Kevin Lamson

Fannie/Freddie Bailout 'Disastrous Fiasco'

SHORT'S DID NOT CREATE THIS FINANCIAL FIASCO. FRAUD DID!

I don't think the "shorts" created the problems at Bear Stearns, Countrywide, Indymac, Fannie Mae, Fredde Mac or Lehman Bros. I do think that the land office creation of trillions of dollars of bundled mortgages or questionable value that were financed by the sale of bonds to both domestic and international investors is what created the current eccnomic fiasco that we find ourselves in.

Just wait till there are fair market valuations done on all these mortgage loans and/or homes that were acquired when the loan defaulted and were foreclosed. I’m pretty sure you will see that there was top to bottom fraud in funding and originating these loans so they could be flipped to investors. Even the conservative Swiss bankers were taken in by these supposedly safe investments. Swiss bank UBS will be reporting another 5 billion in write downs this quarter. U.S Banks, Investment Banks and GSE's Fannie, Mae and Freddie Mac were slow in reporting the amount of defaults in the various loan portfolio's. Some suspect this was to cover up the problem and keep share prices from tumbling. By what has recently transpired this claim of lulling investors by U.S. financial companies appears to be well founded.

I do not see how anyone can vouch for Fannie Mae or Freddie Mac being financially sound when they are publicly reported as being the holders of guarantors of over half of the existing mortgage loans in the USA Which in turn could mean that they own half of lender owned homes, "REO", that have been foreclosed on in the USA. I think these facts should give pause to any prudent investor that Auntie Fannie and Uncle Freddie may not be as financially sound as is suggested by some folks. One can only hope, for U.S. taxpayer's sake, that Fannie and Freddie assets when valued at fair market will be worth not to much less than its liabilities including contingent liabilities from their guarantees. Only time and audits will tell.

Fannie/Freddie Bailout 'Disastrous Fiasco'

Why anyone would have continued to hold or invest in Fannie Mae or Freddie Mac after the the Office of Federal Housing Enterprise Oversight (or OFHEO), issued its 211 page report in 2004, wherein it concluded that Fannie Mae had a coprorate culture where "earnings manipulation" was "pervasive and willful" there were lax controls, perverse incentives, unjust bonuses. Then in May of 2006 the Securities and Exchange Commission (SEC) accused Fannie Mae of fraud and other misdeeds. Without admitting or denying wrongdoing, Fannie agreed to a $400 million settlement. That's right a FOUR HUNDRED MILLION DOLLAR ($400,000,000.00) fine. This was just over two years ago.

Does this sound like a company anyone in their right mind would invest money in? Now that the chickens have finally come home to roost. It will be interesting to see if any Fannie Mae or Freddie Mac executives are indicted and or imprisoned now that Fannie Mae and Feeedie Mac seized by the U.S. Government. Probably not because these two companies have been run by executives and boards who were politically connected and appointed.

When the average American taxpayer finds out how big this Fannie Mae and Feddie Mac financial debacle is and the fact that it got progressively worse since the OFHEO report in 2006, they will be outraged. The idea that our government is going to guarantee the bonds that were floated by Fannie Mae and Freddie Mac that back billions of dollars if not trillions of dollars of non-performing mortgages that were flipped to Fannie Mae and Freedie Mac by Wall Street is unconscionable. It is yet another example of how our government allowed Wall Street to privatised profits from public companies to its executives through bonuses, stock options, director fees etc. and now that these public companies financial schemes are collapsing our government has decided to socialize the losses to American tax payers. Privitizing profits socializing lossess. Thats the new game the U.S. Government is playing.