Saturday, December 26, 2009
Mortgage Executive Kills Himself, After Obama Makes Freddie Mac Waste Money on Bailouts
The chief financial officer of mortgage giant Freddie Mac committed suicide today today in his basement in Fairfax County. The Obama Administration forced Freddie Mac to run up billions of dollars in losses to bail out mortgage borrowers, including irresponsible high-income households whose payments are getting reduced to a ridiculously low level.
Until last year, Freddie Mac was a GSE — a Government Sponsored Enterprise, an entity chartered and subsidized by the federal government, but owned by private shareholders. But the federal government seized direct control of Freddie Mac last year after it ran up big losses.
Ironically, although the government took over Freddie Mac in the name of reducing its risky mortgage practices, it ended up doing just the opposite. The government made Freddie run up even bigger losses buying risky loans in an effort to artificially stimulate lending. In conduct reminiscent of Enron, federal regulators tried to prevent Freddie from disclosing to the public and the SEC how Obama’s mortgage bailout was forcing it to lose even more money....
Freddie Mac's Duel With Regulator: Does It Report Government's Role in Its Losses?
...But when Freddie Mac's executives concluded a few weeks ago that they had to disclose that the government's management of the McLean company was undermining its profitability and would cost it tens of billions of dollars, the firm's regulator urged it not to do so, according to several sources familiar with the matter.
Freddie Mac executives refused to bend. The clash grew so severe that they threatened to go to the Securities and Exchange Commission, which oversees corporate disclosures, to secure a ruling that the regulator's request was out of line. The company's regulator backed down, the sources said. ...
...As Freddie Mac executives were preparing their annual 10-K financial disclosure this month, they reported that carrying out the Obama administration's housing plan would cost $30 billion this year. That sum would have to be covered by the Treasury Department. The federal government has pledged to cover $200 billion each in losses for Freddie Mac and Fannie Mae, of which the pair have asked for about $60 billion.
The housing agency asked that the cost of the program be withheld and that the firm soften language describing how government management was undercutting profitability, according to sources.
People familiar with the dispute offered different views about why the regulator sought to prevent the disclosures. One source said the regulatory officials didn't want to make it seem like government actions were causing big losses at the company and would require more taxpayer dollars. Another person said the officials thought that accounting rules would soon change, making the disclosure unnecessary. ...
...The main way that the government is c ausing Freddie to incur losses is by requiring it to play a central role in the Obama administration's Homeowner Affordable and Stability Plan, a $75 billion effort launched this month. The program aims to restructure mortgages that struggling borrowers cannot afford, bolster the sagging housing market and bring down interest rates on home loans. ...
Feds Make Freddie Mac Even Worse, Ripping Off Taxpayers
After federal regulators took over failing mortgage giant Freddie Mac, they didn’t stop its risky lending practices. Instead, they ramped up its risk-taking, making it run up even bigger debts at taxpayer expense to try to artificially pump up the economy. They made Freddie buy countless risky mortgage loans. Recently, the Obama Administration forced it to incur $30 billion in losses as part of the administration’s bailout for irresponsible mortgage borrowers, which caps mortgage payments for even high-income borrowers at a ridiculously low level. The Obama Administration tried to prevent Freddie Mac from even disclosing these losses in the financial disclosures it must make to investors under the securities laws....
U.S. promises unlimited financial assistance to Fannie Mae, Freddie Mac
The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress.
The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama's current term.
But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.
The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac's chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid....
