Instead of 'shovel ready'

Interesting days on the financial side of things, no?

Take, for example, Fannie Mae's draw on the US Treasury after a $14.8 billion loss (Source: Al Yoon, 05 AUG 2009 at al-Reuters):

NEW YORK (Reuters) - Fannie Mae, the largest provider of U.S. home mortgage funding, on Thursday reported a $14.8 billion quarterly net loss that it said would force it to go to the U.S. Treasury trough a third time for money to stay in business.

The company noted a "significant uncertainty" of its long-term financial health in reporting its eighth consecutive quarterly loss, which illustrates its struggle to make money in the face of rising defaults and pressure to do more to stabilize the housing market.

Say, isn't Fannie Mae supposed to be one of those lovely government backed organizations that does so much 'good' for borrowers? If so, then what is up with the big, bad nasty loss after the 'stimulus'?

Ah, just a drop in the bucket that, after all...

How about Freddie Mac? Doing great, huh?

From Trading Markets, 07 AUG 2009 we can find that Freddie is turning a profit:

(RTTNews) - Friday, government-sponsored home mortgage finance company Freddie Mac (FRE Quote Chart News PowerRating), reported a swing to profit in the second quarter of 2009 from a loss a year ago, driven by higher net interest income reflecting a $4.2 billion gain on its derivative portfolio. On account of funding commitment to the Treasury Department, Freddie Mac has paid out a dividend of $1.14 billion on the its senior preferred stock. The dividend payment has left Freddie Mac with a loss attributable to common shareholders, however, one that narrowed from last year. Further, the mortgager noted that it would not request any additional financial support from the federal government. Freddie Mac indicated signs of slowing in home price declines, however, remains cautious due to rising foreclosures, growing unemployment, tight lending standards and buyers' reluctance to re-enter the market.

The McLean, Virginia-based company reported that its second quarter net income attributable to the company totaled $768 million, compared to a loss of $821 million in the prior-year quarter.

The company paid out a dividend of of $1.14 billion to the U.S. Department of the Treasury on the senior preferred stock during the second quarter.

After the dividend pay out, Freddie Mac posted a loss attributable to the common shareholders of $374 million or $0.11 per share, compared to a loss of $1.05 billion or $1.63 per share in the same quarter last year.

Oh, it only moved in a profitable direction. It still posted a loss after getting Treasury help. And from that nasty 'derivatives' sector that everyone decried from SEP to DEC 2008, you remember the folks who supposedly played lots of games with the market? Well Freddie Mac is helping them to do that, it appears.

That must mean all is going swimmingly with FHA, right?

From Friday Morning Federal Newscast at Federal News Radio 18 SEP 2009:

The Federal Housing Administration, hit hard by the mortgage crisis, is in need of a cash infusion. For the first time, cash reserves will drop below the minimum level set by Congress according to FHA officials. The FHA part of Housing and Urban Development insures mortgages against losses and guaranteed about a quarter of all U.S. home loans made this year. The Washington Post reports rather than raise fees or go to Congress for a bail out the agency is considering a proposal that would require banks and lenders to keep a million dollars in capital to repay the agency for losses due to fraud to make up the shortfall.

Say, instead of asking others to cover for the FHA, how about taking the regulations off the books that allow people with No Income, No Jobs or Assets (NINJAs) to get loans? That might help a whole lot more by getting creditworthy borrowers into the system and ease the un-creditworthy ones out as they default on loans.

Do remember that one of the groups to push for that was ACORN Housing Affordable Loans, LLC, with the help of many:

"Bank of America is proud to participate in the launch of ACORN's mortgage brokerage," said Glenda Gabriel, Bank of America Neighborhood Lending Executive. "Working with ACORN, this valuable partnership will make Bank of America's suite of safe and affordable mortgage products more accessible to first-time homebuyers interested in achieving the American dream of home ownership."

"Over the last 12 months, we have worked diligently together to get ACORN established as a broker, provided training and support as they set up their broker operations and strategy. The launch today is a culmination of these efforts. We are proud to announce this alliance with Acorn Housing Corporation," said Danny Gardner, National Director of Strategic Markets for CitiMortgage. "In the current climate, we feel the mortgage products we are offering through this relationship will not only help first-time homebuyers looking for a home but also may help those faced with rising mortgage payments."

"First American Title has been a committed partner in the industry in serving low-to-moderate income and multicultural families in achieving the American dream of homeownership. We are happy to take another step forward with this partnership with ACORN Housing Corporation, " said Lionel Savage, Vice President for Lender Services and Industry Relations, First American Title Insurance Company. "First American Strategic Markets is fully equipped with assisting in this partnership with our multicultural escrow and closing services and tools that directly address the need for education about the homebuying process amongst the multicultural community."

"Fannie Mae is proud to work with ACORN Housing, " said Thomas Collins, Director, Single Family Business, and Fannie Mae. By working with ACORN and lenders like Citibank, we can support their efforts to expand homeownership opportunities for underserved communities at affordable price points achieve sustainable homeownership."

Yup and the ACORN folks are a small business by the SBA rules on such, so can get preferential treatment! It has truly taken a great number of swell hearted fools handing out federal money hand over fist, no money down, low interest for the first year, no questions asked to get the mortgage sector into this mess.

But 'cash for clunkers' was a glorious success, no?

From Gary E. Sattler at BloggingStocks comes this analysis:

Analysts are also pointing out that consumers who purchased vehicles during this period paid higher prices on average for those vehicles than purchasers in the previous month. It is believed that the Clunker vouchers dampened the spirit of wheeling and dealing by helping to reduce initial sticker shock.

The data also shows that the average age of traded-in vehicles during this period almost doubled. In this regard, the Clunkers program was a great success. While consumers put new cars into service, saving themselves fuel expense and short-term maintenance costs, they also created a flurry of new consumer debt. However, negative equity of trade-ins dropped to its lowest point of the year, thereby considerably reducing the "rollover debt" factor.

Another noteworthy sales dynamic I garnered from the article is the fact that the value of vehicles sold during this period actually trended downward, indicating that the program's vehicle value cap did in fact limit or direct consumer choice. People bought less car for more money. The facts speak for themselves.

To get the 'good' of lower mileage cars, consumers paid more for lower end vehicles and got lesser vehicles for their purchase. In other words the net effect of the vouchers was a higher end cost for a lower end value, because there was less haggling in the market on trade-in values and new car values. Buyers would have been better off without the vouchers, without the 'help', gotten cars for less money and better value. To balance that people purchased cars below what they normally would have gotten which did help banks, somewhat, but removed market incentive to do more for less.

Good job!

And today we find out that there are some minor problems at another place, this at WSJ 18 SEP 2009:

WASHINGTON -- Federal Deposit Insurance Corp. Chairman Sheila Bair said Friday her agency may tap its $500 billion credit line with the U.S. Treasury to replenish its deposit insurance fund, though she appeared cautious about doing so.

"We are carefully considering all options" including borrowing from the Treasury, Ms. Bair said Friday after a speech in Washington.

Ms. Bair has already warned banks that they may face an assessment increase to bolster the fund. Friday, she said there are also other little-known options available to the agency, including requiring banks to prepay assessments. The FDIC board of directors will meet at the end of this month to consider how to replenish the fund, she said.

Ms. Bair appeared cautious about resorting to the Treasury credit line, saying there are different views on when it should be used. She said some believe it should be reserved for emergencies only, rather than for covering losses that are already known.

Congress acted earlier this year to allow the FDIC to borrow as much as $500 billion from the Treasury if the Treasury, the Federal Reserve and the White House believe it is warranted. Otherwise, the agency can borrow up to $100 billion.

So let me get this straight:

• We have major problems in the mortgage market that go unaddressed to stop giving out mortgages to those who can't afford them.
• We have the two federally backed mortgage groups losing money, even with cash infusions and playing with the derivatives market.
• We have the FHA dropping below its minimal required cash reserve levels, which should mean that it will stop handing out cash but, instead, will seek to put good money after bad.
• We have just one group that helped stimulate all these loans finally getting some scrutiny nearly a decade after the regulations were loosened under the Clinton Administration.
• We have a federal program which ends up costing the consumers money in order to get federal largesse to trade in cars.
• We have the FDIC, that much vaunted institution that everyone always points to as the one great good of the FDR Administration now pointing out that it is running out of money to cover depositors.

The 'We' is you, me and every other citizen of the United States.

That is our cash they are playing with, and treating our hard earned money as play money.

Mind you this was all done with federal regulations and the close observation of federal regulators and 'oversight' by the swell minded idiots Upon the Hill. No one can complain that there weren't ENOUGH regulations as it was the regulations that caused these problems IN THE FIRST PLACE.

And now that 'We' are still in a recession, with high unemployment rate, these bozos Upon the Hill refuse to STOP playing with our money and start addressing the problems that has been caused by our elected representatives in the House, Senate and White House for decades. Thus they are lengthening and deepening the recession and just as 'We' begin to get a little economic footing under us, the bill for all that lovely government spending comes due and that will get us a devalued currency with inflation, to boot. To pay out all that money will require a huge cash infusion into the system over the next few years just to cover the debt that our government has put into place. Plus the hugely expanded deficit that will then kick into high gear about 5-6 years down the road when the huge amounts of interest on all that lovely new debt comes due for us to pay out. That being 'We'.

We the People.

We have an agreement.

This is not forming a more perfect Union.

The agreement is being violated.

This government, even if it changed over to Republican majorities overnight, would leave the Nation with a huge debt, climbing deficits, and, as Republicans are so fiscally management oriented, with a political class that will want to KEEP the new status quo of spending.

That is a Charlie Foxtrot no matter which way you go.

The last time Democrats had any concept of fiscal sobriety was in the 19th century.

For Republicans that last time was in the early 20th, probably around the Taft Administration.

The much vaunted two party system is SOS.

Stuck on Stupid.

Both parties, without exception.

They can't even recognize that before spending on 'shovel ready' things they need to spend on 'hole ready' things, because the holes already exist and they need to be filled and closed off so that the filling doesn't melt away.

Our swell Ignoramuses Upon the Hill can't figure that out.

We have a problem when our government will not do things necessary to get out of our way so that We may build a more perfect Union.

Activism FOR more government regulation and control has purchased us this problem. It is the problem, not a solution.

So if more government is not the solution, then how about less of it?

Or are we afraid to build our more perfect Union with less government and more from ourselves?

Just how much do you fear that face that looks back at you in the mirror?

Just how much do you want to be controlled by government?

This isn't about other people and helping them, it is about you and you giving up your voice, your money, your liberty and your freedom to those that don't give a damn about you. Do you really want someone else to take a major role in deciding if you live or die, and that can change with a misfiling of a form? An accidentally dropped number?

Are you a number?

Or are you a person?