"Fannie & Freddie Are Back; Bigger & Badder Than Ever" - NYTimes Warns

Tyler Durden's picture

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Just in case you still harbored any doubt that absolutely zero lessons were learned from the cataclysmic financial collapse of 2008/09. We learn from the New York Times that:

AFTER the financial crisis of 2008, there was one thing that almost everyone agreed on. The government-sponsored mortgage giants, Fannie Mae and Freddie Mac, had to go. While shareholders and executives reaped the profits from Fannie and Freddie in good times, taxpayers were stuck with the bill in a crisis. President Obama described their dysfunctional business model as “Heads we win, tails you lose.” But here we are, seven years after the crisis, and nothing has changed.

 

In the 2008 crisis, when it looked as if Fannie and Freddie might go bankrupt, Henry M. Paulson Jr., then the Treasury secretary, argued that their fall would cause economic catastrophe. Foreign investors, stuck with their securities, would panic, and the mortgage market would shut down. So Fannie and Freddie were put into something called conservatorship, and are now government controlled, supported by a line of credit from the Treasury.

 

Conservatorship was supposed to be temporary — a “time out,” according to Mr. Paulson. We were going to stabilize the companies’ finances, reduce their importance to the mortgage market, and figure out a better system. But nothing happened. In fact, the situation has gotten even more precarious. In the years since the crisis, private lenders, for the most part, have been willing to make mortgages if they can immediately sell them to government agencies, mainly Fannie and Freddie. In other words, without Fannie and Freddie, there wouldn’t be much of a mortgage market.

 

To make things worse, the government decided to “sweep” almost all the duo’s profits into its own coffers, to be used as a slush fund for general government expenses. As Treasury Secretary Jacob J. Lew said in congressional testimony this spring, “As a practical matter it’s what has helped us reduce our overall deficit.” If there is another downturn in the real estate market and Fannie and Freddie suffer losses on their some $5 trillion in outstanding securities, taxpayers will again have to foot the bill. 

What do you expect to happen when the people responsible for running the economy into the ground are rewarded with bailouts and deemed “Too Big to Jail?”

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pauhana's picture

I'm really tired of this.

EscapeKey's picture

 

zero lessons were learned from the cataclysmic financial collapse of 2008/09.

 

i don't understand what you're on about. a very significant lesson was learned - if you gamble with shitloads of other peoples money and lose, you get bailed out.

i can think of no greater encouragement to continue along the same line, if you're a banker.

Oh regional Indian's picture

Whey the fock are these two Freddie and fannie not married to each other? Why 2 orgs doing the same shit? For cubing the in-efficiency and thus potential for graft? Fail-over protection? Why?

Has this question been deeply debated?

Very strange, don't you think? Almost occult. And these strange focking names.

 

Elliott Eldrich's picture

"Whey the fock are these two Freddie and fannie not married to each other?"

Because then they would make a baby. You would not like that baby. It would be a very, very bad child, and there's no reason to think they couldn't make more than one.

Oh regional Indian's picture

You mean it would result in an Un Holy Fock?

And a bastid child? A debt spawn? 

Ugly....very ugly...

How about un-en-acting them out of existance? 

ParkAveFlasher's picture

Government agencies have limited input from shareholders (those who hold dollars).  The system thus tends towards inertia, rather than flexible transformation.

froze25's picture

The baby is known as Sally Mae, notice the same last name as the mother Fannie Mae, bastard spawn.

Bastiat's picture

Of course there's a problem.  Who's bought all the US mortgage paper since they world market for it collapsed after the sub-prime meltdown?

NoDebt's picture

Goes back to the 30s when they were first set up as public/private entities.  They thought having two would make them compete with eachother and keep prices down, terms competitive.  The crony capitalists blew right through that little roadblock like a train through a sheet of tissue paper.

Oh regional Indian's picture

I'm sure the roadblock was a tiny figment of the drafter's conscience...easily circum-vented over a Glenlivet and perhaps an ass-fucking...who knows, all this I Is Wide Shut Shit...

 

ejmoosa's picture

You gotta have competitopn or they couldn't claim it was capitalism...

NoDebt's picture

Here's what I think was learned:  The government is the source of all lending.  Student loans?  All student loans are government loans now.  Mortgages?  Unless your Mom is going to bankroll you, it will be a government loan, no matter what bank is filling out the paperwork.  Car loans?  Govvie's got your back again.  Credit Cards.... well, not yet, but they've got this new Consumer Credit Protection Agency calling the shots.

What was learned is that even the mock vestiges of capitalism that may have existing prior to the '08 crash were FAR too dangerous to allow to exist.  Government most control all.  Nobody wants to hear shit about anything that isn't government guaranteed.  In short, yes, we insitutionalized the whole concept of "too big to fail".  It's called the Feral Government.

Dr. Engali's picture

Yep, we're all communists now. But I'm still not sharing my sammich with you comrade. 

greenskeeper carl's picture

I think its slightly more perverted than that. Private banks issue the loans and issue the credit. As long as they are paid how they are supposed to be, the loans remain with the banks and the banks make money on them. When a large enough number of the loans go bad, they wind up on the books of the central bank(much of QE was them buying MBS) or bailed out by the govt. The bank makes money when things go well by issuing the credit, get bailed out when things go bad, losing no money themselves. The bank gets bailed out, since they are "too big to fail" and thus must be rescued by the govt from bankruptcy. The individual that borrowed money from them declares bankruptcy, gets his house reposessed, and is financially ruined, and the bank now owns the house, and is thus able to repeat the process with a different buyer.

 

Privatized gains, socialized loses. Its like the worst of both worlds.

Iam_Silverman's picture

"Privatized gains, socialized losses. Its like the worst of both worlds."

 

Well, that kinda depends on which side of the equation you're on, doesn't it?

EscapeKey's picture

is it the government, though? ultimately most of the debt is owned by the central banks around the world.

look at the monetary base over the past 10 years. then apply leverage.

http://cdn8.jeremyrhammond.com/wp-content/uploads/2015/06/monetary-base-...

NoDebt's picture

If you can tell me the point where banks end and the government begins, I'll buy your premise.  They're two arms of the same creature.

EscapeKey's picture

is that creature public or private? and who controls it?

am i allowed to ask these questions without being called a conspiracy theorist?

Jack Napier's picture

The creature from Jekyll Island does not reveal itself for what it is. It is private, but its appendages do surface. Banks are the heart and circulatory system. Government is the body. Courts are the immune system. Military is the fist. To kill the hydra, either cut off the heads or else stake the heart. The heart is well protected. The heads are less protected, but better hidden. Those who control it are falsely proclaimed Ashkenazi Jews from the nation of Georgia who hide behind the ADL for protection from any scrutiny. Their true nature is outlined in Revelation 2:9 and 3:9. In light of this, it is quite simple to win. All one must do is choose good over evil within their own heart.

zaphod42's picture

"is that creature public or private? and who controls it?"

Maybe it is out of control...  facts would seem to suggest that as a probability.  I think the banksters thought they controlled it; then the politicians thought they did.  Now everyone is pointing their fingers at everyone else. 

My conclusion is that "corporations" have taken on a life of their own, and now the entities control their own directors, and their own officers.  No human is in charge.  And you can thank John Roberts for that.

 

Craig

Sages wife's picture

The central bank initiates the debt; the government assumes responsibility for it on behalf of the taxpayers. Privitize profits, socialize losses.

Meat Hammer's picture

Federal Reserve!  Unless Federal means something other than 

  • of, relating to, or denoting the central government of the US.

So, yeah, it's the government who is run by The Fed.  Or is it The Fed who is run by the government?  I forget.

Hugh_Jorgan's picture

Yes. And, how about:

"If we control when the crisis happens and everyone is freaking out we can get all kinds of protections and legislations that will allow us to put a bridle on the Markets with HFTs and smooth out the steering on this thing a bit"

"It's time we really put the thumbscrews to the media so they can cheerlead for us. Yes they suck, but they are the only game in town. Let's hook up a few mergers and deals to keep them alive and carrying water for us."

DeProgrammed's picture

ZHers, please educate me on some history: Why was Madoff the only major player to receive prison time? Did he Ponzi the wrong people, or was he the designated patsy/fall guy? Other?

Fun Facts's picture

Fish are refusing to be wrapped in the New York Times tabloid ziopropaganda news.

large_wooden_badger's picture

"A national debt, if it is not excessive, will be to us a national blessing. It will be a powerful cement of our Union." ~ Alexander Hamilton

It was never a slippery slope, right?

KnuckleDragger-X's picture

Three card monte on an epic scale.....

Oh regional Indian's picture

Indeed, old game man, old old game.

How is debt good cement for a union?

That sounds like the product of a rather twisted mind....

KnuckleDragger-X's picture

Hamilton was the first to push for a central bank.....

greenskeeper carl's picture

he was. He was also the initial person arguing over negative vs positive rights. He argued that unless the constitution explicitly prohibited the federal govt from doing something, the govt was legally allowed to do something, vs the original intent which was for the fedgov to have a very small and specific number of roles. We have him to thank for Henry Clay, and we have clay to thank for lincoln, and lincoln to thank for everyone since.

 

Looking around, its quite easy to tell which view of the constitution won

falconflight's picture

The American System, I think Clay and Lincoln called it.  Seems like just another iteration of Mercantilism.

Oh regional Indian's picture

Nice insights there GreensK Carl...

KnuckleDragger-X's picture

Yeah, but it took the lawyers to really screw things up. We really need to outlaw them and put a bounty on their heads just like any varmint.....

large_wooden_badger's picture

Debt is good cement for a union, like cement shoes were good footwear for a good fella that knew too much.

EscapeKey's picture

right up there with new-age keynesians claiming bubbles are great, and can fuel economic growth. i forget exactly who penned an article as such, but i'd guess it would have to be either krugman or stiglitz.

(because artificial asset price inflation is never a problem to keynesians)

large_wooden_badger's picture

Keynesians woulud endorse any idea that will allow them to continue waging their butt love fest on each other

detached.amusement's picture

If one could go back in time and assasinate....prime candidate

Harbourcity's picture

Canada has thee CMHC - first times a charm.

Temporalist's picture

The government is "sweeping" this shitshow with $50,000 brooms...that they bought on sale.

Dr. Engali's picture

There was a crisis? When did this happen? The average citizen has a memory of a donut........ mmmmmmm....... donuts......

NoDebt's picture

That's so fucking true it hurts.  Thanks for the laugh.  Now I need to go jump off a bridge.

Dr. Engali's picture

Make sure you don't accidentally shoot yourself in the back of the head with a nail gun five times on your way down. 

NoDebt's picture

I think that would be a fitting end for me, don't you think?

SubjectivObject's picture

But Phew!

It appears an avatar such as you cannot shoot itself.

The avatars around you though ...

saints51's picture

Taxpayers do not have to foot the bill. All we have to do is stand together and say NO!!!!!!

So yes we will be paying this bill because my above statement will never happen.

Bioscale's picture

Depends on where and with whom you're going to stand.. doing such excercise in the backyard with kids changes nothing and the rest of folks don't give a fucking fuck.

saints51's picture

Well, I know good people who understand the game. Getting them to stand against the system is another issue.