Dick Bove: Fannie and Freddie will be gone in a year

[Eli Weiss]

I was listening to a interview of banking analyst Dick Bove of Ladenburg Thalmann & Co. on Fox Business News and he stated that he thinks that Fannie and Freddie will be gone in a year, he thinks they are simply too big, badly managed, and their debt equals to that of the US national debt.
He forecasts that Fannie and Freddie will be split up into 12 institutions...(not sure why he picked that number).

Dick Bove: Fannie Mae and Freddie Mac in my view are disasters they were basically companies that were filled with fraud and mismanagement for the last five or six years. They have to be broken up, they have to be gotten rid of. I don't think there's any question about that, but it can't be done now and can't be done in a period of hysteria...what will the structure of the financial industry be in 2009, after congress gets finished with it? I think what you'll see is that Fannie Mae and Freddie Mac will be gone.

http://dealbreaker.com/2008/07/post_44.php

http://www.clusterstock.com/2008/7/bove-fannie-fnm-and-freddie-fre-should-be-broken-up-eliminated

This is by far the most shocking analysis I have heard to date in regards to this mortgage mess, and if he is right (like he was in the past), this will have a major impact on our profession, I am not talking business or income wise, but rather "the way we do business" for example the Fannie and Freddie guidelines and forms....
Should Fannie and Freddie become obsolete, will we see a transformation to the GPAR forms and an end to their guidelines? who knows....

About Dick Bove:

"Dick is one of the most respected, visible, credible analysts on the Street, and in one fell swoop with him, we've gotten immediate credibility in the financial services industry," CEO Richard Lampen says. "Dick has been in this business for over 40 years. He is a seasoned executive. He's such a visible person out there with strong views. I'm not surprised that he is very much in demand by the media."

http://www.thestreet.com/story/10424474/4/dick-bove-crazy-smart-or-just-crazy.html

So how do my peers see the appraisal profession without Fannie and Freddie?

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[Marcia Langley]

I've heard that idea from several different "experts" this week.

I think the rest of the financial community just don't like them having so much power.

It's odd, but the financial industry in general seems to be favoring consolidation of power and wealth into a few big companies. But in the case of the GSEs they seem to be taking the opposite tack.

I wonder if they are simply trying to erase the status quo so that investigations of the GSEs become a moot point.

 

[Don Clark]

Never heard of him. But, he has likely never heard of me either. i doubt that the government, regardless of who is in charge next year will let fannie and freddy be broken up or go out of business. We simply cannot afford the debt that would be left behind.

 

[Eli Weiss]

This may be an interesting twist on the HVCC.

 

[Mike Boyd]

I think it would be good for the industry. Split both entities into several TOTALLY PRIVATE investor groups. Competition would greatly improve. Each new entity would take on its proportionate share of the original's liability, debt and obligations. AND, if the new entities get too big, have a rule that they also should split again. Any appraisal guidelines should be developed by a government agency such as FHA/HUD (and, appraisal ordering)......not by the investor.

 

[Thomas N. Morgan]

We appraisers would be much better off without Fannie and Freddie. Fannie and Freddie's "Guidelines" turned appraisers into field underwriters. Fannie and Freddie had a negative affect on appraising as a profession.

The basic underlying problem of the whole mess is that mortgage loans are being brokered and sold like a commodity. All aspects of the lending process were more honest when loans were originated and held by the lender.

 

[timd354]

I wish that were so, but there is no chance that the government will let Fannie and Freddie go under.

 

[Greenback]

...He forecasts that Fannie and Freddie will be split up into 12 institutions...(not sure why he picked that number).

Doesn't the number 12 relate to the Federal Reserve, somewhow? I remember the number 12 pertaining to the Federal Reserve, somewhere. I may be wrong.

 

[Eli Weiss]

Ditto Greenback, you did your homework...

Yep, he stated they will end up similar to the split of the Federal Reserve.

Organization of the Federal Reserve System
Board of Governors
Overseeing the system, the Board of Governors of the Federal Reserve System, controls operations of the 12 Federal Reserve Banks, several monetary and consumer advisory committees and the thousands of member banks across the U.S.

The Board of Governors sets minimum reserve limits (how much capital is on hand) for all member banks, sets the discount rate for the 12 Federal Reserve Banks, and reviews the budgets of the 12 Federal Reserve Banks.

After reading the above, its starting to make a bit more sense....

 

[Renee Healion]

But who gets the art and antiques from the executive offices when they padlock Fannie HQ?