Comment Detail

Comment

Time for rough justice.

In 2005, the Senate sponsored a bill that prohibited the GSEs from holding mortgage-backed securities in their portfolios. Congress wanted to reduce the risk to the government. By 2009, the two GSEs owned or guaranteed $4.8 (44%) of residential mortgage debt, up from 36% in 2006.3 But the Senate bill failed, and Fannie and Freddie were indirectly forced by the failure of Congress to increase their holdings of risky loans. The fault for failure here falls to the taxpayers agents, the Congress, and the U.S. government, and also to the greedy agents of the finance banking system. 

1. The rescue of the GSEs proceeded in 2008. The Senior Preferred stocks "issued" to the government in exchange for a credit line were at 10 percent. This whopping and onerous rate is more than charged to "rescue" others?? Was this rate obtained in a good faith negotiation with GSE owners? The GSEs debt must be recalculated at a fair interest rate. 

2. The GSE warrants obtained by the treasury, and itemized in the CBO  were not taken for the government to make a profit. These warrants were not purchased in the open market. These warrants were issued to the Treasury at the direction of the government, as an "Ace in the hole". At this point in the recovery of the GSEs such are not in legitimate play. They must never translate into a government accrual or profit, nor must they detract from the value due the real (private) GSE owners for it would "smell" of a "taking". The private owners of the GSEs are due any amount that exceeds the lines of credit extended. Other arguments exist that simply exacerbate the hypothetical debt of the victimized GSEs. 

3. Have the CBO adjust the Sr Preferred interest rate and null any proposed warrant value that might be accrued to the treasury. Also, have the CBO ensure that any government lawsuits settlements for fraudulent loan sales to the GSEs be credited to the GSEs, as they are not so done now. 

4. Compare GSE stock value changes to S&P or NYSE value changes over the period. Why the deterioration of price?  The government Conservatorship has failed to result in an appreciation of GSE or Conservatee stock. To the contrary the abusive actions of the government have devastated GSE stock value. Most investors have thrown in the towel. The stock price of the GSEs under Conservatorship reflects the continued adverse and regressive trend in restoring confidence in the GSEs.

5. Taxpayers have provided 86 billion to restore union pension funds! Were those funds not lost to corruption? What of financial value did the government take in return? Most of those in the stock market, excepting GSE investors, have fully recovered. Union pension funds come before GSE investors? The GSE investors have not lost to overt corruption, but to Congressional incompetence and greed. In TRUTH, the GSEs were not the cause of the sub-prime crisis, but were instead victims of the bad loans made by the greedy banking industry, and the failure of Congressional control,  and they also were further victimized by the subsequent forced and usurious actions of the ultimate agent of the taxpayer, the U.S. Treasury (government).

6. Final losses, correctly accounted, accrue to the taxpayer, as their agent, the government,  was the cause of the financial disruption. Taxpayers have now recovered and have had their losses more than offset and can "afford" to contribute to victimized GSE stockholders. We can truly thank the government for that. GSE investors also ask for similar confidence and to be fully restored.  Such would indicate the actions of a JUST government. 

The continued abuse and victimization of the GSEs must be concluded and confidence must be restored to their market value. We can not claim victory over the sub-prime crisis until such occurs. We can not forgive our government until made whole.Get to work and stop empire building.

Respectfully and have a very great day.
Dean Featherston, RVa