Fannie and Freddie is at the heart of this economic meltdown. Big Media has not done this story justice for it would expose the damaging effect of Big Government intrusion into the free market as the reason for the failure of the economy and that has political consequences. Please do see related links at the end of this article to better understand why Fannie and Freddie is at the heart of our economic woes and you will note that this article like most liberal slanted articles on the subject of Fannie and Freddie do not give you a history and understanding of Fannie and Freddie. You will see why as you investigate.
U.S. Doubles Fannie, Freddie Backing to $400 Billion
By Binyamin Appelbaum
Washington Post Staff Writer
Thursday, February 19, 2009; A06
The federal government yesterday doubled its commitment to Fannie Mae and Freddie Mac, promising to reimburse the companies for up to $400 billion in losses on their investments in mortgage loans.
The massive expansion of the government backstop is a response to mounting strains on the two companies, officials said.
It was announced as part of the Obama administration's broad plan to reduce foreclosures, which will further squeeze the companies' revenue by requiring the pair to refinance or modify millions of loans to lower monthly payments.
And it comes as a souring economy is pushing more borrowers to default. Fannie and Freddie estimate they will need up to $65 billion from the original $200 billion backstop to cover their losses on mortgage-related investments in the second half of 2008.
"It is crucial to maintain confidence in these institutions even under worse-than-expected economic conditions," Treasury Secretary Timothy F. Geithner said yesterday in a statement announcing the new aid package.
The companies, both based in the Washington area, were seized by the government in September to stabilize their role as the main funding source for mortgage lending. Fannie and Freddie buy loans from originators such as banks, allowing new loans to be made before existing ones are repaid.
At the time, the government promised to cover the companies' losses, injecting money in any quarter when the companies' liabilities exceed their assets, up to $100 billion each. Fannie and Freddie raise money from private investors to fund their loan purchases, and the government wanted to reassure those investors that the companies would be able to repay their debts.
Officials said in September that $200 billion was much more money than the companies would need. Officials now acknowledge that won't be enough to calm investors. Yesterday, they said that $400 billion would be much more money than the companies would need.
"Resetting these agreements from $100 to $200 billion each should remove any possible concerns debt and mortgage-backed securities investors have about the strong commitment of the U.S. government to support Fannie Mae and Freddie Mac," said James B. Lockhart III, director of the Federal Housing Finance Agency, which oversees the companies.
The Obama plan also increases by $100 billion, to $1.8 trillion, the volume of mortgage loans the two companies can own. The change has the effect of allowing the companies to sell more debt to raise money to buy additional loans. The administration also said that the Treasury would continue to buy securities created by the two companies, easing the pressure to find private investors. Both moves will tend to reduce the cost of financing mortgages, holding down interest rates for customers.
The expanded backstop was criticized by Republican lawmakers who have long pushed for the government to reduce the size of the two companies.
"Why should we reward Fannie Mae and Freddie Mac with $200 billion in taxpayer dollars without first reforming these housing entities that were at the heart of the economic meltdown?" House Minority Leader John A. Boehner (R-Ohio) said in a statement.
That debate remains in the offing, but the financial crisis has only increased the importance of the companies' health. As other sources of financing disappeared, Fannie and Freddie bought or agreed to buy about three-quarters of all new mortgage loans last year.
Now the companies also will play a central role in the Obama administration's plan. Officials described the effort as requiring sacrifices by private firms, but the greatest costs will be incurred by two in which the government owns an 80 percent stake.
Fannie and Freddie have been instructed to offer up to 5 million refinancings and to modify millions of additional mortgage loans. The plan is intended to benefit the companies in the long term by avoiding defaults on many of the loans, but only by reducing the amount they collect each month.
Staff writer Zachary Goldfarb contributed to this report."
Not only that but I found these interesting articles from mid '08 when the first bailout talks were generating and what effect on the world these two companies have and why at: Global Nightmare: If Fannie And Freddie Had Failed(NPR), Freddie, Fannie Failure Could Be World `Catastrophe,' Yu Says(Bloomberg), Fannie Mae and Freddie Mac rocking the world together again(France24), and Trouble at Fannie Mae and Freddie Mac Stirs Concern Abroad(New York Times). One thing to take careful note as you read all of the above articles is that I don't believe one of them makes mention that Fannie and Freddie are GSE's (Government Sponsored Enterprises and note in the above YouTube video of democrats and republicans arguing over regulation of Freddie and Fannie how they refer to them as GSE's) which is huge on this debate as to whether or not this world economic failure is at root a free-market/private sector or a Government intrusion into the free-market/private sector failure. For more on that see list of related articles at bottom of this blog but first I just found this interesting article at: THE LOOMING COLLAPSE OF EUROPEAN BANKING-02/17/2009
"The banking system of Europe is at the edge of the abyss. A brief story by "The Telegraph" revealed this last week. The original was almost immediately deleted. A new version was substituted.
You can see the original headline on Google:
European banks may need £16.3 trillion bail-out, EC document warns ...
http://www.garynorth.com/snip/790.htm
.......Here is the story, as airbrushed by the editors.
"Estimates of total expected asset write-downs suggest that the budgetary costs -- actual and contingent -- of asset relief could be very large both in absolute terms and relative to GDP in member states," the EC document, seen by The Daily Telegraph, cautioned."
And he ends in part with these comments: "The markets don't reflect this yet."
And now we are 3 to 4 days after those comments and the Dow Jones has ended at 7365.67 which is over 550 points lower since the stimulus package passed. I know the markets are complicated but when you have a company the size of Fannie and Freddie that is so interconnected with the global markets you can't help but to believe there is a connection along with tax cuts and/or hikes and market perception of how Big Government is going to handle this either in a way that is pro-market or anti-market and so far all seems to be against the market from what I can see and the Dow seems to be reflecting that. Ultimately God is in control and whatever happens is because He has planned it and so maybe we just need to start crying out to the Lord for mercy and His help. It seems to me we need His blessing cause right now it appears we are under a curse and maybe justly so.
I have been reading in the book of Judges to my kids each night before they go to bed. Israel would turn from the Lord and the Lord then would put them under an ungodly ruler and then Israel would cry out to the Lord and God would send a deliverer. It seems to be the time to cry out to the Lord for His mercy and trust in His Son and see what happens. If we refuse to cry out why should we not have to endure these woes until we do...
New York Times articles in 1999 and 2003 on the Economy
New York Times not telling you the whole story once again
Media is not giving you the whole Mortgage Crisis story: Fannie and Freddie is Enron x 19/Microsoft Sized Monopoly/Leading Compaign Giver and Lobbyist
The Economy and what Big Media is not telling you...
Freddie Mac and Fannie Mae in 5th grade terms
Found this excellent article on CBNNews.com concering Fannie and Freddie
