - 15:46 | 4564810 Seer
Seer's picture

Fannie and Freddie take a Crapo...  Might need a rating of "X."

Tue, 03/18/2014 - 15:46 | 4564813 johny2
johny2's picture

United Socialistic States of America knows it has to keep the american citizens better of than than the rest, as they are well armed and serve well as the army personel needed for keeping the order where the resources are taken from. Free housing, drugs, fast food and smart phones for all! 

 

Tue, 03/18/2014 - 15:47 | 4564815 fzrkid
fzrkid's picture

who bails out the insurance entitiy when the new heavily capatilized firms claim loses on the mortgages they purchased

Tue, 03/18/2014 - 15:49 | 4564828 NOTaREALmerican
NOTaREALmerican's picture

Belgium.    Was covered two or three posts ago.

Tue, 03/18/2014 - 15:50 | 4564835 Seer
Seer's picture

... looks on his watch, tap, tap... "Where's that 777?"

Tue, 03/18/2014 - 15:48 | 4564821 i_call_you_my_base
i_call_you_my_base's picture

It's hard to see how something like this will play out, but you can guarantee it's got the right loopholes to inflate (reinflate, superinflate) a housing bubble.

Tue, 03/18/2014 - 15:48 | 4564823 Johnny Cocknballs
Johnny Cocknballs's picture

To rephrase a bit:  banks created money out of thin air to loan to people who have to work for around 25-30 years to pay it back, with interest amounting to...roughly 3 times the actual value of the house at purchase. 

The government then takes taxpayer money, gives cash to the banks, then sells tranched CDOs or whatever other mbs derivative to... the same banks, who can use some of the cash they got from selling prior bundled notes to .gov to buy the derivatives.

Then if the banks get over-leveraged and/or otherwise fail, .gov will use taxpayer money to bail them out, socializing their losses while keeping their profits and bonuses both absurd and private.

 

Cute.

Tue, 03/18/2014 - 15:49 | 4564829 Seer
Seer's picture

Masterpiece!

Tue, 03/18/2014 - 15:50 | 4564837 NOTaREALmerican
NOTaREALmerican's picture

Gotta hand it to them smart-n-savvy people, they sure know how to scam the dumbasses.

Survival of the fittest, Bitchez!!!

Tue, 03/18/2014 - 20:08 | 4565756 johny2
johny2's picture

survival of parasites

Tue, 03/18/2014 - 15:50 | 4564832 BandGap
BandGap's picture

Is it me or have 2200 pages of laws and regulations confused people before? Wait, that's the intent while they pick their fucking pockets.

Baffle them with bullshit, no, Johnson-Crapo.

Tue, 03/18/2014 - 15:50 | 4564834 slightlyskeptical
slightlyskeptical's picture

Might as well just keep Fannie and Freddie intact, include the 10% thingee on all new mortgages and welcome new entrants as well.

This achieves nothing but moving profits out of Fannie and freddie and into private hands.

I also think that we need a national, government sponsored non-profit primary mortgage system. I think it atrocious that we allow investors, using other peoples money ultimately backed by the government, to take a huge piece of homeownership costs over time. Shelter is a basic human need and our governemnt should ensure we have access to it without fattening the wallets of several layers of middlemen. Banks/investors should be limited to origination and servicing and should not be allowed to have any interest in the ongoing mortgae payments.

I am all for allowing banks to make money on second mortgages, second properties and the such. Just not primary home ownership.

Tue, 03/18/2014 - 16:04 | 4564897 Seer
Seer's picture

MyRE?

Tue, 03/18/2014 - 15:50 | 4564836 Seasmoke
Seasmoke's picture

Sounds like privatize the profits and public the losses.....SSDD

Tue, 03/18/2014 - 15:54 | 4564839 DIgnified
DIgnified's picture

Home-bamacare or;  How I learned to stop worrying and love cardboard boxes

 

 Wonderful. 

Tue, 03/18/2014 - 15:57 | 4564866 Sach Mahoney
Sach Mahoney's picture

If you like your house, you can keep your house

Tue, 03/18/2014 - 16:24 | 4564871 NOTaREALmerican
NOTaREALmerican's picture

You just need to find "opportunities".

S.F. increases down-payment loans to 1st-time home buyers

THe early smart-n-savvy person, finds the scam.

Tue, 03/18/2014 - 16:46 | 4565062 DIgnified
DIgnified's picture

SF.  Something is not right up there. Feinstein turf. The world's most godawful expensive, overregulated city in history, just got a little worse. 

Tue, 03/18/2014 - 15:55 | 4564854 Bill of Rights
Bill of Rights's picture

VIX Trader Pays $8 Million on Bet Gauge Will Increase 60% by May - Bloomberg

An investor paid about $7.95 million for a trade that will pay off if the Chicago Board Options Exchange Volatility Index rallies at least 60 percent by May.

The trader bought 150,000 bullish contracts on the VIX expiring in May with a strike price of 22, while selling the same number of May 30 calls in a strategy known as a call spread, according to New York-based Miller Tabak & Co. The trade cost 53 cents to put on for each contract and it will profit if the volatility gauge rises above 22.53 from the current level around 14, data compiled by Bloomberg show. It has a maximum payoff if the VIX more than doubles to 30.

Tue, 03/18/2014 - 16:06 | 4564903 Seer
Seer's picture

And Buffett put down $50 million on the "other side."

Tue, 03/18/2014 - 15:57 | 4564865 Sach Mahoney
Sach Mahoney's picture

So 10% goes to the "Guarantee Fund".  Who guarantees the guarantee fund?  Oh, we are back to the tax payers...again, who will be on the hook for the TBTF institutions.  The home lending terms have to require 20% down and borrowers are fully documented and vetted. Who believes that will happen?   

Tue, 03/18/2014 - 16:06 | 4564872 Emergency Ward
Emergency Ward's picture

It's all the same, only different.  "Promote, Transfer, Mandate, Create, Establish, Require, Facilitate, Eliminate, Maintain, Wind Down, Risk-sharing."

Tue, 03/18/2014 - 15:59 | 4564879 Piranhanoia
Piranhanoia's picture

See the little tiny green lego blocks on each side of the banks?   It has an arrow going from Old Freddie and Fat Fannie to the bank.   That is where the money comes from and your bank isn't the lender.  That means they are hiding the real transaction from the person signing the documents to take out a loan.  The law appears to say that makes it an unsecured loan and a bad contract.  Might mean no one is entitled to enforce the note and collect against the home or homeowner.    As a very well studied expert in law and mortgage backed securities said ,   "a loan that is performing and when payments are being made has no paperwork. They can't answer legal requests to show the chain of title.  The only time there is any paperwork to a loan is when there is a foreclosure.  That is when they make it all up.  They create all the documents needed because the real ones don't exist, and wouldn't tell the same story.

Wells Fargo's attorney guidebook for fabricating documents tells all the employees and attorneys how to fake it to foreclose;   http://nypost.com/2014/03/12/wells-fargo-made-up-on-demand-foreclosure-p...

Tue, 03/18/2014 - 16:10 | 4564910 Seasmoke
Seasmoke's picture

Maybe that's why my QWR (that was avoided for a few years) finally answered that Fannie was the "investor" since 6/2002 the same day of the closing with the so called "lending bank"   ......it's fraud in every sense......yet it continues with foreclosures 

Tue, 03/18/2014 - 16:23 | 4564960 FreeNewEnergy
FreeNewEnergy's picture

Should be: How Freddie and Fannie will Eliminate the Government in One Simple Chart

Fannie + Freddie = Bankruptcy*

 

 

*flush twice to clear Johnson-Crapo

Tue, 03/18/2014 - 16:28 | 4564983 californiagirl
californiagirl's picture

They forgot to explain the details of how they will first dump most of the remaining toxic liaiblity on the taxpayers.  Has anyone figured it out?  Will there be a Maiden Lane 4, 5, and 6, or some other backdoor vehicle?

Tue, 03/18/2014 - 16:31 | 4565004 pitz
pitz's picture

Why all this bullshit?  Why not just get the government out of the business of being involved with private sector finance altogether?

Tue, 03/18/2014 - 16:41 | 4565043 NOTaREALmerican
NOTaREALmerican's picture

Re:  Why not just get the government out of the business of being involved with private sector finance altogether?

Uh,  hate to break this to you, but...

The government is owned and operated by and for the benefit of the top 10% (or so).   

It's simply survival of the fittest.   There are predators and there's prey.   It's a bitch, tho, when you find out you're a member of the "Prey Class" and the Elysium Class is on another fun hunting trip. 

(Run fast,  altho some say that just makes the hunt more fun).

Tue, 03/18/2014 - 16:35 | 4565022 drinkin koolaid
drinkin koolaid's picture

The Johnson-Crapo bill. Need I say more?

Tue, 03/18/2014 - 16:46 | 4565063 zipit
zipit's picture

There is a typo in the onfographic.  It says, "... to maintain a catastrophic insuracnce fund."

Let me fix it: "... to maintain a catastrophic insuracnce fund that will need to be bailed out in the future."

Done.

Tue, 03/18/2014 - 17:17 | 4565157 headhunt
headhunt's picture

should that be 'near' future?

Tue, 03/18/2014 - 16:52 | 4565091 kurt
kurt's picture

I smell a rat

 

A new rat

who want to take over the old rat's den.

 

He want to share it with other rats he prefers over the rats that have it now, but not too much.

Tue, 03/18/2014 - 19:04 | 4565547 22winmag
22winmag's picture

Truer words were never spoken.

 

Mortgage Backed Securities will always be bogus, shit-and-piss laced instruments and their manufacture and distribution should be made punishable by death.

Tue, 03/18/2014 - 17:15 | 4565151 headhunt
headhunt's picture

"Do you think they possess the knowledge and skills to comprehend the complexity of [insert daily business of government]"

That could be said about pretty much the entire Executive, Legislative and Judicial branches of government these days.

Tue, 03/18/2014 - 18:44 | 4565476 Teamtc321
Teamtc321's picture

"Freddie and Fannie are back in the limelight. This time, the plan is coming from Senate Banking Committee leaders Tim Johnson (D., S.D) and Mike Crapo (R., Idaho).

Here are the bios of Johnson and Crapo, two lawyers with not a trace of experience in real estate finance and housing matters. They represent Idaho (pop 1.6 million) and South Dakota (pop 0.8 million) with a combined population of about half a Phoenix (pop 4.3 million). Neither State played any role in the subprime bubble. >>>> Johnson/Crapo simply do not possess even the most basic qualifications for the job."

I see O'Putzin swooping in with a single bound to appoint a fellow, experienced community O'rganizer .....

Tue, 03/18/2014 - 22:18 | 4566203 AdvancingTime
AdvancingTime's picture

Government should stay out of housing. The large number of government programs that have failed to carry out their duties and the dim view many Americans have towards Washington may be starting to take its toll on those who think big government is the answer to curing many of our woes.

Sadly cost and reality are quickly beginning to show the flaws in this theory, government is far better at providing access of citizens and good at passing popular laws, but the private sector tends to be more efficient and better at controlling costs. More in the article below.

http://brucewilds.blogspot.com/2013/11/flaws-in-big-government-concept.html

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