Courtesy of Lee Adler of the Wall Street Examiner
The independent federal agency that administers Fannie Mae and Freddie Mac said once again on Tuesday that it would not let the mortgage finance companies offer debt forgiveness to homeowners, rejecting the entreaties of congressional Democrats and the Obama administration.
The Federal Housing Finance Agency said it had concluded after months of study that debt forgiveness might benefit up to half a million homeowners, but that the costs – including the cost to taxpayers – outweighed the potential benefits.
Offering debt forgiveness “would not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers,” the agency’s acting director, Edward J. DeMarco, said in a statement.
“The choices we’ve had to make are hard but they need to be made,” he told reporters.
The decision is a direct rebuff to the Obama administration, which has pressed Mr. DeMarco for more than a year to reconsider his long-standing opposition. It is also a blow to the administration’s efforts to increase help for homeowners.
OK, so here’s the thing. If Fannie and Freddie were to write down all of their owned and guaranteed loans to actual market value of the collateral, the US taxpayer would be on the hook for up to a trillion dollars in losses. OK, maybe only $500 billion, but who’s counting. If the US wants to back away from the government guarantee, then fine, we can stop pretending the collateral is real and make the bond holders take the haircut.
But they’re not going to to that. So that put that forked tongue tax cheat Geithner out there with a phony letter begging FHFA head DeMarco to reconsider.
The Obama administration is pretty slick on this, although anyone with half a brain can see through their disingenuous act. They can pretend that they really want to do something to help under water homeowners and make themselves look like the good guys and Ed DeMarco look like the big bad bogey man.
Well, I’m calling them on this phony act. If you want to do this, then screw the guarantee and make the bond holders take the haircut. The US Government can walk away from this phony guarantee and stick the loss where it belongs on the sophisticated investors and foreign central banks who bought the paper in the first place. Yeah, I know the Fed holds a bunch of it, so we’ll get stuck on some of it anyway.
But as we all know, they’re not going to do that. They’re going to play this shell game for pretend political gain instead. - Lee Adler
Get regular updates the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Click this link to try WSE’s Professional Edition risk free for 30 days!
Copyright © 2012 The Wall Street Examiner. All Rights Reserved. The above may be reposted with attribution and a prominent link to the Wall Street Examiner.