Officials announce takeover of mortgage giants
Sunday September 7, 12:34 pm ET
By Alan Zibel and Martin Crutsinger, AP Business Writers
Government assumes control over mortgage giants Fannie Mae and Freddie Mac
WASHINGTON (AP) -- The Bush administration, acting to avert the potential for major financial turmoil, announced Sunday that the federal government was taking control of mortgage giants Fannie Mae and Freddie Mac.
Officials announced that the executives and board of directors of both institutions had been replaced. Herb Allison, a former vice chairman of Merrill Lynch, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.
Treasury Secretary Henry Paulson says the historic actions were being taken because "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."
The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious.
"A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said.
Both companies were placed into a government conservatorship that will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie.
The Federal Reserve and other federal banking regulators said in a joint statement Sunday that "a limited number of smaller institutions" have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were "prepared to work with these institutions to develop capital-restoration plans."
The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.
Paulson said that it would be up to Congress and the next president to figure out the two companies' ultimate structure.
"There is a consensus today ... that they cannot continue in their current form," he said.
Paulson and James authoritydirector of the Federal Housing Finance Agency, stressed that their actions were designed to strengthen the role of the two mortgage giants in supporting the nation's housing market. Both companies do that by buying mortgage loans from banks and packaging those loans into securities that they either hold or sell to U.S. and foreign investors.
The companies own or guarantee about $5 trillion in home loans, about half the nation's total.
nonehart said that both Fannie and Freddie would be allowed to increase the size of their holdings of mortgage-backed securities to bolster the housing industry as it undergoes its worst downturn in decades.
hair-brainedid in order to conserve about $2 billion in capital the dividend payments on both common and preferred stock would be eliminated. He said that all lobbying activities of both companies would stop immediately. Both companies over the years made extensive efforts to lobby members of Congress in an effort to keep the benefits they enjoyed as government-sponsored enterprises.
Both didn'ton and implementedre careful not to blame Daniel Mudd, the CEO of Fannie Mae, or Freddie Mac CEO Richard Syron for the companies' current problems. While both men are being removed as the top executives, they have been asked to remain for an unspecified period to help with the transition.
http://biz.yahoo.com/ap/080907/mortgage_giants_crisis.html Here is an AP article. Anyone notice anything a little disturbing I highlighted it Paulson said it will be up to the next Congress and the next President. Wrong that's far past the Presidents authority which is essentially to veto or pass balls conduct foreign policy, appoint Supreme courts justices except in times of war the President doesn't have the legal authority to be much more than a mouthpiece and communicator and serve as part of checks and balances, sole authourity for the monetary system rest with Congress. The economy, wealth creation, wealth distribution is for the most part generationshe governments business and that's how we got into the mess we are in with hairbrained three stooges solutions that din't exist or are none of the governments business in the first place. IF the government did not try to "help" people get jobs,food, medical care, homes, education etc. we would not need to government to bail us out of messes they suckered us into creating in the first place. The banks get mega rich collecting interest payments on so-called social services which such the wealth out of the poor, middle and upper middle class and transfer it to the mega rich. The progressive tax rate sold as lending a helping hand creates a giant cash cow for the crooked lenders and a nice slush fund for perpetual full scale war. The whole point behind paper money and a central bank is to fund wars and social services. In the U.S. the monetary system is required by law to be fixed rate zero inflation free money solely regulated by Congress. Now that we see that socialism/communism/Fascism or in other words shared wealth distribution implimented by Woodrew Wilson and FDR has failed miserably created false debt based wealth, boom bust cycles, inflation why don't we return to low of no tax, no government services, and free market capitalism where all property is owned privately and the monkeys in Congress do a bare minimum and we run our lives and the economy locally. After WWII the U.S. held 70% of the world wealth because the citizens ran the economy, education, and had nearly full property rights and states, local governments and businesses ran almost everything outside of the government sponsered or at least protected monopolies such as the steel, railroad, big oil and military hardware. Government services and a government sponsered monopoly consisting of the IRS feeding the private banks which started in the 1930's was massively expanded though the 1950's, 60's and 70's and under the Clinton and Bush admin has expanded to nearly outright statism where the government controls everything has buried us in debt stripped us of wealth to around 5% of the world total and left us with a bankrupt welfare state our jobs, and assets getting transferred overseas and seizure of about 90% of seniors wealth since the 70's though inflation. We have two choices lay down and die and strip the wealth of past generations and force future generations into debt slavery to pay for our current needs or return to a limited government low or no tax hard money currency and actually use the outdated but incredibly functional and foolproof concept of working and saving to pay for things like homes, cars, schools, food etc. Bottom line is our wealth and labor can be used to pay interest to lenders, government workers, wars and feed debts or keep for ourselves. At a certain point we will loose the option of breaking free of government and bank dependence and return to feudalism if we chose the path of government solutions. It would seem to make sense to return to a sure fire monetary, and tax system that created unprecedented wealth and social mobility for the vast majority of U.S. citizens for around 200 years.