Investors cheer as Treasury promises more free money to Fannie, Freddie

[rfranklin]

Dec. 28, 2009, 11:06 a.m. EST

Fannie, Freddie shares rocket on Treasury
By John Spence, MarketWatch
BOSTON (MarketWatch) -- Shares of mortgage-finance giants Fannie Mae and Freddie Mac were up nearly 20% in early trading Monday as investors reacted to news the U.S. Treasury Department will provide as much assistance as the companies need over the next three years.

On Christmas Eve, the Treasury said it lifted the cap on aid to Fannie and Freddie, which were placed into government conservatorship in 2008.

The Treasury said it will amend the terms of its agreements with Fannie and Freddie "to support their ongoing stability." Amending the agreements "should leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis," it said in a statement last Thursday.

http://www.marketwatch.com/story/financial-sector-flat-but-fannie-freddie-soar-2009-12-28

[clear eye]

1. And Congressional powers are further usurped

continuing what Bush/Cheney began.

[amborin]

2. "Unlimited Bailout"

http://www.economicpopulist.org/content/fannie-mae-freddie-mac-get-unlimited-bail-out



"What a time to bury a press release,Christmas Eve, the headlines awash on health care bill Senate passage. Well, some of use are wired to God and despite cooking pomegranate glazed ducks and wrapping presents, we're not asleep at the wheel!

To find the juice, one must even look between the lines of the U.S. Treasury Press release:

Treasury is now amending the PSPAs to allow the cap on Treasury's funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years. At the conclusion of the three year period, the remaining commitment will then be fully available to be drawn per the terms of the agreements.The cap was $400 billion dollars. Previously, Fannie Mae and Freddie Mac requested $800 billion dollars in available bail out money. Now, it's unlimited.

Treasury is also amending the PSPAs to provide Fannie Mae and Freddie Mac with some additional flexibility to meet the requirement to reduce their portfolios. The portfolio reduction requirement for 2010 and after will be applied to the maximum allowable size of the portfolios – or $900 billion per institution – rather than the actual size of the portfolio at the end of 2009.Note that the Treasury and Federal Reserve stopped buying mortgage backed securities. Current Fannie/Freddie holdings are each about $760 billion. Now is this yet another free money to Goldman Sachs and other large institutions to get them to buy toxic MBSes from Fannie and Freddie? They can now hold onto this toxic waste for 3 years instead of 2010.

Treasury will delay setting the Periodic ......"

[Nikki Stone1]

3. No more no less than a heist.

:(

[amborin]

4. and "An Inside Job" at that:

"What a surprise, it's not what you know, but who you know especially if you want billions in free money to cover your screw up.

A new study from University of Michigan Professors Ran Duchin and Denis Sosyura found that the financial institutions who has the strongest political "ties" received the largest bail outs.

Duchin and Sosyura focused on the Capital Purchase Program, the largest TARP initiative in terms of the number of participants and the amount of expended capital. As of late September, nearly 700 financial institutions had received about $205 billion under the program....."

snip

http://www.economicpopulist.org/content/bank-bail-outs-proved-be-inside-job


(which we already knew)

[Nikki Stone1]

5. It's a pay to play system, isn't it.

We're in the twilight of America, that's for sure.

[amborin]

7. yep; and what about John Dugan? article:

"John Dugan, currently serving as Comptroller of the Currency, hasn’t gotten nearly as much attention as his fellow architects-of-disaster Rubin, Summers, and Greenspan. But Zach Carter’s latest article in The Nation makes it clear that this man deserves a prominent place in the Deregulation Hall of Fame. Dugan, as much as anyone, gets credit for knocking down the wall between banking and commerce that sank the country into financial chaos.

Dugan’s dubious career started at the Treasury in 1989, when he wrote an influential book on deposit insurance. Carter writes:

Published in 1991 under the mundane title Modernizing the Financial System: Recommendations for Safer, More Competitive Banks, Dugan’s tome became known as the Green Book, and it established him as one of the earliest architects of the “too big to fail” economy.

In addition to writing what essentially became the Bible of Deregulation, Dugan had his hand in several disastrous policies that got the banking industry into the kind of speculative activities that turned Wall Street into a casino. As Carter explains:

His first objective was to allow banks to expand into multiple states without incurring additional regulatory oversight. His second, more radical goal was to allow relatively safe commercial banks to merge with riskier investment banks and insurance companies. And his third, most extreme initiative was to allow commercial firms–General Electric, Sears–to purchase a bank.

His most recent escapades include distorting the history of the subprime mortgage disaster and trying to block consumer protection. His term is up in August 2010, and from the perspective of those interested in serious financial reform, that’s not a moment too soon. As Carter puts it, “given Dugan’s record, it’s hard to see why he has been allowed to stay on the job for Obama’s first year. It is not customary for the president to discharge the comptroller in the middle of his term, but he does have the legal authority to do so.” Isn’t it time to get rid of the bad blood and chart a new course for America’s economy?
"

snip

http://www.newdeal20.org/?p=7092

[Greyhound]

6. What a perfect "solution".

Make the taxpayers pay to prop up the artificial housing prices. Our wealth remains intact at the new values, we take no risk, and the suckers we stole it from pay us to for the privilege.
:woohoo:

[Stinky The Clown]

8. If critics are being asked by supporters to be quiet and wait ...... and they do that .....

.... will this sort of thing stop?

If that were the case, I'd shut up in a heartbeat.