Why The Government Needs to Get Out of Housingby Gerri Willis
Fannie Mae and Freddie Mac, the monster mortgage companies that have sucked up 183 billion in taxpayer dollars, have found a new way to spend our money: Conferences.
The two spent more than $640,000 this fall to send 100 employee to a Chicago mortgage industry conference.
Let's break that down, it was:
-$342 thousand for travel, food and hotels.
-$74 thousand wining and dining bankers.
-$140 thousand to sponsor their conference.
- $68 thousand in registration fees.
So, not only did we dole a ton of money out to send employees to this conference, but we also paid for bankers to break bread with Fan and Fred employees -- an unholy alliance that drove our economy into a depression-like recession only three years ago.
If anything, we should be paying to keep them apart!
This comes on the heels last month that 12 executives at the two companies got $35 million in performance bonuses! We're still treating these companies as if they were successful operations -- they are not!
But wait, it gets worse. The government's meddling in housing doesn't stop with Freddie and Fannie, There's actually a three-legged stool, and the third leg is the Federal Housing Administration.
In its annual report to congress two weeks ago, it said there was a 50-50 chance it would go bust.
But today, at a congressional hearing, HUD Secretary Shaun Donovan defended his agency saying it won't need a bailout.
He says, “not only does the actuary report find the fund retains positive capital today, it projects the FHA should be able to rebuild reserves to the congressionally mandated 2 percent threshold quickly, once markets across the country exhibit sustained growth."
He's looking at this from a best-case scenario.
But as we've reported here, there are many independent reports showing the agency in much worse shape that it admits, including one from professor Joseph Gyourko from the Warton School. He said here on this program the FHA could need at least $50 billion ... Maybe even $100 billion.
According to Ed Pinto, a housing consultant, the FHA is operating in a reckless fashion without the kinds of congressionally mandated capital cushions the law requires.
He says, if the administration's single-family home program was forced to meet legal requirments required of banks, it would be insolvent.
The FHA is facing losses of $40 billion on just the part of its portfolio that is delinquent 60 days or more.
Meaning: the FHA would run through all of its loan loss reserves and then some.
I fear another big stinking bailout. A bailout we can't afford.
It’s time to get government out of housing.
Do we need any more evidence? I don't think so.