Anyone who stumbles across this blog will quickly realize I don't write much. I only write here when I feel like I want to "record" for my own purposes something going on inside my head.
The recent announcement that any person seeking a visa to the US will need to turn over all social media / blogs etc to the State Department for review makes me physically ill. The US Government has no "infrastructure" or "publicly accountable agency" to act as sensor. Perhaps the US Government should outsource this aspect of the visa review process to the Chinese...
Well that is not why I decided to write this entry. I decided to write this because of the recent news about the mortgage agencies still in receivership after over 10 years known as Fanny Mae and Freddie Mac. The criminal* running the Treasury Department, Secretary Mnuchin, would like to dump these institutions back on the "market" according to Bloomberg with "an explicit government backstop of Fannie and Freddie securities".
WTF? I know Secretary Mnuchin, from his past industry dealings, is a total criminal and would only even been on the radar for the job he holds under a real estate developer, TV personality, primadonna like President Trump, but for the most part until now I have not seen or heard an original idea come out of the guys mouth so he is pretty innocuous in his job and thus can't do to much harm. But this?
Any idiot can see how dangerous it is to have the US Government backstop anything. If you don't understand what I am talking about just look at the student loan situation we are in (or Medicare and Medicaid, two of the most ripped off agencies in the nation). Having the government backstop student loans and putting "guaranteed repayment" in via whatever means the "government" has at its disposal, including not allowing student loans to be expunged in bankruptcy, meant anybody with a pulse could get one because the "industry" (meaning everyone from the rip-off criminals running so called on line universities to the loan sharks and the loan servicers, to the brick and mortar universities jacking up tuition at 3x the rate of inflation) could hand out money and earn money with NO RISK!
Well actually, you can just look at the history of Fanny and Freddy to understand that as they operated prior to the melt down, they were run by people who also thought there was NO RISK in buying sub-prime garbage. In fact from my knowledge of those institutions at the time, they were run by second tier people and 3rd tier salaried traders who could be convinced to buy any garbage some Wall Street sales guy was selling for a couple tickets to a concert! They were taken for fools and they did not care cause, well, they could get money cheaper than anyone and buy whatever they wanted or whatever Wall Street was hawking.
In addition, political mandates for the GSE's to commit to increasing their low-income and moderate-income mortgage purchases to 55% was completely insane. These were "publicly traded companies" that had to show Wall Street an increase in income every quarter like a non GSE entity would and thus had to conform to Wall Street's wishes to increase profitability as well as politicians mandates to buy sub-prime loans. Again, it was a perfect storm for the "industry" that could lend money to anyone with a pulse knowing they had a bunch of pansies in Washington and N. Virginia (along with a bunch of Hedge Fund wantabe's financed by the banks they left to leverage up and buy the junk even the pansies would not buy) who would buy it all up!
So for Criminal Secretary Mnuchin to be touting an idea like the US Taxpayer should backstop Fannie and Freddie is not surprising. He is a legacy criminal from the subprime era. It is however a REALLY BAD IDEA and should be dropped immediately. In addition, why the hell did the Treasury even allow common shares to float after the takeover? Ask yourself that question? It should be made clear that the common stock is worthless and would be retired upon any re-float of the companies.
As of 2017 according the Government Account Office: "Together, the enterprises and the Government National Mortgage Association (Ginnie Mae)—a federally owned corporation that guarantees MBS backed by federally insured mortgages—have issued or guaranteed 95 percent or more of all MBS issued annually since 2008."
Can you imagine what "mortgage market" would exist today if the above statement were not true? Try ZERO. No fool would buy 30 year debt at the artificially low rates the Fed continues to put out there without a government backstop. And after a couple years of trying to get rates back to market and their balance sheet back to "normal" (of course making sure there remain plenty of "excess reserves" to handle all those worthless securities still on the balance sheets of the banks as they mature), everyone cried foul! The stock market tanked, everyone panicked. The loudest complaints of course came from the guy who runs the country as he IS IN REAL ESTATE and has every interest to see rates stay low as humanly possible as does his Treasury sidekicks Mnuchin, who is the mouthpiece of the banking industry and who essentially made a couple billion dollars off the implicit guarantee / assumption of bad debt by the FDIC from the bank his Hedge Fund bought from the FDIC and Wilbur Ross, the current Commerce Secretary! The Fed has become their whipping boy, the asset bubbles remain intact and very few people if any even know what the hell is going on.
So as I stated in my 2017 blog, where are the "private participants" who will buy mortgages or Mortgage Backed Securities at Federal Reserve below market rates of interest? The GSE's, currently owned and backed by the Treasury and Federal Reserve of course, who just announced they will stop their balance sheet roll off in September 2019!
If Congress even contemplates a real government guarantee of mortgages through the GSE's, the US taxpayer is in really big trouble. The nation already has over $20 trillion in debt with nothing to show for it. We have unfunded liabilities over the next 30 years that will absolutely require a fundamental reassessment of what money is and how the country will pay for it's obligations. Taking on a guarantee of something the size of the mortgage market in the US would surely be the straw that "breaks the camel's back" so to speak. Within a few years the US Government would be totally and utterly bankrupt with a debt rating of junk for sure.
* Just google Steven Mnuchin and IndiMac or OneWest or start here: or here: or here: or here:
Monday, June 10, 2019
Subscribe to:
Posts (Atom)