Sep 29, 2008

Philip Rewrites History: A Bad Bill

Philip R. Klein writes in his latest article on the Southeast Texas Political Review:

For those of you that do not understand what is going on - we will make it pretty simple for you.

Nancy Pelosi, Bill Clinton, George Bush, Harry Reid and some other "do-gooder" legislators tried to make the American Dream real for many by two companies called Freddy Mac and Fanny Mae. Meaning - who cares what your credit looked like or your ability to pay a mortgage - you could own the American dream. In that - slush funds were created for the democrats to groups like ACORN and some other special interests. There were some that simply wanted to .... well make money after they got out of congress. And of course making money for campaigns like Obama - but ignore that. He was only the number one recipient from Freddy for congressional money.

I do so love it when Philip tries to "talk educated" about the economy!

Actually, the bill  to which Philip is referring has nothing to do with Fannie Mae and Freddie Mac.  Instead, this bill would have provided $700 billion for the bailout of private banks affected by the sub-prime meltdown, NOT Fannie Mae and Freddie Mac.

Problems with Fannie Mae and Freddie Mac were already addressed on Sept. 7, 2008, when the Federal Housing Finance Agency (FHFA), placed "Frannie" into a conservatorship, to be administered by the FHFA.

Furthermore, Philip is so far off the mark that I wonder if he had heard of Fannie Mae and Freddie Mac before the Sept. 7th announcement - "Frannie" is not an invention of anyone currently serving in the Federal Government.

Fannie Mae was founded as a government agency in 1938 under the Roosevelt Administration to provide liquidity to the mortgage market. For the next thirty years, Fannie Mae held a virtual monopoly on the secondary mortgage market in the United States. Readers will note that this was long before Nancy Pelosi, Bill Clinton, George Bush (who Philip now claims is a Democrat) and Harry Reid were active in politics.

Frannie's association with the government ended in 1968 when a Democratic Congress and Administration removed Fannie Mae from the annual balance sheet of the federal budget. Instead, Fannie Mae was converted into a private corporation, under the theory that free market forces could best provide regulation. So, Fannie Mae ceased to be the guarantor of government-issued mortgages, and that responsibility was transferred to the new Government National Mortgage Association (Ginnie Mae). 

Neither does Philip R. Klein understand what Fannie Mae and Freddie Mac do:

What you call the above is social engineering by the government. And guess what? It screwed up the banking world who bought and sold these mortgages. Now less than 5% of the market is taking down the 95%.

Actually, Fannie Mae and Freddie Mac buy loans from the actual mortgage originators; in this case, those banks and non-bank mortgage firms that Philip refers to as "the banking world." Fannie and Freddie repackage this paper, as mortgage backed securities, and sells them on the secondary mortgage market, with a guarantee that the interest and principal will be paid, whether or not the original borrower pays.

Freddie and Fannie got stuck when all of those questionable loans made by Countrywide and other banking firms started defaulting.  By the way, Philip, who made the initial loan on your house?  Any comment, buddy?

This is not to say that Fannie Mae and Freddie Mac didn't have their own problems, but Philip is completely confused about what all of this means.  Pretty funny for someone whose company is called, "Klein Investments, Inc."   I think we can see why Philip is no stranger to the bankruptcy courts.

I'll address the rest of Philip's confusion in a later posting - really, how can one take such a buffoon seriously when they can't even get the principal issues correct?

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