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Posts Tagged ‘mortgage’

Here is a collection of 2004 statements of impassioned defense of the mortgage institutions Fannie Mae and Freddie Mac, and how the Democrats downplayed any notion of crisis.

Notable is 6:05: Democrat Barney Frank, whom we’ve seen in recent news actively involved in the bailout of failed banks and mortage institutions, brushing off any idea of impending danger back in 2004:

But I have seen nothing in here that suggests that the safety and soundness is an issue, and I think it serves us badly to raise safety and soundness as a kind of general shibboleth when it does not seem to be an issue.

– Barney Frank

Flash forward in 2008, Frank is blasted on O’Reilly for his continued denial of responsibility in this crisis. Check out 0:58 where Frank states something that contradicts his original stance in 2004:

I’ve always felt two things about Fannie Mae and Freddie Mac, that they had an important role to play but that the regulations should be improved. Now from 1995 to 2006 when the Republicans controlled Congress and we were in the minority we couldn’t get that done.

– Barney Frank

I would say shouting and screaming are hardly hallmarks of critical thinking and discourse, however it’s useful taking O’Reilly’s accusations in the context of 2004. If anything, O’Reilly is playing out is role as the sensational voice of outrage in this mess.

Hindsight 20/20.

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Ever hear how “no one saw this crisis coming”?

A Fox-News report in September 2008 shows that as far back as 2002, members of the Bush administration as well as Republican senators were raising red-flags on the potential regulatory problems in Fannie Mae and Freddie Mac with threat of serious repercussions to the financial markets.

Hindsight is 20/20, but the irony we see in our backvision is chilling.

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In this clip, Yaron Brook of the Ayn Rand Institute and Peter Schiff of Euro Pacific Capital explain why the new mortgage reform bill wil hurt housing market and economy. The discussion hints at restrictive regulations in the wake of irresponsible actions of the U.S. government.

Government intervention is contrary to the principles of free market capitalism and the new proposed regulations impinge on individual rights which the essence of a free economy.

In his article: The High Cost Of Washington’s Price Manipulation Policy, Dr. Brook expounds on his view of the need to remove government intervention particularly in the mortgage and housing markets in order to allow capitalism to resume its healthy flow:

Maybe it’s time for a new approach. How about we start thinking of ways to address this crisis by getting the government out of the business of price manipulation–and let prices, from home values to interest rates, be determined by people’s free choices and the law of supply and demand?

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citibankJust a couple of days after I heard that rumor on the Philippine operation of Citibank, today’s financial newswires are outlining the unfavorable situation of Citigroup.

The Financial Times, Bloomberg, and Reuters articles today are writing that Citi’s top brass are mulling “options” for their business following the dramatic slide of Citi shares in recent days. Serious actions reportedly being considered by management include further job cuts, potential mergers, and fire sale of assets.

The likelihood of a government bailout by the US was one of the items mentioned by the news, as Reuters writes:

Citigroup “will get bailed out, and that’s another unfortunate strain on the U.S. government,” said Saj Karim, an investment adviser at Cannacord Capital in Waterloo, Ontario.

News of Citigroup’s woes is simply the most recent in a series of events which include the bailout request by the US Big 3 automakers (GM, Ford, and Chrysler) and the bailout of large financial institutions such as AIG in the wake of the financial crisis following the burst of the housing and mortgage bubble.

I personally wonder how many more popular names will get dragged into the news as the US economic recession gets underway. Really very interesting times.

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In these times of crisis, there’s an ever growing risk of making snap judgements based on present concerns without regard for longer term ramifications.

It’s only been two months (since September) that Congress debated and passed the original bailout plan proposed by US Treasury Paulson and Fed Chairman Bernanke. In this segment from Charlie Rose, Rep. Barney Frank expounds on the criticism of the bailout plan and its implications.

(more…)

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Saw this on Finance Manila. It’s a humorous but surprisingly accurate assessment of how the housing and mortgage bubble created the financial crisis gripping the US and the world presently. It’s also a good analysis of investor psychology and herd mentality.

The scary part is: what comes after bailout?

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I normally don’t pay much heed to corporate rumor-talk, however several bits of not-so-encouraging information have come my way, which with a very big CAVEAT, I am sharing here in case anyone can confirm their veracity:

First is that the local Philippine entities of banking giants Citibank and Standard Chartered will be or are in the process of rationalizing their branch networks. Citibank is said to be closing down at least six of its Savings Bank branches within the next three months, at the same time, a slightly conflicting report said the Citibank will instead be opening branches in the high-end areas of Rockwell Center and Fort Bonifactio. Rival foreign bank Standard Chartered is said to also be closing its Philippine branches in Quezon City and Caloocan City.

On another note, property giant Ayala Land is said to be offering a generous settlement of as much as thirty-six (36) months pay to those who will avail of early-retirement as a measure to rationalize staffing costs. As much as 20% of the company’s existing staff are said to have signed up for the offer.

The above bits are not confirmed, however what makes me a little worried about these developments, whether real or imagined, is its implications on the Philippine economy. The status of large banks such as Citibank and property developers like Ayala are an indicator of economic health. Only recently, the Philippine government downsized its GDP growth forecast in light of the recession already affecting the US, Europe, and just this morning: Japan. Throughout the financial crisis, the Philippines has seemingly escaped unscathed, but developments in the US have not spared the Philippine Stock Market, and even the financial woes of AIG has forced the sale of its otherwise healthy local Philippine affiliate: Philam Life.

These rumors are an indication that there may be no escaping the global recession that began with the blow-up of US mortgages. Peter Schiff commented on Bloomberg earlier about how Asia will definitely be affected by the US slowdown, but unlike the US and Europe, Asia’s manufacturing and production capacity remains intact–and is strong enough to weather the storm. Whether this assessment is correct, remains to be seen.

Meanwhile, I just hope there’s more fiction than fact behind the grapevine.

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