Posted on 09/23/2008 8:49:22 AM PDT by johncocktoasten
Senators Isakson/Chambliss,
I am writing to express my hope that you will oppose ANY federal bailout of wall street, including government purchase of private mortgage loans and asset backed securities.
The implementation of this plan would result in the immediate insolvency of numerous banks and financial institutions across the country as the marking to market of these assets would create a massive hole in the capital base of these banks.
Under the alternative of not bailing out these institutions, many will still fold. However, allowing them to fold on their own will allow PRIVATE industry to come in and buy the liquidated assets at a real market price. Additionally, FDIC will be able to re-work loans for borrowers that these banks have failed to resolve.
Bolstering the FDIC insurance fund, as well as backing up the money market funds is the way to handle this problem. As far as the derivatives investors, they are responsible for knowing the risks of trading in illiquid securities with no actual commodity or instrument supporting them. It just like an option trade, the option written is only as good as the entity that writes the option.
I am in the mortgage industry, and can report to you that home prices are beginning to stabilize. This bailout will jeopardize the beginning of this recovery as moral hazard, with forced writedowns on mortgages and bankruptcy judges re writing loans, will erode any financial incentive for private industry to lend where the government will not.
If the credit default swaps market and the commodity market are properly regulated, and participants in those markets are required to have a stake in those markets, there would be a stabilizing effect. This stability would come thru in food and energy prices and consumers could begin to re-align their budgets to reflect the new economic reality.
YES- Bolster FDIC Insurance Fund YES- Bolster Money Market Funds YES- Require commodity and derivative market participants to have open interests in those markets
NO- Federal Purchase of Bad Assets NO- Federal Ownership stakes in Corporations NO- Allowing Judges to Rewrite Private Contracts (mortgages) NO- Do Not Hand Over this kind of power to the next chief executive of the United States
Paulson's apologists want to quibble about what the meaning of is is.
‘(2) The increased interest payments on the national debt is offset by the cashflows from the mortgages. The average mortgage yields upwards of 7%. The US’ cost of debt is less than 2.4%.
If you borrow 700 million of debt at 2.4% and use it to buy assets that yield more than 2.4%, you are profiting.’
Private investors can do that math, too. LIBOR is about 3%, and they would be happy to borrow at 3% and earn 7%. The problem, of course, is that many of the borrowers are defaulting, which means no yield and a loss of principal. Why do you trust government bureaucrats using taxpayer money to do a better job of valuing mortgage-backed securities than private investors?
Paulson is a lying sack of s__t !He has not provided a straight answer to any question
I want to know why little Jorge Arbusto selected him.
Reject this New World Order plan of socialism
http://gatewaypundit.blogspot.com/2008/09/bush-called-for-reform-of-fannie-mae.html
** 2001
April: The Administration’s FY02 budget declares that the size of Fannie Mae and Freddie Mac is “a potential problem,” because “financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.”
** 2002
May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)
** 2003
January: Freddie Mac announces it has to restate financial results for the previous three years.
February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that “although investors perceive an implicit Federal guarantee of [GSE] obligations,” “the government has provided no explicit legal backing for them.” As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. (”Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO,” OFHEO Report, 2/4/03)
September: Fannie Mae discloses SEC investigation and acknowledges OFHEO’s review found earnings manipulations.
September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact “legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises” and set prudent and appropriate minimum capital adequacy requirements.
October: Fannie Mae discloses $1.2 billion accounting error.
November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any “legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk.” To reduce the potential for systemic instability, the regulator would have “broad authority to set both risk-based and minimum capital standards” and “receivership powers necessary to wind down the affairs of a troubled GSE.” (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)
** 2004
February: The President’s FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: “The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator.” (2005 Budget Analytic Perspectives, pg. 83)
February: CEA Chairman Mankiw cautions Congress to “not take [the financial market’s] strength for granted.” Again, the call from the Administration was to reduce this risk by “ensuring that the housing GSEs are overseen by an effective regulator.” (N. Gregory Mankiw, Op-Ed, “Keeping Fannie And Freddie’s House In Order,” Financial Times, 2/24/04)
June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying “We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System.” (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)
** 2005
April: Treasury Secretary John Snow repeats his call for GSE reform, saying “Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system.” (Secretary John W. Snow, “Testimony Before The U.S. House Financial Services Committee,” 4/13/05)
** 2007
July: Two Bear Stearns hedge funds invested in mortgage securities collapse.
August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying “first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options.” (President George W. Bush, Press Conference, The White House, 8/9/07)
September: RealtyTrac announces foreclosure filings up 243,000 in August – up 115 percent from the year before.
September: Single-family existing home sales decreases 7.5 percent from the previous month – the lowest level in nine years. Median sale price of existing homes fell six percent from the year before.
December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying “These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I’ve called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon.” (President George W. Bush, Discusses Housing, The White House, 12/6/07)
** 2008
January: Bank of America announces it will buy Countrywide.
January: Citigroup announces mortgage portfolio lost $18.1 billion in value.
February: Assistant Secretary David Nason reiterates the urgency of reforms, says “A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully.” (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)
March: Bear Stearns announces it will sell itself to JPMorgan Chase.
March: President Bush calls on Congress to take action and “move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages.” (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)
April: President Bush urges Congress to pass the much needed legislation and “modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes.” (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)
May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.
“Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans.” (President George W. Bush, Radio Address, 5/3/08)
“[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator.” (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)
“Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans.” (President George W. Bush, Radio Address, 5/31/08)
June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying “we need to pass legislation to reform Fannie Mae and Freddie Mac.” (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)
July: Congress heeds the President’s call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.
In 2005— Senator John McCain partnered with three other Senate Republicans to reform the government’s involvement in lending.
Democrats blocked this reform, too.
More... Not only did democrats not act on these warnings but Barack Obama put one of the major Sub-Prime Slime players on his campaign as finance chairperson.
UPDATE: The media is not reporting that the failed financial institutions are big Obama donors
“I have no interest in bailing out lenders or property speculators.” --Henry Paulson, October 2007
It means nothing, because it basically amounts to a wish list. Any legislation that emerges from the 100th version of this draft will be filled with all kinds of restrictions, caveats, conditions etc.
That's the way legislation works.
You know, that "Plan" that makes him the King?
His dream draft doesn't make him anywhere near "The King."
Says you.
Let's just wait until the proposal is law and then we can discuss it.
/sarcasm
Example of what we are looking at here:
I once lent a friend $1500 to cover some legal fees for an issue he was handling. He said he would pay me back by the 1st of the following month. I needed the money back by then to pay my house payment. When the first came around, he hadn’t paid me back, and I couldn’t find him to get the money. I was now in the position of not being able to pay my house payment on time.
Considering that I intended well by helping a friend, I demand that you, as taxpayers of the United States, give me the money to make my house payment. If you don’t pay me, I will stick a jalopy up on blocks in my front yard, stop cutting my grass, allow radioactive waste to be stored on my property, and rent my house to illegal aliens.
Who will be rescue by these actions?
While, as you point out, many of these go go Wall St. types may be Democrats, whereas CEO’s of old line companies like Halliburton tend to be Republican, look at what is happening to the old line companies. I own small amounts of GE and PB stock, and they have both dropped substantially in value in the past 6 months. Many old line stocks and their owners are being badly hurt by the current market turmoil, including I suspect our own top Administration people.
Since you mentioned Halliburton, you might be interested in the hearing(?) I heard part of last night on the radio. Iraqis, some at great personal danger, who were working with us on financial accountability in Iraq were telling how their US counterparts generally ignored their attempts to point out fraud and waste. Specific examples were a $24 million prison we insisted on building which the Iraqis did not want and is now abandoned. Who had the contract for that? Also they said many millions have been spirited out of the country to banks in Lebanon, Jordan, and Germany. The questioners were particularly interested to hear about Germany. No US companies were mentioned by name, but someone really seemed to be pulling strings so the whole effort was BUILD, BUILD, BUILD, and cost and usefulness be damned.
The problem is that private investors cannot borrow at LIBOR to fund the purchase of mortgages. No bank in its right mind would lend money that had as underlying collateral precisely what they do not want more of in their own portfolios.
Why do you trust government bureaucrats using taxpayer money to do a better job of valuing mortgage-backed securities than private investors?
I don't. The eventual workout of these loans will be much less efficiently priced than they would be if we allowed every lending institution in the United States to fail.
However, the benefit of the entire US banking system not failing outweighs the loss of several percentage points of net margin on these mortgages.
President Bush also said those same words back in February of 2008. I sure do wish we had a Ronald Reagan again, when he said something you could take it to the bank.
But it is not a depression and we still have a strong market, even if it goes to 8300. In fact we will have the strongest one in the world because we will learn from our mistakes and hopefully throw some fatcats in jail, thus sending a message to future banking folk.
I’m in - I just sent emails to my congress critters.
My rep goes to my church and I’ve never bothered him before..... Looks like that is gonna change...
Emails sent to :Ken Salazar
Wayne Allard
Doug Lanborn
Yes, it is both. It's an abomination unfitting to free people. It's the bastard child of the America's only four term President, the horrid FDR. It is the primary conditioning agent that makes government intervention in everything else acceptable.
I take your point: it's just ANOTHER giant government program, it may not be bigger or worse than other ones. Still the idea of ramrodding it through in a day, the lack of any oversite, is all a very very ugly sight.
Oh man... you nailed it!!!
LLS
Are you sure you know more about the global economy than the economists? Are you really sure?
If the “global economists” constructed a system where “markets work,” then why is there such a lack of faith that markets will work in this circumstance.
These global investment banks have been writing hot checks for years. Now the checks are showing up at the bank, and they don’t have the money to clear them. So they want to point the gun at you and at me, and demand that we put our money in their account to clear the check.
Let them bounce the checks, and the folks who have been responsible investors will have the capital to pick up the pieces for pennies on the dollar. To hell with their franchises!
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