Things are far worse than they seem..

Yeah, that’s my new special post category, in honor of CM, which try as he might, seems to only use vague and generalized personal attacks to dispute my points, and makes the case that I am exaggerating how bad things are. Well, in honor of that I have this juicy revelation for today:

(CNSNews.com) – The Congressional Budget Office (CBO) says the real cost of the federal government guaranteeing the business of failed mortgage giants Fannie Mae and Freddie Mac is $317 billion — not the $130 billion normally claimed by the Obama administration.

That’s more than double the real risk/cost that they told us was involved here. Remember that Fannie Mae and Freddie Mac where the key instruments of the idiotic policy that forced lenders to give loans to bad risk, then guaranteed those risk at the tax payer’s expense, and pushed for the regulations to create the disastrous credit swap scheme. Neither organization, nor their role in causing this recession, was addressed by all the new regulation passed by Barney Frank and Chris Dodd, two of the key players behind the policies that allowed the shenanigans to go on. We already poured millions into these two to bail them out, and we might not be done at all, since Bloomberg predicted that the actual bailout amount for this disaster might even top a trillion dollars back when: a number I wouldn’t be surprised ends up being the low end. But back to the article in question.

In a report delivered to the House Budget Committee on June 2, the CBO said a “fair value” accounting of guaranteeing the two defunct mortgage companies – known as Government Sponsored Enterprises (GSEs) – was more than twice as high as the Office of Management and Budget had accounted for.

“Specifically, CBO treats the mortgages guaranteed each year by the two GSEs as new guarantee obligations of the federal government,” the CBO report said. “For those guarantees, CBO’s projections of budget outlays equal the estimated federal subsidies inherent in the commitments at the time they are made.”

“In contrast, the Administration’s Office of Management and Budget continues to treat Fannie Mae and Freddie Mac as nongovernmental entities for budgetary purposes, and thus outside the budget,” the report stated. “It records as outlays the amount of the net cash payments provided by the Treasury to the GSEs.”

The total of those cash payments is $130 billion, and is normally reported as the cost of the bailout of the GSEs to date. However, the CBO said that merely counting the cash payments, and not the cost of federal subsidies granted to the GSEs, obscures their real costs. Essentially, the CBO is accounting for the cost of the federal government guaranteeing the loans bought and securitized by the GSEs.

What this says in short is that the Keynesians have purposefully underestimated the debt they have straddled us tax payers with, because while they claim Freddie & Fannie are non governmental agencies, we the tax payers still are on the hook for their risk taking ventures, which I must again stress, remain untouched and ongoing. But don’t take my word for it: here is the CNS article:

Currently, Fannie and Freddie rely on explicit federal guarantees to continue to secure below-market financing rates. Because Fannie and Freddie are insolvent, the federal government must make up their losses when the loans they have guaranteed lose money in default.

However, the CBO counts not only the amount of federal funds spent to keep the GSEs operating but the cost to the federal government to subsidize the mortgage guarantees issued by Fannie and Freddie. In other words, the CBO counts as a federal spending commitment the subsidy given by the government to the GSEs.

And the CBO has to count that in, because our government, well we the tax payers, are responsible for those risky loans. And it gets better:

However, this subsidy cost could grow if the housing market continues to be weak. While the CBO expects it to recover, the difference between the agency’s own 2009 and 2011 estimates show that this may not be the case.

We haven’t heard the true numbers yet. Me, I wouldn’t e surprised that in the end it is closer to a trillion dollars of risky loans that will need to be written off and paid for by the tax payers, because in my personal experience the number of people that never should have been given a loan far surpasses those of us that didn’t buy more than we could afford, or worse, promptly took out 125% or more of the value of the homes they owned out to do other frivolous things.

Don’t worry though: Freddie & Fannie are in good hands. And don’t forget that we the tax payers are paying for the lawsuit by the government against the Freddie & Fannie execs too. Joy! All hail the Keynesians! Things aren’t all that bad….

Comments are closed.

  1. mikedomi39

    Me, I wouldn’t e surprised that in the end it is closer to a trillion dollars of risky loans that will need to be written off and paid for by the tax payers, because in my personal experience the number of people that never should have been given a loan far surpasses those of us that didn’t buy more than we could afford, or worse, promptly took out 125% or more of the value of the homes they owned out to do other frivolous things.

    This is where you lose me, Alex. You state early on the flaws of the “idiotic” policy, then you write this about people that “never should have been given a loan”. But, you seem to refuse to put much blame on the people who took the loans or the companies that offered them.

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  2. loserlame

    Let see, Conservatism Not Science News is in Big Money’s pocket, anyway, Fannie Mae and Freddie Mac were Bush schemes, Bloombergs a Jewish name, the CBO is in Big Moneys hypocritical pocket, anyhow.
    American homes are cheap cardboard and energy-inefficient to the point of melting the Earths two poles, causing rape, plunder and murder in non-Christian regions, where oil is plentiful. Facts proving this are all over the Internets.

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  3. sahrab

    Them jesus killing jews are trying to initiate the New World Order.

    Watch out for the silent black helicopters Mel Gibson!

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  4. balthazar

    Why would he lose you?

    The majority of lenders were giving borrowers all the information. Granted they may have said “Hey just refinace or sell when the price goes up” But the numbers were there in front of them. People taking out loans they knew they couldnt afford is totally the borrowers fault (barring ILLEGAL activity on the lender side of course). The bank wasnt telling them to buy bigger houses than they could afford, they were doing it because they just could.

    Why could they you ask? Well because the GSE’s were baking the bad loans to the hilt. I totally place more blame on the people borrowing the money. Then the Government enabling it to happen, thru GSE backing or thru strong arming some banks. Especially the banks that service lower income areas.

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  5. AlexInCT *

    So your qualm with me Mike is that, to use an analogy, when I talk I blame a legalized crack dealers selling the stuff to stupid addicted people, and not the morons that buy the crack and overdose? I do blame the people that did the stupid things to some degree Mike. The fact however is that I didn’t expect anything but stupid from them though. However, the lion share of the blame needs to go to the enablers and promoters, since we have a system which these promoters push on all of us that forces those of us that are not stupid to pay for the mistakes of the stupid. Hence my ire and focus remains directed at those that hurt me the most, and that’s the politicians. As far as I am concerned stupid people should reap the full consequences of their stupid choices. Nothing teaches sense to people more than pain after a dumb choice. I am a firm believer in the theory of natural selection. Pity that the left, which claims to be the more sciency ideology, doesn’t really like any of that real science that would basically destroy the ideology’s fundamental attempts to ignore both nature and reality.

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  6. mikedomi39

    Why would he lose you?

    The majority of lenders were giving borrowers all the information. Granted they may have said “Hey just refinace or sell when the price goes up” But the numbers were there in front of them. People taking out loans they knew they couldnt afford is totally the borrowers fault

    BALTHY! Hope you are well. GO BRUINS!

    I’m not arguing that point, quoted above.

    Hence my ire and focus remains directed at those that hurt me the most, and that’s the politicians.

    THIS is the the point I am arguing, Alex’s crack dealer analogy not withstanding. The collapse in 2008 didnt happen only becuase of Politicians or the government “strong-arming” the banks. Their was a nation-wide collapse of understanding that a bubble was beinf formed by bad policy from the government, banks, Mortgage companies who were desperate to make money before the bubble burst, Rating agencies that were afraid to lose bank business, and individuals who thought house values were NEVER going to go down.

    I have commented on Alex’s posts about this in the past. To me, there is no way you can sit there and say “only the republicans did this” or “only Barney frank and the Dems did this”. It was years in the making, and many parties are responsible for it. But I dont see that when I read his posts on the subject.

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  7. CM

    Yeah, that’s my new special post category, in honor of CM, which try as he might, seems to only use vague and generalized personal attacks to dispute my points, and makes the case that I am exaggerating how bad things are.

    Your ‘points’ are invariably emotional diatribes based purely on ideology. If you want to take that as a “generalized personal attack” then be my guest. And no, I don’t make the case that you’re exaggerating how bad things are, I make the case that you continually fail to make your case. You seem to be running on a formula of 5% fact and 95% opinion. You actually seem to think it’s the other way around.

    and pushed for the regulations to create the disastrous credit swap scheme.

    J.P. Morgan & Co. is widely credited with creating the modern credit default swap in 1994.

    http://en.wikipedia.org/wiki/Credit_default_swap

    I have commented on Alex’s posts about this in the past. To me, there is no way you can sit there and say “only the republicans did this” or “only Barney frank and the Dems did this”. It was years in the making, and many parties are responsible for it. But I dont see that when I read his posts on the subject.

    It seems clear to me that Alex is an ideologue. There is no way you can use logic and reason to argue with an ideologue. He follows a strict narrative and has learnt mechanisms to conveniently filter out (or incorporate if he see a way to filter out) inconvenient facts. “Blame the liberals” is apparently the only song he can sing.

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  8. loserlame

    It seems clear to me that Alex is an ideologue.

    Who said that – “Which CM laments as he also wags his tail in delight.”

    “I yearn languidly, feverishly for deep, meaningful and rich discussion based on scientific fact. I’m done talking with you, Alex. Hey, Alex… Alex!”

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