By Pete the Banker
The Obama administration plans to remove the $400 billion financial cap on capital infusions pledged for support of Fannie Mae and Freddie Mac under the 2008 ConservatorshipTreasury Department will replace the existing cap with a “flexible formula”, ensuring that these firms can stand behind the billions of dollars of investor owned mortgage-backed securities, as well as apparently rewarding their CEO’s for “stellar” performance. Does this “flexible formula” infer that the full faith and credit of the US Government stands behind these flailing and failing Giants? Agreement structured to prevent the mortgage giants from failing. In doing so the Treasury in essence suggests it will fund amounts up to and in excess of $400 Billion established by them earlier this year in order to save these allegedly “Too Big Too Fail” entities.
To date, Fannie and Freddie have lost billions of dollars over the past year at the same time have receiving $110 Billion in government capital infusions. A few months ago, the Administration suggested raising the maximum amount of capital available to GSE’s from $200B to $400B under the Conservator Agreement, although quickly maintaining that the total amount of funds ultimately needed to rescue Fannie and Freddie wouldn’t exceed $171B. Is the current action being taken simply precautiionary or another sign of the Treasury Department’s incompetence?
While many analysts similarly suggest that the former GSE’s aren’t likely to use the full $400 billion, the Administration decided to give the a Government Mortgage Entities a blank check anyway. The Treasury stated (HERE),
“The amendments to these agreements announced today should leave no uncertainty about the Treasury’s commitment to support these firms as they continue to play a vital role in the housing market during the current crisis,”
From the Wall Street Journa (here)l, “The Federal Housing Finance Agency approved compensation plans for Fannie Chief Executive Michael Williams and Freddie CEO Charles Haldeman Jr. Those packages are expected to be in a range of $4 million to $6 million.”
Perhaps the Administration’s real plan for the former GSE’s involves their becoming nothing more than massive Government Agencies, backed by the full faith and credit of the United States without regard to their efficient operation in a competitive market. And perhaps the big bonuses are nothing more than payoffs for expediting that surreptitious Administration goal.
Tell ’em where you saw it. Http://www.victoriataft.com