Housing Finance Kabuki: Moving from an ‘implicit’ to an ‘explicit’ government guarantee, taxpayers last in line and holding the bag (again)
10:39am EST- Geithner panel done, Donovan panel beginning.
ZeroHedge notes the ELEPHANT- if Gross wants to nationalize FAN FRED we have to take that second set of books into account…
In fact, Gross urged a move one step further, with the full nationalization of the GSEs – as the GSEs are nationalized now in all but writing, this would be logical. Alas, the fact that US Debt to GDP would jump from 90% to 140% may make this proposal a little difficult to implement.
It is incredibly obvious, to me anyway, that the plan is to convert all those foreclosures to GSE Section 8 rentals with taxpayer subsidized guarantees and payments. And to think all those people didn’t want to help the homeowners. HA!! Now we will help renters instead. PS I dont see Mark Zandi…..good, he has been WRONG, wrong on the spendulus, wrong on the recovery, wrong, wrong, wrong.
and Bill Gross keeps calling Geithner, Tim, which reminds me of Sen Tester calling Chairman Bernanke, Ben, during the last Humprhey Hawkins testimony. I find it very disconcerting. PRETEND you dont own these people mkay? sheesh.
Update 4: Bill Gross says let me address reality. It is an 11 trillion dollar market and a large place for private entities here is unrealistic.
Update 3: LiveStream from Treasury here, list of panelists at bottom of this post. Oh look it has occurred to Mark Morial-one of the panelists that this would create a ‘class of Section 8 renters’. Yep. Timmeh says, well Marc, if we maintain the FHA giving generous subsisdies to people who buy a more modest house would that address your concerns? Yes says Marc,
Pfft! Require housing counseling, etc. Oh here we go BACK TO CRA good grief. As long as everyone gets ‘theirs’ frak the taxpayers right people? Jeebus! Marc says as long as Main St and Back St get covered we are aall good. O..M…G… Main St is PAYING FOR ALL THIS SHXT!!!!!
The government should create an apartment real estate investment trust (REIT) to rent out foreclosed properties — a method that would avoid flooding the housing market with foreclosed properties, a real estate consultant said as President Obama’s “Future of Housing Finance Conference” kicked off Tuesday.
John Burns, CEO of John Burns Real Estate Consulting, said the government-created REIT would be self-sustaining via rental fees. The government-sponsored enterprises, Fannie Mae and Freddie Mac, would hire outside property-management firms to manage the rental properties, Burns said….
and another update from Jimmy P, Gross is throwing his CONSIDERABLE weight around (biggest bond playahs worldwide!)
Housing Conf. Bill Gross: Comes out for a Giant Refinancing Plan for America. 1 minute ago via web
Housing Conf. Pimco’s Bill Gross: Too many homeowners, houses – more renters; 1 giant GNMA replacing Fannie, Freddie; Need govt guarantee;
Update: Follow JimmyPethokoukis on Twitter for updates from the conference!!~
Housing Secretary Sean Donovan: Being a homeowner not the right option for everyone
ZeroHedge has a nice write up. Geithner is on record indicating the implicit guarantee needs to be explicit, and PIMCO’s Bill Gross is REALLY CLEAR they will NOT be buying any mortgage securities unless we move back to a 30% down model. Since the government will not ‘take the pain’, pain we taxpayers KNOW is ALREADY coming for US BTW, they need to reflate the bubble, so Bill gets what Bill wants, an explicit guarantee…guaranteed!
Tomorrow, a variety of luminaries, such as Bill Gross and Mark Zandi, will be panelists in a worthless and futile spectacle titled “Conference on the Future of Housing Finance ” which has the aim of doing something or another to extend and pretend the ticking timebomb that are the bankrupt GSEs. It will most certainly succeed in that regard. What it will definitely fail at, is to provide some resolution to the $7 trillion mortgage “holding” problem, which incidentally was the first domino to fall in 2008, which just so happened nearly took down western-style capitalism with it (and morbidly, it should have: the result would have been a system infinitely better).
Yet as we prepare for this hearing (and try to track down Mr. Gross’ testimony to validate his previous statement that absent an implicit government guarantee he would buy MBS/Agency securities only with 30% down), here is another view, this one from none other than Edward Pinto, who himself was an executive vice president and chief credit officer at Fannie Mae in the late 1980s. As Pinto says, echoing the previous high dB statements by Rick Santelli, “We’ll never get a rational mortgage system until the government’s affordable housing mandates are ended.” We couldn’t agree more….
From Pinto, the BAD news for taxpayers:
…A consensus is building around a three-part grand bargain:
• An explicit federal guarantee of a large portion of the mortgage-backed securities created to finance American’s home mortgages;
• A tax on these securities to fund low-income housing initiatives; and
• A requirement that issuers of securities meet affordable housing mandates.
This is a dead end for two reasons. First, while supporters of an explicit federal guarantee tell us it will never be called upon, Americans have read this book before and know how it ends….
Diana Farrell, NEC Deputy Director
Treasury Secretary Geithner
HUD Secretary Donovan
Barbara J. Desoer, President of Bank of America Home Loans
Ingrid Gould Ellen, Professor of Urban Planning and Public Policy at New York University’s Wagner Graduate School of Public Service and Co-Director of the Furman Center for Real Estate and Urban Policy
Bill Gross, Co-founder and Co-chief Investment Officer of PIMCO
Mike Heid, Co-president of Wells Fargo Home Mortgage
S.A. Ibrahim, Chief Executive Officer of Radian Group Inc.
Marc H. Morial, President and Chief Executive Officer of the National Urban League
Alex Pollock, Resident Fellow at the American Enterprise Institute
Lewis Ranieri, Chairman of Ranieri and Company, Inc.
Ellen Seidman, Executive Vice President for Mission and Strategy, at ShoreBank Corporation, and Chair of the Board of Directors at the Center for Financial Services Innovation
Michael A. Stegman, Director of Policy and Housing for the Program on Human and Community Development of the John D. and Catherine T. MacArthur Foundation
Susan Wachter, Richard B. Worley Professor of Financial Management, Professor of Real Estate, Finance and City and Regional Planning at the University of Pennsylvania’s Wharton School
Mark Zandi, Chief Economist of Moody’s Analytics