Folks, not sure how many times you are going to allow your wallet to get raped by your congressman before you decide term limits and throwing the bum out are good ideas.
The latest exciting news in the “ballooning budget deficit/corporate malfeasance/ congressional economic ignorance” department comes from the NY Times, where it was reported that Richard Syron, CEO of mortgage giant Freddie Mac, received a memo in 2004 outlining the risks to the firm as they underwrote increasingly risky mortgages.
NY Times Article – 8.5.08
Apparently, this memo was ignored. Seriously, this could not have come as a surprise to people.Syron may be greedy and/or a bit foolish, but I know he isn’t dumb. These guys had to know what was happening but played ignorant to keep rolling in the profits and options (Syron has earned $38+M since 2003 according to the article).
To add insult to injury, as a result of all of this, Congress felt the need to bail out them along with Fannie Mae. And what does that mean? As Freddie messed with these mortgages, they created a situation where your ignorant (or perhaps personal job preserving) Congressman provided an emergency funding bill and guess who paid for that? If you guessed you, then you are correct.
YOU WILL PAY FOR OTHERS’ FOOLISHNESS UNDER THE RIDICULOUS PREMISE THAT WE NEEDED TO SAVE THE ECONOMY – BS – WE NEEDED TO SAVE REPUTATIONS, SALARIES, STOCK OPTIONS, AND CORPORATE KICKBACKS TO POLITICIANS.
I challenge you to vote for term limits and vote out your incumbent if you determine that person to be wasting our money to protect his own job.
: Editor’s addition: Today the headline is Freddie’s much larger than expected loss due to increasing problems in their Alt-A loan portfolio (Alternative A rated borrowers – e.g. ones with good credit scores but limited documentation such as no income verification).
According to the article, they company has reserves of about $2B higher than regulators require. However, they increased their loan loss reserves to $2.5B from $1B in the first quarter – at that pace, the reserves won’t last long. Their Alt-A default ratio is almost 4%, which is MUCH too high. As an aside, they cut the dividend from 25 cents to 5 cents.
When the write offs on home equity loans hit the regular banks in the third quarter, and Fannie & Freddie experience continued defaults on primary loans, we will see LOTS more pain in 2008.
Chris Grande
8.6.08
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