Sperling: WH not interested in GSE recap plan


"I want to make clear our administration believes the risks are simply too great, that this would re-create the problems of the past," says the president's chief economic adviser Gene Sperling of any recapitalization plan for Fannie Mae (FNMA +7.5%) and Freddie Mac (FMCC +6.4%).

Speaking at an industry conference in D.C., Sperling says the administration is interested in rebuilding a stronger mortgage market not dominated by two mammoth institutions, and Frannie - even if restructured - would retain a large advantage over newer entrants.

Needless to say, Sperling's remarks come in wake of Bruce Berkowitz's buyout and recap proposal for the GSEs from last week.

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Comments (22)
  • dgfurr
    , contributor
    Comments (66) | Send Message
     
    It doesn't really matter if the White House is interested or not. Its in the hands of the courts. The White House caused the mess the GSE's are in. by acting unconstitutionally to seize private property. This is just another president and he will be gone and Fannie and Freddie will still be standing. the president has no authority over a private business unless the government purchases the assets, which it has not. So at this point I don't really care if the white house objects to the recapitalization, they can't even appoint a confirmable regulator.
    20 Nov 2013, 04:10 PM Reply Like
  • Ahmed Amin
    , contributor
    Comments (18) | Send Message
     
    Totally agree with dgfurr's comments. It is not up to the WH or anyone but the courts. With FnF showing a great track record over the last year and how the house market is getting stronger and stronger by the day, week, and month, it is going to be hard to say restructure FnF. Let alone all the large financial institutions, hedge funds, and real state businesses asking to keep FnF in place else there is a risk of tanking the housing industry.
    Obviously tax payers do not see any of these profits collected which makes this is all very questionable transactions.

     

    To protect all the stock holders and the common stock holder (mainly) we are working with a company to create a site where we can gather names of stock holders so we can start another law suit which can add a lot of pressure as what is happening is very unconstitutional. The government has no business to take the profits from Fannie and Freddie unless as a way of getting repaid.

     

    If you are all interested in the idea of building a list so we can defend stock holders and common stocks precisely please comment or something so that we can proceed with it.

     

    Filing a law suit that represents a lot of people will probably add to the stress.
    20 Nov 2013, 05:29 PM Reply Like
  • Palenque
    , contributor
    Comments (395) | Send Message
     
    The derivative lawsuit of Bryndon Fisher Vs US is suing the government on behalf of the shareholders
    20 Nov 2013, 10:21 PM Reply Like
  • ljnst
    , contributor
    Comments (7) | Send Message
     
    I am Fannie stock holder and like the idea of protecting my investment .
    21 Nov 2013, 12:05 AM Reply Like
  • Charles A. Smith
    , contributor
    Comments (1264) | Send Message
     
    "The government has no business to take the profits from Fannie and Freddie unless as a way of getting repaid."

     

    OK. Let's start repaying the annual value of the "implied" (it became very real in 2008) Federal guarantee on FNM & FRE debt, which guarantee has been in place over the entire lives of the two institutions. CBO estimated it as $5 billion to $7 billion per year back in 2001. So the subsidy has amounted to $78 billion just over the past 13 years, let alone the compounded value over the period from 1938 (FNM) and 1970 (FRE). You've got a lot of catching up to do.
    20 Nov 2013, 06:08 PM Reply Like
  • dgfurr
    , contributor
    Comments (66) | Send Message
     
    We don't need to repay any such implied value. the very act of supporting property ownership manifests itself higher tax revenues at all levels, local through federal, it pays all municipal salaries and the salaries of all who supply the goods and services to all government entities. All of that income is taxed and ultimately pays all federal employees as well. If housing ownership falls out of favor, watch the government vampires starve.
    20 Nov 2013, 07:45 PM Reply Like
  • Charles A. Smith
    , contributor
    Comments (1264) | Send Message
     
    "...watch the government vampires starve."

     

    Sounds like a plan.
    20 Nov 2013, 09:33 PM Reply Like
  • philipmax
    , contributor
    Comments (420) | Send Message
     
    Interesting viewpoint.
    Some issues:
    Firstly -The government structured these entities to remove them from the National Debt. There must be some value in to these GSEs for "fooling" the world that our National Debt was $11B less than was advertised. Interest rates on Treasuries would be much higher.

     

    Second- 1935-1970 have nothing to do with shareholders' ownership, so we need not impute value added that far back.

     

    While you might have a point, let's understand that the function of these GSEs is to provide a valuable service to both the banking industry and the home buying public. All the chatter about replacing these institutions will end up with an agreement that they exist simply because there is no better system than these genius inspired entities.

     

    So, true, the fact that they have access to Treasury rates gives them an advantage, but your argument implies that they have to return this advantage back to the government, therefore, you want to tax this "advantage" through the back door. Sort of defying the raisin-De-etre of these companies.
    Conclusion: This idea is a none starter
    20 Nov 2013, 11:04 PM Reply Like
  • Charles A. Smith
    , contributor
    Comments (1264) | Send Message
     
    "... you want to tax this "advantage" through the back door..."

     

    What? This "advantage" (and it was, and remains, very real) should never have accrued to private hands in the "implied" way that it did. EITHER MAKE THE SUBSIDY EXPLICIT OR GET RID OF IT. Sort of like the way Obamacare is wealth redistribution dressed in the guise of a health care system, FNM and FRE were a large and ongoing shift of resources to the real estate complex (brokers, builders, mortgage bankers, etc.). And the results are the same: rising prices as the subsidy grows ever larger and (eventually) a collapse. Can't you see it happening all over again with student loans? Get real. Admit your "investment" depends upon taxpayer support, and that taxpayers are finally wise to how the subsidy game ends. It's laughable to me how many people on this board are unwilling to make this simple admission.

     

    "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair
    21 Nov 2013, 08:16 AM Reply Like
  • philipmax
    , contributor
    Comments (420) | Send Message
     
    Charles, Upton is one of my favorites. Personally, though, I can't relate to your quote.
    No doubt, real estate is an important contributor to the GNP. So, yes, many people are dependent on its continued development, and their self-interest is wound up in the discussions about FnF.

     

    The original declared purpose of these GSEs, is precisely, to make loans available where none would be made. No secret as to their market advantage either. In the depression era of the 1930's, the banks refused to, or could not, give out mortgages. Congress established FNMA in order for ordinary people to have access to mortgage money. FNMA should have stayed as a government agency, but in 1970, the national debt was a huge concern, and spinning off this entity with its huge debt burden was the solution taken at the time. Its attraction was its market rate advantage. It worked well for forty years, and still does - if the politicians stayed away from interfering in its policy. I see no reason why it should not keep functioning well into the future.

     

    We were almost back to square one in 2008, when the banks again tanked and refused to issue mortgages. FnF are a good backstop to this issue. No other country has this system in place.
    Now, if you want to argue about continued private ownership of these Crown Jewels, you might have a point. But, first, Uncle Sam has to square up with the stockholders, and confiscation issues, and.....

     

    P.S. Student loan issues???!!!...DON'T GET ME STARTED!!!
    21 Nov 2013, 08:55 AM Reply Like
  • Charles A. Smith
    , contributor
    Comments (1264) | Send Message
     
    "...first Uncle Sam has to square up with the stockholders, and confiscation issues..."

     

    Square up? The tiny amounts of equity on FNM's and FRE's balance sheets were WIPED OUT by the 2007-2008 debacle. Or is ALL of the risk supposed to go to the taxpayer, while none goes to the "shareholder"?
    21 Nov 2013, 09:22 AM Reply Like
  • philipmax
    , contributor
    Comments (420) | Send Message
     
    They'd have equity today, were it not for Treasury confiscating all their income. This is thuggery, the mob does it to mom-and-pop shops all the time. FnF function well with little equity base because they have a license to mint money.
    I am not arguing their unique and advantaged position in the financial world. They have it made. I am not so sure that the conservatorship was necessary in the first place, as they were never denied access to the debt market, even in the darkest August days of 2008.
    The decision to put them into this position was a spur of the moment, Summers/Geitner/Paulson gangsterism that pervaded the WH and Treasury. Maybe panic, maybe greed, maybe fear, but, not well thought out. And, definitely, never intended as a final solution.
    Want to take these institutions back into government fold, then follow the rule of law. They are profitable private enterprises and this is a capitalist society (nominally). Let government buy them back from private hands.
    21 Nov 2013, 10:13 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11168) | Send Message
     
    If you think THIS administration is going to work with a pack of hedge funds on ANY plan (even one as fundamentally sound as Berkowitz's) then you need to have your head examined.
    20 Nov 2013, 08:06 PM Reply Like
  • 96815234
    , contributor
    Comments (2035) | Send Message
     
    Agree, but the courts could compel them to.
    21 Nov 2013, 12:10 AM Reply Like
  • Gumbolimbo
    , contributor
    Comments (58) | Send Message
     
    The administration we have can not revamp or rebuild its way out of a paper bag! This administration is so poorly leading our country and is causing so much confusion and despair. Just take a look at their latest fiasco with, Obama Care. I think my 92 year old aunt would do a much better job at rolling out a major overhaul. I hope this administration would learn from all of the mistakes they have already made to each major policies plan they set out on. One mistake after another from our current administration is just embarrassing our nation to others. Now, they think they can solve housing finance reform??? Give it a break. I voted for, Mitt Romney, at the last election because it was just plain common sense.

     

    Leave the GSE's alone and let them do their job! They are the only entities paying down the deficit. If it was not for Ben Bernacke adding such great stimulus, the economy would really be up the creek without a paddle. I am counting the days till we get an administration that knows what they are doing and will acknowledge shareholders and the common good. They want to break up and change a housing finance system that has been in place since the 1930's with something unproven in this fragile market? All they have to do is something that they neglected to do in the first place, and that is have the proper government oversight and guidlines in place so the housing market can sustain itself with our current GSE's remaining solid. Government misleading the GSE entities is what lead to their collapse. If Fannie and Freddie were regulated properly as are the banks of today, their would be no need to get rid of them. They should have proper capital requirements that have to be met and tested just as the banks in the worst case scenarios. Look, the taxpayers will be made whole by the end of this year. Fannie and Freddie were their to support the housing liquidity when know one else would. They have done their job all along for America. All they need is the proper supervision and let them recapitalize. Now, that is a no brainer!
    20 Nov 2013, 08:23 PM Reply Like
  • Special Situations Monitor
    , contributor
    Comments (178) | Send Message
     
    Yup. Sounds like a great idea to hand over mortgage guarantors to hedge funds. This way what ever is left of the patient on life support will be properly dealt with. Better yet, may be we should also let hedge funds run the FED, the department of treasury and lets throw in the SEC and FINRA in the mix while we are at it.
    20 Nov 2013, 08:38 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11168) | Send Message
     
    Which specific part of the plan would hurt the American people?
    20 Nov 2013, 09:38 PM Reply Like
  • User 16640252
    , contributor
    Comments (3) | Send Message
     
    "and Frannie - even if restructured - would retain a large advantage over newer entrants".

     

    I believe the above mentioned comment by Mr. Sperling means the White House may be reconsidering FNMA's fate. The White House is starting to realize that the Bills that promote private investors are a big mistake. To me it means they are now entertaining the idea of restructuring and spinning off FNMA.
    20 Nov 2013, 09:26 PM Reply Like
  • dyao333
    , contributor
    Comments (2) | Send Message
     
    It is good idea building a list so we can defend stock holders and common stocks precisely !
    20 Nov 2013, 10:27 PM Reply Like
  • User 12761281
    , contributor
    Comment (1) | Send Message
     
    I agree with you guys. I and my friends are waiting to see the website so that we can put the pressure on the WH.
    20 Nov 2013, 10:32 PM Reply Like
  • ga jim
    , contributor
    Comment (1) | Send Message
     
    Count me in
    20 Nov 2013, 10:32 PM Reply Like
  • Huskyblue
    , contributor
    Comment (1) | Send Message
     
    I am on board with the lawsuit. Nobody is talking about all the defaults and bailout of FHA. They recently asked for 7B and they are charging current customers more than double what they did prior to crisis to insure the loans and if they put less than 10%down which is probably the case on over 90% of loans they are required to pay this monthly insurance to the government for the life of the loan regardless of how much equity they have in the property say 10 or 20 years from now.
    22 Nov 2013, 01:00 AM Reply Like
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