The Taxpayer Bailout of Wall Street Is Far From Finished

Submitted by gjohnsit on Tue, 12/17/2019 - 6:50pm

Everyone remembers the collapse of Lehman Brothers, but most people forgot the event that happened just one week earlier that caused Lehman Brothers to collapse - the failure of Fannie Mae and Freddie Mac.
Fannie and Freddie were actually much, much larger than Lehman, but because both of these government sponsored enterprises were placed under conservatorship it didn't cause an immediate system failure.

That government takeover required hundreds of billions of taxpayer dollars, and now the Trump Administration wants them privatized again.

The investors, including BlackRock Inc., Fidelity Investments and Pacific Investment Management Co., have told the Trump administration that any move to privatize Fannie and Freddie should include an explicit guarantee of the $5 trillion in mortgage-backed securities they issue, which only Congress can provide, according to people familiar with the matter.
Eleven years later, the Trump administration has outlined plans to put the companies back into private hands—and the way in which taxpayers could be on the hook to bail out the institutions has emerged as a stumbling block.
...
The administration has said it could support a federal guarantee for Fannie and Freddie securities, but it warned that action to end the companies’ conservatorships couldn’t wait indefinitely.

As you might imagine, this is problematic because it puts us back into the exact same situation that we were in before 2008.
And when I say "the exact same situation", I mean the exact same situation.
This happened just yesterday.

Thirteen prominent banks and financial services companies agreed to pay $337 million to resolve claims by investors that they conspired to rig prices of bonds issued by mortgage companies Fannie Mae (FNMA.PK) and Freddie Mac (FMCC.PK) for a decade.
...Investors including Pennsylvania Treasurer Joe Torsella had accused the defendants of exploiting their market dominance to overcharge for Fannie Mae and Freddie Mac bonds from Jan. 1, 2009, to Jan. 1, 2019, and keep more profit for themselves.
According to an amended complaint, the 16 defendants underwrote $3.97 trillion, or 77.2%, of Fannie Mae and Freddie Mac bonds from Jan. 1, 2009, to Jan. 1, 2016.

So virtually every Wall Street bank has been rigging Fannie and Freddie bonds since they were bailed out by the taxpayers, right up until today.
And they want a taxpayer backstop to Fannie and Freddie after privatization. Yeh, right.

Yet that still isn't the whole story.
Just the act of privatizing Fannie and Freddie requires a taxpayer bailout of sorts.

Now private shareholders eagerly anticipate an emergence from conservatorship.
But first, Fannie and Freddie must repay taxpayers for these bailouts and rebuild their reserves against future losses, a task requiring $400 billion in capital. The mortgage giants understandably want to get out from under those obligations, so now they are seeking two more gifts from Uncle Sam. First, debt forgiveness or the “liquidation preference” and second, a rollback of dividend requirements. These stealth bailout proposals are potentially larger than those of the past decade. That is saying a lot.

Funny how working class people never seem to get debt forgiveness.
This newest taxpayer bailout won't be the $400 Billion number above, but it will be in the billions, and that brings up the question of "why?"
Why exactly should the taxpayers send another dime to Wall Street? And why shouldn't we hang every member of Congress and the Trump Administration that supports this bailout from the nearest lamppost?

Before we go any further, some on the right want to muddy the waters by mixing up the numbers.

Proponents of the bailout this year push note that Fannie and Freddie have borrowed $192 billion since 2008, yet have paid $305 billion in dividends. It is fair, they say, to forgive some of the debt and lower the dividend requirements. This argument, however, does not distinguish between the return on an investment and the investment itself. Those dividends paid on cash infusions and the open $445 billion credit line are far from extraordinary. If you account for all the economic risks associated with the bailouts, the true costs of intervention are more than double the value of cash infusions. The dividends merely compensate taxpayers for the risks incurred. The outstanding balance remains until Fannie and Freddie repay the principal.

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Submitted by gjohnsit on Tue, 12/17/2019 - 6:55pm

Speaking of bankster bailouts

they are back in season in Europe

Two episodes in a fortnight show that taxpayers are still very much on the hook for the financial system’s losses. At the start of December, the European Commission gave a green light to the rescue of NordLB, a German savings bank, by the governments of Lower Saxony and Saxony-Anhalt; the protection scheme of the German savings bank sector also chipped in.
Then on Sunday, Italy set aside 900 million euros ($1 bn) to recapitalize Banca del Mezzogiorno-Mediocredito Centrale (MCC), a state-owned bank, so that it can save a private regional lender, Banca Popolare di Bari SCpa. Brussels hasn’t yet cleared this rescue plan, but Rome is confident it will. In recent years, Italy has rescued Banca Monte dei Paschi di Siena SpA and Banca Carige SpA. In 2015, the German states Hamburg and Schleswig-Holstein helped HSH Nordbank.

Submitted by snoopydawg on Tue, 12/17/2019 - 7:34pm

Well aren't you just a ray of sunshine lately?

Kidding, but what else is in the pipeline to screw us? How many billions in fines did Goldman pay after the economic crash? How many more billions have they paid since then? How many times does Goldman get to get away with fraud before something serious happens to them?

Thirteen prominent banks and financial services companies agreed to pay $337 million to resolve claims by investors that they conspired to rig prices of bonds issued by mortgage companies Fannie Mae (FNMA.PK) and Freddie Mac (FMCC.PK) for a decade.

Isn't Goldman on probation for all of the other crimes it has committed? And yet Eric Holder is saying that Barr is the most corrupt AG in history. Gee Eric, why didn't you hold any bank CEOs accountable for crashing the world economy?

What? The $29 trillion that the banks got last time wasn't enough to stop them from having to be privatized? Or the hundreds of billions that they have been getting the last few months? They actually want more? In the Dodd Frank bill congress wrote it so banks don't have to ask to be bailed out. They can just get it with no input free congress. Sweet.

Funny how working class people never seem to get debt forgiveness.

Yeah funny how that never happens for us little guys. Hell we can't even discharge our debts as easily as the big corporations do. Trump is doing everything he can to hurt us and then he turns around and does something like this? Oh wait...this is all part of Vlad's devious plan to destroy the USA. Never mind.

Why exactly should the taxpayers send another dime to Wall Street? And why shouldn't we hang every member of Congress and the Trump Administration that supports this bailout from the nearest lamppost?

This is a very good question. Even better. Why aren't we in the streets like people elsewhere are? Or maybe if Macron goes ahead and does his pension reform after people have been striking for a week we can see that it won't matter what we do because we will just be ignored and congress will do whatever the hell they want anyway. Or maybe guillotines will come back into fashion.

—

Scientists are concerned that conspiracy theories may die out if they keep coming true at the current alarming rate.

Submitted by gjohnsit on Tue, 12/17/2019 - 8:09pm

You are thinking of JPMorgan

@snoopydawg
JPM is currently being charged with RICO violations while still being on probation for 3 counts of criminal fraud.

And no one is in jail

Kidding, but what else is in the pipeline to screw us? How many billions in fines did Goldman pay after the economic crash? How many more billions have they paid since then? How many times does Goldman get to get away with fraud before something serious happens to them?

Thirteen prominent banks and financial services companies agreed to pay $337 million to resolve claims by investors that they conspired to rig prices of bonds issued by mortgage companies Fannie Mae (FNMA.PK) and Freddie Mac (FMCC.PK) for a decade.

Isn't Goldman on probation for all of the other crimes it has committed? And yet Eric Holder is saying that Barr is the most corrupt AG in history. Gee Eric, why didn't you hold any bank CEOs accountable for crashing the world economy?

What? The $29 trillion that the banks got last time wasn't enough to stop them from having to be privatized? Or the hundreds of billions that they have been getting the last few months? They actually want more? In the Dodd Frank bill congress wrote it so banks don't have to ask to be bailed out. They can just get it with no input free congress. Sweet.

Funny how working class people never seem to get debt forgiveness.

Yeah funny how that never happens for us little guys. Hell we can't even discharge our debts as easily as the big corporations do. Trump is doing everything he can to hurt us and then he turns around and does something like this? Oh wait...this is all part of Vlad's devious plan to destroy the USA. Never mind.

Why exactly should the taxpayers send another dime to Wall Street? And why shouldn't we hang every member of Congress and the Trump Administration that supports this bailout from the nearest lamppost?

This is a very good question. Even better. Why aren't we in the streets like people elsewhere are? Or maybe if Macron goes ahead and does his pension reform after people have been striking for a week we can see that it won't matter what we do because we will just be ignored and congress will do whatever the hell they want anyway. Or maybe guillotines will come back into fashion.

Submitted by snoopydawg on Tue, 12/17/2019 - 8:27pm

Yep

@gjohnsit

Thanks for the correction. No one being in jail was my rant about Holder. The Bush men prosecuted the fraud committed during their time. But Obama didn't bother with the bank CEOs , the torturers or the war criminals. Just imagine if he had gone after all of them. Might have made a difference. Ole Gina wouldn't be heading the CIA today.

—

Scientists are concerned that conspiracy theories may die out if they keep coming true at the current alarming rate.

Submitted by edg on Tue, 12/17/2019 - 8:47pm

But wait!!

There's nothing to worry about. The Democrats that control the House of Representatives will stop this pillaging right in its tracks.

Bwaaa-haaa-haaaa!!!!

Submitted by snoopydawg on Tue, 12/17/2019 - 10:23pm

This article is a great read

"It's A Systemic Looting On A Massive Scale"

The United States has historically bragged about its free and transparent markets. But what the Fed is doing today is pulling a dark curtain around the financing of this so-called free and transparent market. The public has no idea which Wall Street firms have received this $3 trillion or why they can’t borrow it elsewhere. This kind of obfuscation by the Federal Reserve could actually stimulate distrust in the U.S. banking system. The Fed admitted as much in its most recent Federal Open Market Committee (FOMC) minutes, writing that participation in the Fed’s loan program “could become stigmatized.”

– Wall Street on Parade: Is the Fed’s $3 Trillion in Loans to Trading Houses on Wall Street Legal?

The business model of Wall Street is fraud.

– Bernie Sanders
....
Instead of providing the public with the transparency it deserves, Fed officials run around pretending to be financial surgeons called in to perform an unexpected emergency operation on a patient after a freak accident. In reality, central banks are merely pumping billions into an already dead body while enriching connected and powerful individuals and institutions in the process. They know exactly what they’re doing and we need to stop pretending otherwise.
....
We don’t know because they don’t want us to know, and they don’t want us to know because they don’t want the public thinking or talking about it. It’s at times like these when the totalitarian nature of central banking comes into crystal clear focus. What we have is government via unelected, unaccountable bankers. It’s the opposite of self-government, and understanding this simple fact blows apart all the myths about our so-called democracy and freedom. Nothing of the sort exists in reality, and when push comes to shove, you’re just a peasant living in an imperial oligarchy.

Someone should ask Bernie and Warren about this. Warren said that congress should hold hearings on this, but when they did not much came from it. I know...shocking isn't it?

How is it that we’re accepting this? Why isn’t the inequality obsessed left commenting more aggressively on the central bank mechanism of upward wealth transfer, which is precisely what’s been happening for so long? Why push for a wealth tax while leaving the primary instrument of upward wealth transfer (central banking) completely unchecked?

—

Scientists are concerned that conspiracy theories may die out if they keep coming true at the current alarming rate.

Submitted by Lookout on Wed, 12/18/2019 - 7:25am

...and that doesn't include the repo loans does it?

There is growing evidence that the New York Fed, the Wall Street feeding tube team of the Federal Reserve Board of Governors, is using its massive new repo loan operations to securities firms (primary dealers) to foam the Wall Street runways to try to avoid a crash landing as money gushes out of hedge funds by the tens of billions of dollars.

https://wallstreetonparade.com/2019/10/new-york-feds-repo-loans-are-foam...

We are so screwed.

—

“Until justice rolls down like water and righteousness like a mighty stream.”

Submitted by lotlizard on Thu, 12/19/2019 - 2:42am

Dem Senators keep choosing Chuck Schumer (D-Wall St.) as leader

The only public figure who focused negative attention on the Fed in recent years seems to have been Ron Paul, but no other prominent figure in politics wanted to be seen agreeing with him.

Apparently few understand the banking system and the Fed’s role as motor pumping money upward from the 99% to the 1%.

Now the same thing’s happening in Europe with the ECB (European Central Bank). Why is it only the right-wing populists criticizing the zero interest rate policy (ZIRP)? Why don’t other politicians speak out about the absurdity of expecting people to save for retirement while zeroing out the possibility of earning any return on savings? Oh, I see, nowadays everyone is supposed to turn to the casino of the stock market and let themselves be fleeced by the insiders there, just like in the U.S.