In the wake of the recent housing foreclosure issues, we bring you this piece from August about Bill Gross and his call to fully nationalize the mortgage finance system.
Archive for the ‘Fannie’ Category
Notes From Underground: Notes From Underground: Bill Gross calls for “full nationalization”of the mortgage finance system (REPOST)October 18, 2010
The housing confab was the big story Tuesday as the Obama administration was trying to figure out how to put the biggest slush fund to work. Last Christmas Eve, the U.S.Treasury–under the spell of eggnog and mistletoe–nationalized Fannie Mae and Freddie Mac by removing the caps on the losses that the two GSEs would be allowed to absorb.We don’t know where “PIMCO’s” Bill Gross was but we had assumed that the removal of loss caps was nationaliztion by stealth. Now as the largest holders of MBSs next to the FED, he is openly calling for outight government control of the mortgage market because Gross doesn’t believe there is room for the private sector. Yes, he is correct if the mortgage market reverts to NINJA loans and other zero-down types of nonsense. However, if the originate-to-distribute model were to be restructured so that only deserving loans were made, private lenders would be lining up to get into that business. We caution our readers to understand that today’s conference on GSEs was meant to give some type of cover to an already conceived plan of how Fannie and Freddie can absorb more losses and for the Obama team to gain some political advantage.
All eyes are now focused on the release of the U.S. employment data. This has taken on a new level of importance as the inflation/deflation argument heats up. The pundits have woken up to the fact that without robust job growth the U.S. will remain mired in a deleveraging quagmire. All the economic modelers and Greenspan put followers cannot understand how you cannot have growth and an equity rally with zero interest rates … hmmm, they must have been sleeping like MOTHRA while Japan deflated.
There is a Reuters blog making the rounds that the Obama administration is planning a surprise for the 15 million homeowners who are undergoing severe stress on their mortgages. It is surmised that Fannie and Freddie are going to absorb the mortgage losses by writing new mortgages based on the depreciated value of the homes in foreclosure. This will be a major act of forebearance on the part of the two NATIONALIZED mortgage lenders.