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>Tim Geithner Hasn’t Changed: New Plan To Eliminate Freddie and Fannie Would Cost As Much And Our Treasury Secretary Hasn’t Got A Clue

>From the American Spectator:

The Administration’s Options for Ending Fannie and Freddie

Posted by Joseph Lawler on 2.11.11 @ 2:35PM

Today the Treasury released a report on options for reforming the housing finance market, and specifically for winding down Fannie Mae and Freddie Mac. Secretary Tim Geithner has suggested that the plan is to end Fannie and Freddie in the next five to seven years. 
The report includes three possible options for winding down Fannie and Freddie, which have already cost the taxpayers hundreds of billions of dollars in bailouts. The Atlantic‘s David Indiviglio has summarized those three paths, all of which, he thinks, “were variations on a clear theme: the government’s role in the housing market will be sharply reduced once a new policy is adopted.”
Although the winding down of Fannie and Freddie is a good thing, the report itself is a little short on details. Cato’s Mark Calabria writes that it is short on “real details,” and doesn’t address the fundamental problems of government intervention into the housing market: 
…in many areas, the report makes clear that the Obama administration intends to keep the taxpayer on the hook for future losses arising from Fannie and Freddie. For instance, after assuring us that the GSEs will have sufficient capital to meet their obligations, including debt, the report tells us that such capital will not come from investors, but from the taxpayer. One has to wonder whether this report was written for the benefit of the Chinese Central Bank (one of the largest GSE debtholders) or for the benefit of the U.S. taxpayer.
Arnold Kling is thinking along the same lines: 
Incidentally, the more I think about it, the more outraged I am by the sketchiness of their proposal. It takes up only a few paragraphs, and those are quite vague….
This puts me in the strange position of defending Freddie and Fannie. My first choice would be for government not to hand out any goodies. But if you are going to have the government hand out goodies, the ability of regulators to control the costs and mitigate the risks will be much greater if we revert to Freddie and Fannie than if we try something new. Under any arrangement, the hard part will be what I call “staying off the booze,” meaning keeping the government from guaranteeing riskier mortgages (second mortgages, cash-out refis, loans on investment properties, loans with low down payments, etc.) when house prices start rising again.

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>We Need McCain-Palin To Clean Up Washington

>

September 8, 2008

By Don White

Orlando, FL—In a previous post today I asked some pertinent questions about the government takeover of Fannie and Freddie. I have studied the questions and now it’s time for some answers.

Question One Through Three: I asked why Bush and Secretary Paulson hadn’t come on prime-time national television to explain both what they did and where we’re going. I can’t answer why they haven’t appeared, except to conjecture that they haven’t the slightest idea of where they’re going.

That being the case, may I offer some advice. America is not a socialistic country. Taking over a function of the private enterprise should not become a habit. In fact, there is a way to reverse this “error” and to do it right.

The president should announce that Fannie and Freddie will be chopped up into several—maybe two dozen—small private mortgage guarantee companies completely disassociated from the government. They would be private companies capable of purchasing mortgage paper just as the F&F twins do right now. Except, there will be one huge difference. Never again will the American taxpayer be placed on the hook for failure of a mortgage guarantee company. These companies must buy good paper, loans that will have expectation of full payoffs.

That means banks and mortgage companies must cease operating like they have in the past, That is, offering credit to people who have no expectations of paying their mortgages each month. That’s precisely what got us into this mess. The sub-prime mortgage business was booming and someone was making some money, but it sure wasn’t Mr. And Mrs. John Q Public. They are only the sad goats of all this nonsense. “Nonsense” is too kind a word.

What banks, mortgage companies, Freddie Mac and Fannie Mae did was outright criminal and someone should go to jail. But I would rather someone other than taxpayers foot the bills, which I estimate could range from $50 billion to $200 billion.

What that will result in is a big tax increase for everyone. Oh, lawmakers will delay the impact. Paulson will merely print some more money and our buying power will take a beating commensurately because the Chinese will exact an arm and a leg for future financing, knowing our paper just depreciated ten percent.

Who is at fault? The Democrat high rollers and their slush funds.

“What? Why do you people always blame the Dems?” we will hear from the liberal left.

“Because they’re at fault, especially in this one,” I’ll reply. There were a lot of conservative financial gurus who saw this coming. They warned politicians on both sides of the isle what was coming down. They said we needed a vast cleanup of the financial mess in this country. But strong Democrats always stood in the way of reform—people like Rep. Barney Frank (D-MA), Rep. Charles Rangel (D-N.Y.); Byron Lewis Sr., chairman & CEO Uniworld Group; Sanford Weill, chairman & CEO Citigroup and H. Carl McCall, New York State Comptroller, and Richard A. Grasso former chairman of the NY Stock Exchanges, and benefactors of Jesse Jackson’s Rainbow/Push Coalition.

Big money went to fake do-good concerns like Acorn and the Open Society Institute — an institution committed to George Soros’ militant ideology of toppling the “fascist” tyranny of the United States, which he says must undergo “de-Nazification” in favor of “justice.” As writer Michelle Malkin said, “The mob at Obama-endorsing MoveOn, purveyors of the “General Betray Us” smear against Commanding General, MNF-I, David Petraeus, is the most notorious Soros-backed political arm. But scores of other activist nonprofits have received Soros funding under the guise of doing nonpartisan “community” or “social justice” work — and it is exactly such leftist activist groups that would be first in line for the Democratic Party/Obama’s “social investment” seed money.”

Point in case: ACORN. As I’ve reported before, Obama’s old friends at the Chicago-based nonprofit now take in 40 percent of their revenues from American taxpayers. They raked in tens of millions in federal antipoverty grants while some of their operatives presided over massive voter fraud and others were implicated in corporate shakedowns and mortgage scams across the country. Soros has donated at least $150,000 to the group, according to Investor’s Business Daily, and “heads a secretive rich-man’s club called ‘Democracy Alliance’ that has doled out $20 million to activist groups like ACORN.”

Substituting for Rush Limbaugh today (September 8, 2008), Jason Long said the reason Republicans haven’t been able to clean up the partisan “waste” in Freddie Mac and Fannie Mae financials is because certain powerful democrats didn’t want it cleaned up. He said one of the reason these institutions were not well enough funded to handle the unusually high number of mortgage note failures is because they had donated their “rainy-day funds” to Acorn, the Open Society Institute and other Democrat social investment groups—and he mentioned $400,000 and $600,000 going to these two groups in a given year, and there are more. It’s kind of like Jesse Jackson’s Rainbow Coalition that sucked The New York Stock Exchange for hundreds of thousands of dollars each year until scandal caused its leader to be discredited and fired.

Once the spigot is turned on, there’s no plugging it up.

The McCain-Palin ticket has promised to reform Washington. This is just the place to start putting people like Frank and Rangle out of business.

I doubt there will even be indictments, but there should be.

To Sum it Up, here are the answers to this mornings Post:
Orlando–Secretary of Finance Henry Paulson has some tall explaining to do. The American taxpayer demands it. He recently took over Fannie Mae and Freddie Mac, ousted their president and CEO and assumed management of two very poorly financed and managed companies.

First, President Bush and Paulson should come on national television and explain these actions. In a free country with a market-driven economy what the administration did is tantamount to something you hear about in dictatorships, not in America. Here’s what they could say:

While it’s true that “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil . . at home and around the globe,” we need to turn Washington upside down. We need to get rid of corrupt politicians and get the U.S. government out of the mortgage guarantee business. McCain and Palin are just the people to do it. This is part of the reason liberal congressmen like Barney Frank insist on criticizing Sarah Palin and believe even her family is fair game. She could hurt Barney and his kind, and hurt him bad!

I strongly suggest we chop up Fannie and Freddie and don’t guarantee any more loans. The good will of the taxpayers is fragile. It won’t take much more of this bailout and guarantee stuff to create a real taxpayer revolt in America.

But by the same token, I believe THIS LAST TIME a bailout is necessary. “A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business financing. And a failure would be harmful to economic growth and job creation,” Hank Paulson said. We know that, but why wasn’t action been taken sooner? Just reorganize the whole thing differently to insulate and protect American taxpayers in the future

I still ask question two. Lest you forgot, here it is again:
Question Two: If things are so bad, why didn’t you (Bush Administration) see it coming? Why did you wait so long to take such drastic action? Is someone in Washington falling asleep? Why weren’t the Democrats calling for Bush to do something before now? The answer to that is the graft they were aiding and abetting. It was to the Democrats’ best interest to look the other way and they did. In a real sense, you could say the Democrats caused this whole mess, and that is true; but that, too, would be an oversimplification of a complex problem.

Question Three: How much? How much is this going to cost you and me, Mr. and Mrs. American taxpayer? Why doesn’t anyone have a handle on the costs? Or is it so bad you can’t face us with the facts? Come on, George Bush, you owe a full accounting, and not next week but right now. Someone knows precisely how bad things got. Someone also knows how much it may cost the U.S. taxpayers. Freddie Mac alone will cost the American taxpayer more than $12 billion. I’m still estimating the whole mess could cost us $50 billion to $200 billion. Whoops! Barak Obama, there went your big money you were going to give to Africa. We just don’t have it anymore. You and your fellow Dems stole that money and more from the taxpayers long ago...


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