tagged w/ Henry Paulson
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NEW YORK (Fortune) -- It took two months, but the bond market called Henry Paulson's bluff: The Treasury Secretary was widely expected this weekend to announce a plan to take Fannie Mae and Freddie Mac under government control.
News reports say the mortgage giants will be placed under a "conservatorship" of their new regulator, the Federal Housing Finance Agency. That would enable the government to gradually invest funds in the troubled mortgage giants.
The reports come just two months after Paulson attempted to calm financial markets by pledging government support for Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500), which were under siege by investors because of fears about their weak balance sheets.
Paulson asked Congress for the right to use taxpayer funds to intervene - but hoped the pledge alone would be sufficient. "If you have a bazooka in your pocket and people know it, you probably won't have to use it,'' he said at a July 15 Senate Banking Committee hearing.
But now Paulson is readying the bazooka, because the markets didn't respond as hoped. Shares in the companies bounced back from multiyear lows in recent weeks, but bond markets have not regained confidence in Fannie and Freddie.
The amount the companies pay to borrow in the bond market has risen sharply during the past year.
Fannie and Freddie rely heavily on their ability to borrow money at good rates, which they use to buy mortgages from lenders - they now own or guarantee some $5 trillion in home loans.NEW YORK (Fortune) -- It took two months, but the bond market called Henry... more
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ivxx
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3 years ago
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(Bloomberg) -- Treasury Secretary Henry Paulson met with regulators and executives of Fannie Mae and Freddie Mac today amid speculation the Bush administration is near completing a plan for an injection of government funds in the companies.
Paulson gathered with Federal Reserve Chairman Ben S. Bernanke, Fannie Mae Chief Executive Officer Daniel Mudd, Freddie Mac CEO Richard Syron and Federal Housing Finance Agency director James Lockhart in Washington. Mudd and his aides have also been meeting at the FHFA, which oversees the two firms, with catered food scheduled for delivery at the agency through the weekend.
The meetings come a month after the Treasury hired Morgan Stanley to advise on any potential use of taxpayer funds to recapitalize the beleaguered mortgage firms. Investors have pressed for clarity on how any intervention would work, spelling out what would happen to current and future stockowners, bondholders and other creditors.
``We are making progress on our work with Morgan Stanley, FHFA and the Fed,'' Treasury spokeswoman Brookly Mclaughlin said in Washington.
Bernanke participated in today's meetings because the central bank was given a consultative role in overseeing Fannie's and Freddie's capital under the July legislation. The Fed chief said July 15 that Paulson would have the right to make changes in the two companies' management.(Bloomberg) -- Treasury Secretary Henry Paulson met with regulators and executives of... more
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ivxx
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3 years ago
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The U.S. economy will need months to recover from a growth slowdown caused by a home mortgage crisis, turmoil in financial markets and high energy prices, Treasure Secretary Henry Paulson said on Sunday.
Paulson also told CBS television's "Face the Nation" he was optimistic Congress would approve the Bush administration's request for authority to lend money to the troubled mortgage giants Fannie Mae and Freddie Mac.
"We're going through a challenging time with our economy," Paulson said. "We're going to be in a period of slow growth for a while ... I think it's going to be months that we're working our way through this period."
A key to recovery was for the housing market to stabilize quickly, he said. To that end, it was essential that Congress approve the plan aimed at shoring up confidence in Fannie Mae and Freddie Mac.
Paulson said he was "very optimistic we're going get what we need from Congress."The U.S. economy will need months to recover from a growth slowdown caused by a home... more
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kushan
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3 years ago
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This week, with the nation’s financial infrastructure crumbling before our very eyes, the nation’s top two economic policy makers made their way to the Congress for an extraordinary episode of political theater. Fannie Mae and Freddie Mac, the quasi-government entities that form the backbone of America’s gargantuan mortgage market, appeared to be cracking. To the somewhat bewildered members of Congress, Ben Bernanke and Henry Paulson offered radical remedies to save the lenders. Despite the fact that the proposed policies would thoroughly redefine America’s supposedly capitalistic pedigree, the moves were presented as wholly inevitable, and in the end, benevolent and costless.
If you are looking for a new chapter in American history, it has just begun.
The most memorable moment in the episode came when Secretary Paulson explained that the best way to minimize the chances that Fannie Mae and Freddie Mac will need a government bailout would be for Congress to grant the Treasury unlimited authority to lend to the two institutions. His analogy: When the bad guys see a bazooka on your hip, you are less likely to be challenged to a gunfight...
... At present, the best the government can do for housing and the economy is to leave both alone, cease interference in the free market, restore sound money, and allow capitalism to work.
Unfortunately, the laws of capitalism are now demanding that home prices continue to fall precipitously. But, based on the speed in which our government, public and financial institutions are willing to abandoned free market principals at the first whiff of economic pain, the likelihood that this impulse will take hold is increasingly remote. So hunker down as the United States finds itself on the express track to state socialism with Paulson’s Bazooka locked, loaded and pointed right at us. When the government pulls the trigger the blast will blow the dollar, and what’s left of our capitalist economy, to smithereens."
(End of excerpt)
Full commentary "Armed and Dangerous" (July 18th, 2008) at link by Peter Schiff, President & Chief Global Strategist// Euro Pacific CapitalThis week, with the nation’s financial infrastructure crumbling before our very... more
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The proposed changes to the financial regulatory system are the most far-ranging since the Great Depression and the stock market crash in 1929. The plan runs the gamut, from consolidating duplicitous agencies to creating new supervisory groups. But Democrats are already criticizing the plan for not being tough enough on mortgage lending and securities trading, and Treasury Secretary Henry Paulson admitted that the plan would require lengthy debate in congress...meaning that most of the work would be left to the next administration.
If the plan is in fact a good one, then that's fine. If it's not...I can only hope that Congress will stop or stall it, and allow the next president to try their hand at fixing it, rather than having to deal with another mess from the Bush team.The proposed changes to the financial regulatory system are the most far-ranging since... more
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Tori
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4 years ago
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So if you stuck around past this freaky moment (http://youtube.com/watch?v=Va7zZbUQZG0) brought to you by "Code Pink" protesters, you would have seen Secretaries Rice and Paulson slap some harsh sanctions on Iran. Is this the ground work for a conflict with Tehran? Or a way of avoiding a more dangerous confrontation? You be the decider...So if you stuck around past this freaky moment... more
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