Posted on 06/19/2016 2:20:08 PM PDT by Lorianne
To hear the establishment media tell it, you would think that Attila the Hun was fixing to sack the Imperial City. Would that Donald Trump were that bold or dangerous.
Then again, he is a showman of no mean talents. So if there is a maquette of Fannie Mae’s planned new $770 million headquarters somewhere around Washington DC, he could start the sacking right there. Hopefully, he would not hesitate to shatter it with a fusillade of tweets—-or even take a jackhammer to it while wearing a Trump hard hat.
Fannie Mae is surely a monument to crony capitalist corruption, and living proof that massive state intervention in credit markets is a recipe for disaster. But rather than shut it down after it helped bring the nation’s financial system to the edge of ruin, the beltway pols have come up with an altogether different idea.
To wit, they plan to move Fannie from her already luxurious NW Washington headquarters to this hideous new glass palace to be built in the heart of Washington DC. Could there be a bigger insult to the 15 million families who lost their homes to foreclosure owing to the crash of the giant housing bubble that Fannie Mae and the crony capitalist crooks who ran it helped perpetuate?
And that’s to say nothing of the $180 billion of taxpayer money that was pumped into Fannie Mae and the other GSE’s after the house of cards came tumbling down in August 2008. In fact, while the politicians on Capitol Hill have dawdled for eight years without any statutory changes or mandates for even minor reforms, Fannie Mae’s management and its phalanx of K-Street lobbies showed exactly who rules in the Imperial City. It is the larcenous rule of these syndicates of beltway racketeers, in fact, that has put Donald Trump’s name on the Presidential ballot.
So let it be granted that his manners and policy knowledge appear to be on the meager side. Yet it is malodorous tales like that of Fannie Mae’s swank new palace which demonstrate why a disrupter on horseback is exactly what the Imperial City deserves.
In truth, the government housing guarantee programs at Fannie Mae and Freddie Mac have been an abomination from the very beginning.
Not only did they inappropriately subsidize home mortgages by upwards of $60 billion annually—–most of which went to affluent middle class households not entitled to taxpayer help in the first place—-but they were also based on the kind of Washington artifice upon which today’s rampant crony capitalism thrives. Namely, the specious claim that the GSEs are unique, creative “public-private partnerships” that enable a “secondary market” for home mortgages, and thereby remedy the alleged failure of the free market to provide cheap 30-year housing loans to the public.
In fact, the so-called secondary market for mortgages was no such thing. Freddie and Fannie have always been a de facto branch office of the US Treasury and their securities have been just another variant of treasury bonds. That finally became official when the U.S. Treasury threw them a $180 billion lifeline on the eve of the financial crisis.
The reason that became necessary, of course, is that the GSE’s had been minting fabulous book profits over several decades by drastically under-reserving for losses, confident that Uncle Sam would bail them out if a crisis ever came.
In fact, when the mortgage meltdown did come, Freddie and Fannie had virtually no accumulated reserves and capital and would have exposed investors to tens of billions of losses. Needless to say, the implicit “call” on the US Treasury that had always been embedded in the below market rates on Freddie/Fannie paper was instantly exercised by Wall Street’s then plenipotentiary in Washington, former Goldman CEO and US Treasury Secretary Hank Paulson.
To be sure, the proper course would have been to force investors ranging from the sovereign wealth fund of China to Norwegian fishing villages and Wall Street hedge funds to take their lumps for not reading the indentures (which contained no legal US guarantee), and to prosecute Freddie and Fannie and their executives for blatant and monumental accounting fraud.
But the accounting fraud was never even acknowledged, let alone prosecuted, owing to the beltway fiction that the GSE’s are “off-budget” public-private partnerships.
snip (there's more)
more renderings of the planned monstrosity
http://dc.urbanturf.com/articles/blog/a_look_at_the_new_fannie_mae_headquarters/10177
Fannie Mae has always been just what it was intended to be from the get go. A money laundering machine for the commies at DNC.
I hate it when writers assume everyone knows what their acronyms mean. Using an acronym AFTER spelling the whole thing out is fine, but really!
What is a “GSE”? Government sanctioned entity? Giant slithering elephant? Generally syphilitic engram? Generous sublime entertainer? Goofy small eraser?
Fannie and Freddie should have been dismantled long ago. As in during the housing crisis. And all the executives should have at least been in the dock.
I learned a new word today. Is Stockman related to William F. Buckley? Buckley introduced me to the word: "lacuna." Great word.
A 2009 Wall Street Journal investigative report WRT the subprime mortgage borrowing spree that wreaked havoc on the US economy revealed that----according to the Federal Financial Institutions Examination Council---financial schemes by low-income housing groups, Hispanic lawmakers on Capitol Hill.
A congressional Hispanic housing initiative, subprime mortgage lenders and brokers, colluded together in fraudulent schemes to increase homeownership among Latinos using falsified applications, and other tricks of the trade.
The massive mortgage fraud ended in disaster for which no one has been held responsible. Taxpayers got saddled with billions of dollars in bailout taxes.
These subprime activities were not simply the mortgage market at work. They were fueled by avarice, greed, stupidity--all enabled by Congressmen and other groups which leave a trail at the door of then-Cong Joe Baca (D-Cali).
Between 2000 and 2009, Hispanic populations increased; but Hispanic home ownership grew even faster, increasing by 47%, to 6.1 million from 4.1 million, according to the US Census Bureau. Over that same period, homeownership nationally grew by an anemic 8%.
In 2005 alone, mortgages to Hispanics jumped by 29%; Latinos with multiple fraudulent identities in low-paying jobs obtained costly non-prime mortgages---soaring to a shocking 169%, (Research provided by Wall Street Journal)
The subprime mortgage bank fraud network was spearheaded by then-Cong Joe Baca (D-Calif 43rd), in his powerful position as chairman of the Congressional Hispanic Caucus. Baca's district ranks No.5 among all US Congressional districts in percentage of home loans tailored to sub-prime borrowers.
Baca used his the legislative power of his office and his leadership position in the Congressional Hispanic Caucus to calculatedly launch a housing initiative called "HOGAR"-- Spanish for home. conspiract and colluison the Congressuial Hispanic caucuss has been quiet about his role in financing, and, earmarking the blood-thirsty America-hating La Raza. race-based "La Raza" was given tax dollars and Congressionsl earmarks to finance its so-called mortgage activities.
La Raza's "strategic partnerships” with Wachovia and Bank of America forced the fraudulent mortgage-application requirements and documentation standards.......which caused taxpayers to be soaked w/ billions in bailouts....... and decimating the US economy.
La Raza aided and abetted risky federal and private-home loans to latinos over the last decade. thanks to the lending industry’s version of “don’t ask, don’t tell.”
In addition to millions of federal tax dollars, La Raza also collected a $1 million Democratic earmark that funded “community-development” projects. Analysts report that much of it went to "mortgage counseling." (cue laugh machine)
REFERENCE--Falsifying Government Documents. involves altering, changing, or modifying a document for the purpose of deception.......can also involve forgery and/or passing copies of false documents. Falsifying documents is usually done in connection with broader criminal aims, such as extortion, government fraud, tax evasion, money laundering, financing terrorism........
Types of documents commonly falsified may include:
◾Tax returns and income statements
◾Personal checks
◾Bank account records
◾Business record keeping books
◾Immigration documents (such as visas, passports, etc.)
◾Identification cards and birth certificates
Many different types of acts can be considered as falsifying a document, including:
◾Altering or misrepresenting factual information such as prices or monetary amounts
◾Stating false information when requested to provide truthful statements
◾Forging a signature
◾Using official letterheads without authorization
◾Concealing assets or property WRT obtaining federal/state grants))
◾Knowingly using or distributing a fake document
A person can only be held criminally liable if they are deliberately acting with the intention of deceiving or defrauding another party.
Falsifying documents is a very serious offense and is generally classified as a felony. This means that a person charged with falsifying documents may be subject to the following legal penalties:
◾Having to pay a monetary fine
◾Incarceration in a prison facility
Depending on the gravity of the offense, as well as individual state laws, falsifying documents can result in a prison sentence of 5-10 years. Also, if government documents or authorities were involved, the legal penalties may be more severe. ..... legal penalties may increase with repeat offenses.
The penalty for falsifying government documents is outlined in the Crimes Act of 1958.
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ITEM Bill Clinton's hand-picked HUD secretary, Andrew Cuomo, plunged Fannie Mae and Freddie Mac into the fringe subprime pit, announcing in a 2000 HUD report, "(Their) expanding presence in the subprime market could be of significant benefit to lower-income families, minorities and families living in underserved areas." The buzz is Cuomo left HUD about 8 million dollars richer.
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ITEM Another Clinton appointee---Franklin Raines---asserted his position on sub-prime lending in a letter to Fannie Mae stockholders. Read on.
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GENESIS OF THE SUB-PRIME BILKING OF TAXPAYERS Clinton appointee, Fannie Mae CEO Franklin Raines, Pens a Letter to Shareholders Excerpted from Raines 2003 Fannie Mae Annual Report
Excerpt ...Ten years ago the typical conforming mortgage required a down payment of 10-20%, and low-down payment mortgages were considered too risky. But then we helped to standardize the 3-5% down payment loan, brought it to global capital markets, and made it available to lenders and communities nationwide. Now low-down payment loans are commonplace. And we just adopted a new variance in our underwriting standards that will make the $500 down payment loan widely available as well...
In 1994, we pledged to provide $1 trillion in capital to ten million underserved families by the end of 2000. Thanks to our housing and industry partners, we met that goal early.
Then in 2000, we launched our American Dream Commitment, a pledge to provide $2 trillion in capital to 18 million underserved families by the year 2010, including $400 billion targeted specifically for minority families (later raised to $700 billion in response to President Bush’s Minority Homeownership Initiative). After four of the strongest years in housing and mortgage finance history, we’ve already surpassed the top-line goals of this commitment. But our work is far from complete.
So in January 2004, we announced our Expanded American Dream Commitment and pledged significant new resources to tackle America’s toughest housing challenges. Our new commitment has three main goals.
First, we will expand access to home ownership for six million first-time home buyers in the next ten years, including 1.8 million minority first-time home buyers.We also will help raise the national minority homeownership rate from 49 percent to 55 percent, with the ultimate goal of closing it entirely.
Second, we will help new and long-term homeowners stay in their homes through a series of initiatives, and commit $15 billion to preserve affordable rental housing and $1.5 billion to support the revitalization of public housing communities.
Third, we will increase the supply of affordable housing and support community development activities in at least 1,000 neighborhoods across the country through our American Communities Fund, and through targeted investments like Low-Income Housing Tax Credits that help finance affordable rental housing.
It is because of initiatives like our Trillion Dollar Commitment and our American Dream Commitment that we have exceeded our HUD affordable housing goals for ten consecutive years. (End Raines excerpt.) (NOTE Raines is a Clinton appointee)
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NOTE: Raines was fired for being a crook---Raines cooked theF/M books to get bonuses. But he walked away a multi-millionaire---extorting millions from taxpayers for pensions, bonuses, lifetime healthcare, donations to his fave charites....etc, etc, and so on, and so forth, ad infinitum ad nauseaum.
We are still waiting for him to go trial for cooking the F/M books.
A retail mezzanine? Fannie Mae now needs their own shopping zone. Sheesh
Government Slithering Entity works for me.
You may have concluded the wrong root cause. Some post-crisis analysis done indicates a different view.
(1) Fannie and Freddie did not cause the housing crisis. Mortgage loans from TBTF banks with default rate (as high as 30%) is the root cause.
(2) Fannie and Freddie did not require any bailout. Bailout was imposed on them using worst-case scenario book-loss that no financial institution could possible meet. (a) Fannie & Freddie was never in negative cashflow during the crisis. (b) $50B Deferred Tax Asset was intentionally ignored. Or, (c)Fannie and Freddie could not resume profitable so soon (and with 10% interest payment to the $180B bailout).
(3) Fannie and Freddie model is a proven and extremely cost efficient (at 0.15%) model. It helps to ensure liquidity at such low cost to millions of US households for decades. Any other alternative may implies a 1-1.5% extra mortgage payment.
(4) Returning the mortgage market to the TBTF banks is not preferred.
People who invested in Fannie and Freddie before and during the housing crisis suffered heavily and deserve something back (now that Fannie and Freddie are working well again).
In 1936 there was no private market in 30 year mortgages.
You had to roll over your loan every 3 years and if you couldn’t find a lender, a very real problem during the Depression, you would lose your home.
Fannie was created to fill this void. It was a gov’t agency until Lyndon Johnson spun it off to the private sector to get it off the gov’t budget. Freddie was created shortly thereafter to provide competition to Fannie and it also was sold to the private sector.
Both GSEs were listed stocks on the NYSE in 2008. There was no legal requirement for America’s taxpayers to backstop and bailout the investors. The companies could have been allowed to go bankrupt with the investors taking the hit.
The decision to bail them out was made by GW Bush and his administration.
GSE= Government-sponsored enterprise
Some of the GSEs (such as Fannie Mae and Freddie Mac ) have been privately owned but publicly chartered; others, such as the Federal Home Loan Banks, are owned by the corporations that use their services. GSE securities carry no explicit government guarantee of creditworthiness, but lenders grant them favorable interest rates, and the buyers of their securities offer them high prices. This is partly due to an “implicit guarantee” that the government would not allow such important institutions to fail or default on debt. This perception has allowed Fannie Mae and Freddie Mac to save an estimated $2 billion per year in borrowing costs. This implicit guarantee was tested by the subprime mortgage crisis, which caused the U.S. government to bail out and put into conservatorship Fannie Mae and Freddie Mac in September, 2008.
https://en.wikipedia.org/wiki/Government-sponsored_enterprise#Ownership_and_implicit_guarantee
http://www.presidency.ucsb.edu/ws/?pid=64935
“The rate of homeownership in America now stands at a record high of 68.4 percent. Yet there is room for improvement. The rate of homeownership amongst minorities is below 50 percent. And that’s not right, and this country needs to do something about it. We need to close the minority homeownership gap in America so more citizens get the satisfaction and mobility that comes from owning your own home, from owning a piece of the future of America.
“Last year I set a goal to add 5.5 million new minority homeowners in America by the end of the decade. That is an attainable goal; that is an essential goal. And we’re making progress toward that goal. In the past 18 months, more than 1 million minority families have become homeowners. And there’s more that we can do to achieve the goal.
“The law I sign today will help us build on this progress in a very practical way. Many people are able to afford a monthly mortgage payment but are unable to make the downpayment, and so this legislation will authorize $200 million per year in downpayment assistance to at least 40,000 low-income families. These funds will help American families achieve their goals and, at the same time, strengthen our communities.
Actually Congress, which was majority Democrat at the time, and a majority of Democrats voted for the bailouts. Bush would not have had anything to sign regarding bailouts had the majority of the majority (in both houses of Congress) not voted YES to the bailouts.
So while Bush signed off, it was Democrats who actually facilitated the bailouts.
That’s a distinction without a difference.
Dubya and his administration endorsed bailing out Fannie. It was a bipartisan affair.
http://www.nytimes.com/2008/12/21/business/21admin.html
“Armando Falcon Jr. was preparing to take on a couple of giants.
“A soft-spoken Texan, Mr. Falcon ran the Office of Federal Housing Enterprise Oversight, a tiny government agency that oversaw Fannie Mae and Freddie Mac, two pillars of the American housing industry. In February 2003, he was finishing a blockbuster report that warned the pillars could crumble.
“Created by Congress, Fannie and Freddie — called G.S.E.’s, for government-sponsored entities — bought trillions of dollars’ worth of mortgages to hold or sell to investors as guaranteed securities. The companies were also Washington powerhouses, stuffing lawmakers’ campaign coffers and hiring bare-knuckled lobbyists.
“Mr. Falcon’s report outlined a worst-case situation in which Fannie and Freddie could default on debt, setting off “contagious illiquidity in the market” — in other words, a financial meltdown. He also raised red flags about the companies’ soaring use of derivatives, the complex financial instruments that economic experts now blame for spreading the housing collapse.
“Today, the White House cites that report — and its subsequent effort to better regulate Fannie and Freddie — as evidence that it foresaw the crisis and tried to avert it. Bush officials recently wrote up a talking points memo headlined “G.S.E.’s — We Told You So.”
“But the back story is more complicated. To begin with, on the day Mr. Falcon issued his report, the White House tried to fire him.
“At the time, Fannie and Freddie were allies in the president’s quest to drive up homeownership rates; Franklin D. Raines, then Fannie’s chief executive, has fond memories of visiting Mr. Bush in the Oval Office and flying aboard Air Force One to a housing event. “They loved us,” he said.
“So when Mr. Falcon refused to deep-six his report, Mr. Raines took his complaints to top Treasury officials and the White House. “I’m going to do what I need to do to defend my company and my position,” Mr. Raines told Mr. Falcon.
“Days later, as Mr. Falcon was in New York preparing to deliver a speech about his findings, his cellphone rang. It was the White House personnel office, he said, telling him he was about to be unemployed.
“His warnings were buried in the next day’s news coverage, trumped by the White House announcement that Mr. Bush would replace Mr. Falcon, a Democrat appointed by Bill Clinton, with Mark C. Brickell, a leader in the derivatives industry that Mr. Falcon’s report had flagged.
“It was not until 2003, when Freddie became embroiled in an accounting scandal, that the White House took on the companies in earnest. Mr. Bush decided to quit the long-standing practice of rewarding supporters with high-paying appointments to the companies’ boards — “political plums,” in Mr. Rove’s words. He also withdrew Mr. Brickell’s nomination and threw his support behind Mr. Falcon, beginning an intense effort to give his little regulatory agency more power.
“Mr. Falcon lacked explicit authority to limit the size of the companies’ mammoth investment portfolios, or tell them how much capital they needed to guard against losses. White House officials wanted that to change. They also wanted the power to put the companies into receivership, hoping that would end what Mr. Card, the former chief of staff, called “the myth of government backing,” which gave the companies a competitive edge because investors assumed the government would not let them fail.
“By the spring of 2005 a deal with Congress seemed within reach, Mr. Snow, the former Treasury secretary, said in an interview.
“Michael G. Oxley, an Ohio Republican and then-chairman of the House Financial Services Committee, had produced what Mr. Snow viewed as “a pretty darned good bill,” a watered-down version of what the president sought. But at the urging of Mr. Card and the White House economics team, the president decided to hold out for a tougher bill in the Senate.
“Mr. Card said he feared that Mr. Snow was “more interested in the deal than the result.” When the bill passed the House, the president issued a statement opposing it, effectively killing any chance of compromise. Mr. Oxley was furious.
“The problem with those guys at the White House, they had all the answers and they didn’t think they had to listen to anyone, including the Treasury secretary,” Mr. Oxley said in a recent interview. “They were driving the ideological train. He was in the caboose, and they were in the engine room.”
“Mr. Card and Mr. Hennessey said they had no regrets. They are convinced, Mr. Hennessey said, that the Oxley bill would have produced “the worst of all possible outcomes,” the illusion of reform without the substance.
“Still, some former White House and Treasury officials continue to debate whether Mr. Bush’s all-or-nothing approach scuttled a measure that, while imperfect, might have given an aggressive regulator enough power to keep the companies from failing.
“Mr. Snow, for one, calls Mr. Oxley “a hero,” adding, “He saw the need to move. It didn’t get done. And it’s too bad, because I think if it had, I think we could well have avoided a big contributor to the current crisis.”
Wow, thanks for posting that.
Oh I completely agree it was bi-partisan. But when people invoke only Bush that important point gets lost.
So I always have to make the point that they were both in on it.
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