Posts Tagged ‘Fannie Mae’
Phony Republican debates ignore Wall Street’s role in the recession
As much space as they deserve
Daylife/Getty Images used by permission
All of the post-mortems on the CNBC Republican debate focused on the sad, but hilarious, senior moment Gov. Rick Perry suffered when he couldn’t remember the third federal agency he wants to eliminate.
…But what also stood out as perplexing — and stunning — was how all of the candidates were unwilling to hold Wall Street accountable for the deplorable economic condition the nation continues to find itself in.
When the housing crisis was raised, Mitt Romney and most of the others chose to unleash their rage on the consumers and the financial reform bill that was passed after the crisis hit, instead of on the shady practices of Wall Street…
The favorite GOP bogeyman is Fannie Mae and Freddie Mac, the government-backed housing lenders. Yet anyone with half a brain knows that those institutions brought on Democrats and Republicans on their payroll in order to ensure that Congress would let them continue practices as usual.
During the debate, Newt Gingrich was asked about the $300,000 he was paid by Freddie Mac in 2006, which he said was for “advice.” He was quick to say he did no lobbying on behalf of Freddie Mac, but we all know that his presence, along with other former politicians and political strategists from both parties, greatly helped the company prevent congressional scrutiny…
What Gingrich and the other candidates absolutely refused to do was tell the public that one of the biggest proponents of an aggressive home ownership plan in America was President George W. Bush…
It is beyond clear that we got into this huge mess because we were too lax in holding banks accountable. Getting rid of the Glass-Steagall Act, thus allowing commercial banks and investment banks to merge, was a disaster.
Not a single GOP candidate said we should put the provision separating those activities back in place…
In no way can I remove the role the consumer played in the economic debacle, but for the GOP candidates to act like we had too many regulations, and that’s why Wall Street bankers lost their minds, is deplorable…
How in the world can we trust that any of these candidates will care about the Average Joe, Jane, Jose, Jimmy, Janice or Jamila if they are elected president, when they won’t even hold Wall Street accountable in a debate?
Roland Martin pretending that we’re just discovering that the Republican Party is a wholly-owned subsidiary of the US Chamber of Commerce is a bit disingenuous.
That Republicans and Teabaggers alike attend worship services at the Wall Street branch of the Church of the Holy Dollar should be no surprise to anyone. They kneel before the lords of finance and banking as automagically as any serf in the Dark Ages.
Anyone hear a moderator ask if anyone understands evolution, BTW?
Fannie Mae says “No need” for due diligence to prevent fraud
Federal courthouse in Newark, NJ
A New Jersey man was sentenced to 14 years in prison for running a $140 million scheme that defrauded credit unions on loans sold to Fannie Mae, and led to bankruptcy for his mortgage company.
Michael McGrath, 47, had pleaded guilty in June 2009 to two counts of conspiracy, including one to commit mail and wire fraud and one to commit money laundering. The defendant had run U.S. Mortgage Corp, a Pine Brook, New Jersey, lender and broker that filed for Chapter 11 protection in February 2009, and was a principal at its CU National unit serving credit unions.
At a hearing in the Newark, New Jersey federal court on Thursday, U.S. District Judge Katharine Hayden also…ordered restitution in a sum to be determined, but which prosecutors expect will exceed $136 million. McGrath also forfeited $14 million of previously seized or frozen assets.
Federal prosecutors said McGrath admitted to conspiring with others from January 2004 to January 2009 to fraudulently sell credit union loans, and use proceeds to finance U.S. Mortgage’s operations and investments for himself.
The Montclair, New Jersey resident also admitted to diverting funds that should have been paid to credit unions on mortgage loans he sold to Fannie Mae, which prosecutors said helped offset his own bad mortgage investments…
Four credit unions are still pursuing civil litigation against Fannie Mae to recover more than $64 million of loans they originated, and which they say were sold fraudulently to the mortgage financier via U.S. Mortgage, court records show.
… Fannie Mae said it had no duty to investigate, and that none of the “red flags” that Picatinny said should have been found at U.S. Mortgage involved loans it bought.
“Fannie Mae buys millions of notes each year,” the filing said. “Its business would grind to a halt if it had to investigate every signature on every note.”
Perish the thought that a government-insured corporation like Fannie Mae live up to the due diligence required of ethical banks and mortgage lending institutions.
The history of sleaze started downhill by Clinton and swelling into a torrent of bad loans and corruption under the incompetence and deceit of the Bush Administration obviously still infects the brains of Fannie Mae bureaucrats. Lack of standards and unwillingness to do your job is not excusable because “it takes too much time and money”. McGrath was able to steal tens of millions in part because Fannie Mae didn’t do their job.
Readjusting priorities, recalling standards dropped by the wayside of corporate greed are tasks still awaiting the green flag in American financial circles. Honesty was not made an out-of-date instruction set by its absence from American business software.
Obama administration wants a smaller federal role in mortgages
The Obama administration’s much-anticipated report on redesigning the government’s role in housing finance, published Friday, is not solely a proposal to dissolve the unpopular finance companies Fannie Mae and Freddie Mac.
It is also a more audacious call for the federal government to cut back its broadly popular, long-running campaign to help Americans own homes. The three ideas that the report outlines for replacing Fannie and Freddie all would raise the cost of mortgage loans and push homeownership beyond the reach of some families.
That fact is already generating opposition in Congress and among groups like community banks and consumer advocates.
But administration officials said they had concluded the country could no longer afford to sustain its commitment to minting homeowners. Better to help some people rent…
Which was the conclusion Clinton should have considered IMHO instead of lowering the bar, diminishing due diligence in mortgage loan requirements. Couple that with Republican deregulation, removal of oversight in combination with their bubbas on Wall Street designing mythical investment instruments for private trades – and you’re looking at the roots of the Great Recession.
Foreclosures slow down as systematic document flaws exposed
The foreclosure machinery that has forced millions of Americans out of their homes is beginning to seize up as some lenders and their lawyers are accused of cutting corners in their pursuit of rapid home repossessions.
Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country’s biggest home lenders in the last two weeks.
Even lenders with no known problems are expected to approach defaulting homeowners more cautiously and look more aggressively for resolutions short of outright eviction…
GMAC has acknowledged legal missteps in processing mortgages, and JPMorgan Chase has acknowledged the possibility of missteps, and both have suspended all foreclosures in the 23 states where they need a court’s approval. That’s 56,000 in the case of Chase alone; GMAC declined to provide a number…
The federal government has been the majority owner of GMAC since supplying $17 billion to prevent the lender’s failure during the financial crisis…
Taxpayers provided the capital; but, no one kicked a sufficient number of Bush-era pickpockets out of management.
No-money-down mortgages reappear – what a concept?
When the housing bubble burst, one of the culprits, economists agreed, was exotic mortgages, including those that required little or no money down…
“Loans that have zero down payment perform worse than loans with down payments,” said Mathew Scire, a director of the Government Accountability Office’s financial markets and community investment team. “And loans with down payment assistance” — “perform worse than those that do not.”
An analysis filled with logical fallacies.
But the surprise is the support these loans have received, even from critics of exotic mortgages, who say low down payments themselves were not the problem, except when combined with other risk factors like adjustable rates or lax underwriting.
Say “lax underwriting” out loud several times and genuflect in the direction of Countrywide Financial. Or as the process is referred to in community banking, “liar loans”.
Moreover, they say, the housing market needs such nontraditional lending, as long as it is done prudently.
“This is subprime lending done right,” said John Taylor, president of the National Community Reinvestment Coalition, an umbrella group for 600 community organizations, and a staunch critic of the lending industry. “If they had done subprime this way in the first place, we wouldn’t have these problems.”
At Harvard’s Joint Center for Housing Studies, Eric Belsky, the director, said the loans might be the type of step necessary to restart the housing market, because down payment requirements are keeping first-time home buyers out.
“If you look at where the market may get strength from, it may very well be from first-time buyers,” he said. “And a very significant constraint to first-time buyers is the wealth constraint.”
Wealth constraints are the all-American bugaboo. The wealthy of this nation and their flunkies in the Republican and Democrat parties fear someone with little or no income qualifying for the benefits they claim as a god-given imperative. They apply to everything from welfare to unemployment insurance, healthcare to mortgages.
RTFA. Anecdotal tales, analysis that skips here and there through current economic ideology.
I have a few articles like this one in the hopper. Worth reading, reflecting upon. Political bushwa is already knee-deep in preparation for the coming elections; so, any pretense at solving the remainder of the disaster we acquired from decades of Democrats collaborating with Republican ideology about removing oversight and regulation, freeing up the market for thieves and other scumbags, is gone by the boards.
The Party of NO is to become the Tea Party, Young Guns, John Wayne in a hip-hop video and, of course, the kindly caring face of liars and hypocrites like John McCain and Sarah Palin playing the lead roles in Little Poorhouse on the Prairie.
Fannie Mae logic bomb would have caused shutdown and more!
A logic bomb allegedly planted by a former engineer at mortgage finance company Fannie Mae last fall would have decimated all 4,000 servers at the company, causing millions of dollars in damage and shutting down Fannie Mae for a least a week, prosecutors say.
Unix engineer Rajendrasinh Babubha Makwana, 35, was indicted in federal court in Maryland on a single count of computer sabotage for allegedly writing and planting the malicious code on Oct. 24, the day he was fired from his job. The malware had been set to detonate at 9:00 a.m. on Jan. 31, but was instead discovered by another engineer five days after it was planted, according to court records.
Makwana, an Indian national, was an employee of technology consulting firm OmniTech, but he worked full time on-site at Fannie Mae’s massive data center in Urbana, Maryland, for three years.
On the afternoon of Oct. 24, he was told he was being fired because of a scripting error he’d made earlier in the month, but he was allowed to work through the end of the day, according to an FBI affidavit in the case. “Despite Makwana’s termination, Makwana’s computer access was not immediately terminated,” wrote FBI agent Jessica Nye.
Five days later, another Unix engineer at the data center discovered the malicious code hidden inside a legitimate script that ran automatically every morning at 9:00 a.m. Had it not been found, the FBI says the code would have executed a series of other scripts designed to block the company’s monitoring system, disable access to the server on which it was running, then systematically wipe out all 4,000 Fannie Mae servers, overwriting all their data with zeroes.
Wow!
I understand why IT departments consider it sound management to cut off someone’s privileges just before you fire them.
Fannie/Freddie CEOs get golden parachutes – you pay for ‘em!
Syron & Mudd – the dangerous duo
Taxpayers are now on the hook for tens of billions of dollars of capital necessary to save Fannie Mae and Freddie Mac. The CEOs of both companies–the ones who ran them into the ground–have thankfully been shown the door. But they’re taking a nice pot of money with them.
Specifically, Dan Mudd, the CEO of Fannie Mae, is getting $9.3 million of severance for destroying his company. Richard Syron, the CEO of Freddie Mac, is getting $14.1 million–in part because of a clause he added to his employment contract two months ago, when it was clear the company was headed for disaster…
The severance money comes right out of the pockets of taxpayers, who didn’t agree to the severance deals and aren’t ponying up to save the companies because they want to. Taxpayers are saving Fannie and Freddie because they have to–because Mudd and Syron were incompetent.
“Incompetent”? Is that too harsh? Absolutely not. Both men gambled big and lost bigger. The fact that they may not have appreciated how big a risk they were taking is no defense: If they didn’t, they should have.
Both Mudd and Syron chose to run their companies at an astronomical level of leverage, borrowing more than $50 for every $1 they put to work. Why? Because, in the good years, the companies made more money than they would have had they been levered, say, 20-to-1. Just because a housing crash of the current magnitude hasn’t happened since the 1930s doesn’t mean Mudd and Syron shouldn’t have guarded against it. Instead, they chose not to, and the companies–and shareholders and taxpayers–have paid the price.
They should be forced to take what shareholders in the companies are getting: nada, nothing, nuttin’ honey…
Thanks, Justin
Feds outline massive intervention to save Fannie Mae, Freddie Mac
U.S. federal regulators, in a dramatic move highlighting the tenuous state of global credit markets, have outlined a takeover of Fannie Mae and Freddie Mac including giving control of the firms to their regulator and allowing the Treasury Department to purchase billions of dollars of the firms’ senior preferred stock.
The plan, offered jointly by the Treasury Department and Federal Housing Finance Agency, also gives the Treasury authority to purchase mortgage-backed securities from the firms in the open market and a lending facility through the Treasury from its general fund held at the Federal Reserve Bank of New York.
Treasury Secretary Paulson acknowledged that the radical proposal does pose risks for U.S. taxpayers, giving the U.S. government a “large stake in the future value of these entities.”
“In the end, the ultimate cost to the taxpayer will depend on the business results of the GSEs going forward,” Mr. Paulson said. “To that end, the steps we have taken…will together improve the housing market, the U.S. economy, and the GSEs’ business outlook.”
The takeover bounced Fannie’s CEO Daniel Mudd and Freddie Chairman CEO Richard Syron. A couple of winners whose combined take exceeds the GNP of most nations.
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