(V): Isn't that what Fannie and Freddy was all about in the US?

Artful Dodger: Close enough (for government work)

http://www.investopedia.com/articles/economics/08/fannie-mae-freddie-mac-credit-crisis.asp

When the housing bubble of 2001-2007 burst, it caused a mortgage security meltdown. This contributed to a general credit crisis, which evolved into a worldwide financial crisis. Many critics have held the United States Congress - and its unwillingness to rein in Fannie Mae and Freddie Mac - responsible for the credit crisis. In this article, we'll examine the extent to which Fannie Mae, Freddie Mac and their allies in Congress contributed to the largest financial and economic crisis since the Great Depression.


A Brief History of Mortgage Markets

For most of the twentieth century, mortgage lending took place mostly at banks, thrifts, credit unions, and savings and loans. The most common type of mortgage was a fixed-rate mortgage and most of the financial institutions originating mortgages held the mortgages that they originated on their books. Starting in 1968, when Fannie Mae was chartered by the U.S. Congress as a government-sponsored enterprise (GSE), and two years later when Freddie Mac was chartered as the same, things began to change quickly. (Fannie Mae was originally created in 1938, but until its privatization in 1968 it was a part of the U.S. government). Fannie Mae and Freddie Mac created a liquid secondary market for mortgages. This meant that financial institutions no longer had to hold onto the mortgages they originated, but could sell them into the secondary market shortly after origination. This in turn freed up their funds such that they could then make additional mortgages.

Fannie Mae and Freddie Mac had a positive influence on the mortgage market by increasing home ownership rates in the United States; however, as history has proved, allowing Fannie Mae and Freddie Mac to function as implied government-backed monopolies had major repercussions that far outweighed the benefits these organizations provided.

The Privileges of GSE Status

According to Fannie Mae and Freddie Mac's congressional charters, which gave them GSE status, they operated with certain ties to the United States federal government and, as of September 6, 2008, were placed under the direct supervision of the federal government. According to their congressional charters:

•The president of the United States appoints five of the 18 members of the organizations' boards of directors.

•To support their liquidity, the secretary of the Treasury is authorized, but not required, to purchase up to $2.25 billion of securities from each company.

•Both companies are exempt from state and local taxes.

•Both companies are regulated by the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA). The FHFA regulates the financial safety and soundness of Fannie Mae and Freddie Mac, including implementing, enforcing and monitoring their capital standards, and limiting the size of their mortgage investment portfolios; HUD is responsible for Fannie and Freddie's general housing missions.

Fannie and Freddie's GSE status created certain perceptions in the marketplace, the first of which was that the federal government would step in and bail these organizations out if either firm ever ran into financial trouble. This was known as an "implicit guarantee".

The fact that the market believed in this implicit guarantee allowed Fannie Mae and Freddie Mac to borrow money in the bond market at lower rates (yields) than other financial institutions. The yields on Fannie Mae and Freddie Mac's corporate debt, known as agency debt, was historically about 35 basis points (.35%) higher than U.S. Treasury bonds, while 'AAA-rated' financial firms' debt was historically about 70 basis points (.7%) higher than U.S. Treasury bonds. A 35-basis-point difference might not seem like a lot, but on borrowings measured in trillions of dollars, it adds up to huge sums of money.

With a funding advantage over their Wall Street rivals, Fannie Mae and Freddie Mac made large profits for more than two decades. Over this time period, there was frequent debate and analysis among financial and housing market professionals, government officials, members of Congress and the executive branch about whether Fannie and Freddie's implied government backing was working mostly to benefit the companies, their management and their investors, or U.S. homeowners (particularly low-income homeowners) as was part of these firms' HUD-administered housing mission.

One thing was clear: Fannie Mae and Freddie Mac were given a government-sponsored monopoly on a large part of the U.S. secondary mortgage market. It is this monopoly, combined with the government's implicit guarantee to keep these firms afloat, that would later contribute to the mortgage market's collapse.

Iamon lyme: Why is it government never learns? They keep making the same mistakes over and over.

Artful Dodger: "Why is it government never learns? They keep making the same mistakes over and over."

It's not easy to come up with a short answer to that. When government is made up of too many individuals who only work for personal political gain, then anything can happen. A lot of time and effort goes into securing votes and gaining control... so there's not a lot of time left over for actually doing their jobs.

There are short term political strategies, like pressuring banks into making risky home loans to curry favor (i.e., votes) among poorer working class people. We all know how well that worked out.

And then there are long term strategies, like rejecting tort reform so that problems with the health care industry would lead to a government take over... we will know before too long how well that works out.

Artful Dodger: From what Lamon has posted of it's operating nature... no. And in no way would such be allowed by the UK people... we've seen too much of the results of that, and how close the main UK banks nearly collapsed our financial system beyond control to accept a state backed toxic debt selling system.

So much has been picked on by the opposition that it'll be hard to squeeze a mae or mac out of a gnats posterior let alone parliament and our press.

(V): "From what Lamon has posted of it's operating nature... no."

But if it has the same result... then yes.

"...the government will effectively underwrite mortgages. It's right the Institute for Fiscal Studies warned there are risks."

We were warned too.

"Some borrowers might be far less conservative in what they aim to buy, some may default rather than tighten their belts."

Yep, that could happen. It happened over here.

"And in no way would such be allowed by the UK people."

So, are you saying "The Government has released a new scheme to help people buy homes" and it WILL be allowed, because its "operating nature" is not the same as mae or mac... even though it essentially does the same thing?

Iamon lyme: It doesn't though, not imo. In the end your banks sold mortgages to other companies, who sold them onto other companies, etc.

...not the same as this.

Any lenders will have to pay a fee to have it 'underwritten'.

It seems the rules will be..

5-20% deposit
20% shared equity loan
75-60% mortgage

It replaces a system called FirstBuy, which helped first time buyers.. now it is being extended to those buying a new home under £600,000 ($900,000 approx)

It does not sort out the problem of a lack of social housing which started in the Thatcher years. Long term tenants were allowed to buy their homes at a greatly reduced price. The money went to the councils, but they were not allowed to reinvest it in new stock by order of Queen Maggie.

(V): I wasn't saying they are exactly the same things, but both entail similar risks that can affect prospective homeowners... that much I think we can agree on.

What they do have in common is government involvement in private enterprises and concerns. Some people are concerned about governments encroachment on our private lives and personal business dealings. They see it as the government becoming a nanny state... gradually taking over personal responsibilites to make life easier for us, but at the same time making us more and more dependent on the government. Increased government involvement may be good for government workers (whose salaries are drawn from taxes) but not always so good for the private citizen (who works to pay those taxes).

What you're talking about is government inserting itself into the housing market by offering to underwrite loans. I can see you are okay with that, and your complaint is actually about something else... socially funded housing.

Iamon lyme: ... I stand by common law more than statutes and acts. The power on consent is then mine... as we are policed by consent.

.... If you are not breaking common law than what is the worry?

"I can see you are okay with that, and your complaint is actually about something else... socially funded housing."

No.... I'm not ok with it, but I accept if run well it could be a useful scheme.

"I assume what you call social housing is what we call low income (affordable) housing."

No. it's not the same. With some areas (eg London) being very expensive many middle class folk do live in social housing... The properties are better maintained than private landlords tend to can be bothered with.

Low income would be the slum owning private landlords renting places out that are 10 years overdue for an extreme makeover!!

(V): "Low income would be the slum owning private landlords renting places out that are 10 years overdue for an extreme makeover!!"

In the US, what we call "low income" housing is government subsidized housing. Sometimes they are called housing developments or "the projects".

"With some areas (eg London) being very expensive many middle class folk do live in social housing... The properties are better maintained than private landlords tend to can be bothered with."

Maintained by whom? If not by private landlords, then who is in charge of those properties? I'm not familiar with the term "social housing"... what exactly is it?

Iamon lyme: Subsidies for new homes (often termed 'social housing grant') amount to sizeable public investments. In its 2008–11 Prospectus, the Housing Corporation stated that in the three-year period to 2011 subsidy would be "at least £8 billion".[5] The majority of this would go to housing associations for use in development projects. Since 2003, in an effort to seek greater value for money, much of the funding by the Housing Corporation for new house building has been channelled to fewer than 80 "developing housing associations" that have achieved "partner status" through Partner Programme Agreements.

Housing associations borrow money to pay for new homes and improvements. After the Housing Act 1988, the proportion of the cost of new homes met by capital grant was scaled back by the Government, so borrowing became the primary source of funding for investment. Much of this was simply borrowed from banks and building societies, but after the late-2000s financial crisis these institutions ceased to offer long-term loans, so developing associations are increasingly turning to corporate bonds to raise funds for expansion.

"The only difference I can make out is that your social landlords have more latitude in drawing up allocations policies... other than that, there is no real difference."

From what I've seen...... a big difference. Maybe just your media misrepresents your 'projects' :/ Standards tend to be better here.

"Some people would happily give up many of their freedoms in exchange for being cared for, and others wouldn't like it at all."

Some people seem to think their freedom can be taken... sorry, but to me that is a big lie. Hence the reference to common law. Inalienable rights like you state your constitution provides... but we don't need to fight and moan.

One guy just sent a 15 page statement to the PM stating he does not stand under any acts or statutes and is therefore operating as a 'free' man of the land and bound by only common law. By that law we are all equal, no one has rights above the other. He was free but made sure the government knew he knew he was free.

But you are bound to not harm, defraud or cause loss or damage to anyone or their property under common law.

(V): "From what I've seen...... a big difference. Maybe just your media misrepresents your 'projects' :/ Standards tend to be better here."

If our media misrepresents anything, it usually falls on the side of favoring governmental actions and covering as best it can government misdeeds. But this is only temporary, and the media will reverse itself when the other party is in power... they always do.

As for misrepresenting low income housing, what would be the point of doing that? I can google low income housing and find information nearly identical to your social housing.

"Some people seem to think their freedom can be taken... sorry, but to me that is a big lie."

I see, so it's your belief that once you have a freedom it can never be taken away. That must feel very reassuring.

"One guy just sent a 15 page statement to the PM stating he does not stand under any acts or statutes and is therefore operating as a 'free' man of the land and bound by only common law."

We have guys like that over here too. But they tend to keep to themselves and collect weapons.

"By that law we are all equal, no one has rights above the other. He was free but made sure the government knew he knew he was free."

I see, so he wanted to remind the government of those rights in case they forgot or were tempted to ignore them.

"But you are bound to not harm, defraud or cause loss or damage to anyone or their property under common law."

That's reasonable.

"Hence the reference to common law. Inalienable rights like you state your constitution provides..."

Over here we have a president, fully supported by his party, who has been ignoring our constitutional rights from the day he stepped into office.

"but we don't need to fight and moan."

You have much more important issues to fight and moan over.

Iamon lyme: A few corrections:

If our media misrepresents anything, it usually falls on the side of favoring governmental actions and covering UP as best it can government misdeeds.


"By that law we are all equal, no one has rights above the other. He was free but made sure the government knew he knew he was free."

I see, so he wanted to remind the government he was free... just in case they forgot or were tempted to ignore that little detail. (?)



One other point I failed to mention... you said: "One guy just sent a 15 page statement to the PM stating he does not stand under any acts or statutes... "

It appears he has given himself permission to ignore any of those acts or statutes if he so chooses.

Iamon lyme: Including the mix that happens? As 'estates' as such are disappearing.

"We have guys like that over here too. But they tend to keep to themselves and collect weapons"

Not the same.

"I see, so he wanted to remind the government of those rights in case they forgot or were tempted to ignore them."

No.

"Over here we have a president, fully supported by his party, who has been ignoring our constitutional rights from the day he stepped into office."

And you think the Republicans don't?

"You have much more important issues to fight and moan over."

???

"It appears he has given himself permission to ignore any of those acts or statutes if he so chooses."

You don't get it. If people were not ignoring common law, none of these statutes would be needed... or as a buffer to stop so many companies and 'persons' ending up in court on criminal charges.... for things like 'food safety'.

(V): [ Including the mix that happens? As 'estates' as such are disappearing. ]

The mix? Disappearing 'estates'? Well, I can't argue with that...

What the #@&% are you talking about?


"Over here we have a president, fully supported by his party, who has been ignoring our constitutional rights from the day he stepped into office."

[ And you think the Republicans don't? ]

How many presidents do you think we have?


"You have much more important issues to fight and moan over."

[ ??? ]

Errant banks and phone hacking scandals and rich people with offshore accounts.


"It appears he has given himself permission to ignore any of those acts or statutes if he so chooses."

[ You don't get it. If people were not ignoring common law, none of these statutes would be needed...]

And if those people decided they too will no longer stand under any acts or statutes... do you see where I'm going with this? If those acts and statutes were not needed, there wouldn't be any acts or statutes. And if one person says he only recognizes common law and does not stand under any acts or statutes, what's to stop everyone else from making the same claim? He is fantasizing about a perfect world where everyone respects "common law", making any other rule or act or statute or law unnecessary. Either that or he's doing it for his allotted 15 minutes of fame.

Iamon lyme: People having bought off the 'councils', I mentioned it earlier. That building projects now tend to be more 'general' not 'projects'.

"How many presidents do you think we have?"

One at a time. Bush was quite willing to have demonstrators against the Iraq invasion 'escorted' to zones away from the eye of the 'press''.

Isn't that a breach of your rights in the USA? When Raygun and other US governments supported terrorists isn't that a breach of American Law?

"Errant banks and phone hacking scandals and rich people with offshore accounts."

And a big company called UK.plc

"And if those people decided they too will no longer stand under any acts or statutes... do you see where I'm going with this?"

Them being responsible rather than need 'government' to tell them. I thought you were for that!!

(V): "How many presidents do you think we have?"

[ One at a time. ]

So which one do you think I was talking about?


[ Bush was quite willing to have demonstrators against the Iraq invasion 'escorted' to zones away from the eye of the 'press''. Isn't that a breach of your rights in the USA? When Raygun and other US governments supported terrorists isn't that a breach of American Law? ]

Irrelevant. I'm talking about the current president. I always know when I've scored points when you decide to take a walk down memory lane.

[ Them being responsible rather than need 'government' to tell them. I thought you were for that!! ]

Sure, but no one needs to make self serving and essentially meaningless proclamations in order to do that. In a perfect world, everyone would behave responsibly whether there were acts and statutes or not.

[ People having bought off the 'councils', I mentioned it earlier. That building projects now tend to be more 'general' not 'projects'. ]

You mean corruption still exists? Oh well... so much for the power of wishing a perfect world into existence, eh?

Iamon lyme: No.

"I always know when I've scored points when you decide to take a walk down memory lane."

I know (if it's all about point scoring as you state) that such an answer means you have no answer. You can't justify Bush crushing Americans First Amendment rights.

Ok... I can understand that. He was a Conservative, and Conservatives don't do that.

Right??

(V): Yes.

Obama takes first prize. Carter and Clinton combined did less damage than Obama can take credit for, and he's not done yet.

Iamon lyme: meaningless.

(V): Why stop with Reagan and Bush? Lincoln trampled over the rights of law abiding slave owners, and Washington defied the king when he fought against British troops. It all started in 1,000,000 BC when Ogg took Ugh as his mate from a neighboring clan, thinking it would end strife between the two clans. But the plan backfired, and it only worked to create more resentment and greater animosity between the two clans. So Ogg took Pew as another mate from a smaller third clan, to shore up his strength if the two major clans ever came to blows. This too was a mistake, because the third lesser clan decided to align itself with Oggs enemy.

Ogg traveled many days to reach the largest clan in recorded prehistoric history, and took Ick as a mate after striking a deal with that clans leader... Icks father. But Ogg never received any support from him after Ogg came home with Ick... he called and left messages, but Icks father never got back to him. Before it was all over the political landscape was a mess, and Ogg had seven mates fighting among themselves for his attention...
Oh well, pooka happens.

Iamon lyme: Meaningless.

(V): "Meaningless."

LOL

Iamon lyme: Well..... I don't see you doing anything than making straw man arguments.

(V): Subject: "... I stand by common law more than statutes and acts. The power on consent is then mine... as we are policed by consent. .... If you are not breaking common law than what is the worry?"

I think what we have here is a failure to communicate. I'm talking about an increasing role of government in our lives, beyond what is necessary or appropriate. I can understand how someone might not be alarmed by this, because everyone has a different idea as to what level of government involvement is appropriate or not. Some people would happily give up many of their freedoms in exchange for being cared for, and others wouldn't like it at all.

(V): Okay, I should know better by now... all I had to do was google "social housing in england", and here is what I got:

"A key function of social housing is to provide accommodation that is affordable to people on low incomes. Rents in the social housing sector are kept low through state subsidy. The social housing sector is currently governed by a strictly defined system of rent control to ensure that rents are kept affordable."

"Social housing is allocated on the basis of need
Unlike the private rental sector, in which tenancies are offered according to the free choice of the landlord or existing household in question, social housing is allocated according to need."

"Each social landlord operates an allocations policy, stating in advance what factors will be taken into account when deciding who gets preference for the limited amount of social housing on offer. These policies must include 'reasonable preference criteria' that are set out in law, but beyond this, allocations policies can be drawn up at the discretion of the social landlord."


This is what we in the U.S. call "low income housing". The only difference I can make out is that your social landlords have more latitude in drawing up allocations policies... other than that, there is no real difference.

(V): I assume what you call social housing is what we call low income (affordable) housing.