Pimco's Gross Urges `Full Nationalization' of Housing Finance

[dipsydoodle]

Source: Bloomberg

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the U.S. should consider “full nationalization” of the mortgage- finance system as the Obama administration plots the revival of a market that was at the center of the 2008 credit crisis.

“To suggest that there’s a large place for private financing in the future of housing finance is unrealistic,” Gross said today at a U.S. Treasury Department conference in Washington. “Government is part of our future. We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won’t work.”

Treasury Secretary Timothy F. Geithner and Housing and Urban Development Secretary Shaun Donovan gathered housing- industry stakeholders to seek advice as the administration prepares a housing-finance overhaul to be delivered in January. The position taken by Gross, whose firm is among the biggest holders of U.S.-backed mortgage debt, is at odds with industry and government officials who have urged a smaller federal role.

Read more: http://www.bloomberg.com/news/2010-08-17/geithner-says-fannie-mae-freddie-mac-need-overhaul-to-reduce-u-s-role.html

[T Wolf]

1. I'm not financial scam-saavy enough to figure out if Gross is saying something "good" or "bad"

here. Is he just trying for another taxpayer bailout of his "U.S.-backed mortgage debt" assets?

I do know that anything coming from those that far up the food chain is to be sampled with a ton of salt. They are not trustworthy.

[Kweli4Real]

2. Of Course Gross ...

Would want nationalization of the market ... It would mean that so long as the treasary has money, 100% of his holding are guaranteed.

I have always thought that having quasi-governmental units operating like and competing against private businesses was a bad idea. It encourages them to chase profits without having to shoulder the risk.

[SILVER__FOX52]

4. Maybe the Government could set up an investment

Morgage Fund that share income and loss equally with a guaranteed minimum, return to private investors. It could offer a way of recapitalizing the bad loans on the Big Banks Books by slowly buying ( at Market ) the toxic debt on the banks balance sheets. This would spread the risk for mortgages between taxpayers and private long-term investors and stabilize the Market, eventually.

[Po_d Mainiac]

3. In English it would translate to

The Gov't takes all the risk, and Pimpco gets to keep all the rewards.

Propping up the housing market by the Fed just keeps the bubble inflated. The market is still highly bloated and needs to clear itself. That means there will be pain. That pain needs to be shared. Homeowners and mortgage holders all must take the hit. The derivative market (technical term for financially toxic crap) may well implode

Gross wants the Fed and homeowners to absorb the hit while the banksters and fund owners rake in the bonuses.

Here's a better idea...Close down the Fed discount window. That will force banks to pay for their money, and get back into the mortgage underwriting business instead of cashing in on the discount window-T bill circle jerk that's fattening their wallets at the present.

This is not anything new...just going back to the system that worked quit efficiently for decades.

Keep FHA and VA as they were intended, and wind down the rest of the schemes that helped blow the bubble up in the first place.

[T Wolf]

5. About the only thing I do know about finance is this - the more complicated and

gimmicky something is (e.g., derivatives), the more prone it is to manipulation by those with money.

The further a financial arrangement goes away from a simple loan/investment in actual product, the worse it is for everyone except those at the top.

That is the way they socialize the cost but privatize the profit.

[Kaleko]

7. Recommended for your post.

Thanks,man.

[dipsydoodle]

8. Surely that wouldn't apply

if only new mortgages came under such an umbrella. That would leave those with everything current holding the bag on them.

[Po_d Mainiac]

9. One would like to think so, but look at this crap!!!

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a1wC0JBGED_w

The Federal Housing Administration agreed in March to insure mortgages for apartments at the 98-unit Gramercy Park development, known as Tempo. That enables buyers to make a down payment of as little as 3.5 percent in a building where apartments are listed at $820,000 to $3 million.

The FHA, created in 1934 to make homeownership attainable for low- to moderate-income Americans, is now providing a lifeline to new Manhattan luxury condominiums after sales stalled. Buildings featuring pet spas, concierges and rooftop lounges are applying for agency backing to unlock bank financing for purchasers. The FHA guarantees that if a homebuyer defaults on his mortgage, the agency will pay it.

With apartments over $1 million, FHA isn’t going to help you,” Behin said. “You’d have to put down 30 percent to get the loan of $729,000. And if you have 30 percent to put down, a bank will loan to you without FHA.”
.................................

This shit has to stop! If you don't have the cash for a 20% down-payment on a friggin mansion, you can't afford a friggin mansion:grr:

[Chan790]

13. $820K in NYC isn't crap.

Just saying, that really is the entry-point in Manhattan for moderate-income low-end first-time homebuyers.

That's the going rate on a 1BR apartment under 800 sq. ft. Not a mansion.

[Po_d Mainiac]

19. If there aren't any qualified buyers, then the place is over-priced!

FHA entering the picture with an absurd 3.5% DP is simply continuing to inflate an unsustainable market.

[wordpix]

23. absolutely, and that's how we got into the mess in the first place

Think of it: how many people can afford an $800K "low income-starter" apt. that's a 1-2 br. fixer-upper? The Wall St. fat cats can afford it for junior, maybe, but most of us can't.

I'm in DC and there are LOTS of places on the market everywhere in the city but prices are not coming down. Something's got to give.

As for PIMCO, it sounds like another bailout to me.

[Po_d Mainiac]

28. More from the Pimpco a-hole...with a bonus quote from Greenscum

By refinancing those mortgages at current, lower rates, Greenlaw believes those homeowners would save $46 billion a year. Gross said the refi scheme would spur some $50-60 billion a year in new consumer spending and raise home prices between 5-10 percent. Forecasters, including Fannie Mae, say home prices are set to decline the rest of the year and into 2011. Former Federal Reserve Chairman Alan Greenspan said this month that a so-called double-dip recession is possible "if home prices go down."

http://www.huffingtonpost.com/2010/08/17/bill-gross-mortgage-refi-_n_685228.html

[wordpix]

30. this clarifies that Gross wants home prices to rise. That's not a good thing if you

can't afford a NYC fixer-upper apt. for $800K or one in DC for $450K.

[FBaggins]

26. Then if you can't afford $820k without government support...

...you can't afford to live in NYC.


I'd like to live in the Hamptons. If the cheapest home there is outside of my price range... do I deserve government support?

[Salander]

17. If Marie Antoinette had been this clever, she could have saved her head

This is the latest 'let them eat cake' strategy.

[wordpix]

24. +1 In 2006 when I couldn't afford a small 2 br. with no storage space @$425K

I walked away from buying. I simply could not afford it and besides, thought it was a ridiculous amt. of money for a small place in an area that wasn't so great. So I kept renting my affordable studio awhile more.

Now that $425K apt. is worth $225K. I would now be in a huge financial mess had I listened to my real estate agent's advice to go to her mortgage expert buddies about financing. :puke: :grr:

Luckily, I've learned to question authority and the "experts."

[tridim]

11. What kind of a "hit" should an unemployed, bankrupt, honest homeowner take?

[girl gone mad]

16. They're taking a hit to their credit score at the very least.

[Po_d Mainiac]

18. Questions

1) Was the home purchased with a %20 down-payment?
2) Was the loan a 30year Fixed?
3) Was the appraisal proper?
4) Was the income stated on the application true?
5) Was the borrower free of credit card debt?
6) Did the borrower make extra payments every month, and on a timely basis?
7) Was this house purchased to be a home?
8) Where the vehicles parked in the driveway the simplest most fuel efficient in their size class?
9) Is there a single land-line phone that is/was the only service?

[tridim]

21. Yes to all, that's why I used the word "honest"

I'm losing my home and everything else because my former boss thought it was business as usual to not pay me a cent for a completed 11 month contract. The law is helpless against his LLC scam. Lawyers say that it's pointless to sue him.

Bankruptcy will probably end my mortgage debt (my only debt BTW), but I'm still going to be punished severely for something that's not my fault.

[Po_d Mainiac]

22. One more question

Has the SOB that screwed you been kneecapped yet?

[tridim]

25. I tried, legally.

He's living his life as if nothing happened. His FB postings indicate he's happy as a fucking clam.

[Po_d Mainiac]

27. post the link n/t

[tridim]

29. Sorry, I'm not going to do that.

It's between my boss, myself and the other people he screwed.

[Po_d Mainiac]

31. Contractors Lien

[tridim]

32. Thanks, looking into it.

[Turbineguy]

6. Housing is not liquid

Wall Street likes to be able to take the money and run.

[high density]

10. Continuing the plan of socialized losses and privatized profits

I don't know why these loans need to be guaranteed by the government because there is already real collateral behind them. The issue seems to be the greed that lenders don't want to lend for 30 years at 5% APR.

[Po_d Mainiac]

20. Currently the problem is there is no "real collateral"

What the banksters and bondsters are saying under their breath, is that they believe RE prices are still too high. In the event of a default there is no way to recoup the investment since they expect the mortgage to be several leagues below the surface of the pond.

[superconnected]

12. I'm for it. I don't think the gov would be as prone to predatory lending

and any of the other financial scams banks and investment firms pull to make money in the short term.

[Fool Count]

14. Why the hell just housing? Banking and finance are too important to let

them be run for private profit. If you kick those crooks from housing only, they will quickly find some other area to apply
their awesome bubble-building skills to and it, for sure, will be just a matter of time before they ruin it for everybody too.

[eridani]

15. If that happens, the first thing on the agenda should be cramdowns n/t