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Hehe My Personal Dilemma ...
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| occrider |
So here goes ... I just started a new job working for Freddie Mac (which is one of the reasons why I never post during work hours anymore). To fill you in on what Freddie Mac and Fannie Mae (our primary competitor) do, we essentially were created by the federal government during the great depression in order to make affordable housing possible. It works like this: houses cost upwards of $300,000 to purchase. Banks loan money out to people so they can buy houses. Banks don't have enough money to loan out enough money to everybody in the community to buy houses. What would happen is that banks would be ultra elitist with who they lend money to (ensuring 0% deliquincies) and interest rates would be through the roof because risk would be high for that particular bank because it's a load of money to lend. Therefore Freddie Mac and Fannie Mae purchase mortages from banks, package them together into a security, and sell it to wallstreet and investors with gauruntees in case of deliquincy. The banks therefore have plenty of capital to lend out to homeowners.
Sounds peachy right? Well, Fannie and Freddie actually don't make the most of our money doing this. We make the most of our money by buying securities ourselves, hedging them, and retaining a portfolio much like most of the other investment banks do. In doing so, we have much more profits to issue to homeowners applying for mortages. This is ultimately a good thing, however, the problem is, is that we focus on making money as opposed to truly helping homeowners. Now then, Bush hates Fannie and Freddie. Treasury Secretary Snow hates Fannie and Freddie. They don't like governments in private markets, and they recognize us for what we are ... government sponsored private enterprises that are motivated towards profit rather than helping homeowners. As a result, Fannie and Freddie have been making enormous sacrifices to help homeowners at the expense of profit ... a good thing to a certain degree.
HOWEVER, most of the exuctives at Freddie WANT Kerry in office. Because Kerry shares the mentality of every other stupid big government democrat ... big government is good and government sponosred enterprises (eg: freddie) are good. Therefore what would happen is Fannie and Freddie would have free reign to resume pre-Bush practices and make billions of dollars. Soooooo, my dilemma is this:
Bush in office:
- My company serves the public interest directly with a noticeable impact (Seriously, minorities should vote bush if they want to buy a house)
- The stuff I hate about Bush
Kerry in Office:
- My company serves the public less
- I make more money because my company makes more money
- No stuff that I hate about Bush
Ok so it's not much of a dilemma. I'm still voting Kerry ... it's not very often that greed is correlated with the democratic party :p. |
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| Q5echo |
| quote: | | it's not very often that greed is correlated with the democratic party |
it's not very often that OVERT greed is correlated, but thats another thing altogether.
there is a thread about morals on this page somewhere. maybe you missed it whilest you were "working" ;) |
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| Arbiter |
| quote: | Originally posted by Q5echo
it's not very often that OVERT greed is correlated, but thats another thing altogether. |
Bingo. The Democrats try to make themselves look like they're out to help the little guys, but with a few exceptions, they're just as self-serving as the Republicans. They just attack the problem from a different angle:
Instead of cutting taxes and reducing regulations to directly benefit their business investments, they raise taxes, put the money into the inefficient public infrastructure, and siphon it out of the infrastructure into their own pockets.
99% of those in politics are in it for their own interests first, and those of their constituency second (or sometimes third or fourth). It's not a partisan problem, it's a systemic problem. |
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| biznology |
yes, but Bush has spent more on questionable practices than any Dem in history...
Kerry *might* *perhaps* support institutions that help people get healthcare, housing, whatnot...why wouldnt Fannie want that? Bush will likely spend more than anyone(Dem) in recent history. No one can predict the future. Yet Bush turned a horrible surplus into an unquelchable deficit| |
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| biznology |
| quote: | Originally posted by Arbiter
Bingo. The Democrats try to make themselves look like they're out to help the little guys, but with a few exceptions, they're just as self-serving as the Republicans. They just attack the problem from a different angle:
Instead of cutting taxes and reducing regulations to directly benefit their business investments, they raise taxes, put the money into the inefficient public infrastructure, and siphon it out of the infrastructure into their own pockets.
99% of those in politics are in it for their own interests first, and those of their constituency second (or sometimes third or fourth). It's not a partisan problem, it's a systemic problem. |
But Bush has done most of things(for RP) you mention without requite|
systemic yes... |
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| Arbiter |
| quote: | Originally posted by biznology
But Bush has done most of things(for RP) you mention without requite|
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Regrettably, that's true. |
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| Shakka |
First of all, McLean is a nice area.
Second, I think the GSE's have gotten themselves into trouble due to their wreckless hedging tactics. Not that they're doing what anyone who wants to make money wouldn't do, but as GSE's with a specific role/obligation to help create affordable housing, they have taken on substantially more risk and have become increasingly more aggressive than they should due to that lovely "implied backing" from the gov't. They have become increasingly focused on the hedging side and have been playing some accounting shinanigans according to a lot of smart money--particularly with how they are able to defer unrealized losses in the "other income" portion of the balance sheet.
Bush is pro-reform here, and I'd bet it's in part because he understands business and would like to get a better regulator involved to prevent a potential meltdown as interest rates climb their way higher again. While some people think he's just throwing water on the fire and trying to slow down an economic boom, those with a longer view would prefer a new/more effective regulator even though doing so might cause some short-term pain. OFHEO is clearly not doing enough to mitigate the potential risks that could come from the massive hedging and risk that FNM and FRE have taken on.
Since you work there, I suppose self-preservation is a huge driver of personal choice! I think there needs to be better regulation, not to mention better disclosure on the derivative side of their books. Whether the OFHEO steps up or a new regulator gets involved, something is going to have to happen one way or another, though so much politicking and beaurocratic debate might make change a difficult thing to accomplish.:) |
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| Yoepus |
| quote: | Originally posted by occrider
Ok so it's not much of a dilemma. I'm still voting Kerry ... it's not very often that greed is correlated with the democratic party :p. |
Viva la Capitalisim!!! .... err Communisim!!!
Kerry will most likely also raise the minimum wage, greedy bastard:whip: (is this why you said you will make more if he is in office?:disbelief ) |
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| occrider |
| quote: | Originally posted by Shakka
First of all, McLean is a nice area.
Second, I think the GSE's have gotten themselves into trouble due to their wreckless hedging tactics. Not that they're doing what anyone who wants to make money wouldn't do, but as GSE's with a specific role/obligation to help create affordable housing, they have taken on substantially more risk and have become increasingly more aggressive than they should due to that lovely "implied backing" from the gov't. They have become increasingly focused on the hedging side and have been playing some accounting shinanigans according to a lot of smart money--particularly with how they are able to defer unrealized losses in the "other income" portion of the balance sheet.
Bush is pro-reform here, and I'd bet it's in part because he understands business and would like to get a better regulator involved to prevent a potential meltdown as interest rates climb their way higher again. While some people think he's just throwing water on the fire and trying to slow down an economic boom, those with a longer view would prefer a new/more effective regulator even though doing so might cause some short-term pain. OFHEO is clearly not doing enough to mitigate the potential risks that could come from the massive hedging and risk that FNM and FRE have taken on.
Since you work there, I suppose self-preservation is a huge driver of personal choice! I think there needs to be better regulation, not to mention better disclosure on the derivative side of their books. Whether the OFHEO steps up or a new regulator gets involved, something is going to have to happen one way or another, though so much politicking and beaurocratic debate might make change a difficult thing to accomplish.:) |
Hehe well Freddie's accounting shenanigans were not about inflating profits in order to hide risky losses. They were designed to underinflate revenue earnings on the part of $5 bilion. Freddie follows the model of stable earnings. We earn what we predict. The surge of the housing market in 2000 earned us a crapload and as a result of our business model, we underinflated earnings in order to hide the substantial fluctuation.
Secondly, the fuss over Freddie and Fannie's derivates holdings is a bunch of hot air. Freddie has some 25-30 different counterparties that hold our derivates. The primary holders are major financial institutions that include: JP Morgan Chase, Citigroup, Salomon Smith Barney, Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley Dean Witter. The liklihood of any of these firms going under are slim to none. Furthermore, Fannie and Freddie have some of the best mortgage portfolios than any other financial institution. We're limited by our charter to what mortgages we can buy and we have a deliquincy rate of less than 1% which is why we make sure our portfolios are sound in order to provide the gauruntee. In addition, we're well hedged against interest rate rises. I have a friend in the capital markets and investment group who could probably explain this a lot better (I only deal with operational risk), but unless there's a complete collapse of the housing market (in which we would have far greater probelms to worry about) Freddie and Fannie are very stable institutions.
Btw: How does Europe do without institutions such as these? To the best of my knowledge there are no European counterparts. |
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| Shakka |
| quote: | Originally posted by occrider
Hehe well Freddie's accounting shenanigans were not about inflating profits in order to hide risky losses. They were designed to underinflate revenue earnings on the part of $5 bilion. Freddie follows the model of stable earnings. We earn what we predict. The surge of the housing market in 2000 earned us a crapload and as a result of our business model, we underinflated earnings in order to hide the substantial fluctuation.
Secondly, the fuss over Freddie and Fannie's derivates holdings is a bunch of hot air. Freddie has some 25-30 different counterparties that hold our derivates. The primary holders are major financial institutions that include: JP Morgan Chase, Citigroup, Salomon Smith Barney, Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley Dean Witter. The liklihood of any of these firms going under are slim to none. Furthermore, Fannie and Freddie have some of the best mortgage portfolios than any other financial institution. We're limited by our charter to what mortgages we can buy and we have a deliquincy rate of less than 1% which is why we make sure our portfolios are sound in order to provide the gauruntee. In addition, we're well hedged against interest rate rises. I have a friend in the capital markets and investment group who could probably explain this a lot better (I only deal with operational risk), but unless there's a complete collapse of the housing market (in which we would have far greater probelms to worry about) Freddie and Fannie are very stable institutions.
Btw: How does Europe do without institutions such as these? To the best of my knowledge there are no European counterparts. |
Provided there's no sub-prime meltdowns! I don't know about Freddie, but Fannie got bit in the ass recently due to their exposure to manufactured housing. For the sake of the economy I hope nothing happens to them! |
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| trancaholic |
| quote: | Originally posted by occrider
Btw: How does Europe do without institutions such as these? To the best of my knowledge there are no European counterparts. |
I'm not totally sure that I grasp the workings of the institutions you have described, but if you would buy a house in Denmark, you would approach something called a "kreditforening" which according to my dictionary would be translated into "mortgage provider". To my understanding it works like this: The provider give you thousands of bonds, to the price of dKr 100 each. Of course you cannot pay that amount so the provider lets you pay it off in monthly installments. Sort of like a bank loan. Except that you do not get proper money, but only bonds which you would then have to sell to others (private investors) at a lower price.
The provider may issue any number of bonds, but with the obligation to pay a fixed interest fee to the owners each year. Furthermore, it is obliged to buy back the bond after a specified time period. Although only a few providers exists they do not hold enough money to buy back all the bonds they have issued at any given time - and, as the debitors of the providers (the house buyers) usually puts up some guarantee when taking on the loan, providers generally end up owning a large part of the houses in Denmark when times are bad, and less so when they are good.
I'm possibly as far removed from being an expert on economics as you're likely to find in this part of the forum, so I might have misrepresented something slightly or completely. I guess the system is pretty much the same in all of Europe, so one of the other European PFRs may be in a better position to explain it. |
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| LiquidX |
| Oh Yeah.. BUsh Really Understands Business :p |
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