Why the Fannie/Freddie Bailout Seems Cheap

I have taken my lumps and now lenders must take theirs.

I agree with 'Ian S of WA' Let the market right itself under good old Capitalism. Why should taxpayers (the middle class and poorer) bail out the wealthy investors and the mortgage giants? They ruthlessly took advantage of people seeking the American Dream at all costs. Politics have taken over our country and people in the US are not paying attention. Get the self serving Republicans out of office and hold the Democrats (I would rather vote in a third party entity) but reality dictates we don't have much choice - hold the Democrats accountable with our money. Stop the corruption and drunken spending of our tax dollars. Time for a revolution. Wake up America.

Burke Skeffington of TX @ Sep 07, 2008 10:14:33 AM

Why should we bail these giants out?

"The moves by the Bush administration hold the prospect of becoming the biggest government-funded bailout of private industry in American history. They would put the federal government in control of institutions that finance or guarantee about half of all the mortgages in the country." This is to save the hides of the wealthy investors and speculators!

This is just par for the course for the most corrupt administration in US History. Why should taxpayers like me who just lost my home to foreclosure have to pay to bailout these two giants who were part of the problem of me losing my home? I didn't file bankruptcy - I found two buyers - one of which who would have purchased my home for what I owed. But the mortgage company - Countrywide - chose to sell the house at auction for much less. Who was hurt there? Initially I asked the mortgage company to put simply 7000 on the back end of the mortgage as they offered to do as a resolution - and after making jump through hoops for six months - instead they chose to double my monthy mortgage and when I showed them I could not afford that - they said "you're right" we will foreclose unless you can borrow the money and pay up. So I lost the $55,000 I had invested in the home (equity) and they sold the house for less than I owed. What sense does that make? Who was there to bail me out? Now that I am apartment living for the first time in my life - I ask - why should my taxes go to bail out two of the largest lenders / backers of loans that pander to the wealthy investors? I say no to this one sided madness! This bailout is NOT CAPITALISM - it smacks more of a command economy ! What the hell? Where is the America I grew up in?

Burke Skeffington of TX @ Sep 07, 2008 10:05:50 AM

That makes no sense

"If Fannie's and Freddie's problems forced them to cut back on the number of loans they were able to back, liquidity would dry up: Banks would lend only to the safest borrowers, and fewer people would qualify. Instead of putting 10 percent down, for instance, imagine rules that required buyers to put 30 or 40 percent down. Or prove that their monthly mortgage payment would be a small fraction of their total income."

I have to say that is one of the dumbest assessments I have read on the topic. It was the "everyone qualifies" mentality that got us into the trouble in the first place. I applaud any lending institute that actually makes sure they loan money to borrowers that are capable of paying it back...where as you make it sound like it is a bad thing.

DanTampa of FL @ Aug 06, 2008 09:34:03 AM

The Congressional 700 page Housing Bill or is it Shill?

Congratulations to the members of Congress who passed this housing bill.

Thank God for the wealthy Congress people who had the foresight to pass this bill and take the National Debt to 10.6 Trillion Dollars.

We should remember that these are the same Congress people who will have spent over 1 Trillion Dollars on an oil war.

Let me see if I have this straight:

Freddie and Fannie will now have money to save them. These are the people who buy all the mortgages from the banks. If the wealthy and powerful banks could not sell their mortgages then they would go out of business or be accountable for their actions.

I read the other day that Fannie and Freddie have 800 billion in mortgages and those mortgages represent 60 billion in value. Thank God, we the taxpayers will only have to pay 740 billion to save Freddie and Fannie. It was either the Fannie or Freddie boss that took home 60 million in one year.

I would suggest to save money, that we combine Freddie and Fannie into the Frankenstein Mortgage Company with offices in Bad-bag Iraq.

With this bill we help the first time homeowner with $7500. Is this so that they can buy foreclosed housing which is a blessing for the wealthy and powerful Banks ?

Here is the one I like the best. It reminds me of Am Trust Bank, Cleveland Ohio, who foreclosed on my home of 7 years. This is the bank that promised me in writing that they would file a frivolous lawsuit against me for fighting my foreclosure. This is the same bank that refused to discuss the issues and the violations of law that caused the foreclosure.

Well, billions of dollars have been set aside for people that meet certain criteria to refinance their present mortgage to SAVE them from foreclosure. THEIR BANK IRONICALY HAS TO AGREE to this to make it happen. This of course involves 400,000 homeowners. What about the other millions of homeowners pending foreclosure?

Well now, these banks are the same ones that operate under the” Lynch Mob” program. The bank forecloses the home and then hangs the borrower. You see, the borrower in the USA has no RIGHT to contest or to fight their foreclosure with in the federal regulatory system, because the Congress won’t permit this to happen. Why? This protects the federally chartered savings banks.

Therefore the Bank which is regulated under the federal regulatory system operates with impunity—there are no federal consumer banking regulations. Banks accordingly conduct their mortgage lending activities knowing the borrower has no redress with in the federal regulatory system.

My question is, WHAT ABOUT THE 4 MILLION PEOPLE IN FORECLOSURE OR WHO HAVE BEEN FORECLOSURED?

Are these not the homeowners who started this foreclosure crisis? Are not these the same people who have no rights to fight their foreclosure within the same federal system that the banks in the same federal system are lending mortgage money? Can’t these homeowners fight their foreclosure doing the big dollar LEGAL DANCE? You know, the borrower’s attorney and the bank’s attorney dance before the Band (Court) until your money runs out. And you out there who blame these homeowners who lived high on the hog and who demanded that the banks give them a mortgage they could understand and could not afford. You are right. No more bailouts for the lowlife bad credit home owners who were the cause of this foreclosure crisis, which made this lending system so profitable for the wealthy and the powerful. You are so righteous. You are so wrong.

Thank God for my Ohio Senators, newbie Sherrod Brown and wait till something happens George Voinovich for spending every cent the taxpayer has, plus 10.6 Trillion dollars that we don’t have. I can sleep well in Cleveland Ohio under the 9th Street bridge knowing that my ex attorney and the bank were at the dance having a financial wrecking ball.

This bill basically protected the entire mortgage system and the way it operates and those who profit because of the system. The Bill did not protect those among us who had nothing to gain, but everything to lose. Congress dealt a low blow to the American homeowner.

The idea was to pass something, they passed nothing.

Michael LittleBig Rocky River, Ohio

Michael Littlebig of OH @ Aug 02, 2008 16:07:23 PM

Obscene....

The salaries of the top executives of Fannie and Freddie... plus the bonuses they receive...for what..??? I could've been at the helm of these companies and done a better job... what is this country coming to... are these people going to walk...??? sounds like you can have your cake and eat it too.. These people need to be investigated, put on trial, and punished severely...

I disagree with the bail-out or backing of Fannie and Freddie... let nature take it's course.... the more "tweaking" we do the worse it's going to be.. let the lessons be learned... this whole situation stinks to high heaven...

Jake Jacoby of NC @ Jul 31, 2008 00:57:01 AM

The Problem

"Banks would lend only to the safest borrowers, and fewer people would qualify."

"If lots of people can afford homes and get loans, then demand rises, and so do prices."

If Fannie, Freddie, banks, and mortgage lenders had not spent the last 10 years loaning (or guaranteeing) money to people who could not afford to pay it back, they wouldn't be in this situation. They should only loan money to people who ARE the "safest borrowers" or who CAN afford a home. And if they lend money to someone they shouldn't, then that's their problem. By loaning to people incapable of living within their means, their sheer greed has created thousands of houses inhabited by people with the financial stability equal to building in sand. What did they honestly think was going to happen if they kept giving $400k loans to people who make $30k/year. Or giving $150k loans to people on welfare? And if you make $30k/year, what would make you think you could afford to pay off a debt that size? These people who can no longer "afford" to pay their mortgage b/c their ARM went thru the roof, or the interest is eating them alive, well, that's their problem. Homebuilders who are going under b/c they continued to build house after house with no eye to the future, and now they're sitting on them? That is their problem.

I do agree that people who have lost their primary source of income (ie their job, not their stock portfolio) deserve a helping hand to avoid foreclosure, to some extent. But, bailing out mortgage lenders, homebuilders, and people who just simply over extended themselves, is not something my tax dollars should be earmarked for.

It may be painful for a while, but it will eventually correct itself. Throwing (my) money at the irresponsible parties who have created this debacle and saying it's for the "greater good", is hogwash.

Allen of TN @ Jul 30, 2008 14:37:23 PM

Bankers Benefit

The author paints over the largest swindle in banking history with misdirection and faulty reasoning. Bankers made billions in misleading packaging of high-risk loans with loan risk paper and sold it for a premium (MBS CDO, etc.). Sound banking practices were ignored for fees, premiums and commissions. Reset mortgages, nothing down mortgages etc lead to an unjustified surge in housing prices and speculation. Those who have committed these malpractices never had to pay the price - Do you see the CEO's fo banks, thrifts, and brokerages returning the last 7 years of salaries, benefits and bonuses (and doing jail time)?

So now prudent savers and fiscally responsible individuals who did not participate in this housing speculation bubble are being made to pay with billions of dollars of election bribing vote-buying bailouts. Instead of letting prices return to prebubble prices by market forces so housing is more affordable to the millions who are now locked-out, we'll just tack this debt onto our children heads by printing more money.

Sweep "this little housing problem" away - under the carpet.

Ian S of WA @ Jul 30, 2008 12:28:45 PM

Between a rock and hard space

I do not believe there were many options with respect to the housing market and maintaining an efficient finance conduit aka Fannie and Freddie.

Some Points:

1. The Government only backs up bondholders. With a default rate well under 2%, and with some of that curable, and with almost no subprime, there is not excessive financial exposure here, but, in any event, it would be in the billions.

2. The rescue is more a a check box for congress to get re-elected. The public screamed for a bailout. The congress responded with a program that mandates that the banks holding paper write down the loan to 85% of current market value, and then the borrower / homeowner must PROVE they can make the payments. And, when they sell, they split the profit with the government. No bailout here.

Given how ineffective and impractical our congress can be, I give them high marks on this bill. We had little choice.

William Sheridan of CA @ Jul 30, 2008 12:08:40 PM