Part of Newt's housing advice?

Turns out Freddie Mac is betting that many underwater homeowners will lose their homes, and that it started increasing securities trades toward this end in the middle of the recession, running counter to its mission to boost affordable housing AND the general needs of the economy. And, it's made refinancing almost impossible to get. Even if the trading division didn't get  work by the "main division" coordinated, it still smells to high heaven. And, so does the oversight that won't let even the president take much action.

#SEC sues Fannie, Freddie bigwigs; where's #Newt?

Fig Newton Gingrich

This could be good news, or it could be hot air. The Securities and Exchange Commission is suing six former top officials at Fannie Mae and Freddie Mac.

On the surface, it's good news. But, we've seen just how air-pillow light the SEC's punishment hammer has been in the past couple of years.

Anyway, here's the gist:

The SEC's complaint against the former Fannie Mae executives alleges that, when Fannie Mae began reporting its exposure to subprime loans in 2007, it broadly described the loans as those "made to borrowers with weaker credit histories," and then reported — with the knowledge, support, and approval of Mudd, Dallavecchia, and Lund — less than one-tenth of its loans that met that description. Fannie Mae reported that its 2006 year-end Single Family exposure to subprime loans was just 0.2 percent, or approximately $4.8 billion, of its Single Family loan portfolio. Investors were not told that in calculating the Company's reported exposure to subprime loans, Fannie Mae did not include loan products specifically targeted by Fannie Mae towards borrowers with weaker credit histories, including more than $43 billion of Expanded Approval, or "EA" loans. ...

In the complaint against the former Freddie Mac executives, the SEC alleged that they and Freddie Mac led investors to believe that the firm used a broad definition of subprime loans and was disclosing all of its Single-Family subprime loan exposure. Syron and Cook reinforced the misleading perception when they each publicly proclaimed that the Single Family business had "basically no subprime exposure." Unbeknown to investors, as of December 31, 2006, Freddie Mac's Single Family business was exposed to approximately $141 billion of loans internally referred to as "subprime" or "subprime like," accounting for 10 percent of the portfolio, and grew to approximately $244 billion, or 14 percent of the portfolio, as of June 30, 2008.

There's another way this could be good news, for the general public and for Barack Obama, and GOP presidential contestants along with Obama.

Two words: Newt Gingrich. His allegedly non-lobbying lobbying efforts for Freddie Mac are going to draw even more fire now. He got hammered for it in last night's debate:

Fox News debate moderator Brett Baier pointed out that in a previous debate, Gingrich said that Rep. Barney Frank, former Sen. Chris Dodd and Federal Reserve Chairman Ben Bernanke should be imprisoned for their roles in the financial meltdown. He pointed out that such statements could look hypocritical given that Gingrich supports government policy to encourage home ownership.

Gingrich defended his earlier remarks by saying that "Barney Frank was in public office with direct power over Freddie Mac [and] he exploited that power... I was a private citizen, engaged in a business like any other business." 

As I blogged yesterday: Newt, it's your turn to slip. And, it's going to happen pretty quickly, perhaps. If it's a slow news cycle otherwise, this is going to draw plenty of chatter on Sunday morning political talk TV.

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Beyond Newt, though, this says Fannie and Freddie should be reformed, and frankly, made back into straight government entities. The filing involves some major fraud allegations.

Do you know why they're "hybrid" quasi-public, quasi-private government service enterprises? LBJ, as part of his guns-and-butter financial strategy for the budget and the Vietnam War, pushed the two out of government. Yet another way he got way too fixated on Vietnam, to his own detriment and the country's as well.

Team Obama suing #banksters on #CDO and #CDS - more on why this is likely 'show'

I said yesterday that, after Dear Leader's minions, including and starting with Little Timmy Geithner, along New York Fed members and others, have spent months attacking N.Y. Attorney General Eric Schneiderman, color me skeptical at least, and cynical at most, that any talk  of a federal lawsuit against banksters for their alphabet soup diarrhea of CDOs, CDSs, etc., is anything more than a hill of diarrhea-inducing beans.

 The suit's been filed. So, let's update this from yesterday Adding to my skepticism? It names no dollar amount for damages sought. (Fannie Mae and Freddie Mac reportedly lost $196 billoin on the alphabet soup crap.) So, let's look more at the reality of why this is probably a dog-and-pony show.

Here's how this will likely play out.
1. Team Obama goes through motions of filing suit.
2. Goddam Sachs, Citigroup, Morgan Stanley et al plead remorse. (Like AT&T pleading to "tweak" the T-Mobile takeover.)
3. Said banksters eventually agree to a settlement. (This is part of "doing God's work," of course. Loyd Blankfein will combine this with the "remorse" part for Goddam Sachs.)
4. Money for said settlement will pennies on the dollar, payable over a decade or more. Updated with the new link, 10 percent of this is about $20 billion. And, not coincidentally, that's what Team Obama suggested in initial settlement talks. Even prorated by company size among the 17 defendants, that's, say, $3 billion for Bank of America. BofA had that much profit in one quarter in 2010. Even if I temper my cynicism somewhat, and call it 20 percent on the settlement, payable over three years, that's $6 bil for BofA over three years, or $500M a year. It will be able to digest that, write it down on earnings statements, and possible even find a way to a tax deduction or two.
5. Said money is then used by Team Obama to create a successor to HARP and HAMP called HEMP: "Home Equity Maintenance Program." God, I love being snarky.
6. Said program is started, oh, say, July 2012? Just in time for the Democratic National Convention and some appropriate re-election PR?
6A. Said program, said start of payments, said percentage markdown of payments, etc., all get connected in some way to Democratic campaign contributions.
7. Team Obama tells Schneiderman: "We really, really tried. This is the best we can do. Now, for the last time, stop bothering the banksters."

Why Fannie and Freddie need more regulation

As Gretchen Morgenson points out, Fannie Mae and Freddie Mac are still bleeding money, and the federal subsidies they continue to seek and get constitute an ongoing back-door bailout of the banks who wrote subprime dreck in the first place.

Of course, it is primarily for that reason that they're not likely to come under review for possible further regulation.

And, the GOP? In the Senate, it's just looking for a talking point of leverage, that's all, combined with its ongoing BS about how Fannie and Freddie overextended themselves to minorities in the first place.

Fannie and Freddie told to double bad mortgage buys

Separate from the Troubled Assets Relief Program, the Housing Finance Agency wants Freddie Mac and Fannie Mae to start buying $40 billion a month of tanking mortgage securities. That was after the two agencies told bond traders last month they would start upping their buys to $20 bil a month.

This seems like a good news, bad news story.

On the bad side, when Fannie and Freddie were taken into conservatorship Sept. 7, they were limited in how much they could grow their portfolio. And now, they’re being told to balloon it. So, it seems like Paulson et al are throwing in everything but the kitchen sink.

On the good side, they’re throwing in everything but the kitchen sink.

Soros partner — Let Fannie-Freddie go bankrupt

While a pseudolib squish like Kevin Drum continues to link to a libertarian like Tyler Cowan who will nonetheless do philosophical headstands to justify the federal bailout of Fannie Mae and Freddie Mac “Let the patient go bankrupt.” Damn straight.

Rogers, known for launching the Quantum Fund with left-wing heavyweight George Soros, had plenty more where that came from.

“America is more communist than China is right now,” Rogers told CNBC Europe’s “Squawk Box Europe” Sept. 8. “You can at least have a free market in housing and a lot of other things in China. And you can see that this is welfare for the rich. This is socialism for the rich. It’s bailing out the financiers, the banks, the Wall Streeters.”

“Let the patient go bankrupt,” he said. “We have courts in America; they will be reorganized.”

Indeed.

Meanwhile, the WSJ gives us its take “on bailout winners and losers.

Back to my other rant, though. Drum’s drinking Cowan’s Kool-Aid more than one too many times makes me wonder, other than being a left-coast techie and early in blogger who is mainstream liberal on a couple of hot-button (to conservatives) social issues, why the hell did Washington Monthly ever hire him in the first place? Does he have some negatives of Paul Glastris?