Compilation of Past and Present News Articles:
Oct. 11 (Bloomberg) — Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of underperforming mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan.
Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury’s $700 billion Troubled Asset Relief Program.
The Federal Housing Finance Agency, which placed the two companies in conservatorship on Sept. 7, directed them last month to start increasing their purchases of loans and mortgage-backed securities as the Treasury seeks to absorb underperforming and illiquid assets from financial companies.
Treasury Acts to Shore Up Fannie Mae and Freddie Mac – Quoted Lies:
“Officials said the proposed investment and lending elements of the plan were to last two years.” and “It’s important to note that our understanding with Treasury is that any agreement to purchase equity can only occur with the mutual agreement of both parties.”
The GSEs Were Not Like Wall Street – As Quoted Below:
Contrary to popular myth, Fannie and Freddie did not face the same kind of liquidity crises that beset Wall Street banks in September 2008. The GSEs did not depend on overnight deposits, which can be withdrawn without notice. They did not require the massive liquidity needed to support trading of securities and derivatives conducted on behalf of clients. The GSEs did not own or insure exotic investments, like collateralized debt obligations, which were subject to margin calls.
Russia ‘planned Wall Street bear raid’= BBC News Quote from Paulson
“China had lent so much to the US that Mr Paulson needed to do his best to persuade its government and central bank that China’s investment in all this US debt would not be impaired.”
“Here I’m not going to name the senior person, but I was meeting with someone… This person told me that the Chinese had received a message from the Russians which was, ‘Hey let’s join together and sell Fannie and Freddie securities on the market.’ The Chinese weren’t going to do that but again, it just, it just drove home to me how vulnerable I felt until we had put Fannie and Freddie into conservatorship [the rescue plan for them, that was eventually put in place].”
EXCERPT: Henry M. Paulson Jr.’s: ‘On the Brink’ – Feb. 1, 2010 – Article Quote
Thursday, September 4, 2008
Do they know it’s coming, Hank?” President Bush asked me. “Mr. President,” I said, “we’re going to move quickly and take them by surprise. The first sound they’ll hear is their heads hitting the floor.”
It was Thursday morning, September 4, 2008, and we were in the Oval Office of the White House discussing the fate of Fannie Mae and Freddie Mac, the troubled housing finance giants. For the good of the country, I had proposed that we seize control of the companies, fire their bosses, and prepare to provide up to $100 billion of capital support for each. If we did not act immediately, Fannie and Freddie would, I feared, take down the financial system, and the global economy, with them.
“The government bullied and coerced the companies’ boards of directors” into consenting to the takeover at the expense of property rights, according to the complaint.
“The companies’ willingness to continue providing liquidity to the mortgage markets on a large scale was crucial to the recovery of the devastated home market and the broader economy,” lawyers for the plaintiffs wrote. “The government took control of the companies to make sure this happened on its terms, completely ignoring the loss of rights and economic value it caused to the shareholders.”
Leading up the government takeover, Fannie Mae’s and Freddie Mac’s “financial status did not warrant the imposition of conservatorships,” the shareholders said in their complaint. They argue that neither company satisfied any of 12 financial and other criteria for a takeover outlined in the Housing and Economic Recovery Act of 2008.