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RED ALERT: House to vote TODAY on bailout of Fannie/Freddie!!!
- Jul 23, 2008 at 12:14 PM
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- Comments (9) Total Views (281) Everyone can see this journal post.
WATCH THE VIDEO AND READ THE ARTICLES please - this is essentially a BLANK CHECK which is going to be funded by the American taxpayer for a potentially enormous sum of money to bail out Fannie and Freddie!!!! The Treasury is not allowed to provide aid in excess of the federal
debt limit... so they are going to raise the debt limit by 800 billion
dollars! That's an 8% increase on our current national debt... $250B more than we've spent on the Iraq War... on a bailout! YOU fund the bailout with YOUR tax dollars! CALL YOUR REPRESENTATIVES ASAP!! Bush is not threatening to veto! This bill is expected to pass the House this afternoon! They only have two hours to debate -- with no amendment.
$800 billion/300 million men, women and children in the US = $2,600 per person, $10,600 per family of 4
What do you think that this will do to the value of your dollar? What happens when the "assets" that the government (YOUR taxpayer dollars) are backstopping are discovered to be worthless? What happens when the government itself takes on financial risk?
http://www.fedupusa.org/ <---- read me!
http://www.c-span.org/ <---- live coverage
US House To Proceed With GSE Help, Housing Legislation
(Updated to include outcome of House Rules Committee meeting, comments from Reps. Frank and Bachus)
By Michael R. Crittenden
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--The U.S. House of Representatives will vote Wednesday on a massive package of housing legislation that includes foreclosure relief and a proposed federal backstop for Fannie Mae (FNM) and Freddie Mac (FRE).
The House Rules Committee on Tuesday evening approved a rule allowing debate on the bill in the House. Lawmakers will debate the bill on Wednesday for two hours, with no amendments to be considered. Despite the objections of Republicans on the committee, House Rules Chairman Louise Slaughter, D-N.Y., said Tuesday that "to allow amendments on the bill would kill the bill."
The legislation has been the source of constant negotiations in recent weeks between House and Senate lawmakers, the Treasury Department, and other federal financial regulators. When asked whether the two lead Senate negotiators - Sen. Christopher Dodd, D-Conn., and Sen. Richard Shelby, R-Ala. - had agreed on the legislation the House will vote on, Frank said they had.
"Yes, an official sign-off," Frank said.
Dodd and Shelby, however, refused to endorse the version Frank was bringing before the House in a joint statement issued late Tuesday evening.
"We have been working diligently for months on legislation to address the housing crisis. Last week we sent legislation to the House. Since then, we have been engaged in extensive and largely fruitful discussions with our counterparts in the House of Representatives, as well as Administration officials," the statement said. "We remain optimistic about the prospects for this legislation."
The legislation the House will vote on includes a regulatory overhaul for Fannie Mae and Freddie Mac, changes to the Federal Housing Administration, and a $300 billion program to offer federal insurance on refinanced mortgages.
It will also include a dramatic proposal by Treasury Secretary Henry Paulson to provide a temporary federal backstop for Fannie and Freddie in the wake of concerns within the capital markets about the firms' solvency.
Frank, Dodd, Shelby, Paulson and their staff have been meeting and in contact almost constantly in recent days to iron out the details of the legislation. Frank told reporters a handful of details about the legislation the House will vote on, including the idea that any help for Fannie and Freddie would be counted against the federal debt limit.
Additionally, Frank said it will allow the firms' regulator to approve authority over Fannie and Freddie's executive pay packages, and would set the size of loans Fannie and Freddie can purchase - also known as the conforming loan limit - at $625,000. Frank said lawmakers are talking about including a 115% "escalator" clause for certain metropolitan areas that would allow the firms to buy loans above the median home price in those cities.
Regarding the temporary federal backstop for Fannie and Freddie, Frank said lawmakers won't mandate, but will give the Treasury Secretary the discretion, to delay their dividends among other emergency authorities. He also said lawmakers won't require that any Treasury stake in the firms be in the form of senior preferred shares.
"We will give the Secretary authority but not mandate because we're playing games here with the capital markets and we don't want (Fannie and Freddie) to say 'Well I couldn't raise capital so you have to buy the stock.' We'd rather have (the private market) buy the stock," Frank said.
He said lawmakers may also raise the federal debt limit, which currently sits at $9.8 trillion, to $10.6 trillion as part of the legislation, Frank said.
"I believe it will be raised in this bill," Frank said.
Earlier Tuesday, the non-partisan Congressional Budget Office said the proposed backstop for Fannie and Freddie could cost federal taxpayers $25 billion, though it set the chances the program will ever be used at less than 50%. [SEE NEXT ARTICLE]
It is unclear whether the White House would veto the bill, despite public threats to do so. The top Republican on the House Financial Services Committee, Rep. Spencer Bachus, R-Ala., said Tuesday that the Bush administration has "given every indication they will sign the legislation."
Frank also expressed doubt that the White House would veto the bill.
"For people who say they are going to veto the bill, they spend an awful lot of time negotiating details," Frank said.
Bachus himself did not say on Tuesday whether he would support the bill, but criticized the backstop provision for Fannie and Freddie.
"We are giving the executive branch pretty much carte blanche," Bachus said.
A Mortgage Rescue Strains Calculations
By DAVID M. HERSZENHORN
Published: July 23, 2008
WASHINGTON — The proposed government rescue of the nation’s two mortgage finance giants should appear on the federal budget as a $25 billion expense, the independent Congressional Budget Office said on Tuesday, but officials conceded that there was no way to really know what, if anything, a bailout might cost taxpayers.
The budget office said the chances were better than even that a rescue would not be needed before the end of 2009 and would not cost any money. But the office also said there was a 5 percent chance that the mortgage giants, Fannie Mae and Freddie Mac, could lose $100 billion.
Lawmakers said that the $25 billion cost would not have to be offset with spending cuts or tax increases as would normally be required by “pay as you go” budget rules, and instead would be regarded as emergency spending and added to the national debt.
The budget office, while acknowledging that the $25 billion was, at best, a rough estimate, did not explain fully how it came up with the figure. The office said it analyzed the companies’ financial statements and consulted with regulators, analysts, market participants and the companies themselves to estimate possible future losses and the amount of any cash injection that might be needed from the Treasury.
The full $25 billion cost would appear on the government’s books in both fiscal years 2009 and 2010; the Treasury’s authority to aid Fannie and Freddie would expire at the end of 2009, or one-fourth of the way into fiscal 2010.
Senator Jim DeMint, Republican of South Carolina, said lawmakers were generally supportive of the overall rescue plan, but he added that he had doubts about the $25 billion estimate. “Everyone knows it’s just a wild guess,” Mr. DeMint said. “We are either going to spend zero or we’re going to spend a whole lot more than they are talking about.”
The House is expected to vote as soon as Wednesday on housing legislation that includes the proposed rescue plan. The housing bill would also raise the national debt limit to $10.6 trillion, an $800 billion increase.
The higher debt ceiling gives the Treasury more room to aid the mortgage companies, but it could also stir opposition among fiscal conservatives.
Tony Fratto, a White House spokesman, said Tuesday night that the bill was being reviewed by the White House, which has objected to a provision providing nearly $4 billion in grants to local governments to buy and rehabilitate foreclosed properties.
“It’s clear that the Democrats chose to play politics with the legislation, and it’s unfortunate that they’re doing it with legislation that will prevent systemic risk to our financial system,” Mr. Fratto said.
In a letter to the House Budget Committee chairman, John M. Spratt Jr., Democrat of South Carolina, the director of the budget office, Peter R. Orszag, predicted “a significant chance, probably better than 50 percent, that the proposed new Treasury authority would not be used before it expired at the end of December 2009.”
But Mr. Orszag, at a briefing with reporters, acknowledged that pinpointing the eventual cost of the package was impossible. “There is very significant uncertainty involved here,” he said.
The uncertainty runs in both directions, with some government officials and market analysts suggesting that Fannie Mae and Freddie Mac are fundamentally sound and will perform well over the long term — a point that was emphasized again on Tuesday by the White House and by the Treasury secretary, Henry M. Paulson Jr.
Others, including some private equity managers, are pessimistic and predict heavy losses.
The rescue plan, put forward last week by Mr. Paulson, would give the Treasury temporary authority to shore up the mortgage companies, either by extending credit or by purchasing equity in the companies, which are publicly traded.
The price of Fannie Mae shares closed at $13.41 on Tuesday, down 72 cents, while shares in Freddie Mac closed up 95 cents at $9.70.
“This bill requires an emergency designation before one dollar of federal funding can be used,” Representative Mike Ross, Democrat of Arkansas and a leader of the fiscally conservative Blue Dog coalition, said in a statement. “We are clearly facing an emergency situation and we must act now in order to secure the financial future of millions of homeowners.”
Mr. Orszag said that the analysis by his office did not distinguish between the different forms of aid that might be offered — a credit line or a stock purchase — and that it had no way to know under what circumstances help would be extended.
At the briefing, Mr. Orszag said his office expected that help would be offered if the mortgage giants experienced credit losses beyond the $85 billion in losses they have already recognized on their balance sheets as well as other losses they have not yet had to recognize.
Mr. Orszag said that the analysis showed no short-term potential financial benefit for taxpayers even if Fannie Mae and Freddie Mac performed well. But he said the analysis found substantial risk for taxpayers if the companies had steep losses. He would not say if his office had analyzed the implications of a full government takeover of the companies.
How much the government will end up spending on a rescue, if one is needed, would depend on many factors, he said, including sentiment on Wall Street. “A key question becomes, How does the market view the entities?” he said.
Fannie Mae and Freddie Mac are commonly referred to as government-sponsored entities. They were established by Congress, and their debt and other obligations have always carried an implicit guarantee that the federal government would step in to save them if they were ever in danger of collapse.
The rescue proposal has made the guarantee of government backing more explicit, and Mr. Orszag said that the government’s assurance that it would not let the companies fail would have to be included in any analysis of their long-term financial prospects.
The budget office projection also includes a sobering assessment of the mortgage companies.
Under generally accepted accounting principles, Mr. Orszag said that the net worth of the mortgage giants at the end of the first quarter of 2008 was about $55 billion. He also said that the companies were considered to be “adequately capitalized” by the Office of Federal Housing Enterprise Oversight, which regulates them.
But on a fair value basis — or what the companies’ assets would fetch on the market today — the value of the mortgage companies’ assets exceeded their liabilities at the end of March by just $7 billion, a thin cushion considering that their total debt is $1.6 trillion. That explains why there have been numerous calls for the companies to raise additional capital.
Comments:
Ugh - I didn't get this until just now. I'll try to put in a call anyway (once I track down how the vote went).
They have not voted yet!
That felt good. I called my representative's office....
...and voted this journal popular.
It passed. 272-152. The Senate votes on Friday or Saturday. It's not over, yet!
Dang, it passed by that big of a margin? What is happening to our government???
since when does the government care so much that these businesses are going to lose all that money? Outrageous. I missed this until today. Thanks for providing me with yet another reason to move out of country and to a farm where we'll be subsistence farming.
I just so happen to be finally reading the book "Cold Mountain" after seeing and loving the movie, and reading about how the economy was collapsing during the Civil War and about how money wasn't worth anything, but bartering was, and how to have a self-sufficient farm which I think Americans would benefit from learning about during these times.
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I've contacted them. I tried getting ahold of some friends to call as well.
- VaillanteFemme
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