Friday, March 7, 2014

F&F's way out of conservatorship will require action in congress

Govt should not be an investor. It sets a bad precedent. If the govt were an investor, like buffet, everyone would flock to the investment, like buffet. The govt needs to exit this. but how?

well the govt has been paid in full plus billions. They need to protect the "investors" AKA bond market for fannie and freddy MBS. THIS IS THE END GAME.

the whole explicit, not explicit backing of the GSE needs to be resolved. 

The govt cannot exit until there is a backstop in place as to draw "investors", bonds, into feeling safe in buying MBS. while in conservatorship the govt is propping up the GSE's not by the conservatorship but by buying bonds in them , and making a profit, for as much as 80 billion a month. Do you guys see the real money trail now? 

In order for the govt to exit the bond market, which it trying to do, they need private investors, banks, foreign govt, private investors to buy MBS instead of them! in order for this to happen they need to make bond buyers feel safe. bond buyers will not buy and pay 10% cut in their money. bonds give a safe return, unlike stocks. So there needs to be protection for them, or they wont buy. 

The govt will write a backstop into the duties of the FHFA. The FHFA will collect a fee for the "insurance" it provides to the BONDS and to F&F. The backstop will NOT allow BANKS to roll their mortgages directly into the bond market as corker and warner would. This is foolish and would eliminate the safety of the middle men that F&F provide. The Banks will be the ones paying the 10% first loss so that F&F are never in need of a bailout again and the taxpayer will be protected. The banks caused the 2008 bubble and F&F saved the economy. 

This is how this plays out, and when it does. F&F will be free, And the taxpayer and bond holder will be protected from the banks Fraudulent actions of 2002-2008 that caused this crisis.

Do not let anyone tell you the banks will take over for F&F in the market. This is a lie. If 2002-2008 has taught us anything, its that the banks cannot be trusted to run the mortgage market. Look at bear sterns and all the fraud in the PLS market! Alt A and subprime loans were rampant and these caused the bubble and the crash. bear sterns went belly up. but the bonds had to be paid, by AIG, is how they paid. the PLS market was 60% in 2006 of the mortgage market, now in 2014 it is less than 1%. Fannie and freddie and ginnie are 99% now in 2014. These are the facts. The secondary mortgage market is needed and private SMM cannot be trusted, there needs to be a GSE middle man to do the work of keeping everyone honest. Govt cannot regulate it alone, as seen in 2008. govt already regulated in 2002-2008 and we all know how that ended. Fannie and Freddie have done a great job for decades and will do a great job in the future.

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