Last week one of Fannie Mae and Freddie Mac’s major shareholders proposed dismantling the government-sponsored enterprises (GSEs) and replacing them with two new private-sector entities that would offer the same services, namely buying and guaranteeing home mortgages. Perhaps more interesting than the plan itself was the knee-jerk, statist reaction from the Obama administration, which suggests that we’re likely stuck with the status quo for a while longer.
The Treasury Department assumed a 79.9 percent stake in Fannie and Freddie when it placed the two under conservatorship in 2008, leaving stockholders with the remaining 20.1 percent. It also gave itself a 10 percent dividend on the $188 billion it invested in the entities to prop them up, to ensure it recouped the government’s money that went into the bailout.
Last year President Obama and his henchmen unilaterally altered the terms of its ownership to lay claim to every dime of profit generated by the GSEs above and beyond its dividend. Their justification for abrogating the previous arrangement? Essentially, that private shareholders are rich plutocrats who deserve nothing, whereas the administration is looking out for the people. Never mind that for years before the financial crisis, regulators steered community banks to invest in Fannie and Freddie to keep their balance sheets strong, let alone the quaint notion of the rule of law.
One Treasury official scoffed at the very idea that the housing market could exist without the federal government. The need for affordable mortgages is too important, he opined, to be settled by profit-seeking firms.
The administration’s reflexive response to privatizing a market that the government made an utter hash of . . . is to assert the importance of government intervention. While this may not qualify as newsworthy, it’s surely worthy of mockery, and makes us wonder what else the current regime has in store for us.
The Federal Housing Authority is running a little short so the Treasury is advancing a small loan – not even $2 billion – to replenish an insurance fund. This is necessary, as Clea Benson of Bloomberg reports:
Between Sunday and Wednesday, Newt Gingrich went from leading Mitt Romney by 8 points to trailing Mitt Romney by 8 points in the Florida GOP primary polls. Thursday night's debate in Jacksonville was Gingrich's best opportunity--and most likely his only--ahead of Tuesday's primary to reverse Romney's momentum. But far from landing a knockout blow, it was Gingrich who was thrown back on his heels.
Cocoa, Fla. Newt Gingrich is promising voters the moon—or a moon base, at least.
During what his campaign dubbed its “Space Coast Town Hall Meeting,” Gingrich told a packed Holiday Inn Express conference room on Wednesday evening that one of his goals at the end of two terms in the White House is to have the “first permanent base on the moon.” He also invoked John F. Kennedy just miles from the former president’s eponymous space center about the challenges and the potential of a reinvigorated space program.
In response to charges from Mitt Romney that the former House speaker 'lobbied' for Freddie Mac, Newt Gingrich campaign surrogate J.C. Watts, a former congressman from Oklahoma, argued that his work as a 'consultant' to the mortgage giant actually makes Gingrich a better candidate for president.
Dueling Republican front-runners Newt Gingrich and Mitt Romney have been trading barbs on money and wealth the last few days. After Romney said Gingrich should return the $1.6 million he received from Freddie Mac, Gingrich shot back by saying Romney should return the money he made at Bain Capital by "bankrupting companies and laying off employees over the years."
Urbandale, Iowa Newt Gingrich responded to a report from Bloomberg News today that he earned upward of $1.8 million in consulting fees from Freddie Mac, the quasi-public home mortgage firm. Speaking with reporters outside a restaurant in this Des Moines suburb, Gingrich said he offered the firm, which has been in conservatorship since the 2008 financial crisis, "strategic advice" over a period of eight years through his private consulting firm the Gingrich Group.
The capital markets subcommittee of the House Financial Services Committee held a markup on Tuesday for eight small bills related to reforms of Fannie Mae and Freddie Mac. At the markup, congressional Democrats on the committee employed several parliamentary tactics to stall the votes. Democrats frequently demanded for a quorum call, according to a Republican staffer with the committee, and then each Democratic member would leave to deny the committee a quorum. The hearing lasted over 12 hours.
The video below shows a half-empty committee room during one such quorum call:
Andrew Ross Sorkin has a very interesting column this week examining the signal sent by GM’s purchase of AmeriCredit. The short answer: GM looks like it’s trying to revive the old patterns of demand before the recession. It’s doing so by following some of the same business practices that led to its bankruptcy filing last summer.