Archive for the ‘Freddie Mac’ Category

Habitat for Inhumanity

Monday, May 25th, 2015

The idea was logical enough.

Reduce interest rates, making housing more affordable, which would produce a recovery in the housing market.  The housing market was at the heart of the financial crisis, so bringing the housing market back to health would, presumably, bring the economy back to health.

That conclusion was sound, too.  Housing is a leading economic indicator, so a recovering housing market should mean a recovering economy.

But in economics, as in life, things don’t always go as planned.  The housing market still hasn’t recovered.  And, while low interest rates may have given housing prices a boost, they have not increased home ownership.Home Ownership

In addition, government programs have only made matters worse, while costing taxpayers a bundle.

As Lance Roberts noted on his Street Talk blog, “trillions of dollars have been directly focused at the housing markets including HAMP, HARP, mortgage write-downs, delayed foreclosures, government backed settlements of ‘fraud-closure’ issues, debt forgiveness and direct buying of mortgage bonds by the Fed to drive refinancing and purchase rates lower.”

Yet, as the chart shows, the net result has been that the home ownership rate has dropped to where it was in 1980.

Why did government help” fail would-be homeowners?  (more…)

Embrace the Bailout, Reduce the Federal Debt

Friday, February 28th, 2014

Finally, the U.S. Treasury Department has figured out a way to reduce the federal debt – by giving money away.

That may not make sense, but keep in mind that we’re talking about the federal government.  And that means that money isn’t just given away; there are strings attached, unless you’re a preferred government contractor or an expert in Medicare fraud.

Bailouts

So consider this shocker.  Fannie Mae is scheduled to make a $7.2 billion payment to the U.S. Treasury next month and, when it does, the total payments from Fan and Fred will add up to $192.5 billion, exceeding the $187.5 billion they received from taxpayers.

Granted, a 3% profit over five years isn’t really a profit, but we’re talking about the “toxic twins” here.  And their payments are scheduled to continue, much to the chagrin of Fan and Fred shareholders.  They can just get in line, though.
That’s not the only government bailout that’s been profitable – the Troubled Asset Relief Program (TARP) required a $250 billion investment for troubled banks, but brought in more than $272 billion, a profit of about 9%.  AIG’s bailout was even more lucrative, bringing in $22 billion on an investment of $152 billion, for a 15% return.

(more…)