With the war on the rich, big oil, women and the Supreme Court not gaining enough traction, last week the administration tacked in a different direction…home mortgages. Read more
On this day of the Florida primary, more details are surfacing concerning Newt Gingrich’s interesting relationship with Freddie Mac. You might call the relationship incestuous, but it’s not lobbying and it seems to be perfectly legal. Instead of historian, call him a team motivator.
On Friday, the Securities and Exchange Commission brought civil fraud charges against six former executives of Fannie Mae and Freddie Mac. The complaint charges that the executives knowingly misled the public concerning the extent of subprime and Alt-A (a step above subprime) mortgages that they held. Read more
Yes, I am old enough to remember the quiz show, “The $64,000 Question”. Of course, that was back in the day when $64,000 was a fortune. Recently, Fannie Mae and Freddie Mac spent 10 times that amount sending 100 employees to a “mortgage conference.” I’m not entirely sure what those things are, but, let’s put this in perspective. Read more
Anyone even casually following the financial crisis, precipitated by the burst in the housing bubble which was inflated by sub-prime mortgages (low interest, no interest, no money down mortgages sold to people with sub prime credit), should know that “ground zero” in this entire meltdown was the quasi government banking institutions Fannie Mae and Freddie Mac. Yet in this so called Financial reform bill authored by Connecticut’s senior Senator Chris Dodd, there is not an iota of regulation that corrects this gangs business. You would think it would be at the top of the list?
Today on the Morning Joe, Treasury Secretary Tim Geithner said, don’t worry … we will get around to them. That puts my mind at ease. How about you?
Fannie and Freddie, under direction from Congress, encouraged this kind of irresponsible lending in order to bring the dream of home ownership to people who would otherwise not qualify. Big heart … bad business.
Fannie and Freddie guaranteed these loans as well as buying, packaging and securitizing them, but since they themselves were under-capitalized (I believe their capital reserve requirements were a mere 1% of guarantees – not sourced) … the whole shabang imploded as mortgages collapsed.
One more thing to note here. President “W” tried valiantly to clamp down on Fannie Mae and Freddie Mac in 2003 and 2004 by proposing regulations that would force them both to increase their reserve requirements and tighten lending standards. That bill was rebuffed by none other than Senator Chris Dodd (D, Countrywide) who promised a lengthy filibuster. The bill Reform died in 2005. Three years later the economy collapsed.
UPDATE: From the wayback machine. Karl Rove last year explaining how Bush’s attempts to clamp down on Fannie and Freddie were blocked.
UPDATE 2: Here’s another backgrounder on President Bush his attempts to control Fannie and Freddie.