Bail out doesn't pass!

[Carpenters]

Five years ago the Bush Administration attempted to head off a financial crisis that loomed ahead for Freddie Mac and Fannie Mae. As reported by the New York Times on September 11, 2003:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac - which together have issued more than $1.5 trillion in outstanding debt - is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

However, it was Congressional Democrats who fought tooth and nail to kill this new oversight.

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

“These two entities - Fannie Mae and Freddie Mac - are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Using some people's logic on these boards, shouldn't the Republicans have been able to pass this on their own in 2003 when they were in power? It shouldn't have mattered that the Democrats fought it tooth and nail because the Republicans had the majority and the White House and shouldn't have needed any support from the Democrats at all. It doesn't work that way, just like the Democrats shouldn't have to try to pass this bailout bill on their own.

 

[bsnyder]

Google done, most hits were from 2008...

I would agree 100% that if a family can not get a down payment together themselves, they maybe more likely to default. In the search I could not find any law that required banks to lend to persons that take advantage of such programs.

But I would say that if a bank CHOOSES to lend to such borrowers, it should not be done so in a discriminating manor. Base it on all the traditional criteria and not zip code.

You are oversimplifying the residential home lending market. Fannie, Freddie, HUD, FHA & VA are all government creations, with taxpayer money.

Why haven't we had a speculative bubble in the commercial real estate sector? Those developers and lenders are every bit as greedy as the ones in the residential sector. But the government hasn't meddled in that sector - it has to rely on the free market.

 

[TLSnell1981]

Using some people's logic on these boards, shouldn't the Republicans have been able to pass this on their own in 2003 when they were in power? It shouldn't have mattered that the Democrats fought it tooth and nail because the Republicans had the majority and the White House and shouldn't have needed any support from the Democrats at all. It doesn't work that way, just like the Democrats shouldn't have to try to pass this bailout bill on their own.

Do we have to go through "Filibuster 101"...again?

 

[Charade]

Finally a voice of reason!!

Also though this info from Dave Ramsey was interesting -

How We Can Clean Up A Lot of the Economic Problems

Remember Enron, WorldCom, Adelphia, and other companies had artificially put assets on the books? They'd say something was worth $10M when they bought it, but eventually it decreased in value, and they never updated the value in the books. That was part of the fraud. Under current laws at that time, they were all convicted and put in jail for fraud.



Then we got all mad and made all these new laws that are coming out the wazoo called Sarbanes-Oxley. It's a huge, massive law but the idea is that we were going to mandate ethics to corporate America because apparently they didn't have any, according to the Enron failure. It's now a total pain in the butt to execute it in a publicly traded company.

It didn't work because you can't cause ethics to happen. However, it does make each company each day restate what their assets are worth if sold on the market. This accounting procedure is mark to market accounting--you need to remember that. It's a good concept and keeps companies from having loaded balance sheets.

How This Affects Us Today
However, it's part of what's caused this in the news now. Merrill Lynch was sitting with $30 billion tied up in sub-prime loans with houses. Stupid! They get what they deserve for doing that, and I'm with you on that. Those houses didn't become worthless all of a sudden because those people couldn't sell their bonds. Since they couldn't sell them, they basically gave them away for 22 cents on the dollar. Now do you think all those houses lost 80% of their value underneath that deal? No, they didn't, so they gave them away for 22 cents on the dollar (about $6 billion total) because there was no market for them. Nobody wants to buy sub-prime bonds because they suck. They're junk bonds. But at 22 cents on the dollar, it's a bargain because even if you foreclosed on every one of the houses in there, you'd probably get $20 billion back out of $30 billion, and so the company that bought those for $6 billion got a deal! But there's no market for them. That's where these companies are stuck. They can't sell this stuff, but accounting-wise, they've had to mark it down to market and it's frozen the marketplace.

Economist Wesbury is saying that if we change that one rule and don't force them to mark down to market value and just let them hold on to all the stuff, and say just on sub-primes for this period of time you can change that rule -- a temporary change -- that'll free the market up. It's seized right now; it's frozen. This will thaw it out and get it going again. He says that'll solve 60% of the problem ... and I think he's right.

That one accounting rule is what made Merrill Lynch sell out. That one accounting rule is what's driving other ones into the dirt. Would you rather let them change their accounting rule or loan them $700 billion for us to buyout their bad paper?

I'd rather them work their own crap out than have us bail them out with $700 billion of our tax dollars.

I don't like giving them any money or any help with my tax dollars. But I'd rather see that than see the whole thing turn completely upside down in a fruit basket turnover than have a whole meltdown or something and freak out here in the middle of the election season. Why don't we just take the FHA insurance program and extend it across these sub-primes? What that means is that you and I are guaranteeing the lender that they're not going to lose as much or any money on those mortgages. Now I don't like guaranteeing them, but I like it better than buying them. In other words, instead of $700 billion in tax-payer debt going out there to bail out these companies, just extend the insurance out. You could probably do that for less than $40 billion. It's like a 95% savings!
If the government insured those mortgages, they would then be marketable. And could sell them. And the companies would stay afloat. And we, the people, don't have to get into the mortgage business. Now we're going to get in there a little bit because of the insurance on those getting foreclosed on. But foreclosures aren't causing this. This is being caused because these companies are frozen and seized up. We've got to let some of the steam come off and put some oil in there to get this thing moving again. We can do that without going into debt $700 billion.

Here's Your Plan
Call your Congressman. Call your Senator. Tell them to change the mark-to-market accounting law and to extend insurance but extend no loans. If they extend loans - if they borrow the money on the national debt in order for us to all go into the mortgage business a trillion dollars - you're going to fire their butts and send them home.

I've talked with several people today, and it's on the tables in Washington, but it's not something you're going to see on TV. If you'll let your Congressmen know you know about this and that you'll vote against them if they don't vote to change the mark-to-market law and you'll contribute your money to make sure they never serve in office again. That's what you need to tell them early and often.

If you're pissed, this is the time to step up and do something about it, America! You can stop this! It's being railroaded down your throat, but you can stop them if you call them in mass starting now.

I for one are hoping all House Reps will get back to work (Thursday right?) and figure out how to make a better bill.

Finally!!!

A voice of reason!!!

 

[Galahad]

Are you saying I should take my cash out of my savings account?
Why?

Perhaps he's a fan of self-fulfilling prophecy

 

[bsnyder]

Using some people's logic on these boards, shouldn't the Republicans have been able to pass this on their own in 2003 when they were in power? It shouldn't have mattered that the Democrats fought it tooth and nail because the Republicans had the majority and the White House and shouldn't have needed any support from the Democrats at all. It doesn't work that way, just like the Democrats shouldn't have to try to pass this bailout bill on their own.

We didn't have a full blown crisis then. The Senate Banking Committee tried to pass a very tough Fannie/Freddie reform bill in 2005. Every single Democrat on the committee opposed it. It had no chance in front of the entire Senate. The Dems would have filibustered it, or played the race card.

 

[Anewman]

You are oversimplifying the residential home lending market.

Possibly, but I would apply that same simplification to Bush, Clinton... All the way back to Carter equally.

GREED, as you post is the exact REASON... NOT because any president FORCED them to lower their lending standards.

 

["Got Disney"]

And Nancy was mean to us too. Wah, wah, wah ................

ummm the speech was not what caused the package to go down...it was also that Pelosi could not even get her committee leaders to vote on anything but NO....If she cant get her own top people to say yes on it how does she expect all the others to.

 

[segpm08060]

She can "want' whatver the hell she says she wants. Big deal!

Ouch! I was merely stating her position, since this was a Republican President request.

The GOP is the party that historically has believed in limited government, and obviously a bailout like this cuts against that principal.

What's the Dem excuse?

My personal opinion is that the Dems want things to get worse, giving them an excuse to nationalize the entire financial system. A dream come true from the liberal perspective.

I'm a little confused. Let me see if I have this straight..... The bailout is against GOP principal. Then why did the GOP President and GOP Secretary of Tresuary, GOP Chairman of the Board of Governors of the Federal Reserve request a bailout? Why did the GOP Presidential Nominee agree and declared today how he saved the day? Why did the House GOP and Senate GOP agree to even discuss the bail out?

It is my personal opinion that the GOP lacks leadership starting with the President and the Nominee.

 

[bsnyder]

I don't buy that. They want to get reelected too. Even at it's worst, this plan is not really nationalization. If it worked as planned - and you have to assume that most voting for it WANT it to work as planned - then the government/taxpayers would not ultimately be on the hook for much at all and the government would exit the market. I know that government always gets bigger, but Democrats buy stocks, make profits, and participate in capitalism right along with Republicans.

I agree this plan isn't really nationalization - but it sets a very bad precedent.

Yes, Democrats participate in capitalism too - but,more importantly, they want fairness and a level playing field, and those things are in constant conflict with free markets.

 

[LuvDuke]

I don't buy that. They want to get reelected too. Even at it's worst, this plan is not really nationalization. If it worked as planned - and you have to assume that most voting for it WANT it to work as planned - then the government/taxpayers would not ultimately be on the hook for much at all and the government would exit the market. I know that government always gets bigger, but Democrats buy stocks, make profits, and participate in capitalism right along with Republicans.

It's just carrying to the economy the same Iraq war sentiments "Democrats what to see Americans come home in body bags just because they dislike Bush" or "Democrats want to see more attacks at home because they want to see Bush embarassed".

This financial meltdown started with the deregulation in the Reagan administration and finalized in the Gramm-Leach bill. From that day on, it was just a matter of time. Although our resident banking/financial geniuses can't seem to make the connection. It's all the fault of forcing loans on people who couldn't afford them.

And, no, this Democrat thought it was a mistake for Bill Clinton to sign the Gramm-Leach bill.

 

[ntsammy5]

Fannie & Freddie were definitely a huge part of the problem along with Investment Banks, Rating Agencies, Mortgage Originators, Mortgage Banks, and Commercial Banks among others.

Where the GSEs and Investment Banks went wrong was buying up bad loans and securitizing them so that more bad loans could be made. Why did they do that? Greed! The more they packaged and sold the more they made! It was a never ending spiral! Add to that the credit derivatives that investment banks created for even more profits and the fact that the GSEs invested in them for even more profits and the Rating Agencies rating them all investment grade regardless of the facts, you had a disaster waiting to happen.

What should cause everyone to worry is that only 2 years of really bad underwriting caused this whole mess. Just how fragile are our markets. And we haven't even seen the affect of equity loans yet!

 

[LuvDuke]

I agree this plan isn't really nationalization - but it sets a very bad precedent.

Yes, Democrats participate in capitalism too - but,more importantly, they want fairness and a level playing field, and those things are in constant conflict with free markets.

So in other words, unfairness and a non-level playing field are what makes a free market soar?

 

[bsnyder]

Possibly, but I would apply that same simplification to Bush, Clinton... All the way back to Carter equally.

GREED, as you post is the exact REASON... NOT because any president FORCED them to lower their lending standards.

You didn't answer my question - why didn't the commercial sector lower their lending standards?

 

[bsnyder]

So in other words, unfairness and a non-level playing field are what makes a free market soar?

Of course. In free-market capitalism there are winners and losers.

 

[What the Heck]

And Nancy was mean to us too. Wah, wah, wah ................

Excuse me, but to add a little reality to your world. There were up to 20 Republicans who were ready to vote yes for it, although they didn't believe in it. They were ready to vote because they were willing to place their country first instead of their beliefs. Gee. I can't understand why they wouldn't want to after Pelosi spoke .

I think she wanted this, that she is playing politics with our lives. She needs to resign. Not just from Speaker but from Congress. She is a disgrace to all America.

 

[bsnyder]

It's just carrying to the economy the same Iraq war sentiments "Democrats what to see Americans come home in body bags just because they dislike Bush" or "Democrats want to see more attacks at home because they want to see Bush embarassed".

This financial meltdown started with the deregulation in the Reagan administration and finalized in the Gramm-Leach bill. From that day on, it was just a matter of time. Although our resident banking/financial geniuses can't seem to make the connection. It's all the fault of forcing loans on people who couldn't afford them.

And, no, this Democrat thought it was a mistake for Bill Clinton to sign the Gramm-Leach bill.

Explain how Gramm-Leach is involved in the subprime crisis?

 

[What the Heck]

It's just carrying to the economy the same Iraq war sentiments "Democrats what to see Americans come home in body bags just because they dislike Bush" or "Democrats want to see more attacks at home because they want to see Bush embarassed".

This financial meltdown started with the deregulation in the Reagan administration and finalized in the Gramm-Leach bill. From that day on, it was just a matter of time. Although our resident banking/financial geniuses can't seem to make the connection. It's all the fault of forcing loans on people who couldn't afford them.

And, no, this Democrat thought it was a mistake for Bill Clinton to sign the Gramm-Leach bill.

The cause of this crisis has many, many, many reasons for it. No doubt. But the cause of this bill failing has only one reason for it. The votes were there. All she had to do was keep her mouth shut.

 

[rie'smom]

Are you serious?
An opinion/editorial piece is the same as pointing to the actual legislation where you claim he created the market for "risky" loans.

Yes I know he sued some banks that were discriminating, the person that wrote your opinion for you feels that equals creating the risky loan business.

I understand you agree with that view and will not expect link to actual bill or action with Clinton lowering credit standards

"
THE WHITE HOUSE

Office of the Press Secretary
For Immediate Release December 8, 1993

PRESS BRIEFING
BY
SECRETARY OF THE TREASURY, LLOYD BENTSEN,
ROBERT RUBIN, ASSISTANT TO THE PRESIDENT FOR ECONOMIC POLICY
AND
EUGENE LUDWIG, COMPTROLLER OF THE CURRENCY

The Briefing Room

1:30 P.M. EST

...........
The 12 current CRA assessment factors would be replaced with three tests -- a lending test, a service test and an investment test. And I have right behind me the 12 current assessment factors which are highly subjective and really don't focus on the target of what we're talking about here which is getting loans and services and investments out to our communities. And the simple three tests we will have under the new reform: a lending test, a service test, an investment test. Are you making loans? Are you providing services? Are you making investments? It's really, in the end, just that simple.....

With Clinton's new regulations the assessment factors went from 12 to just 3.

I think the Republicans are being like little school children, I'm going to hold my breathe until I turn blue. Everybody knows that it needs to be passed and nothing that Nancy or anybody else said should have made them decide to just vote against it. They are hurting the American public and they are hurting their own constituents. Those constituents that will be voting AGAINST them come the election. I don't know about you, but the stock market falling almost 800 points in one day because of Republicans acting like children is TOTALLY UNACCEPTABLE.

Many of these constituents called their Congressmen and women and told them in no uncertain terms NOT to ok the legislation.

 

[disney1990]

Excuse me, but to add a little reality to your world. There were up to 20 Republicans who were ready to vote yes for it, although they didn't believe in it. They were ready to vote because they were willing to place their country first instead of their beliefs. Gee. I can't understand why they wouldn't want to after Pelosi spoke .

I think she wanted this, that she is playing politics with our lives. She needs to resign. Not just from Speaker but from Congress. She is a disgrace to all America.

I think the Republicans are being like little school children, I'm going to hold my breathe until I turn blue. Everybody knows that it needs to be passed and nothing that Nancy or anybody else said should have made them decide to just vote against it. They are hurting the American public and they are hurting their own constituents. Those constituents that will be voting AGAINST them come the election. I don't know about you, but the stock market falling almost 800 points in one day because of Republicans acting like children is TOTALLY UNACCEPTABLE.