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HomeTreasury’s Herb Allison Needs a Truth Enema
Posted by Larry Doyle on March 4th, 2010 12:33 PM |
According to testimony this morning from Treasury official Herb Allison, currently charged with overseeing the management of the TARP, there are no financial firms now guaranteed as ‘too big to fail.’
What rock did Herb just crawl out from?
The Wall Street Journal addresses Herb’s ridiculous comment in writing, Treasury Official: ‘No Too Big to Fail Guarantee’ for Big Financial Firms:
There is no U.S. government guarantee to protect the largest financial firms, a Treasury Department official said Thursday, as a congressional watchdog criticized the $45 billion in government aid provided to Citigroup Inc. (more…)
Audit Freddie and Fannie
Posted by Larry Doyle on December 30th, 2009 12:16 PM |
Who will reveal the truth and consequences embedded in the operations of Washington’s newly designed slush funds housed within Freddie Mac and Fannie Mae? The Washington Way all too often pays off those who promote the administration’s interests (both Republican and Democrat alike) while sticking future generations with an ever larger bill.
Is slush fund too harsh a characterization for a Washington-issued blank check? In my opinion, a blank check in Washington has never been anything other than that.
Ron Paul (R-TX) has created quite a stir in 2009 given his continual calls to audit the Fed. Who in Congress will call for the same treatment for Freddie and Fannie?
Let the record show that on December 30th, Sense on Cents is issuing what will be the first of many calls to audit Freddie Mac and Fannie Mae. Why am I calling for an audit of these entities? (more…)
FHA: Go Broke First, Tighten Standards Later
Posted by Larry Doyle on December 2nd, 2009 11:09 AM |
When will those charged with spending taxpayer money treat associated responsibilities with the seriousness they deserve? Indiscriminately and wastefully allocating taxpayer funds is not merely a question of competence but, in my opinion, a question of patriotism.
The Obama administration’s support of our nation’s housing market has been overwhelming. Taxpayer funds have been directed towards Freddie, Fannie, the FHA (Federal Housing Administration), and a wide number of banks. Although government spending and waste go hand in hand, the American taxpayer deserves so much better.
With the recent news that the FHA insurance fund is depleted, now the FHA decides to tighten standards. Spend money first, ask questions later? Where and when will this madness end? A recent release from the Federal Register/Department of Housing and Urban Development highlights new initiatives by Housing and Urban Development (HUD) which oversees the FHA. The FHA Summary reads as follows: (more…)
Will Geithner ‘Walk the Walk?’
Posted by Larry Doyle on November 18th, 2009 9:35 AM |
Do you have any confidence that Washington even knows how to properly address our massive and growing fiscal deficit? Rahm Emanuel, Tim Geithner and others understand that from a political standpoint they need to start talking about deficit control, but will that talk lead to action?
Do you think Congressional leaders, specifically Harry Reid and Nancy Pelosi, have the character and fortitude to ‘tighten the belt?’
The first real test for this crowd is already upon us. How so? The TARP, with a $700 billion commitment, expires on December 31, 2009. Of that $700 billion, $400 billion has actually been spent. Why wasn’t the other $300 billion spent? Well, don’t forget that Obama’s Stimulus Bill totaled $770 billion and assorted other programs implemented by Treasury have run into the trillions. As a result, Geithner did not immediately need to allocate those funds.
The question begs as to what will happen to that $300 billion. While Emanuel and Geithner are starting to ‘talk’ the fiscal discipline ‘talk,’ will they ‘walk the walk?’ (more…)
All Is Quiet On the Freddie Mac Front
Posted by Larry Doyle on October 23rd, 2009 12:03 PM |
The twists and turns along the landscape of the Uncle Sam economy remain ever challenging. How so?
What is an investor to do if he desires to sue an entity that is now part of Uncle Sam’s portfolio? If that is not challenging enough, how does one proceed with the process of discovery if those who could and want to share information have a gag order imposed upon them? What is going on here? Welcome to the world of Freddie Mac investors circa 2009.
In the process of failing, did Freddie Mac’s management engage in illegal and fraudulent activities by misrepresenting the overall health of the company? Did they misrepresent the risks embedded in the portfolio? Many investors believe that to be the case and are considering bringing suit. Who possesses a lot of very useful information? Former employees. Not unlike former employees of many companies, Freddie Mac employees were required to sign departure agreements which compelled them to not share company information. If the employee does speak, he runs the risk of losing his severance. This experience is very common in corporate America. That said, Freddie Mac’s failure hardly represents corporate America. The New York Times addresses this legal and financial entanglement by writing, Freddie Mac’s Secrecy Pacts Face Court Test:
One year after the government took over and bailed out Freddie Mac, the giant mortgage finance company, federal regulators are blocking former employees from revealing information to investors who are suing the company for fraud, lawyers for shareholders say.
The Treasury has propped up Freddie Mac with more than $50 billion in taxpayer money since the company nearly collapsed more than a year ago, and officials warn that the company will probably need additional billions in the months ahead.
Federal prosecutors in Virginia and the Securities and Exchange Commission are already investigating whether the company misled investors about the risks it was taking with securities backed by subprime mortgages and no-document loans.
But in a battle that will surface on Friday in a federal courtroom in New York, the company and its primary government overseer, the Federal Housing Finance Agency, are trying to enforce secrecy agreements that scores of former employees signed as a condition for receiving severance payments when they left the company.
In their class-action lawsuit against Freddie Mac, three big union-based pension funds charge that Freddie Mac executives defrauded investors by concealing the company’s exposure to high-risk mortgages, its mounting losses and its inadequate capital position.
At the hearing on Friday, lawyers for shareholders will argue that Freddie Mac’s secrecy agreements amount to buying silence from willing witnesses who may have crucial information about what the company’s top executives knew at the time they were assuring investors that all was well. The lawyers will ask a judge to invalidate the restrictions, a move that Freddie Mac and federal regulators will say the court has no right to do.
“Federal dollars are being used to bribe people, to buy their silence,” said David George, a lawyer representing the pension funds in a class-action lawsuit.
Wow. Our country is sinking to new depths when we have an arm of the government openly working to prevent the truth from being revealed. To this point, the blockage of the truth would typically take place behind the scenes.
For those Freddie Mac employees who would like to share the truth as to what transpired, are they wondering ‘where did my country go?’
LD
Freddie Mac, Fannie Mae Deja Vu?
Posted by Larry Doyle on May 28th, 2009 4:21 PM |
Can our economy absorb another financial hit of the magnitude of Freddie Mac and Fannie Mae?
In the process of digging for some data on Uncle Sam’s TARP commitments, I came across a compelling story at Subsidyscope, a Financial Primer (right sidebar) link here at Sense on Cents. The lead story at Subsidyscope, dated May 26, 2009: Concerns Grow Over Federal Home Loan Bank Investments. They write:
The Federal Home Loan Banks, or FHLBs, may be the biggest financial players you’ve never heard of. Collectively, they hold $1.3 trillion in assets and are the largest U.S. borrower after the federal government.
For readers here at Sense on Cents, I have raised warnings about the FHLB system both on April 3rd (Putting Perfume on a Pig!!) and just this past Monday, May 25th (FHLBs: Red Sea, Dead Sea, or Both?). In my opinion, there is little doubt that the FHLB system was the greatest beneficiary of the FASB’s relaxation of the mark-to-market. Subsidyscope says as much:
A Subsidyscope review of the FHLBs’ financial statements has found that several of the banks are carrying substantial “unrealized losses” on their investments in mortgage-backed securities. Because the banks believe these losses are temporary, they don’t have to be recognized on the banks’ accounting statements.
What’s potentially worrisome is the sheer size of the losses. For the Federal Home Loan Bank of Seattle, they are substantially larger than the capital the bank holds to protect itself against such declines. If its mortgage-backed securities don’t regain their value, the bank will have to write them down, which could wipe out its capital buffer and raise risks for taxpayers.
Remind you of Freddie Mac and Fannie Mae? I thought so. Let’s continue to dig even deeper. Subsidyscope asserts: (more…)
