Originally posted the year 2008 and reposted on 19 hours ago on USATODAY. Just a reminder of what originally took place in 2008.
Sentiment: Strong Buy
"There's a big difference between IndyMac and Fannie and Freddie," Dodd said. "IndyMac engaged in very bad mortgages, luring people into deals they could never afford. That's not the case with Fannie and Freddie." Dodd said while there may be more bank failures, "I'm more optimistic about Fannie and Freddie than I am about these banks."
The White House, in a statement, said President Bush directed Paulson to "immediately work with Congress" to get the plan enacted. It also said it believed the steps outlined by Paulson "will help add stability during this period."
Fannie Mae CEO Daniel Mudd welcomed the initiative, while saying Fannie continues to hold more than adequate capital reserves.
Analysts called the move welcome.
"There's a fire," said Rich Yamarone of Argus Investors. "These actions are … an attempt to keep that fire from spreading to the entire financial market."
The plan unveiled Sunday is intended to signal the government is prepared to take all necessary steps to prevent the credit market troubles that erupted last year, when losses from subprime mortgages engulfed financial markets.
The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies "should such lending prove necessary." They would pay 2.25% for any borrowed funds — the same rate offered to commercial banks and big Wall Street firms.
The Fed said this should help the companies' ability to "promote the availability of home mortgage credit during a period of stress in financial markets."
Paulson said the Treasury is seeking expedited authority from Congress to expand its current line of credit to the two companies and make an equity investment in the companies — if needed.
Sen. Christopher Dodd, chairman of the Senate Banking Committee, on Monday called the actions Sunday "probably the right steps" and said he will summon Paulson, Fed Chairman Ben Bernanke and Securities and Exchange Commission chairman Christopher Cox to a committee hearing to answer questions.
"What's important here as well is to calm people's fears," Dodd said in an interview on CBS' "The Early Show."
He also drew a distinction between last week's failure of IndyMac Bank — which engaged in originating riskier mortgages than traditional community and regional banks — and the two mortgage giants.
The Treasury Department and Federal Reserve on Sunday laid out plans to provide a financial lifeline to troubled mortgage giants Fannie Mae fnm and Freddie Mac fre, underscoring alarm about their deteriorating outlook and determination to provide a strong federal backstop.
Treasury Secretary Henry Paulson wants Congress to approve a three-part plan to shore up the huge companies: giving Treasury authority to take an ownership position in the firms if needed; temporarily increasing their existing line of credit at Treasury, currently $2.25 billion; and giving the Fed a role in setting capital requirements and other standards.
Separately, the Fed said it would lend to Fannie and Freddie, if necessary. The central bank has authority to lend to partnerships or corporations that put up U.S. government and federal agency bonds as collateral.
The goal is not to have the government take over the firms, which buy mortgages from lenders and resell them to investors in the form of mortgage-backed securities, but to provide support to let them continue operating as private companies.
Wall Street initially appeared to approve of the plan as stocks jumped in early trading, but the rally faded and turned lower as fears persisted.
"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies," Paulson said in a statement.
The two firms hold or back $5.3 trillion in mortgage debt — roughly half of all U.S. mortgages. Freddie Mac stock has plunged 47% the past 10 days, and Fannie Mae's stock has tumbled 45%.
The move came as Wall Street readies for Freddie Mac's effort Monday to sell $3 billion in short-term notes. A failure to attract bidders would be evidence of the company's weakness and potential gridlock in the financial system. The Treasury has been working on proposals with other regulators for several weeks as the plight of the mortgage giants worsened.
WASHINGTON — Sen. Elizabeth Warren hinted at her views on GSE reform briefly Thursday, though it's still unclear whether she will support a bill introduced this summer by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va.
The Massachusetts Democrat laid out her general position during a speech before the Financial Services Roundtable, which was closed to the press.
In her prepared remarks, which largely focused on the budget crisis and debt ceiling, Warren noted that overhauling Fannie Mae and Freddie Mac remains "an important issue."
Notably, however, she suggested that the government-sponsored enterprises should be "significantly reformed."
The mortgage finance system "should preserve access to 30-year fixed mortgages and include a limited but real government guarantee," Warren said, in line with other Democrats on the issue.
She added: "I think most of us can agree that is the starting point, and, while it is a difficult problem, we need to stabilize the housing finance system."
The remarks come after President Obama said last month that he was supportive of efforts like the Corker-Warner plan, arguing that the GSEs should be eliminated.
Chairman Tim Johnson, D-S.D., and Sen. Mike Crapo, R-Idaho, the banking panel's ranking member, meanwhile, have said they will take up the effort to overhaul the housing finance system this fall, with the intention of reaching a bipartisan agreement by yearend. Still, Majority Leader Harry Reid made waves last month after breaking from the White House and suggesting in a local Nevada public radio interview that the GSEs should be altered but not necessarily shut down.
The Corker-Warner bill has otherwise garnered significant bipartisan support on the banking panel.
In March, Warren joined Corker, Warner and Sen. David Vitter, R-La., to introduce the Jumpstart GSE Reform Act, which would eliminate the increase of any guarantee fees at the GSEs to offset other government spending.
Sentiment: Strong Buy
1= Strong Buy.
3= Hold. (previous Rating)
5= Strong Sell.
Only bother to post something credible and with sources that are worth other people's time. Zacks, Forbes, New york times, etc.
Too much ignorant comments on this MB. Gamble responsibly. GL.
Sentiment: Strong Buy