Americans Pay Subprime Debt created by Hedge Fund Crooks

[Guest LAW]

The sub-prime debt crisis is a gigantic fraud perpetrated by crooks, American mortgage brokers and Wall Street packagers of credits, who exported bogus credits around the world. Why do world governments protect the hedge fund industry and assist criminals? Money is held offshore in unregulated investment vehicles and valuation, reporting and independent oversight checks are weak. Did you know anyone can become a US-based hedge fund manager by declaring themselves to be such. What does our government allow banks to cook their books? George Bush is printing money that is becoming more worthless. Saving these banks are not the answer.

 

How and Accounting Fraud Scheme Destroyed Our Economy

 

Years ago, two London bankers left Citigroup Inc. to set up a company specializing in a new kind of investment fund. They named their firm Gordian Knot Ltd., they said, because they liked the legend about Alexander the Great solving a complex knot by simply taking a sword to it. The two bankers are part of a small coterie of London bankers who engendered what became a $400 billion industry.

 

That problem is called ownership. Apparently the post-Enron rule for banks was that if you did not own it, you did not have to put it on the balance sheet. So sham corporations were created, banks lent money at short-term rates to those corporations at a markup. Those corporations in turn invested in long term securities like mortgages.

 

Now, the U.S. Treasury and the world's biggest banks are grappling with their own baffling knot: how to prevent the unraveling of an entire class of such funds -- called structured investment vehicles -- from turning into a financial and economic disaster.

 

Former Federal Reserve chairman Alan Greenspan said that the $75 billion so-called Master Liquidity Enhancement Conduit (MLEC) – proposed by Citigroup, Bank of America, JPMorgan and Wachovia to take on the assets of troubled investments – runs the risk of further undermining already brittle confidence in besieged markets. This latest "Super-SIV" emergency financing scheme is an effort to enable the continuation of the credit binge. These banks are holding billions of dollars in bad mortgage loans. Treasury Deptartment is directly involved in this new scam that saves the banks while trying to “persuade” investors to “pour more money” into toxic mortgage-backed sludge. Treasury Dept officials clearly have a different definition of morality than the rest of America.

 

spokesman for the Financial Accounting Standards Board, which drafted the current rules, declined to comment.

 

Susan Pulliam summed it up like this in the Oct 12 edition of The Wall Street Journal:

 

“Since the invention of the ticker tape 140 years ago, America has been able to boast of having the world's most transparent financial markets. The tape and its electronic descendants ensured that crystal-clear prices for stocks and many other securities were readily available to everyone, encouraging millions to entrust their money to the markets. These days, after a decade of frantic growth in mortgage-backed securities and other complex investments traded off exchanges, that clarity is gone. Large parts of American financial markets have become a hall of mirrors.”

 

 

The Financial Times and Bloomberg report tonight that the formerly $8 billion Cheyne Financial Plc, an SIV managed by hedge fund Cheyne Capital Management, will not longer pay debtors and will either liquidate or refinance. Four banks are bidding on the assets.

 

The value of mortgage-backed debt has collapsed as Americans have begun defaulting on home loans in record numbers. This week, Bank of America said it was taking part in an attempt to resuscitate that market, with a new vehicle that would buy some of the debts held in banks' off-balance-sheet investment vehicles, but it remained unclear yesterday whether the rescue deal would attract wide support.

 

The New York Board of Trade's Dollar Index, which measures the US currency against six component currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish kroner and Swiss franc, touched 77.5, the weakest since the index began in 1973.

 

U.S. Senate banking chairman Chris Dodd of Connecticut said subprime lenders were "predatory" and the government was negligent. But at the end of the day, this is a very simple, but huge, fraud due to the lack of proper U.S. mortgage brokerage licensing.

 

Here's what we have now: U.S. homeowners with mortgages they should never have obtained who cannot make the payments because interest rates have gone up and who cannot sell because house values have gone down.

 

The currency's slide threatens at any moment to become a sudden plunge, and if that happens the Fed's duty to guard against inflation will conflict with its desire to stabilize output and employment.

 

Facing Foreclosure?

 

If you feel like you may be in danger of facing foreclosure, the time to call 888-995-HOPE is now - Homeowner's HOPE™, a counseling service provided by the Homeownership Preservation Foundation, can work with you to find a solution. The sooner you call, the sooner you can regain your peace of mind. Remember, you're not alone. Millions of people across the United States have trouble with their mortgage every year. Since 2002, our counselors have provided advice and education to more than 100,000 homeowners." Please visit http://www.995hope.org for more information.

[Guest Yatra]

Hedge Funds involve a group of private investors, and minimal regulations. They are only through private placement, usually offered to well-informed, high risk-appetite investors that are looking to hide their money from the IRS. Disclosure requirements are minimal.

[Guest DC 4 Obama]

Here is Obama's Vision on How to Address the Subprime Mortgage Issue

 

Combat Mortgage Fraud and Subprime Loans: The implosion of the subprime lending industry threatens to bring foreclosure to over two million households, including many families with children. Barack Obama has been closely monitoring this situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama's STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity. This bill also provides counseling to homeowners and tenants to avoid foreclosures. Finally, Obama's bill requires the Government Accountability Office to evaluate and report to Congress on various state lending practices so that state regulations that undermine consumer's rights can be identified and hopefully eliminated.

 

Create Fund to Help Homeowners Avoid Foreclosures:

 

In addition to taking important steps to prevent mortgage fraud from occurring in the future, Barack Obama will establish policies to help Americans currently facing foreclosure through no fault of their own. For instance, in communities where there are many foreclosures property values of innocent homeowners are often also negatively impacted, driving them toward foreclosure, too.

 

Obama will create a fund to help people refinance their mortgages and provide comprehensive supports to innocent homeowners. The fund will also assist individuals who purchased homes that are simply too expensive for their income levels by helping to sell their homes. The fund will help offset costs of selling a home, including helping low-income borrowers get additional time and support to pay back any losses from the sale of their home and waiving certain federal, state and local income taxes that result from an individual selling their home to avoid foreclosure. These steps will ensure that individuals who have to sell their homes will be able to quickly regain stable financial footing. The fund will be partially paid for by Obama's increased penalties on lenders who acted irresponsibly and committed fraud.

 

Create a Credit Card Rating System to Improve Disclosure:Barack Obama will create a credit card rating system, modeled on five-star systems used for other consumer products, to provide consumers an easily identifiable ranking of credit cards. Under the Obama plan, the Federal Trade Commission (FTC) will assess the degree to which credit cards meet consumer-friendly standards. The FTC will test for a set of credit card features that are deemed the most dangerous for consumers, including the underwriting standards used to issue the card, the card's interest rate spread between the introductory rate and the maximum rate allowed, and transaction fees. The FTC will assign ratings so that consumers can easily understand if a credit card agreement meets or exceeds standards of safety. Credit card companies will be required to display the rating on all application and contract materials, enabling consumers to quickly understand all of the major provisions of a credit card without having to rely exclusively on fine print in lengthy documents. Credit card companies will also be required to disclose in simplified, clear language all of the major features of the card in addition to their FTC rating to provide consumers with additional information to compare credit card products.

 

Establish a Credit Card Bill of Rights to Protect Consumers: Credit cards could turn into the next subprime market crisis. In addition to being able to easily understand how risky a given credit card is, every American should have a uniform set of rights while dealing with credit card companies, no matter their financial status or credit history. To protect those rights, Barack Obama will require the Federal Trade Commission to analyze credit card company compliance with these basic rights, and provide the Department of Justice with the full authority to investigate and penalize non-compliant companies.� The Obama credit card bill of rights will:

 

Ban Unilateral Changes: Currently, credit card companies can unilaterally change the terms of a credit card agreement at any time for any reason with only a 15-day notice to the consumer. Barack Obama will ban these unilateral changes in credit card agreements unless companies have obtained written consent from consumers and have followed the rules and terms of the agreement.

 

Apply Interest Rate Increases Only to Future Debt: Credit card companies often apply increased interest rates to both new debt incurred by the cardholder, as well as previously incurred debt. Barack Obama will require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.

 

Prohibit Interest on Fees: Credit card companies often charge interest on transaction fees, such as late fees or paying a bill by telephone. Barack Obama will prohibit credit card issuers from charging interest on transaction fees.

 

Prohibit ”Universal Defaults”: ”Universal defaults” are a practice in which a credit card company raises an individual's interest rate based on failure to pay a different creditor on time. Barack Obama will prohibit this practice.

 

Require Prompt and Fair Crediting of Cardholder Payments: Barack Obama will require credit card issuers to apply payments first to the credit card balance with the highest rate of interest and to minimize finance charges.

[Guest John Neurohr]

The Center for American Progress released a report examining in detail the relationship between slowly growing U.S. mortgage markets, the suddenly aggressive growth of credit card debt, and what both trends could mean to borrowers, their lenders, and global financial markets.

 

The U.S. credit card market is showing signs of trouble just as the home mortgage crisis surges to unprecedented heights across the United States and throughout the global financial marketplace. Against the backdrop of record-high numbers of home foreclosures, lenders are tightening mortgage lending standards, making it harder for families to maintain their consumption in the face of weakening income growth. At the same time, credit card issuers present their all-too-convenient lending product as a much needed but inevitably dangerous pressure valve for cash-strapped borrowers.

 

A possible unraveling of the U.S. credit card market, with all the attendant costs to global financial markets, could be partially nipped in the bud with improved transparency for credit cards. The report encourages policymakers to take two approaches.

 

First, implement a credit card safety rating system that can give consumers better information about their credit cards and thus help them make better decisions. This system would be similar to the five-star crash test rating system for new cars. Credit cards would be awarded stars based on a points system, with cards earning points for consumer-friendly terms and losing them for terms designed to get consumers into trouble.

 

Second, in addition to a credit card safety rating system Congress should go further to mandate a higher level of fairness in credit card terms. Several members of Congress have introduced bills that would do that. Rep. Carolyn Maloney (D-NY), with the backing of House Financial Services Committee Chair Rep. Barney Frank (D-MA), recently introduced the Credit Cardholders’ Bill of Rights Act. This bill takes a balanced approach to banning several of the most abusive credit card practices.

 

http://www.americanprogress.org/issues/200...se_of_cards.pdf

[Guest Henry Waxman]

The mortgage crisis and credit crunch is devastating to both homeowners and our nation’s economy. Over 7% of all mortgages are delinquent or in foreclosure, the highest rate ever recorded. Almost nine million families now owe more on their mortgages than their homes are worth.

 

Banks in the United States have written off more than $120 billion in assets. Mortgage companies have gone under or are on the brink. Thousands of Americans have lost their jobs and their homes. And the economic spillover is being felt throughout the world.

 

Three companies that gambled heavily on the subprime bet are Countrywide Financial Corporation, Merrill Lynch, and Citigroup. All three companies have suffered enormous losses. Countrywide lost $1.6 billion in 2007 and its stock lost 80% of its value. Merrill Lynch lost $10 billion and its stock lost 45% of its value. Citigroup also lost $10 billion and its stock lost 48% of its value.

 

In light of that terrible performance, the CEOs of Merrill Lynch and Citigroup resigned last year. Mr. Mozilo, the CEO of Countrywide, is also making plans to step down if Countrywide is acquired by Bank of America.

 

But the pay they received from their companies and their stock sales was extraordinary. Any reasonable relation between their compensation and the interests of their shareholders appears to have broken down.

 

Mr. O’Neal left Merrill Lynch with a $161 million retirement package; Mr. Prince was awarded a $10 million bonus, $28 million in unvested stock options, and $1.5 million in annual perquisites when he left Citigroup; and Mr. Mozilo received over $120 million in compensation and sales of Countrywide stock.

 

The obvious question is this: How can a few executives do so well when their companies do so poorly?

 

Mr. Mozilo, Mr. O’Neal, and Mr. Prince are each classic American success stories. Mr. Prince was the first in his family to go to college. Mr. Mozilo started his company sitting at a kitchen table in a small New York City apartment. And Mr. O’Neal’s grandfather was born into slavery and his parents worked several jobs at once to give their children the American dream. Mr. O’Neal himself worked his way through college by working at a General Motors plant.

 

Each of these men achieved incredible success through hard work and ability. And each was richly compensated when their companies prospered. On behalf of this Committee, I want to commend them and thank them for their many contributions to our country. The questions we ask today are not in any way intended to disparage their records.

 

But what we are trying to understand is fundamental to our nation’s values. And it is also of central importance to the effective functioning of business and our economy.

 

Are the extraordinary compensation packages these CEOs received reasonable compensation? Or does the hundreds of millions of dollars they were given represent a complete disconnect from reality?

 

This isn’t a hearing about illegality or even ethical breaches. It’s a hearing to examine how executives are compensated when their companies fail. And it’s a hearing to help us understand whether this situation is good for the companies, the shareholders, and for America.

[Guest S.Ceci]

National Protest on Foreclosures - April 16 and 17

 

AD HOC NATIONAL NETWORK TO STOP FORECLOSURES AND EVICTIONS- BAILOUT PEOPLE NOT BANKS

 

THE MORTGAGE BANKERS ASSOCIATION (MBA)— the biggest national lobby of all the banks—including the criminal predatory lenders, that are busy evicting your neighbors, relatives, friends and maybe you from your home—is holding it's annual policy conference in Washington D.C., on April 16 and 17. Their main goal is to make sure that bankers continue to get bailed out while families get tossed out!

 

Losing our homes: A NATIONAL EMERGENCY: And

it's getting worse. One in every 4 subprime mortgage victims are either in or near fore­closure. Soon, almost 10% of the homes of working families across the country could be in foreclosure. For these families,

this isn't a recession—it's a depression and

a national emergency that calls for emergency measures.

 

A mORATORIUM ON FORECLOSURES & EVICTIONS —politicians have the authority to do it. Many may

not realize that Governors, State Legislatures, the President and Congress (as well as the department

of Housing and Urban Development) have the

statutory authority to declare a moratorium on home foreclosures and evictions during a time of either natural or economic emergency disaster (it's

important to include evictions because record numbers of renters are also losing their apartments).

 

This fight is for all of us. Come to D.C. on April 16 bring a bus, van, or a carload of people. Whether you are directly effected by the home foreclosure epidemic, or just outraged that the Government seems ready to give hundreds of billions of dollars to rescue banks from failing while doing nothing for those who are losing their homes, join people from around the country in Washington, D.C. on April 16 to shake up the bankers and wake up the government. Let's not wait until we're all homeless.

 

UNITE AND ORGANIZE=SURVIVAL Whether it's rising gas and food prices • the lack of health care • losing our jobs • having our wages cut • sinking further into credit card, student loan, or medical debt • or budget cuts • or the destruction of public housing • or ending this war that is costing lives and almost a half a billion dollars a day • surviving hard times is going require that we stick together and organize.

 

Contact: The Ad Hoc National Network to Stop Foreclosures & Evictions

A fast growing network of activists organizing in every region of the country.

 

http://www.StopForeclosuresandEvictions.org 212-633-6646

[Guest U.S. Senator John McCain]

I am calling for an immediate DOJ task force to aggressively investigate potential criminal wrongdoing in the mortgage lending and securitization industry. If there were individuals or firms that defrauded innocent homeowners or forged loan application documents, then the punishments of the market are not enough, and they must answer for their conduct in a court of law.

[Guest Soldier of God_*]

I am calling for an immediate DOJ task force to aggressively investigate potential criminal wrongdoing in the mortgage lending and securitization industry. If there were individuals or firms that defrauded innocent homeowners or forged loan application documents, then the punishments of the market are not enough, and they must answer for their conduct in a court of law.

 

I think we need to pray more and pay attention to what we are signing. I got my mortgage years ago from a friend I knew from high school. I still talk with him today.

[Guest Obama Campaign]

Senator McCain is making some proposals about how to deal with our housing crisis. And I'm glad he's finally decided to offer a plan," Senator Obama said. "Better late than never. But don't expect any real answers. Don't expect it to actually help struggling families. Because Senator McCain's solution to the housing crisis seems a lot like the George Bush solution of sitting by and hoping it passes while families face foreclosure and watch the value of their homes erode. The American people can't afford this kind of do-nothing approach. They need help immediately."

[Guest American For Freedom]

A day after warning the Senate about a “tremendous surge” in the FBI’s mortgage fraud investigations, Director Robert Mueller talked in more detailed terms about the growth in both corporate fraud and public corruption cases at the annual conference of the American Bar Association's Section of Litigation in Washington, D.C.

 

Despite limited resources, Mueller said that the FBI’s corporate fraud cases have grown more than 80 percent since 2003. Last year, we had more than 490 corporate and securities fraud convictions.

 

He predicted that the problem will only worsen because of the "ripple effect of the sub-prime crisis and its impact on the credit market.” The FBI, he said, has already “identified 19 corporate fraud matters related to the sub-prime lending crisis … targeting accounting fraud, insider trading, and deceptive sales practices.” And, we’re currently investigating more than 1,300 mortgage fraud matters.

 

Mueller believes part of the problem is “rampant conflicts of interest in the corporate suites.” He said that FBI investigations “further emphasize the need for independent board members, auditors, and outside counsel. Shareholders rely on the board of directors to serve as the corporate watchdog. ... [but] board members are often beholden to the executives they are expected to oversee.”

 

Acknowledging recent FBI missteps resulting from inadequate internal controls—and a new Office of Integrity and Compliance to identify risks before they become problems—Mueller said, “As we all understand, it is better for a company to self-report and remediate its own wrongdoing before the FBI and the Department of Justice become involved. Executives who let the situation escalate to the point of a sudden restatement—and a resulting loss of shareholder confidence—often do greater harm to the companies they are trying to protect than if they had exercised early intervention."

 

Mueller said that in his days as a defense counsel, he “met a number of executives who could rationalize every bad decision,” warning that “it is a slippery slope from behavior that skirts ethical or legal boundaries to behavior that crosses the line completely.”

 

The FBI also works to combat corruption in the public sector—our top criminal priority—because, as the Director pointed out in his remarks, “democracy and corruption cannot co-exist.”

 

Currently, the FBI has more than 2,500 open public corruption cases, an increase of more than 50 percent since 2003. During the past two years alone, more than 18,000 public officials have been convicted.

 

“The FBI,” Mueller said, “is uniquely situated to address public corruption. We have the skills to conduct sophisticated investigations. But more than that, we are insulated from political pressure. We are able to go where the evidence leads us, without fear of reprisal or recrimination.”

 

In the end, Mueller said, “it does not matter if the corruption is national or local … if it is millions of dollars or merely hundreds. There is no level of acceptable corruption.”

[Guest Fletcher]

I don't feel that we should bail out idiots who can't read. We should not bail out the banks who gambled that people could not read fine print as well.

[Guest John B Clark]

I live in a small house, so this may sound like sniping. BUT I wouldn't trade my too small home and fantastic neighborhood, for a mini-mansion and a neighborhood where nobody knows nobody, and there are alarms for all and everything. I have a library right down the street where the librarian is on first name basis, and knows and anticipates my reading/viewing/listening habits. I have a fresh meat market where I can get not frozen, but fresh cuts of meat when I want. I rather live in my modest living environment than live in a box that I cannot afford to pay.

[Guest JesseLee]

Fannie Mae and Freddie Mac, the largest U.S. providers of home-mortgage financing, tumbled to the lowest levels in more than 13 years on speculation they will be forced to raise more capital.

[Guest Mr. Cawlie]

John McCain believes we need to restructure the mortgage institutions, "We need to keep people in their homes, but we can't allow this to turn into a bailout of Wall Street speculators."

[Guest Fed Up]

Statement by Secretary Henry M. Paulson, Jr. on Treasury and Federal Housing Finance Agency Action to Protect Financial Markets and Taxpayers

 

Read between the lines on this one...

 

Good morning. I'm joined here by Jim Lockhart, Director of the new independent regulator, the Federal Housing Finance Agency, FHFA.

 

In July, Congress granted the Treasury, the Federal Reserve and FHFA new authorities with respect to the GSEs, Fannie Mae and Freddie Mac. Since that time, we have closely monitored financial market and business conditions and have analyzed in great detail the current financial condition of the GSEs – including the ability of the GSEs to weather a variety of market conditions going forward. As a result of this work, we have determined that it is necessary to take action.

 

Since this difficult period for the GSEs began, I have clearly stated three critical objectives: providing stability to financial markets, supporting the availability of mortgage finance, and protecting taxpayers – both by minimizing the near term costs to the taxpayer and by setting policymakers on a course to resolve the systemic risk created by the inherent conflict in the GSE structure.

 

Based on what we have learned about these institutions over the last four weeks – including what we learned about their capital requirements – and given the condition of financial markets today, I concluded that it would not have been in the best interest of the taxpayers for Treasury to simply make an equity investment in these enterprises in their current form.

 

The four steps we are announcing today are the result of detailed and thorough collaboration between FHFA, the U.S. Treasury, and the Federal Reserve.

 

We examined all options available, and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection.

 

Throughout this process we have been in close communication with the GSEs themselves. I have also consulted with Members of Congress from both parties and I appreciate their support as FHFA, the Federal Reserve and the Treasury have moved to address this difficult issue.

 

 

Before I turn to Jim to discuss the action he is taking today, let me make clear that these two institutions are unique. They operate solely in the mortgage market and are therefore more exposed than other financial institutions to the housing correction. Their statutory capital requirements are thin and poorly defined as compared to other institutions. Nothing about our actions today in any way reflects a changed view of the housing correction or of the strength of other U.S. financial institutions.

 

***

 

I support the Director's decision as necessary and appropriate and had advised him that conservatorship was the only form in which I would commit taxpayer money to the GSEs.

 

I appreciate the productive cooperation we have received from the boards and the management of both GSEs. I attribute the need for today's action primarily to the inherent conflict and flawed business model embedded in the GSE structure, and to the ongoing housing correction. GSE managements and their Boards are responsible for neither. New CEOs supported by new non-executive Chairmen have taken over management of the enterprises, and we hope and expect that the vast majority of key professionals will remain in their jobs. I am particularly pleased that the departing CEOs, Dan Mudd and Dick Syron, have agreed to stay on for a period to help with the transition.

 

I have long said that the housing correction poses the biggest risk to our economy. It is a drag on our economic growth, and at the heart of the turmoil and stress for our financial markets and financial institutions. Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner on housing. Therefore, the primary mission of these enterprises now will be to proactively work to increase the availability of mortgage finance, including by examining the guaranty fee structure with an eye toward mortgage affordability.

 

To promote stability in the secondary mortgage market and lower the cost of funding, the GSEs will modestly increase their MBS portfolios through the end of 2009. Then, to address systemic risk, in 2010 their portfolios will begin to be gradually reduced at the rate of 10 percent per year, largely through natural run off, eventually stabilizing at a lower, less risky size.

 

Treasury has taken three additional steps to complement FHFA's decision to place both enterprises in conservatorship. First, Treasury and FHFA have established Preferred Stock Purchase Agreements, contractual agreements between the Treasury and the conserved entities. Under these agreements, Treasury will ensure that each company maintains a positive net worth. These agreements support market stability by providing additional security and clarity to GSE debt holders – senior and subordinated – and support mortgage availability by providing additional confidence to investors in GSE mortgage backed securities. This commitment will eliminate any mandatory triggering of receivership and will ensure that the conserved entities have the ability to fulfill their financial obligations. It is more efficient than a one-time equity injection, because it will be used only as needed and on terms that Treasury has set. With this agreement, Treasury receives senior preferred equity shares and warrants that protect taxpayers. Additionally, under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares.

 

These Preferred Stock Purchase Agreements were made necessary by the ambiguities in the GSE Congressional charters, which have been perceived to indicate government support for agency debt and guaranteed MBS. Our nation has tolerated these ambiguities for too long, and as a result GSE debt and MBS are held by central banks and investors throughout the United States and around the world who believe them to be virtually risk-free. Because the U.S. Government created these ambiguities, we have a responsibility to both avert and ultimately address the systemic risk now posed by the scale and breadth of the holdings of GSE debt and MBS.

 

Market discipline is best served when shareholders bear both the risk and the reward of their investment. While conservatorship does not eliminate the common stock, it does place common shareholders last in terms of claims on the assets of the enterprise.

 

Similarly, conservatorship does not eliminate the outstanding preferred stock, but does place preferred shareholders second, after the common shareholders, in absorbing losses. The federal banking agencies are assessing the exposures of banks and thrifts to Fannie Mae and Freddie Mac. The agencies believe that, while many institutions hold common or preferred shares of these two GSEs, only a limited number of smaller institutions have holdings that are significant compared to their capital.

 

The agencies encourage depository institutions to contact their primary federal regulator if they believe that losses on their holdings of Fannie Mae or Freddie Mac common or preferred shares, whether realized or unrealized, are likely to reduce their regulatory capital below "well capitalized." The banking agencies are prepared to work with the affected institutions to develop capital restoration plans consistent with the capital regulations.

 

Preferred stock investors should recognize that the GSEs are unlike any other financial institutions and consequently GSE preferred stocks are not a good proxy for financial institution preferred stock more broadly. By stabilizing the GSEs so they can better perform their mission, today's action should accelerate stabilization in the housing market, ultimately benefiting financial institutions. The broader market for preferred stock issuance should continue to remain available for well-capitalized institutions.

 

The second step Treasury is taking today is the establishment of a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Given the combination of actions we are taking, including the Preferred Share Purchase Agreements, we expect the GSEs to be in a stronger position to fund their regular business activities in the capital markets. This facility is intended to serve as an ultimate liquidity backstop, in essence, implementing the temporary liquidity backstop authority granted by Congress in July, and will be available until those authorities expire in December 2009.

 

Finally, to further support the availability of mortgage financing for millions of Americans, Treasury is initiating a temporary program to purchase GSE MBS. During this ongoing housing correction, the GSE portfolios have been constrained, both by their own capital situation and by regulatory efforts to address systemic risk. As the GSEs have grappled with their difficulties, we've seen mortgage rate spreads to Treasuries widen, making mortgages less affordable for homebuyers. While the GSEs are expected to moderately increase the size of their portfolios over the next 15 months through prudent mortgage purchases, complementary government efforts can aid mortgage affordability. Treasury will begin this new program later this month, investing in new GSE MBS. Additional purchases will be made as deemed appropriate. Given that Treasury can hold these securities to maturity, the spreads between Treasury issuances and GSE MBS indicate that there is no reason to expect taxpayer losses from this program, and, in fact, it could produce gains. This program will also expire with the Treasury's temporary authorities in December 2009.

 

Together, this four part program is the best means of protecting our markets and the taxpayers from the systemic risk posed by the current financial condition of the GSEs. Because the GSEs are in conservatorship, they will no longer be managed with a strategy to maximize common shareholder returns, a strategy which historically encouraged risk-taking. The Preferred Stock Purchase Agreements minimize current cash outlays, and give taxpayers a large stake in the future value of these entities. In the end, the ultimate cost to the taxpayer will depend on the business results of the GSEs going forward. To that end, the steps we have taken to support the GSE debt and to support the mortgage market will together improve the housing market, the US economy and the GSEs' business outlook.

 

Through the four actions we have taken today, FHFA and Treasury have acted on the responsibilities we have to protect the stability of the financial markets, including the mortgage market, and to protect the taxpayer to the maximum extent possible.

 

And let me make clear what today's actions mean for Americans and their families. Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe. This turmoil would directly and negatively impact household wealth: from family budgets, to home values, to savings for college and retirement. A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation. That is why we have taken these actions today.

 

While we expect these four steps to provide greater stability and certainty to market participants and provide long-term clarity to investors in GSE debt and MBS securities, our collective work is not complete. At the end of next year, the Treasury temporary authorities will expire, the GSE portfolios will begin to gradually run off, and the GSEs will begin to pay the government a fee to compensate taxpayers for the on-going support provided by the Preferred Stock Purchase Agreements. Together, these factors should give momentum and urgency to the reform cause. Policymakers must view this next period as a "time out" where we have stabilized the GSEs while we decide their future role and structure.

 

Because the GSEs are Congressionally-chartered, only Congress can address the inherent conflict of attempting to serve both shareholders and a public mission. The new Congress and the next Administration must decide what role government in general, and these entities in particular, should play in the housing market. There is a consensus today that these enterprises pose a systemic risk and they cannot continue in their current form. Government support needs to be either explicit or non-existent, and structured to resolve the conflict between public and private purposes. And policymakers must address the issue of systemic risk. I recognize that there are strong differences of opinion over the role of government in supporting housing, but under any course policymakers choose, there are ways to structure these entities in order to address market stability in the transition and limit systemic risk and conflict of purposes for the long-term. We will make a grave error if we don't use this time out to permanently address the structural issues presented by the GSEs.

 

In the weeks to come, I will describe my views on long term reform. I look forward to engaging in that timely and necessary debate

[Guest The White House]

The Federal Housing Finance Agency (FHFA), the regulator of Fannie Mae and Freddie Mac, determined that these housing mortgage companies cannot continue to operate safely and soundly, and fulfill their public mission -- posing an unacceptable risk to the broader financial system and our economy. FHFA announced that it will place the companies in conservatorship and appoint new leadership.

 

The Treasury Department and the Federal Reserve are taking additional steps that complement FHFA's actions and will support market stability, add to mortgage availability, and protect taxpayers. These agencies are taking the necessary steps to prevent a disruption of our financial system.

 

Putting these companies on sound financial footing, and reforming their business practices, is critical to the health of our financial system and to making further progress with the housing correction that today is weighing heavily on our economy. Allowing the companies to fail or further deteriorate would damage our home mortgage market, and could weaken other credit markets that are unrelated directly to housing. Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth in the future.

 

The actions taken are temporary, and will support housing finance in the near term. As we determine the appropriate role for the companies in the future, it is crucial that they not pose similar risks to our economy or the financial system again.

[Guest Enron Ex]

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 17, 2008. This week’s results include an adjustment to account for the Columbus Day holiday. The Market Composite Index, a measure of mortgage loan application volume, was 408.1, a decrease of 16.6 percent on a seasonally adjusted basis from 489.3 one week earlier. On an unadjusted basis, the Index decreased 25 percent compared with the previous week and was down 44 percent compared with the same week one year earlier.

The Refinance Index decreased 23.5 percent to 1158.8 from the previous week and the seasonally adjusted Purchase Index decreased 10.9 percent to 279.3 from one week earlier. The Conventional Purchase Index decreased 10.5 percent while the Government Purchase Index (largely FHA) decreased 11.9 percent.

 

The four week moving average for the seasonally adjusted Market Index is down 9.2 percent. The four week moving average for the seasonally adjusted Purchase Index is down 4.9 percent, while this average is down 14.2 percent for the Refinance Index.

 

The refinance share of mortgage activity decreased to 42.6 percent of total applications from 46.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 2.7 percent from 2.6 percent of total applications from the previous week.

 

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.28 percent from 6.47 percent, with points decreasing to 1.09 from 1.14 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

 

The average contract interest rate for 15-year fixed-rate mortgages decreased to 6.05 percent from 6.17 percent, with points decreasing to 1.11 from 1.18 (including the origination fee) for 80 percent LTV loans.

 

The average contract interest rate for one-year ARMs increased to 6.97 percent from 6.67 percent, with points decreasing to 0.40 from 0.43 (including the origination fee) for 80 percent LTV loans.

[Guest Bail Me Out]

I want to know if Daniel H. Mudd is going to prosecuted. After being dismissed from Fannie Mae in September of 2008, little is knownof his whereabouts. Although the political party of Mudd is unknown, according to records he did donate money to Bush in 2004. The government said that his severance package will not be paid.

[Guest DOJ]

Remarks as Prepared for Delivery by Attorney General Eric Holder

 

For millions of Americans, the dream of home ownership has become a nightmare. The unscrupulous actions of individuals and companies who exploit the misfortune of others is despicable, immoral, and illegal.

 

The FBI is investigating more than 2,100 mortgage fraud cases, up almost 400 percent from five years ago. The Bureau has more than doubled the number of agents investigating mortgage scams, has created a National Mortgage Fraud Team at headquarters in Washington, and is working hand-in-hand with our partners at other agencies.

 

Within just the past few months, the Department has obtained important convictions against perpetrators of rescue schemes. We convicted defendants in Kansas who solicited homeowners going through foreclosure, told them that for a fee they could help them keep their homes, and then filed fraudulent bankruptcy petitions on their behalf.

 

We convicted individuals who targeted homeowners in Brooklyn and the Bronx for a rescue scheme. The defendants induced homeowners to "sell" their homes to "straw buyers" on the false promise that they would get them back after they were saved from foreclosure. The distressed homeowners lost title to their homes and faced eviction, and the lenders suffered losses from the defaulted loans.

 

We are working with the FTC to reinvigorate the Executive Working Group, which brings together DOJ, the FTC, and state attorneys general to coordinate and exchange intelligence on competition and consumer fraud issues, such as the rescue scams we are addressing today. We look forward to working with Treasury and HUD to share intelligence so that we can target each new scheme as it arises and hold those who prey on vulnerable homeowners accountable.

 

We are also committed to ensuring that homeowners who may be having difficulty making their mortgage payments do not experience discrimination and can benefit in equal measure from legitimate loan modification programs and other federal programs to provide mortgage assistance and stabilize home prices.

 

Already, we are hearing increasing concerns that not all distressed borrowers are receiving the same opportunities for loan modifications. We are also hearing that the terms and fees for such modifications are not being made available on a non-discriminatory basis.

 

Lending discrimination prevents those who are discriminated against from enjoying the benefits of access to credit, including reasonable mortgage payments, so they can stay in their homes and provide much needed stability for their neighborhoods.

 

Let me be absolutely clear: Discrimination in lending on the basis of race, national origin or other prohibited factors is destructive, morally repugnant, and against the law. And we will use the full range of our enforcement authority to investigate and prosecute this type of unacceptable lending discrimination.

 

To sum up, I’d like to speak directly to those individuals and companies whose illegal and repulsive practices have harmed far too many Americans. My message is simple: If you prey on vulnerable homeowners with fraudulent mortgage schemes, or discriminate against borrowers, we will find you and we will punish you.

 

Thank you.

[Guest LAW_*]

David Kellermann, Freddie Mac's acting chief financial officer, committed suicide in his home in Hunter Mill Estates. Family members were home at the time, police say.

[Guest V]

This man obviously couldn't live with the TRUTH anymore, and he found his ultimate exit strategy.

[JT Allen]

What a mess ... personally I believe this entire situation was caused by greed. Banks, mortgage companies, all the way down to and including residential real estate appraisers. It makes me a combination of angry and sad.

[Guest August]

This is worth taking a look.

 

Mr. Geithner’s reliance on bankers, hedge fund managers and others to assess the market’s health — and provide guidance once it faltered — stood out.

 

His calendars from 2007 and 2008 show that those interactions were a mix of the professional and the private.

 

He ate lunch with senior executives from Citigroup, Goldman Sachs and Morgan Stanley at the Four Seasons restaurant or in their corporate dining rooms. He attended casual dinners at the homes of executives like Jamie Dimon, a member of the New York Fed board and the chief of JPMorgan Chase.

 

Mr. Geithner was particularly close to executives of Citigroup, the largest bank under his supervision. Robert E. Rubin, a senior Citi executive and a former Treasury secretary, was Mr. Geithner’s mentor from his years in the Clinton administration, and the two kept in close touch in New York.

 

Mr. Geithner met frequently with Sanford I. Weill, one of Citi’s largest individual shareholders and its former chairman, serving on the board of a charity Mr. Weill led. As the bank was entering a financial tailspin, Mr. Weill approached Mr. Geithner about taking over as Citi’s chief executive.

 

http://www.nytimes.com/2009/04/27/business...thner.html?_r=1

[Guest LPAC]

Monetarism means the existence of a system of money-values which is independent of national sovereignty, and is therefore the imperial power to which all nations accepting monetarism are subject as imperialism's mere colonies.

 

The case of the present world crisis-swindle has been based entirely, absolutely on the affirmation of the superior authority of monetarist claims over national economies, to which a treasonous gang controlling high-ranking positions in the U.S. government and Federal Reserve System have, in fact, acted as accomplices of an alien, monetarist financier power, a power to loot and ruin many nations which should have been sovereign, including our own United States as the looted victim of treasonous complicity even from among our own influential parties and elements of government.

[Guest ALWAYS READ]

All the major villains, it turns out, have one thing in common: government.

 

That's right. From the "Community Reinvestment Act" that pressured banks into affirmative-action lending, to those "government-sponsored enterprises" Fannie Mae and Freddie Mac -- who bought up all the resulting subprime loans and repackaged them as "investment grade" securities -- the greasy thumb-prints of government were all over this fiasco from beginning to end.