As if the Fannie Mae and Freddie Mac (Fan and Fred) crackups weren't bad enough, IBDeditorials.com noted on Thursday evening that another bad-mortgage shoe is about to drop. This time it's at the Federal Housing Authority (FHA).
First, let's revisit Fan and Fred to remind readers just how complete the disaster has been at these decades in the making Democratic crony-controlled entities.
A little-noticed CNNMoney.com item by Chris Isidore in late July told us what the original announced loss estimate had been a year earlier (bolds are mine throughout this post):
When Congress was debating the bailout of Fannie and Freddie last July (of 2008), the official estimate from the Congressional Budget Office was that a bailout would most likely cost taxpayers $25 billion, with only a 5% chance of the price tag reaching $100 billion between them.
Isidiore then noted that just one year later the loss estimate had doubled:
.... Neither firm has given an estimate as to how high losses will reach. But the original limit of $100 billion in losses set in place when the government put Fannie and Freddie into conservatorship, essentially a form of bankruptcy, last September was quickly raised early this year to $200 billion each because of concerns about looming losses.
In return for pumping taxpayer dollars into the two firms, Treasury received preferred stock, which is designed to give the government a healthy 10% to 12% dividend. But few expect that Fannie or Freddie will be able to pay that dividend, let alone return the money handed to the firms to cover their losses.
Barely 45 days after Isidore's item, John Ydstie at NPR noted that the supposed worst-case scenario had doubled yet again:
in its August update the CBO predicts the Treasury's TARP program — which rescued banks, auto companies and homeowners — will lose more than $200 billion. It estimates the takeover of Fannie and Freddie could cost almost $400 billion.
That gets us back to IBD's editorial on the FHA, a SO-SAD (Same Old Song And Dance) situation involving -- you guessed it -- even more lending to unqualified borrowers. What's particularly galling is that FHA seems to have proactively and irresponsibly decided to be the conduit for bad loans once Fan and Fred stopped serving that purpose:
A huge, government-run housing agency shows massive losses and needs a bailout. Fannie Mae? Freddie Mac? No. It's the Federal Housing Administration, in a bad case of financial-meltdown deja vu.
The FHA, which insures mortgages made by first-time buyers with low down payments, says it may need a bailout because it will have losses of — get this — $54 billion. And how did it lose all that? By backing home loans made to people who couldn't pay them off.
Where have we heard this before?
At a time when we talk routinely of trillion dollar deficits, $54 billion may not seem like much. But it's huge. Worse, it signals that the government, contrary to its repeated assertions of fiscal competence, is incapable of learning from its worst mistakes.
In the case of the FHA, as the Los Angeles Times notes, it doubled down on its bad bet. "This year alone," the Times found, "the agency has backed nearly 2 million mortgages worth at least $328 billion.
Those who think that there are people inside our government who are bound and determined to take the economy down will consider adding FHA's obviously deliberate move to take on new amounts of virtually guaranteed losses to their dossier.
Despite the LA Times work IBD refers to, the establishment media has been very slow to notice the deteriorating FHA situation. That has changed in the past 24-36 hours, which would appear to indicate that once again, an editorial in a conservative publication has shown the media where the story is. It should be the other way around.
Cross-posted at BizzyBlog.com.
—Tom Blumer is president of a training and development company in Mason, Ohio, and is a contributing editor to NewsBusters
Editor at Large
Comments Policy
The Marxist plan coming to
Sat, 10/10/2009 - 10:30 ET by notonmywatchThe Marxist plan coming to fruition. Put enough burdens on a good-intentioned free-market society that it implodes under the weight, then you can come in & take over at will.
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when do you in Congress Get It-we are BROKE!!
Sat, 10/10/2009 - 10:47 ET by JIMMY1660there is no more money to play with.
We taxpayers who are responsible are through, we do not have any more cash.
Its over!!
You want America to fail-you are on track .
BHO- THE PROGRESSIVE PIRATE
The Government Should Outsource
Sat, 10/10/2009 - 10:51 ET by richb313The Government should outsource all that it does and directly hire anyone. This would have two immediate benifits.
1. Contracts could be awarded with fixed costs. If the contractor is able to run an efficient operation they will profit big time.
2. If Contractors do not perfrom they could be removed and another contractor could take the place of the one who could not perform the job.
For this to work Congress would only have the authority to set the requirements, and set the amounts. Congress should not be allowed to have any say in who gets contracts or decide if they are in non-performance. A totally different agency that is made up of member, just like a Grand Jury, would decide if a Contractor was in non-compliance. Congress should have the authority to convene such an agency if they think or have evidence but should not have direct authority to cancel or make contracts. There is simply too much potential for Graft and Corruption. This is why members of the Contract Review Agency should be drawn by lots from a pool of qualified people.
We keep hearing time and time again about all the non-perfromance of Government Agencies and part of the problem is the protection that these agencies have from any real oversight or consequences.
He
Sat, 10/10/2009 - 11:40 ET by jessieHHere's a headline. If It Says FEDERAL On The Package, It's Got To Be CRAP . Put that on every federal building, so the whole world can see it......
I am starting to think
Sat, 10/10/2009 - 12:30 ET by general companyThese are fake crisises. so Obama and his crooks can steal some more from us. Either transfer these to the open market, or shut them down. And BTW, this is also another perfect example why we do not need any further intervention of the fed in our health care and cap-n-tax, or any where else!! Crooks and liars,
My Gov. thinks I am dangerous, so be careful
"Television is a freak show" Bernie Goldberg
Intentions
Sat, 10/10/2009 - 12:33 ET by Jerry MackLiberals should never be judged on the result of any law or government program. They should be judged on their intentions. Just ask them!
Whats a little $100,000,000,000 mistake. That can be made up quickly by raising the tax on the rich, reducing the size of the military spending or by borrowing more money from China. National debt is not anything to worry about. Let our children and Grand children pay for it!
Barack Hussein Obama MMMMMMMMMMM
Barack Hussein Obama MMMMMMMMMMM
Tom.. it's clear that Obama understands all of the history here.
Sat, 10/10/2009 - 12:36 ET by Gary HallTom.. it's clear that Obama understands all of the history here - the "regulations" that brought us the housing bubble ... but.
He's on record saying:
Interview w/ NBC's Brian Williams in 2007 -
Of course - Williams showed no interest in learning more, nor in challenging Obama to provide any details of the "original idea;" rather, Williams instantly changed the subject to a friendly ..all the campaigning Obama was doing.
Once again, this one "regulation" (as I often post - the public really deserves to see it) during the last desperate months of the Clinton tenure is as representative of that "original idea," which Obama spoke of:
Notice to the left -- there are varying forms of "regulations." Sometimes regulations actually do cause more damage than the lack of regulations.
Speaking of the LA Times - They, like most of the MSM, have never allowed this conversation to occur in front of their readers. The LA Times readers have not heard from their paper of record about HUD's role in this crisis, nor of the deep connection between Fannie/Freddie and the likes of Countrywide Financial - nor have they heard Obama say that he was a staunch supporter of the root causes of the housing bubble which led to the credit crisis, which almost took the US down - and may still.
(;~/ gary
..and of course - great coverage, Tom.
Thanks, Gary
Sat, 10/10/2009 - 13:41 ET by Tom BlumerThe lesson here is that if someone says there's only a 5% chance that the worst-case scenario is going to happen, you -- excuse the expression -- bet the house on the worst-case scenario really happening, or worse.
Gary, the issue here isn't the regulations per se, but the logic
Sat, 10/10/2009 - 14:20 ET by acaiguanaI see it through this lens. The idea is to help people who 'cannot afford' housing.
Just give it to them. Duh.
Allocate n dollars each year from our friends and neighbors and then re-distribute these dollars to poor people.
An idea?
Let's build a buncha Soviet style architectual high rises in St. Louis and pack them with poor people.
Uh...
Duh.
ACA
...
Quoted from: 'Acaiguana notes from the Underground' (Soon to be at theaters near you)
Hey Blake..
Sat, 10/10/2009 - 15:19 ET by Gary HallI'm thinking that you didn't catch the subtlety of my use of the term, regulation? The little Soviet style order from HUD, which I linked, is a "HUD Regulation."
And naturally, we're seeing it thru much the same lens here.
(;~> gary
Gary, just don't do the Kerry 'Nuance' like I usta. ACA
Sat, 10/10/2009 - 15:28 ET by acaiguana...
Quoted from: 'Acaiguana notes from the Underground' (Soon to be at theaters near you)
Typical Liberals
Mon, 10/12/2009 - 09:54 ET by Secret ConservativeGreat analysis, Gary. The one thing you don't mention is that this is like most liberal policies. It started out as a well-intentioned IDEA or theory - let's figure out a way to help low-income people buy homes. There are actually arguments to be made for the benefits to society of home ownership. However, like SO MANY other liberal ideas and theories that become REGULATIONS, this failed. Low income people tend to be and stay low income for a reason. Liberals like to argue that it isn't someone's FAULT that they are low income. But it IS usually their fault. They make poor decisions that lead to their economic situation, and that same pattern of poor decisions make them poor risks for lending.
Liberal thoughts, liberal theories and liberal dreams make for very BAD public policy.
By hook or crook
Sat, 10/10/2009 - 13:46 ET by locomotivebreath1901"Those who think that there are people inside our government who are
bound and determined to take the economy down will consider adding
FHA's obviously deliberate move to take on new amounts of virtually
guaranteed losses to their dossier."
Thank you, Tom Blumer! That says it all.
http://locomotivebreath1901.blogspot.com
THANKS AGAIN!
Sun, 10/11/2009 - 21:00 ET by ptsonThank you Barney Fwrank and Chris Dudd for another financial mess. Your CONGRESSIONAL Regulations, mandating that banks consider welfare and unemployment benefits as income when rating loan applications has blown up yet a third time. But instead of hiding in shame or being hung by your ankels, where are you guys? Out demanding more of the same. You fit right in with the Chicago Mobsters in the white house. WAKE UP AMERICA! Throw these tax cheating, bribe taking, perverted elite "public servents" out on their large lazy rumps.
The only way we are going
Mon, 10/12/2009 - 00:56 ET by jdhawkThe only way we are going to stop the insanity is vote these bastards out of office. It isn't too early to "community organize."
If you haven't already, join your local Republican party. Find out who the real conservatives are at the local (city), county, state, and national level that represent you. Then, get behind them with your time, money, and votes.
If you don't do the above, don't complain when gold is $5000 an ounce and your dollar is spit at when you go abroad. Catastrophic times are ahead if we don't get a handle on the prolifigate spending by our representatives. And that isn't just at the federal level.
In my home state of North Carolina, the duly elected recently passed the largest tax increase in the history of the state. This, in the face of the one of the worst recession ever. Had they not gotten "printing press" dollars from the federal level, it would have been twice as bad.
North Carolina is in the top ten for the unemployment rate. It is number one for corporate and individual tax levels as compared to all other southern states.
The insanity has to stop.