Barney Frankâ€™s Ship Continues to Sink into Oblivion
By: Michael John McCrae
Just two months prior to the American economic meltdown, Congressman Barney Frank was still swearing the solvency of Fanny Mae and Freddy Mac to a Bush Administration that had requested more than 15 times an investigation into the financial standing of those organizations.
Barney Frank lied. Instead of losing his position he was permitted to retain his congressional chairmanship and is still calling for the expansion of programs geared toward giving mortgages to people who cannot afford payments.
So we now read this article: â€œFreddie Mac posts $5 billion lossâ€ by Al Yoon (Reuters), November 6, 2009; which is basically telling anyone concerned that all the kingâ€™s horses and men still cannot get Barneyâ€™s â€œHumpty Dumptyâ€ back together again.
Quoting the article: â€œFreddie Mac the second largest provider of U.S. residential mortgage fundingâ€¦posted a loss of $5 billion in the third quarter and predicted it would need more government support amid a “prolonged deterioration” in housing.â€
Understand, Fanny Mae and Freddy Mac are both â€œquasi-governmentalâ€ agencies; each acting as a piggy bank for holding campaign contributions for select members of Congress. Barney Frank., Chris Dodd and Barack Obama have benefitted greatly from the coffers of both â€œbusinessesâ€ and would suffer a bit should these entities fail entirely. It is important that TARP and other â€œbailoutâ€ funds continue to be directed to those agencies. Should they fail it will not be the members of Congress who will hurt; it will be the taxpayers who have already seen billions of dollars wasted on what amounts essentially to economic failure.
Yet, all attempts to shore up Freddy Mac have not helped those holding mortgages. According to Mr. Yoon: â€œThe home funding company’s loss comes amid a rise in provisions for credit losses to $7.6 billion in the quarter, up 46 percent compared with the previous quarter, as delinquencies worsened on loans it guarantees.â€
So Freddy continues to bleed â€œdelinquenciesâ€ even while it continues to â€œguaranteeâ€ unaffordable loans. I believe that would be enough to make any economist not working for the Obama Administration question his college degree. But then to paraphrase something Rahm Emmanuel puked up: â€œa crisis lets the government do things that wouldnâ€™t normally make sense; allowing us to steal even more money from American taxpayers.â€
Not to be outdone, Fannie Mae posted some pretty impressive quarterly losses as well. From Mr. Yoonâ€™s article: â€œIts [Freddy Macâ€™s] larger rival Fannie Mae on Thursday said it would need $15 billion from the U.S. Treasury after a whopping $18.9 billion third-quarter loss.â€
It seems the entire process is working in reverse. No amount of government intervention has alleviated the numbers of foreclosures and yet the now government run agencies are still writing bad loans for political expediency. Mr Yoon reports: â€œIn order to ease the terms of loans under the Obama administration’s Making Home Affordable refinancing program, the companies must buy the mortgages out of securities, and write down their value. Seeking alternatives to foreclosures also means bad loans sit on their books longer.â€
Bad economics is being orchestrated from Obamaâ€™s administrators. The lessons have not been learned and good money continues to be poured after bad money. The situation is determined to worsen. From the article: â€œDespite signs of recovery in home sales and prices, rising delinquencies and unemployment levels mean the housing market is still fragile, Freddie said. High unemployment, foreclosures and excess inventory will impede the recovery “for some time” and push house prices lowerâ€¦â€
As unemployment continues its double-digit rise, the numbers of pending foreclosures will also rise and the need for government funding to keep Fannie and Freddy solvent will increase exponentially. Fannie and Freddy have already taken $112.6 billion in taxpayer money since September, 2008. From the article: â€œStarting in 2010, the company will begin accounting for $1.8 trillion in mortgage-backed securities it guarantees on its balance sheet to meet new guidelines. This will increase interest income and interest expenses, and could have a significant negative impact on net worth, it said.â€
The â€œnet worthâ€ of Fannie and Freddy are already rock bottom. Continuance of government mandated protections is not helping the American taxpayer. It would be wiser to allow the free market to work without government intervention. Allow the foreclosures and the bankruptcies to eventually even out the housing market. Then simply allow mortgage lenders to go back to sound lending practices; giving mortgages only to those families able to make regular payments.
Too, Barney Frank should consider taxing Franklin Raines 90 percent of his $100 million windfall; received upon his resignation from Fannie Mae and every member of Congress who received contributions from Fannie and Freddy should return their largess to those corporations; apologizing to the American taxpayers for their greed and incompetence. Then, Barney Frank should be stripped of his chairmanship for his obstruction into the investigations requested by the previous administration.
Just donâ€™t hold your breath for that.