ShareFannie Mae has the luxury of marking its accounts more accurately because they have no fear of being nationalized or going bust since they already have hit the wall.  So, when we read the latest quarterly results from Fannie Mae, we are not just seeing a glimpse of Fannie’s reckless financing, but of the American [...]

ShareLet’s say you’re an American named Maria living in Southern California.  The year is 2006.  You make $45,000 and your husband David makes another $40,000.  You have two children aged six and four and your two-bedroom apartment is getting too small.  So you decide to consider buying a house.  Eventually, you and your husband find [...]

ShareApparently the answer to this question is yes.  CNBC is reporting that home ‘owners’ who refinance their mortgages through loans backed by Fannie and Freddie will be able to borrow up to 125% of their homes’ value (hat tip Marshall Auerback).  That’s not a typo: we’re talking no-money down and 25% cash back.  Sign me [...]

ShareBloomberg has the goods on Fannie and they’re not good. Fannie’s regulator wants $19 billion from the U.S. government because the firm has negative capital. Fannie Mae had $23.2 billion in losses last quarter alone. And it says losses in 2009 will be worse than 2008.  Nice.
Here’s the money quote: “Fannie says it does [...]

In case you missed it, Freddie Mac and Fannie Mae have cost taxpayers tens of billions to date. The bill is still rising, however, as the two companies are looking for $50 billion more to avoid technical insolvency.

Then there is Citigroup who has had their hands out for $45 billion. They have also written down over $80 billion in bad assets. Yet, they are still splurging on corporate jets.

The video below reports on these events, on John Thain’s million-dollar office makeover and more. Needless to say, we have a clear case of banks behaving badly.

Bankruptcy is a necessary part of a free market. I certainly believe this to be so. Rick Newman, who writes the blog “Flow Chart” over at U.S. News, is putting forward the provocative idea that failure is exactly what we needed more of in 2008 and what we should want in 2009.

Marshall here. Slowly but surely, the Treasury is beginning to move more aggressively on providing help to homeowners, as opposed to bankers. This makes sense: A financial meltdown and housing deflation cannot be cured simply by pumping money into the banking system. You also have to consider a program which provides mortgage relief to homeowners as well.

The Treasury Department is considering a plan to halt the slide in home prices that would lower mortgage rates using Fannie Mae and Freddie Mac. The plan could reduce rates for newly issued loans to as low as 4.5%. Slowly, but surely, the government is moving in the right direction. It is beginning to dawn on Treasury (albeit, belatedly) that a prerequisite for economic recovery is not just the stabilisation of the banking system, but some sort of program which provides mortgage relief for home owners. This plan is a small start.

I have a problem with this though. It is “trickle down”.

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Below is a chart of variable rate loan applications as per cent of total.
This can be looked at from a contrary opinion point of view, that is people are afraid of variable rate loans after they got burned on the upside in the last several years and thus they are moving to fix rate loans [...]

I don’t understand the lack of imagination in DC. All the politicians have to do is tell the banks to lower their variable rate mortgage loans on the books to 4% right now, today or else and it is like $600-$750 billion of stimulus. With short rates as zero it’s the least the banks can do.

That probably offends the free market sensibilities of many of our readers, so here’s an alternative approach: Why not Fannie and Freddie, which are now de facto arms of the US government?