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1392 days ago

GSE's (Government Sponsored Entities) like Fannie Mae would be bankrupt and long gone like Lehman and Bear Stearns today if not for explicit government and Federal Reserve facilitated write downs of their bad assets in the secondary mortgage markets (e.g. securities and derivatives). In their quarterly report last month, Fannie reported that they've transferred thus far over $1.5 trillion in bad mortgage securities to the Federal Reserve's balance sheet, in a loss sharing agreement they came up with after Fannie was put into government conservatorship last year. These are off balance sheet items--their reported losses, after considering operating costs, is a relatively paltry $19 billion.

Turns out that Fannie (and Freddie's) lending policies during the boom years were very relaxed, and in fact, they bought up a lot of NINJA loans (acronym for No job, No Income, No Assets) and repackaged them into securities. It's a blatant example of short term thinking and cheap political compromises. The thinking was that getting people into homes was a worthy policy goal, even if they couldn't afford it. The mentality was that RE prices would go up infinitely and that it would be a positive store of value for lower and middle income people. Credit expanded way too fast though and unnecessary risks were taken

That's why the losses at these organizations are so magnified today, and it's why even Fannie itself anticipates that the secondary mortgage market will only get worse from here on out. That makes talk of "green shoots" in the economy sound rather peculiar. It is estimated that the Federal Reserve has purchased $5 trillion in GSE debt. That's debt that has been transferred essentially right into the country's money supply. That's why they're printing so much money, to modulate the effects of this debt and to subsidize it. Note that this isn't money that's going towards positive credit creation in the form of business development, infrastructure, or research. Its going to pay off debts based on artificially high values: in short, its "clean" money chasing after bad money.

This is a dynamic that will only serve to continue keeping the market weak and job growth down for the next few years. The credit markets won't improve until this debt is written down, rather than subsidized by the government.

These numbers really make you wonder the true costs of the bailouts. Note that the Treasury and the Federal Reserve don't have to disclose all the true costs. The Comptroller General the other day reiterated his claim that the bailouts have cost the country over $23 trillion! That's a debt load that is simply mathematically unsustainable.

Of course, this has the added effect of debasing the currency, thus structurally weakening the value of the dollar. This is the long term effect that I'm truly worried about. This is partially why central banks throughout the world are moving out of the dollar and into other currencies. Whereas just 10 years ago, over 95% of international bank holdings were in dollars, today that number is down to 62% and dropping fast. In short, the dollar is no longer seen as a reliable store of value, and that's because of the unsustainable debt which the country is incurring.

What going on with Fannie and the rest of the GSE's along with the private banks is fundamentally unsound, especially as to how it relates to the Federal Reserves purchases of bad debt. That practice is specifically forbidden under the enabling legislation of the FED precisely because it could threaten the very stability of the monetary system. Yet the Treasury and the Fed continue the practice in direct contrivance of the law.

There's going to come a point where the country is just going to have to default on its debts. The dollar is already losing its status as the world's reserve currency, and whatever demand remains on the international currency markets is coming as a result of the carry forward trade, where currency dealers short the dollar, knowing that in the intermediate term, the value of the dollar will continue to drop as central banks sell off their holding in American treasuries. The long term trends are not looking good, and we're going to have to face the music sooner rather than later.

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1530 days ago

Mr. Troy Boucher was able to help me organize and register my small business in the District of Columbia. Not only is he a patient accountant, but he is an expert in his field.

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1846 days ago

For the most part, my experiences with NFCU have been good. They have given me good rates on some loans and they have a great online system. You can apply for loans and credit cards online, and they recently upgraded their online account features: They now show pending accounts to help you keep your checkbook in order.

The only complaint I have is if you have a loan with them, and it's just a few days late, they will automatically withdraw the loan amount even if you've made a payment arrangement. I have my motorcycle loan with them which was less than a week late (three days). They had just assessed a $20 fee so I called to make a payment arrangement. I told them that I would have the money in three days, which they said was fine, but they instead withdrew it automatically so my rent bounced (they knew I had issued a check for my rent). I admit that this was all my fault (well, the company I work for messed up my pay so it was late again), but they didn't seem to care that they withdrew money even after they agreed to the payment arrangement. They were also rude about the situation, telling me that it wasn't their fault I didn't know how to manage my account and that they didn't care my rent bounced. Again, I know this was my own doing, but no one deserves to be treated like that for an honest mistake (I've never bounced a check or was late on a payment before this).

I've since been looking for other banks to do business with. I understand customer service is questionable wherever you go, but that doesn't mean I should just stand by and let it happen.

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1915 days ago

If you have commercial or multifamily property that has low leverage, good management, solid numbers, and want a great loan with non recourse, a Fannie program is best. This quasi government corporation exists to facilitate solid real estate financing needs.

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2906 days ago

These guys are crooks flat out!

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