Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Yahoo News: Fannie, Freddie writedowns too costly: regulator
WASHINGTON (Reuters) – The regulator for Fannie Mae (OTC BB:FNMA.OB – News) and Freddie Mac (OTC BB:FMCC.OB – News) told lawmakers that forcing the two mortgage firms to write down loan principal would require more than $100 billion in fresh taxpayer funds.
“Taxpayer funds” is a code phrase meaning, “I want you to think you would have to pay for this, rather than understanding that federal payments do not cost you taxpayers one cent.” Generally, when people say “taxpayer funds,” they oppose federal spending, feeling our Monetarily Sovereign government needs money more than do the monetarily non-sovereign people.
In a letter sent on Friday to the Republican and Democratic leaders of a U.S. House of Representatives government oversight panel, the Federal Housing Finance Agency explained why it has long opposed principal reductions for borrowers who owe more than their homes are worth. It said it had determined that such reductions would be more costly for the two firms than allowing those troubled borrowers to default.
Costly for the government, which as the money-creator, can afford anything, and what about the millions of borrowers, whose lives Fannie and Freddie helped destroy?
The regulator has been under pressure from Democrats to permit the write-down of principal by the two government-controlled mortgage finance providers as a way to help some of the millions of U.S. homeowners who are “underwater.”
FHFA has maintained widespread principal forgiveness would undercut the finances of Fannie and Freddie, which have already received about $169 billion in taxpayer aid. Republicans have supported FHFA’s decision.
Again, the “taxpayer” money myth. Total BS. It’s impossible to “undercut the finances of Fannie and Freddie.
“FHFA has a statutory responsibility as conservator to preserve and conserve the assets and property of the regulated entities,” FHFA’s acting director, Edward DeMarco, wrote in the letter to lawmakers dated January 20.
At last, the real truth: “Conserve the assets and property” of Fannie and Freddie and the federal government.
“Given that any money spent on this endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action,” DeMarco said in the letter.
Translation: Screw the public. Screw the people who lost everything, while bankers made billions. My job is to protect Fannie and Freddie. If Congress wants to help the poor people, they can do it. I won’t. Not my job.
Another barrier to principal writedowns, aside from pushing losses at the two firms even further, DeMarco said, was the costs associated with new technology and training to servicers that would be needed to launch a program that offers principal forgiveness. FHFA told lawmakers that forbearance, which allows the borrower to reduce or suspend payments on a loan for a specific amount of time, is a less costly option. Principal forbearance limits accounting losses and allows Fannie and Freddie to recoup the principal at some later point, according to the letter.
The housing regulator also assured lawmakers that FHFA remains committed to helping borrowers to stay in their homes and will continue to work on such principal forbearance plans and government initiatives to modify or refinance loans.
The key words are “recoup the principal at some later point.” It’s something like debtors prison, where the people never stop owing the government.
The Fed stopped short of endorsing such an initiative and noted concern that writing down loan balances would create a moral hazard – the concept that rescue efforts breed further behavior that exacerbates the existing problem – and could prompt other borrowers to stop making timely loan payments.
(Reporting By Margaret Chadbourn)
The irony of Fannie, Freddie and the regulators, criminals all, worrying about moral hazard, is not lost.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports