Post by unlawflcombatnt on Aug 13, 2007 14:42:15 GMT -6
At least for now, the Office of Federal Housing Enterprise Oversight has refused to raise the caps on the number and value of mortgages that Fannie Mae and Freddie Mac can purchase. This decision, however, is far from final.
from the Washington Post
Reins Kept on Fannie, Freddie
By David S. Hilzenrath
Washington Post Staff Writer
8/11/07
"A government agency yesterday refused to loosen restraints on Fannie Mae and Freddie Mac so they could play a larger role in the troubled mortgage markets.
The companies, which were created by the government to provide funding for home loans, had argued that they could help struggling lenders and borrowers if regulators allowed them to buy more mortgages and mortgage-related investments.
But the Office of Federal Housing Enterprise Oversight said yesterday that Fannie Mae and Freddie Mac can pick up slack in the markets by more efficient means -- packaging mortgages into securities for sale to other investors. The agency cast doubt on the potential benefits of letting the companies buy more, saying that the prime segment of the market in which they operate is generally free of trouble.
The agency added that it was still concerned about the safety and soundness of the companies, which remain unable to issue timely financial statements years after accounting scandals exposed weaknesses in their internal controls. Those concerns are what inspired the agency to negotiate the caps on the companies' investments last year, OFHEO said.
OFHEO "will keep under active consideration requests for an increase in the portfolio caps, but we are not authorizing any significant changes at this time," James B. Lockhart III, the agency's director, said in a news release....
The companies' stocks have shot up over the past week based on perceptions that they stand to benefit from the mortgage industry's woes and on anticipation that OFHEO would lift the caps. The stocks continued to climb even after President Bush threw cold water on the notion of raising the caps in comments earlier this week.
OFHEO, which isn't required to follow the president's lead, announced its decision yesterday after the markets had closed....
For years, politicians and regulators have accused the companies of doing little for the public benefit while using their federally chartered status to the advantage of their shareholders and executives. Meanwhile, the Federal Reserve has declared that the companies have gotten so big that they could pose a risk to the financial system. Together, they hold or guarantee 40 percent of the mortgages in the United States, according to OFHEO....
Analysts generally agreed that allowing Fannie Mae and Freddie Mac to increase their investments would boost their profits. Leaving a cap on their investments could prevent them from seizing a rare opportunity to buy huge volumes of assets at fire-sale prices.
But there was disagreement and uncertainty as to who else would benefit from a lifting of the caps....
Much of the pressure to raise the investment caps was coming from Wall Street, and some observers said giving Fannie Mae and Freddie Mac a freer hand would primarily benefit institutional investors such as hedge funds holding assets that have plunged in value.
Bailing out investors could enable them to pump more cash into the mortgage market, but it wouldn't obligate them to do so.
"Buying more of the distressed subprime or Alt-A [unconventional mortgage] securities tilts more toward a lift for Wall Street balance sheets than toward subprime borrowers," Steven Abrahams, a senior managing director at Bear Stearns, said in a report this week....
"Calls to extend the reach and authority of Fannie Mae and Freddie Mac into the healthy and functioning primary mortgage market provided by community lenders appear unjustified," Alfred A. DelliBovi, president of the Federal Home Loan Bank of New York, said in a letter to OFHEO.
Since the companies were found to have misstated their finances by billions of dollars, policymakers generally have agreed that the regulators need more power, but they have argued to a stalemate over details....
Yesterday, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) reaffirmed his view that regulators could safely ease the caps (on value of loans Fannie & Freddie can buy). "The Administration can't continue to close their eyes to the scope of the problem and hope it goes away," he said in a statement."
Another good reason not to vote for Christopher Dodd, a recent graduate of the newly-opened Hillary Clinton School of Corporate Welfare & Bailouts.
from the Washington Post
Reins Kept on Fannie, Freddie
By David S. Hilzenrath
Washington Post Staff Writer
8/11/07
"A government agency yesterday refused to loosen restraints on Fannie Mae and Freddie Mac so they could play a larger role in the troubled mortgage markets.
The companies, which were created by the government to provide funding for home loans, had argued that they could help struggling lenders and borrowers if regulators allowed them to buy more mortgages and mortgage-related investments.
But the Office of Federal Housing Enterprise Oversight said yesterday that Fannie Mae and Freddie Mac can pick up slack in the markets by more efficient means -- packaging mortgages into securities for sale to other investors. The agency cast doubt on the potential benefits of letting the companies buy more, saying that the prime segment of the market in which they operate is generally free of trouble.
The agency added that it was still concerned about the safety and soundness of the companies, which remain unable to issue timely financial statements years after accounting scandals exposed weaknesses in their internal controls. Those concerns are what inspired the agency to negotiate the caps on the companies' investments last year, OFHEO said.
OFHEO "will keep under active consideration requests for an increase in the portfolio caps, but we are not authorizing any significant changes at this time," James B. Lockhart III, the agency's director, said in a news release....
The companies' stocks have shot up over the past week based on perceptions that they stand to benefit from the mortgage industry's woes and on anticipation that OFHEO would lift the caps. The stocks continued to climb even after President Bush threw cold water on the notion of raising the caps in comments earlier this week.
OFHEO, which isn't required to follow the president's lead, announced its decision yesterday after the markets had closed....
For years, politicians and regulators have accused the companies of doing little for the public benefit while using their federally chartered status to the advantage of their shareholders and executives. Meanwhile, the Federal Reserve has declared that the companies have gotten so big that they could pose a risk to the financial system. Together, they hold or guarantee 40 percent of the mortgages in the United States, according to OFHEO....
Analysts generally agreed that allowing Fannie Mae and Freddie Mac to increase their investments would boost their profits. Leaving a cap on their investments could prevent them from seizing a rare opportunity to buy huge volumes of assets at fire-sale prices.
But there was disagreement and uncertainty as to who else would benefit from a lifting of the caps....
Much of the pressure to raise the investment caps was coming from Wall Street, and some observers said giving Fannie Mae and Freddie Mac a freer hand would primarily benefit institutional investors such as hedge funds holding assets that have plunged in value.
Bailing out investors could enable them to pump more cash into the mortgage market, but it wouldn't obligate them to do so.
"Buying more of the distressed subprime or Alt-A [unconventional mortgage] securities tilts more toward a lift for Wall Street balance sheets than toward subprime borrowers," Steven Abrahams, a senior managing director at Bear Stearns, said in a report this week....
"Calls to extend the reach and authority of Fannie Mae and Freddie Mac into the healthy and functioning primary mortgage market provided by community lenders appear unjustified," Alfred A. DelliBovi, president of the Federal Home Loan Bank of New York, said in a letter to OFHEO.
Since the companies were found to have misstated their finances by billions of dollars, policymakers generally have agreed that the regulators need more power, but they have argued to a stalemate over details....
Yesterday, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) reaffirmed his view that regulators could safely ease the caps (on value of loans Fannie & Freddie can buy). "The Administration can't continue to close their eyes to the scope of the problem and hope it goes away," he said in a statement."
Another good reason not to vote for Christopher Dodd, a recent graduate of the newly-opened Hillary Clinton School of Corporate Welfare & Bailouts.