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Treasury official: Recapitalizing GSEs would take 20 years

  • “Even if truly rehabilitating the GSEs were possible, recapitalizing them adequately would take at least twenty years,” says Mary Miller, Treasury's undersecretary for domestic finance. “During these 20 years, the taxpayer would remain at risk of having to bailout the GSEs during another downturn."
  • Calling the current system - where the majority of housing credit is backstopped by taxpayers - "unacceptable" and "an unsound business model," Miller reiterates the administration's position that Fannie (FNMA -1.4%) and Freddie (FMCC -1.9%) be wound down. "Only legislation can protect taxpayers by responsibly winding down the GSEs and replacing them with a system where a government guarantee is transparent and explicitly priced.”
Comments (19)
  • rambler1
    , contributor
    Comments (400) | Send Message
     
    Don't tell that to Mel Watts he wants to keep his job & the funds flowing.
    13 Jun, 03:58 PM Reply Like
  • wpdsr001
    , contributor
    Comments (53) | Send Message
     
    Give me a break, where does government find these people.

     

    Who do you thing backs up (insures) every bank deposit in this country.

     

    OK Ms Miller, you pull the plug.
    13 Jun, 04:05 PM Reply Like
  • David Sims
    , contributor
    Comments (304) | Send Message
     
    Did Mrs. Miller qualify what adequately capitalized means? Not really her job to do that anyway, considering FHFA is supposedly an independent regulator.
    13 Jun, 04:05 PM Reply Like
  • Caludio
    , contributor
    Comments (159) | Send Message
     
    Total nonsense. FnF already have the capital but Treasury stole it in this way:
    1) Forced the companies into conservatorship taking unnecessary noncash losses.
    2) With the 3rd amendment swept away ALL the profits.
    13 Jun, 04:06 PM Reply Like
  • thombiz
    , contributor
    Comments (7) | Send Message
     
    Seems not so long ago there were similar statements about how long it was going to take FnF to repay the money the Fed pumped into them to indirectly keep the "too big to fail banks" from collapsing.
    13 Jun, 04:11 PM Reply Like
  • steven haffner
    , contributor
    Comments (26) | Send Message
     
    Another example why we really need to raise the salaries offered for important government positions in order to attract better candidates. Even with a complete lack of oversight by the Treasury, rating agencies etc. and the resulting private lender fraud and worst housing crisis in our history, the GSEs repaid the taxpayers every dime. Moreover, Treasury has expropriated and been confiscating, in my view illegally, billions of dollars of profits belonging to the GSE's private shareholders. Astonishingly, Treasury now wants to allow these same bad actor "private lenders" to replace the GSEs? Does anyone seriously believe that if these private lenders had the business before the meltdown that any would not have run to the Treasury? Or that any of them would have repaid the taxpayers as the GSEs did? And these concerns leave aside whether such lenders would ever offer the 30 year fixed mortgage at any rate even close to what the average American could afford. And without the 30 year mortgage say goodbye to housing ... one of the few remaining industries that for the most part cannot be outsourced and therefore a vital mainstay to the recovery and the American worker. This woman is dangerous.
    13 Jun, 04:17 PM Reply Like
  • Buckoux
    , contributor
    Comments (5872) | Send Message
     
    "Another example why we really need to raise the salaries offered for important government positions in order to attract better candidates."

     

    That's just stupid! The salaries for "government positions" are already well paid and benefited. The problem is not the pay, it is the partisanship that is endemic with the bureaucracies that is the result of President John Kennedy's Executive Order 10988 of January 17, 1962, entitled the: "EMPLOYEE-MANAGEMENT COOPERATION IN THE FEDERAL SERVICE" (link: http://bit.ly/1mT5PHK)
    13 Jun, 05:31 PM Reply Like
  • RJKRJK
    , contributor
    Comments (125) | Send Message
     
    "Only legislation can protect taxpayers"
    If you, like Mrs. Miller think that govt. is the answer to everything then this might make a lot of sense to you. The old saying appears to be true, at least for people that think like this. If all you have is a hammer, everything looks like a nail.
    13 Jun, 04:41 PM Reply Like
  • oilman545
    , contributor
    Comments (57) | Send Message
     
    I keep wondering why the government thinks it can sell shares of something to the public and then when it is doing well, kill it. They can't legally do that. A public corporation that is doing well cannot declare bankruptcy because it is not in the best interests of the shareholders. If the government really tries to do this, it will be in court defending against scam and swindle. After all this is the USA not Russia and the government in this country can't do anything it wants (although sometimes they come close).
    13 Jun, 04:41 PM Reply Like
  • grshah
    , contributor
    Comments (4) | Send Message
     
    It will take 20 years because the Treasury has plans to steal from these two companies for the next 20 years, it's already spelled out in the OMB budget planning. I can't believe this is America, the country I'm a citizen of, very disappointed in hearing public officials and the govt going against the US constitution.
    13 Jun, 04:55 PM Reply Like
  • Metsch
    , contributor
    Comment (1) | Send Message
     
    She is not dumb. She has what the former Secretary of State, Madeleine Albright, called "cojones" . By taking the risk of voicing her loyal support to the "Führer" she is one step higher in the party line. The people, the economy the reality of what happened is irrelevant in the political trenches.
    13 Jun, 04:55 PM Reply Like
  • titanman
    , contributor
    Comments (3) | Send Message
     
    “During these 20 years, the taxpayer would remain at risk of having to bailout the GSEs during another downturn."

     

    Ummmm... doesnt the taxpayer fund the government? Government control of housing is worse than Obamacare. Owning a home is a privilege, not a necessity.
    13 Jun, 04:55 PM Reply Like
  • bfriedberg19
    , contributor
    Comments (2) | Send Message
     
    Was exec vp at Merrill Lynch and ran global investment banking business. Now on board of directors of New York Private Bank & Trust and the Nicklaus Companies.
    13 Jun, 05:48 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8214) | Send Message
     
    All talk and bluster.

     

    The GSEs are safe and rock solid.

     

    They aren't going anywhere.
    13 Jun, 07:45 PM Reply Like
  • dgfurr
    , contributor
    Comments (62) | Send Message
     
    The rest of comment went on to say that most of the gains in the GSE's profits were tax credits and asset write ups. What she did not say was that most of the losses were taxes assessments, asset writedowns, and increased reserves forced on them by the government after that takeover. She is leaving her post in September and I for one hope a more intelligernt person gets it.
    14 Jun, 08:00 AM Reply Like
  • Retail Investor
    , contributor
    Comments (428) | Send Message
     
    i guess this guy hasn't seen the profitability of gse (barring the one-off housing bust created by wall street)
    14 Jun, 10:21 AM Reply Like
  • HooL
    , contributor
    Comments (9) | Send Message
     
    It looks like Treasury does not like taxpayer make $$$B from FnF. Taxpayer may make more money if next crash.
    Also, what will happen to FDIC if taxpayer did not bail out all the big banks?
    14 Jun, 10:19 PM Reply Like
  • steven haffner
    , contributor
    Comments (26) | Send Message
     
    Further to my earlier comment, it appears below market salaries and compensation is not to blame for Ms. Miller. Nor is she incompetent, since it has been reported she was earning about $3MM/year as a member of T. Rowe Price Group, Inc.'s Management Committee and Director of its Fixed Income Division before she accepted her present government post. Nonetheless, our policy of grossly underpaying senior officials regularly responsible for making decisions involving tens or hundreds of billions of dollars is a very bad idea. The consequence of such short-sighted policy is either less talented/qualified officials making billion dollar mistakes; or, in the case of Ms. Miller, very shrewd individuals from the private sector who take a detour into government to influence policy in favor of their industry, then return to Wall Street. This appears to be Ms. Miller's story who, along with her former company, obviously resent taxpayers sharing the mortgage guarantee business and want all that business going to T. Rowe Price and other Wall Street firms so their senior executives can purchase more Lear Jets and vacation condos. I have no problem with rewarding risk capital with Lear jets and condos when those private firms put skin in the game, but here the private firms looking to make the mortgage guarantee fees are nothing more than unnecessary brokers or middle men. At the beginning and the end of the day, as many of the comments here have aptly stated, these firms are risking and investing OPM (other people's money), namely the taxpayers. Not only would the taxpayers remain at risk were private banks allowed to takeover all of the GSE's business, but for the most part these large financial institutions are not even risking their own capital, since they borrow the money they use to fund homeowner mortgages (or maintaining the required reserves for guaranteeing them) from the taxpayers at ridiculously low, essentially government subsidized, interest rates. In fact, the reason much of the government stimulus since the meltdown never reached Main Street or small business is because the large banks simply borrowed the money at the Treasury Window at rates approaching 0% and lent it back to the taxpayers (the same folks who gave them the money) by buying CD's and other government debt instruments at rates approaching 2%. The problem I have with many conservatives today is that they are all to ready to complain about government subsidies to the poor and middle class, while at the same time ignoring the enormous graft and subsidies afforded wealth interests. Welfare is welfare.
    15 Jun, 10:43 AM Reply Like
  • traderBro
    , contributor
    Comments (12) | Send Message
     
    HAHHAHAHHAHA she just 'resigned'

     

    opps!
    15 Jun, 01:31 PM Reply Like
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