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So why are we dismantling Freddie and Fannie?

Discussion in 'BBS Hangout: Debate & Discussion' started by robbie380, Aug 7, 2013.

  1. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    http://www.nytimes.com/2013/08/07/us/politics/obama-fannie-mae-freddie-mac.html?_r=0

    Ok so I just don't get why we need to get rid of these companies. I understand there were problems during a MASSIVE housing bubble, but that doesn't mean you need to take apart these institutions. Changes can be made rather than just moving everything to the private sector. The abuses on the private side were much greater than on the public side.

    Right now it's stupidly hard to get a loan if it isn't backed by the government. I don't see how this plan helps Americans.

    Can anyone show me how Fannie and Freddie have been bad influences on the American economy? I don't know how they have. They seem to have been beneficial. I think if they are gone then it will be harder and more expensive for people to get mortgages.

    And why do we need more rental housing like where I bolded? Rental housing sucks. Sure it's more affordable, but it also sucks for the most part.
     
  2. JuanValdez

    JuanValdez Contributing Member

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    I think it's just what Obama referred to here -- their profits were private, but their risks were socialized because they knew the Feds had their backs. Whether they live or die, that relationship should not continue. If the Feds are going to protect them from insolvency, the Feds should also take their cut of the profits.
     
  3. otis thorpe

    otis thorpe Member

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    Because Obama wants to move the country away from easy credit no down payment homelending. these instutions privide people who don't really have home purchasing stability to purchase homes . by returning home mortgage purchasing to completely private markets Obama hopes to return fundamentals to home lending
     
  4. Dairy Ashford

    Dairy Ashford Member

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    Need to condition ourselves against home ownership; especially those of us without professional degrees or specialized, licensed skills, who might need to be more mobile for work and not necessarily tied down by a mortgage. Postwar boom's over.
     
  5. Rocket River

    Rocket River Member

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    They *WANT* the abuses to be in the Private Sector.
    This is how they get PAID!
    If it happens in the public sector. . . and select group of people don't get paid.
    Capitalism prefers the corruption be in the private sector so the 'elites' can benefit more from it.

    Rocket River
     
  6. juicystream

    juicystream Contributing Member

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    No we don't.
     
  7. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    I didn't see him mention anything about FHA loans. That would be what you are talking about.
     
  8. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    I'm fine with that. Make too big to fail companies do that as well.
     
  9. justtxyank

    justtxyank Contributing Member

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    LOL. This cat right here thinks people aren't getting paid when the corruption is in the public sector.

    Hehehehehe
     
  10. otis thorpe

    otis thorpe Member

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    No I'm talking about fannie buying mortgages freeing up banks to make more mortgages . There really isn't a big market for thirty year loans that are basically relying on individuals .
     
  11. Rocket River

    Rocket River Member

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    Not the 'right' people

    Rocket River
     
  12. otis thorpe

    otis thorpe Member

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    It wasn't too long ago you couldn't buy a home without at least ten percent down . there is a secondary market for mortgages that start out with a matching twenty pct down payment .

    when we say not too long ago we are talking nineties . i know someone with an fha loan . I'm talking about the entire housing mkt.
     
  13. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    Try putting less than 20% down now for a non-FHA loan and see how many banks lend to you.
     
  14. Cohete Rojo

    Cohete Rojo Contributing Member

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    I think what the presidential administration is doing is saying that there will be no more government backing of the GSEs. They are still private companies and I don't see how the conservatorship can be blamed on them.
     
  15. Cohete Rojo

    Cohete Rojo Contributing Member

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    Of course, taking away the implicit government backing is easy to do when Benjamin "Benjamin" Bernanke is is buying $40 billion worth of GSE MBS.
     
  16. Northside Storm

    Northside Storm Contributing Member

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    on all of the financial issues 2008 highlighted---this is one of the most significant changes. It just doesn't address the root cause of 2008 at all.

    but hey, it's easy to score political hay when Wall Street isn't spending millions lobbying against you.
     
  17. Johndoe804

    Johndoe804 Member

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    I work in the Secondary Mortgage market, and the bolded portion is totally incorrect. Frankly, the reason the President is talking about reeling in Fannie Mae and Freddie Mac (and I say talking because his rhetoric doesn't match his proposal -- which I think would do nothing but add in a government markup into your interest rate when buying a house) is because Fannie and Freddie buy the vast majority of all mortgages on the Secondary Market. His rhetoric is admirable, because he's actually suggesting that, rather than having a GSE with the full faith and credit of the government own the vast majority of mortgage loans, he's suggesting the the investors who sell to Fannie and Freddie hold the loans and assume the risk therein. In general, for those who don't know, big banks purchase closed loans (in various different ways) from smaller mortgage lenders, credit unions and the like, paying back a Servicing Release Premium. They then sell the loan to Fannie/Freddie and hold the servicing rights, so they make their money on the fees associated with servicing, and the tax-payers assume the risk.
     
  18. thumbs

    thumbs Contributing Member

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    If Obama follows through with the elimination of Fannie Mae and Freddie Mac, his action will be one of the precious few with which I agree.

    These programs need to phased out over a decade, but, once Congress approves, all the profits from the two organizations need to go into the general fund. Also, considering their poor performances, no bonuses or raises should be allowed.
     
  19. Johndoe804

    Johndoe804 Member

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    I'm with you on this. I'd agree with this action because it would make investments banks accountable for the risk of mortgage lending. However, without systemic changes to the banking system, we still have a system that incentivizes risky lending because, if the banks do fail, we now have a track record of allowing the Fed to come in and buy all of those worthless mortgage notes off of the big banks (essentially corporate welfare for the biggest banks, while the smaller banks don't get the same perk -- probably because they don't have anybody sitting on the Fed board directing monetary policy). It begs the question: Is it any different for the government and Fed to buy toxic assets off of FNMA/FHLMC versus doing the same for Wells Fargo, JP Morgan Chase, BB&T, and so on? I applaud the move on its own, but I'd compare this to putting a shot of hot water in a pitcher of cold -- it isn't really going to change anything. That is, so long as we have a system where the government can borrow from a central bank that can create money to bailout their corporate masters, the market won't really be "free". Its only as free as the representatives from the big banks that sit on the Fed board make it.
     
  20. thumbs

    thumbs Contributing Member

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    For what it's worth, I don't think any government bailout of private industry, particularly banking, should be "backed" by the federal government. Capitalism is all about profit brought about by hard work and risk-taking. At present, it's like every kid (business) gets a trophy. That's not how it should work.
     

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