Saturday, May 19, 2012

Fannie and Freddie, who could have predicted?

Watching this video and thinking about the dangers of government picking winners and protegees. Some links below (Interesting how we can use the term "deregulation" on government-sponsored, crony capitalist entities)

link para o vídeo no Youtube

The Velvet Fist of Fannie Mae - New York Times -- April 20, 1997

Fannie Mae's fearsome reputation has created the impression in Washington that Mr. Johnson can squelch any meaningful debate over the company's relationship with its Government benefactor. That debate encompasses a regulatory review of whether Fannie Mae should put aside more capital to protect taxpayers against the risk that a ruinous economic spell or mismanagement could lead to a Federal bailout.

Homeowners Record Is Set in Third Quarter - New York Times -- November 01, 1997

In 1995, seeking to save his department from elimination by the newly elected Republican-led Congress, Housing Secretary Henry G. Cisneros adopted a ''national homeownership strategy'' that eased requirements to qualify for Federal Housing Administration-insured loans and reduced closing costs by as much as $1,200 on those loans for first-time buyers.

A Homecoming At Fannie Mae; Franklin Raines Takes Charge Of a Most Political Company - New York Times -- May 17, 1998

Because much of its success can be tied to financial advantages stemming from its roots as a Government agency, Fannie Mae has a huge interest in holding off political attacks on its franchise. Indeed, the company plays hardball politics with tremendous sophistication to defend its interests.

Fannie Mae Eases Credit To Aid Mortgage Lending - New York Times -- September 30, 1999

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. (...) By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Big-City Paydays At 'Farmer Mac' - New York Times -- April 28, 2002

Farmer Mac is the country cousin of two much better-known government-sponsored entities, Fannie Mae and Freddie Mac. Always far bigger, and growing by the day, they have spawned a cottage industry of critics who deride them as costly examples of government do-goodism that could backfire on taxpayers if their implied government guarantees were ever tested. (...)

Wall Street analysts pitch the stock as a ''toddler'' Fannie or Freddie, invoking two names that have made fortunes for investors. Farmer Mac does enjoy many of the same perks. It is exempt from most state and local taxes. Most of all, it pays just over half a percentage point more than the United States Treasury when it borrows. (...)

In 2000, after Mr. Baker proposed overhauling government-sponsored enterprises, Fannie Mae and Freddie Mac swamped Congress with donations. He soon lost every one of his co-sponsors, according to an aide, and could not get legislation out of his subcommittee. Farmer Mac's spending on political gifts and lobbyists pales next to that of Fannie Mae and Freddie Mac.

2 Big Mortgage Agencies Pressed To Buy More Low-Income Loans - New York Times -- May 12, 2004

The companies have not publicly opposed the changes, which will take effect on July 2 unless the administration rescinds them. But they are quietly worried that they will be unable to meet the new goals unless they refuse to buy some loans from people making more than the median income, in effect slowing their growth. (...)

While the companies are privately owned, they have a special relationship with the government, including a line of credit with the Treasury Department. As a result, investors believe that the government would never allow the companies to fail, and so Fannie Mae and Freddie Mac can borrow at lower interest rates than other financial institutions.

The New York Times > Business > Fannie Mae Crisis Raises Concerns on Leadership -- September 29, 2004

Before the the problems surfaced at Fannie Mae, both men were considered to be high on the short lists for top administration jobs should Senator John Kerry prevail in the November presidential election.

A Coming Nightmare of Homeownership? - -- October 3, 2004

Since regulators disclosed evidence of widespread accounting improprieties at the company, which carries almost $1 trillion in mortgages on its books, the response from the financial markets has been surprisingly muted. (...)

So far, Fannie Mae's rarefied status as a government-sponsored enterprise has certainly helped holders of its debt stay calm. (...) Thanks in large part to Fannie Mae's torrid growth, the market for mortgage securities now surpasses that for Treasury securities.

Chief Is Ousted At Fannie Mae Under Pressure - -- December 22, 2004

In recent years, some industry and government critics, including Alan Greenspan, the chairman of the Federal Reserve, have sought to have Fannie Mae's privileges removed. They say the company could pose a significant risk to taxpayers if it became troubled. And the White House, concerned about any political fallout if Fannie were to stumble, has declined to make 5 appointments to the 18-member board.(...)

In the process, it has built a steadily profitable business for shareholders and enriched its top executives. Together with a smaller brother company, Freddie Mac, it holds or guarantees more than $7 trillion in mortgages.

Report on Fannie Mae Cites Manipulation to Secure Bonuses - New York Times -- February 23, 2006

Investigators have uncovered new evidence that senior executives of Fannie Mae, the nation's largest buyer of home mortgages, manipulated its accounting in the 1990's to meet earnings projections so that top executives could receive more than $25 million in bonuses.

1 comment:

  1. And if I understood correctly, this is what Brazilian president Dilma Roussef is trying to do:
    From the text:

    "Todo ello va a costar al BNDES, es decir, a las arcas públicas, más de mil millones de euros. Según el ministro de Economía, Guido Mantega, ello supondrá, por ejemplo, una bajada de un 10% en el coste de la compra de coches a particulares.

    La orden de Dilma es “abrir el crédito” en los sectores que lo necesitan, como por ejemplo en la construcción inmobiliaria. “Vamos a seguir ofreciéndolo donde sea necesario”, confirmó ayer."


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