US Lawmakers Seek Probe Into More Treasury Aid For Fannie, Freddie

[ProSense]

US Lawmakers Seek Probe Into More Treasury Aid For Fannie, Freddie

WASHINGTON (Dow Jones)--The U.S. Treasury Department's surprise Christmas Eve move to uncap the potential aid to Fannie Mae (FNM) and Freddie Mac (FRE) should be investigated, lawmakers from both major political parties said Wednesday.

Rep. Dennis Kucinich (D., Ohio) said his congressional subcommittee plans to investigate Treasury's decision to lift the existing $400 billion cap on government cash available to the two firms. Separately, Reps. Scott Garrett (R., N.J.) and Spencer Bachus (R., Ala.) called for the House Financial Services Committee to hold a hearing on the matter.

Kucinich, who chairs the domestic policy subcommittee on the House Oversight and Government Reform panel, said he is concerned about how the two government-controlled firms will use their new flexibility.

"This cannot be used simply to purchase toxic assets at inflated prices, thus transferring the losses to the U.S. taxpayers and acting as a back door (Troubled Asset Relief Program)," Kucinich said in a statement released by his office.

Garrett and Bachus raised similar concerns in a letter to Rep. Barney Frank (D., Mass.), who chairs the Financial Services panel. The two GOP panel members decried what they called a "transparent attempt to hide the news from the American people" by announcing the news the day before a major holiday.

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Does anyone wonder why Republicans are leading this charge?

Krugman:

And the administration very much wants to keep this kind of intervention going. You can argue that some other policy — inflation targeting by the Fed, expanded fiscal stimulus, whatever — would be better. But none of these things seem politically possible. Keeping Fannie and Freddie fully engaged in the mortgage-support business is one of the few tools available to prop up a still very weak economy. And so they’re doing it.

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[NJmaverick]

1. So Dennis is trying to score points going after a program Krugman approves of

Seems like confirmation of my grandstanding assessment.

[earthside]

2. Krugman is an Infallible Oracle, Now?

It maybe that Krugman is wrong and Kucinich is right.

Take a look at this:

Obama's Outrageous Christmas Gift to Fannie and Freddie - Dean Baker/Comment Is Free/AlterNet.org

[NJmaverick]

3. Nope Krugman can be wrong, however he has made it clear that he is no

President Obama fan, so you can feel pretty safe that Krugman is giving an honest and unbaised assessment. On the other hand Dennis is a politician who loves to score points with his districts large liberal base, so his motives are less noble. Beyond that Krugman is more qualified (what with the noble prize in economics) than Dennis is, to judge this matter.

Finally just reading Kucinich's public statement one gets an over whelming sense of self promotion, rather than serious government.

[ProSense]

4. Or maybe not. "Gov't Lifts Bailout Cap for Fannie and Freddie"

Support Grows for Fan-Fred Plan


Gov't Lifts Bailout Cap for Fannie and Freddie

WASHINGTON (AP) -- The Obama administration says it is removing the $400 billion financial cap it will provide to Fannie Mae and Freddie Mac to keep the mortgage giants from failing.

Treasury Department officials said the cap will be replaced with a flexible formula to ensure the companies can stand behind the billions of dollars in mortgage-backed securities they sell to investors.

Since the financial crisis hit last year, the Fannie and Freddie have received $111 billion in government infusions. In August, the administration projected the cost for rescuing Fannie and Freddie would total $170 billion.

While most analysts believe the companies are unlikely to use the full $400 billion, the administration decided to remove the cap to eliminate any doubts.

''The amendments to these agreements announced today should leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during the current crisis,'' Treasury said in a statement.

The formula Treasury will use will provide the institutions with a sufficient cushion based on the losses they may incur over the next three years.

Treasury officials will provide an updated estimate for Fannie and Freddie losses when President Barack Obama sends his 2011 budget to Congress in February.

Ignore the reality that this was long planned and is only part of a series of steps the administration is taking.

[ProSense]

5. No more comments? n/t