Must watch.Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam

[Hilltop Customs]

using his math(200mil paid citizens, and 30% tax) 700bil turns out to be 2450 a person. I kind of have a split view on this one.....cant really make a decision if I'd want it or not till I read up on what exactly it is planned for now. I could see giving out money like that be both helpful and harmful at the same time, Id be more worried about long term effects than making the public happy by writing them a check.

[beam]

What the FMs did with those high risk sub-primes is the equivalent of me asking the government to buy me millions of dollars worth of lottery tickets and let me keep the winnings.

They reaped the rewards but when the risk should bite them in the rear...they get a buyout.

[Hilltop Customs]

Just for a different perspective....imagine 85billion used for government rebates on solar panels. That massive influx of cash in that area would generate some stiff competition, inducing more rapid development in technologies in the area. A huge number of jobs would be created from production, installation all the way through to cleaning and maintenance. Meanwhile the public's electric bills would drop dramatically from the first person use of solar panels and the effect of supply and demand as max daily demand drops. Your electric bill is a recurring cost, lowering it has a greater effect over your lifetime than giving you a few grand to blow in a few days.

think about it

[teufelhunden]

Fannie Mae and Freddie Mac did, in fact, spur much of the problems that we see today. Some brief history:

Fannie Mae was set up by the government in 1938; Freddie Mac in 1970. The way these institutions were chartered set it up so that the government was, in practical terms, guaranteeing the mortgages that the two "firms" sold. Accordingly, Fannie and Freddie both took very substantial risks; that is, they sold mortgages to those who otherwise should not have been given a shot at a mortgage of the size they were looking for (for those of you who don't know, and it's a surprisingly large number, here's the lowdown on the "subprime mortgage thing" -- the mortgages are sold with an adjustable rate below "prime," which is the rate at which (traditionally) banks lent to their most credit-worthy consumers. The mortgages (which are contracts in which the bank agrees to front money to purchase a home in exchange for monthly payments, plus interest, with the home as collateral in the deal; the bank owns the home until you pay it off, more or less) had a rate reset at some point into the deal, usually 2-4 years-- at this point, the rates which were originally subprime (that is, below the prime lending rate) were adjusted upwards, above the rate that one could get a mortgage for currently-- the bank is making money either way, they are no fools, so the higher rate paid for the lost revenue with the low "teaser" rate. After the rate adjustment, the monthly cost of the loans went up substantially, and those who had bought a home that was above what they could afford with a traditional mortgage, or people who hadn't read the contracts, etc, were in trouble. Some people had bought these homes and mortgages with the expectation that they would refinance the mortgage when the rates reset (that is, get a new mortgage with more favorable terms to pay off the old mortgage, and pay on the new mortgage) -- however, in combination with a correction in the housing market (prices came down, a lot), this was not generally possible as outstanding balances on many of the loans was in excess of the current worth of the house. Hence, foreclosures, etc, yadda yadda, here we are).

Anyway, Fannie and Freddie basically invented the subprime mortgage. They sold them, en masse, and as noted, took risks that prudent firms would not take. They sold loans to people who were not credit worthy period, let alone for a multiple-hundred thousand dollar loan. Call it predatory lending, call it whatever you want, the net net was that these firms sold mortgages that could not possibly be repaid except under the most favorable conditions. Knowingly. They were bankers who understood these concepts, a lot of the people who bought subprime loans were those who didn't qualify for traditional loans, so they didn't understand the risk. I'm not excusing these idiots in any way, believe me, ignorance is no defense at all-- they signed a document signifying their understanding and agreement to these terms. However, the loans never would have existed had it not been for Fannie and Freddie playing with house (read: taxpayer) money and a variety of "American dream" bills that forced lenders to lend to those who would otherwise not be able to get loans. Congress actually promoted subprime loans starting in the late 70s (Democrat controlled Congress) and lenders (incl. Freddie and Fannie) were happy to oblige because it wasn't really their risk.

And the accounting issues at Fannie and Freddie are a whole different story which I will not go into at this point, as it is outside the scope of this discussion (and frankly, the understanding of anybody without an accounting/finance education).

[drg]

First, it's bologna.

Second, I stated that there does need to be a level of agreement for something to pass committee and there does. I am not saying that the level of agreement necessary to pass something on cannot be met by one party or the other. There are times when there are enough votes from one party for something to pass committee. Was Alito's committee vote party line? Yes. Despite that, the mandated level of agreement was met. I did not say that one party could not dominate a committee. I just think that the sweeping generalization is not at all times accurate, though it can be in some--or even most--instances.

http://www.thefreedictionary.com/baloney

[grEnAlEins]

http://en.wikipedia.org/wiki/Bologna_sausage

http://www.answers.com/topic/bologna-sausage-1

Just trust me dude. I'm a fat guy. I know a thing or two about the proper spelling of my meat products. It is named for it's place of origin--well, the place of origin for it's cousin Mortadella. When used in substitution for the phrase "BS" it should still be spelled correctly. What you did is like saying "penises" or something when it should be "penes". Yeah, it is accepted in American English; but no, it is not proper.

/I know the "penes" thing because of a report I had to write for work. It is a long, long story. The best part is that the report was read aloud in a court of law

[Hilltop Customs]

My bologna has a first name, it's O-S-C-A-R
My bologna has a second name, it's M-A-Y-E-R
Oh, I love to eat it every day, and if you ask me why, I'll say,
"'Cause Oscar Mayer has a way with B-O-L-O-G-N-A."

http://www.youtube.com/watch?v=ctNAs1K7nbo

I win

[drg]

http://en.wikipedia.org/wiki/Bologna_sausage

http://www.answers.com/topic/bologna-sausage-1

Just trust me dude. I'm a fat guy. I know a thing or two about the proper spelling of my meat products. It is named for it's place of origin--well, the place of origin for it's cousin Mortadella. When used in substitution for the phrase "BS" it should still be spelled correctly. What you did is like saying "penises" or something when it should be "penes". Yeah, it is accepted in American English; but no, it is not proper.

/I know the "penes" thing because of a report I had to write for work. It is a long, long story. The best part is that the report was read aloud in a court of law

I didn't say bologna, I said BALONEY , meaning nonsense, which is NEVER spelled "bologna."

[drg]

Fannie Mae and Freddie Mac did, in fact, spur much of the problems that we see today. Some brief history:

Fannie Mae was set up by the government in 1938; Freddie Mac in 1970. The way these institutions were chartered set it up so that the government was, in practical terms, guaranteeing the mortgages that the two "firms" sold. Accordingly, Fannie and Freddie both took very substantial risks; that is, they sold mortgages to those who otherwise should not have been given a shot at a mortgage of the size they were looking for (for those of you who don't know, and it's a surprisingly large number, here's the lowdown on the "subprime mortgage thing" -- the mortgages are sold with an adjustable rate below "prime," which is the rate at which (traditionally) banks lent to their most credit-worthy consumers. The mortgages (which are contracts in which the bank agrees to front money to purchase a home in exchange for monthly payments, plus interest, with the home as collateral in the deal; the bank owns the home until you pay it off, more or less) had a rate reset at some point into the deal, usually 2-4 years-- at this point, the rates which were originally subprime (that is, below the prime lending rate) were adjusted upwards, above the rate that one could get a mortgage for currently-- the bank is making money either way, they are no fools, so the higher rate paid for the lost revenue with the low "teaser" rate. After the rate adjustment, the monthly cost of the loans went up substantially, and those who had bought a home that was above what they could afford with a traditional mortgage, or people who hadn't read the contracts, etc, were in trouble. Some people had bought these homes and mortgages with the expectation that they would refinance the mortgage when the rates reset (that is, get a new mortgage with more favorable terms to pay off the old mortgage, and pay on the new mortgage) -- however, in combination with a correction in the housing market (prices came down, a lot), this was not generally possible as outstanding balances on many of the loans was in excess of the current worth of the house. Hence, foreclosures, etc, yadda yadda, here we are).

Anyway, Fannie and Freddie basically invented the subprime mortgage. They sold them, en masse, and as noted, took risks that prudent firms would not take. They sold loans to people who were not credit worthy period, let alone for a multiple-hundred thousand dollar loan. Call it predatory lending, call it whatever you want, the net net was that these firms sold mortgages that could not possibly be repaid except under the most favorable conditions. Knowingly. They were bankers who understood these concepts, a lot of the people who bought subprime loans were those who didn't qualify for traditional loans, so they didn't understand the risk. I'm not excusing these idiots in any way, believe me, ignorance is no defense at all-- they signed a document signifying their understanding and agreement to these terms. However, the loans never would have existed had it not been for Fannie and Freddie playing with house (read: taxpayer) money and a variety of "American dream" bills that forced lenders to lend to those who would otherwise not be able to get loans. Congress actually promoted subprime loans starting in the late 70s (Democrat controlled Congress) and lenders (incl. Freddie and Fannie) were happy to oblige because it wasn't really their risk.

Freddie and Fannie did not invent subprime loans nor did they sell them. Subprime loans are another name for loans that do not meet Freddie or Fannie standards. Fannie and Freddie got into the subprime market through purchases of securitized subprime mortgages.

And the accounting issues at Fannie and Freddie are a whole different story which I will not go into at this point, as it is outside the scope of this discussion (and frankly, the understanding of anybody without an accounting/finance education).

This is true and is really the long and short of the response to this video. It is a partisan screed misrepresenting the source material.

[teufelhunden]

Freddie and Fannie did not invent subprime loans nor did they sell them. Subprime loans are another name for loans that do not meet Freddie or Fannie standards. Fannie and Freddie got into the subprime market through purchases of securitized subprime mortgages

hahahah what? Do you know what the prime lending rate is? http://www.investopedia.com/terms/p/prime.asp or http://www.investopedia.com/terms/p/primerate.asp It is based on the borrowers, not the lenders. Fannie and Freddie (should have) collapsed because of their loans to these borrowers and their inability to pay! So quite obviously, these are not loans that were below Fannie and Freddie standards. Fannie and Freddie would never have had to exist if the intentions of the two were to provide loans to people who could get them else where-- that's what the private sector is for.

While my definition above wasn't truly correct in the technical sense, in practical sense, subprime lending worked as I had described. A subprime borrower is someone with less than perfect (or, in modern cases, pretty crappy) credit. The loans were structured with low rates initially to entice borrowers, which were usually at a rate lower than average.

[Hilltop Customs]

ok so correct me if I'm wrong(I havent read crap other than the posts you guys have put up) a company provided loans to people who were at a high risk of not paying them back. Unless the goverment mandiated these loans be available, the choice to make these loans was still up to the company.....so why are we bailing them out for their poor business decisions? once again correct me if I'm missintrepreting anything here

[drg]

hahahah what? Do you know what the prime lending rate is? http://www.investopedia.com/terms/p/prime.asp or http://www.investopedia.com/terms/p/primerate.asp It is based on the borrowers, not the lenders. Fannie and Freddie (should have) collapsed because of their loans to these borrowers and their inability to pay! So quite obviously, these are not loans that were below Fannie and Freddie standards. Fannie and Freddie would never have had to exist if the intentions of the two were to provide loans to people who could get them else where-- that's what the private sector is for.

While my definition above wasn't truly correct in the technical sense, in practical sense, subprime lending worked as I had described. A subprime borrower is someone with less than perfect (or, in modern cases, pretty crappy) credit. The loans were structured with low rates initially to entice borrowers, which were usually at a rate lower than average.

Fannie and Freddie have fairly stringent standards for loans and loan guarantees (compared to the standards private lenders used to sell subprimes). Fannie and Freddie made none of these dangerous and exploitive loans; they only purchased them, many through MBSes.

[drg]

ok so correct me if I'm wrong(I havent read crap other than the posts you guys have put up) a company provided loans to people who were at a high risk of not paying them back. Unless the goverment mandiated these loans be available, the choice to make these loans was still up to the company.....so why are we bailing them out for their poor business decisions? once again correct me if I'm missintrepreting anything here

The bailout is for the purpose of preventing widespread failures of financial institutions, which could damage the US economy and create very bad conditions for the wider American public. By and large these people are innocent in this financial situation, so it's a way to try to avoid collateral damage, so to speak.

[Hilltop Customs]

collateral damage created by a business failing.....a business which practiced bad businees practices by loaning to people which had a high probability of not paying back.

By making a loan to someone who is purchasing a home, you are effectively purchasing the home and lettting the customer pay you back. If you dont believe in the person who is purchasing, or you dont believe it is a good deal on the home; the loaning company has a right to deny the loan.

What I'm getting at is: Unless a company is forced by the government to do something against their will, why should the government be required to bail them out?

and finanally I see the problem of the collateral damage, but also I see a benifit of many smart companies stepping up and purchasing the remnates of what is left and turning massive profits.

edit: feel free to point any problems with my logic, I like thinking/discussing this type of stuff as its beyond my relm of knowledge and I just try to think it through logically without any bias. aka I love discussing stuff and learning other people's point of view

[wetwrks]

Hey Tuna, I read that article too.

Unfortunately they are correct in that he is faulty in his math, but the idea behind it is correct.