The Real Mortgage Fraud: GSEs and Government Accounting, Duh
As many of you already know, JDA is no mathlete (don't let the name fool you; I am not an accountant, I just play one on TV. Don't ask me to help you with your taxes because I own this shirt) but these numbers just don't check out. And I have sat through several hours of government accounting classes. And I've even contemplated this at the bar loopy on Racer 5. Still, I can't figure out how this adds up. Can one of you fucking math whizzes help a sister out on that? Grab the waterproof calculator, kids, you're going to piss yourselves when you realize how deep in the hole we really are.
Fannie Mae reported a staggering $72 billion net loss for 2009, underscoring the challenges that still face the nation's largest mortgage financier and offering more grim news for taxpayers who may ultimately pick up the bill.
The Washington-based company posted a $15.2 billion fourth-quarter loss and said it asked the U.S. Treasury for another $15.3 billion to stay afloat, bringing its total bailout tab past $76 billion. The quarterly results were an improvement from the year-ago period, when Fannie reported a $25.2 billion loss, but the annual loss surpassed the year-earlier loss of $58.7 billion.
The Fannie Mae earnings release came days after Freddie Mac, its smaller competitor, reported smaller losses. Freddie Mac posted a fourth-quarter net loss of $6.5 billion, didn't ask for more bailout cash and posted a $21.6 billion loss for 2009, down by more than half from a year earlier.
Unfortunately, the GSEs' plan to squash competition (see what happens when things get nationalized? It isn't pretty to watch) by strong-arming independent AVM providers out of the loan modification fun isn't quite working out for them. Aww, now that isn't nice.
The CATC wrote an angry letter that you can find here:
In this era where there is a renewed interest in fair, open and honest dealings we felt it appropriate to communicate that members of the Collateral Assessment and Technologies Committee (CATC) of the Real Estate Information Professionals Association (REIPA) believe that the independent providers of residential real estate automated valuation models (AVMs) have been unfairly excluded by FHLMC and FNMA (collectively the “GSEs”) from participating in the Home Affordable Modification Program and we have a recommendation to rectify the situation.
The Home Affordable Modification Program (“HAMP”) guidelines released by the cosponsors on March 4, 2009 specifically provide for the use of non-GSE AVMs. Contrary to the Treasury’s directives, however, the GSEs made it abundantly clear that for this program only the GSE’s proprietary AVMs could be used for valuation purposes if the lender wanted to receive a waiver of representations and warranties1. While a lender could choose to use a non-GSE AVM, it was clear that they use it at their own peril because representations and warranties would not be relieved. As a result, all private sector AVM providers are effectively “locked-out” of participation in this program. The fact that no AVM other than those owned by the GSEs, can be used for the HAMP creates the appearance of an endorsement by the Federal Financial Institutions Examination Council (FFIEC) and sends a loud message to the lender community, that GSE AVMs are the best from the GSE perspective and unfairly suggest that there are no acceptable substitutes.
But wait, that's not all! Fannie and Freddie lined up for what must be their 9th bailout by now (is that how many quarters deep into this thing we are?) and little Timmy Geithner kept his unlimited bailout promises but failed to deliver on that transparency he's been pushing from the gate:
“The Administration is in the process of reviewing issues around longer term reform of the federal government’s role in the housing market.” Treasury also said that President Obama would provide a “preliminary report” in his fiscal 2011 budget in February 2010.
That report did not happen. On the contrary, this week Treasury Secretary Timothy Geithner told Congress a plan for the reform of Fannie and Freddie would not be offered until next year.
On Friday, Fannie Mae asked to tap into its Treasury credit facility for an additional $15.3 billion, bringing its bailout total to more than $75 billion.
China is holding a lot of this crap, so if they dare grow a pair and dump more Treasurys, Timmy won't be able to fund his unlimited bailout and therefore the Chinese paper will be worthless (oops it already is) and they'll end up screwing themselves. So? Do it already, China, just grab one end of the bandaid and yank. There's a gaping sore underneath it so you might want to look away.
BUT IT GETS WORSE! I know, right? How is it possible? Somehow it is.
GSEs get the most magical accounting treatment of all, somehow counting as their own entity in the debt sense and quarantined from the United States' "budget". That and China dumping the garbage is only slightly disconcerting.
Based on data from TIC and other U.S. sources, it is possible to construct a profile of the owners of U.S. government debt held by the public, which stood at $7.8 trillion at the end of December 2009. China’s share of total outstanding U.S. government debt held by the public has risen steadily over the years, but fell slightly in the latter half of 2009 and now stands at 10 percent (or about one-quarter of all U.S. debt held by foreigners). This represents a one percentage point reduction relative to the share in August 2009, consistent with the fall of about $45 billion in China’s overt holdings of U.S. Treasuries from August to December 2009. Debt issued by government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, which amounted to about $7.2 trillion as of September 2009, represents a liability of the U.S. government as well. China’s share of outstanding U.S. agency bonds was 6.4 percent in 2007 but fell below 6 percent in 2009.
Wait. So they are nationalized and a pretty fucking large liability (again, I suck at math so if I'm over-reacting by over-adding or something, please let me know) and we're on the hook for an unlimited bailout because Tim Geithner is a debt hack but GSEs aren't counted in our overall debt?!
Like the Social Security "Trust" we've been looting for years?
Government accounting. It's a miracle. And we truly are screwed.
If the government would really like to be proactive in attacking mortgage fraud at the root, JDA humbly suggests they bust themselves and let competent entities (like the markets) figure out how to put the pieces back together as they have failed miserably. Good luck with that.