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Gses Fail Stress Test, May Require Future Bailout

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Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York

GSEs Fail Stress Test, May Require Future Bailout
The Federal Housing Finance Agency reported Aug. 7 that government-sponsored enterprises Fannie Mae and Freddie Mac failed stress tests and may need as much as $100 billion in assistance should another financial crisis hit, Bloomberg reported. > FULL STORY
 

timd354

Elite Member
Joined
Jan 11, 2008
Professional Status
Certified Residential Appraiser
State
Maryland

GSEs Fail Stress Test, May Require Future Bailout
The Federal Housing Finance Agency reported Aug. 7 that government-sponsored enterprises Fannie Mae and Freddie Mac failed stress tests and may need as much as $100 billion in assistance should another financial crisis hit, Bloomberg reported. > FULL STORY
Of course they failed the stress test since under the current system as they are setup to fail the test as the government has systematically looted their assets/profits - They are currently not allowed to retain more than $600 million each as a capital buffer (decreasing to zero on 1/1/2018) while the treasury sweeps all of their profits in the form of dividends ($275.9 billion so far, which far exceeds the $187.5 billion in treasury draws they received).

The government should either just officially make the GSE's government agencies or re-privatize them with a new law that prohibits any future government bailout and requirees that each GSE to retain capital reserves that are sufficient to survive the worst case scenario without the need of a government bailout. However either of these scenarios would take some hard work and the assumption of responsibility on the part of the Congress, which menas it won't happen any time soon.

Additionally, as long as the GSE's keep throwing off significant cash to the government which is then used to fund government programs. nothing will happen since there is nothing more that the folks in DC like than government revenue, especially when it comes in without having to raise taxes. Thus, the government will continue to systematically loot the the GSE's profits and the private shareholders of the company can be damned until the next housing downturn, at which point they will blame the GSE's for being under capitalized

It has been almost 10 years now since the government takeover of the GSE' and there is still no viable plan by the government regarding what to do with these entities...that is just pathetic.
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
Of course they failed the stress test since under the current system as they are setup to fail the test as the government has systematically looted their assets/profits - They are currently not allowed to retain more than $600 million each as a capital buffer (decreasing to zero on 1/1/2018) while the treasury sweeps all of their profits in the form of dividends ($275.9 billion so far, which far exceeds the $187.5 billion in treasury draws they received).

The government should either just officially make the GSE's government agencies or re-privatize them with a new law that prohibits any future government bailout and requirees that each GSE to retain capital reserves that are sufficient to survive the worst case scenario without the need of a government bailout. However either of these scenarios would take some hard work and the assumption of responsibility on the part of the Congress, which menas it won't happen any time soon.

Additionally, as long as the GSE's keep throwing off significant cash to the government which is then used to fund government programs. nothing will happen since there is nothing more that the folks in DC like than government revenue, especially when it comes in without having to raise taxes. Thus, the government will continue to systematically loot the the GSE's profits and the private shareholders of the company can be damned until the next housing downturn, at which point they will blame the GSE's for being under capitalized

It has been almost 10 years now since the government takeover of the GSE' and there is still no viable plan by the government regarding what to do with these entities...that is just pathetic.

Agreed.
 

Eli

Elite Member
Joined
May 12, 2007
Professional Status
Certified General Appraiser
State
Tennessee
I don't see it as pathetic. All the mortgage fraud is pathetic.
 
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