Question: How involved should the govt be involved in mortgage finance?

[Narkos]

And why?

[bemildred]

1. Private property is a fiction created and managed by the government.

The functions of the government are central to private propery, and therefore central to the mortgage finance business.

[Narkos]

2. Nicely put.... A lot of wingers have this obsession with the GSEs

And how, if the solution is to get he govt completely out of the housing business... Of course, as you correctly point out, property as a concept is meaningless without govt enforcement.... However, should the govt continue with a new model if complete nationalization's has been proposed by Bill Gross at PImco or just a guarantor for all MBs that meet stringent criteria thereby indirectly reducing excessive risk taking?

[bemildred]

4. Could you give me a link to the Pimco Piece?

I'd have to see what he has to say to hazard an opinion about it.

I have not really thought much about what we ought to do about this mess, I was still in the phase of trying to understand it, and I don't have the feeling that we are done with revelations yet.

[Narkos]

7. Here you go

http://www.businessweek.com/news/2010-08-17/gross-urges-full-nationalization-of-housing-finance.html

[bemildred]

9. Well, I dug up his letter:

http://www.pimco.com/Pages/MrGrossGoestoWashington.aspx?WT.svl=hero_IO

The one you put up doesn't give enough detail of his argument.

Mr Gross writes well. He makes a couple of good points: that it would be hard to sustain recent and current prices at unsubsidized rates, not enough people with the cash, and that the psychology of the housing market has been changed by the decline in market prices these last couple years, people are not going to be expecting to dispose of property easily for big gains anytime they want to, no easy seconds to "pull out equity".

On the whole I like his argument, which boils down to the idea that the housing market is too important to be left to private controls. It is a public good important to the nations economic future.

I particularly like that he implies what I said, that the government is in fact central to property (i.e. the Real Estate market) and it ought to assume its proper role and do a good job. If the mortgage banking folks had done a good job we would not be having this discussion, so they really have nobody to blame but themselves. I think that the idea is a winner politically, all of us folks with mortages are going to support anything that leaves us feeling secure in our homes.

Geithner babbles incoherently as usual, attempting not to offend anybody he might want to work for again some day.

[Bigmack]

3. The private sector mortgage ....

industry has shown it can't be trusted to carry out the lending of money for property.

I say nationalize the whole damn thing. Government inspectors evaluate how much the house is worth... how much the government is willing to lend would be an easy way to control "bubbles". The government agency loans the money to the reasonably well qualified. No outsourcing or privatizing of paperwork, either.

[jtuck004]

5. One way to answer that would be to look back at why

they got involved in the first place. Much property was simply the under the ownership of the state prior to our constitution.
Once that was established property sales were private, until they collapsed. The New Deal brought about Fannie Mae when the private market collapsed and people would not invest. Freddie came along much later. Their requirements for down payment and time at work served this country very well at an extremely low overhead for nearly 50 years.

Then Wall Street found a way to bundle home loans making them attractive to other investors, and the devil's work of borrowing against them. Because of pressure about government spending Fannie was converted to a GSE in '68, and Freddie came along soon after. Their lending nearly ended by 2005-06, so the investment banks began to turn to investors outside this country, nearly doubling the amount of real mortage debt. In the process that borrowing created over a $100 trillion of leveraged debt on top of what was a $10 trillion (approximately) housing market. When that debt turned toxic the result was millions of people unemployed as well as millions of people losing their homes.

It was the private market that handed us this financial tragedy, and may wind up being responsbile for the end of this country.

If you want a good answer as to why the government should be involved in the financing of homes, take a look around.

[truedelphi]

6. Look, the government oversight on these things is already there, and well established.

It is hard to believe that the Large Financial Investment Firms didn't realize that the worthless pile of toxic assets they were bundling together weren't worthless. (Even with the Underwriting Godl Star of Approval from the rating agencies sitting on top of those assets.)

Since they knew this, they are guilty of fraud, pure and simple. And also insider trading. They set the game up, and they knew how the game worked, and that when the game fell apart, the Top Dogs knew that the winners would be those who "shorted" these bundled assets.

But what is overwhelming about all this is that while someone like Elliot Spitzer says if he was still in office, the indictments would be handed out right and left. The fact remains however, that Spitzer is no longer in a position to do that. And those who are probably won't.

We have the SEC and we have plenty of laws on the books. But these Criminals are well heeled, and own half if not all of Congress. They certainly are not going to see any charges filed against themselves. Not any more than Geithner is going to face RICO charges for his deals when he was heading the New York Fed.

[pokercat999]

8. The next two or three years will see the housing market

continue it's collapse. Over 50% of the houses with mortgages will be underwater. The value of homes will drop another 5%-10% per year or more. The banks holding that paper are already insolvent, (the govt allows them to pretend otherwise) we will see the takeover/breakup/restructure of BOA, and possibly many other "too big to fails". There is only one real choice to move forward and that is a percentage of principle forgiveness across the board and refinance the market value at a single rate for everyone regardless of credit worthiness. Barring this action we will see the total collapse of the banking and mortgage and housing sectors. It will cost in excess of 5 trillion of todays dollars to straighten out the mess created by greedy bankers and wall street. If this is done it will allow our economy to recover somewhat, however we MUST build a new economy based on a solid mix of manufacturing and services with no worse than 50/50 mix of exports/imports to any but the smallest of our trading partners.


From the article.

"An explicit government guarantee against catastrophic losses could help attract private capital, said Mike Heid, co- president of Wells Fargo Home Mortgage." No shit! If I could get a guarantee against losses I would open up an auto repair shop tomorrow!
How f---ing stupid, what world does Mr. Heid live in? Oh yeah, he lives in Capitalist America!

[truedelphi]

10. Your first paragraph is spot on. But you will only see this principle of

Forgiveness, or nationalisation, or what ever you'd want to call it, happen somewhere like Ireland, where the government officials/Political Class are more honest than here.

And why is that? Well perhaps because so many there have learned over the decades how to fashion a Molotov Cocktail.

In this country, the propaganda machinery is already geared up to tell people that no, they really do not have the right to have a legal remedy between them and foreclosure, as after all, most people being foreclosed upon are greedy fools who attempted to buy more house than they could afford.

And that charges of Fraud and Insider Trading against the Too Big To Fail Crowd would only undermine our gloriously rebounding economy at this critical juncture where it was just about to start to become golden once again.

When in truth, the real reason the banks want the foreclosures to happen is because they are indemnified and "made right" by their insurance on those foreclosed mortgages.

[truedelphi]

11. Oh and my answer to your question about Mr Heid - He lives in a nation that has allowed

His Bank, and several others, to own our Congress and the Presidency.