Fannie, Freddie Rescue Could Cost $25B

Analyst Says There's Less Than 50 Percent Chance That A Pricey Bailout Will Be Necessary

(CBS/ AP)  Congress' top budget analyst says a federal rescue of troubled mortgage giants Fannie Mae and Freddie Mac could cost taxpayers as much as $25 billion.

But Peter R. Orszag, director of the Congressional Budget Office, predicted in a letter to lawmakers Tuesday that there's a better than 50 percent chance the government will not have to step in to prop up the companies by lending them money or buying stock.

Congress is expected to vote this week on a housing measure that includes Treasury Department authority to throw Fannie and Freddie a temporary lifeline.

Treasury Secretary Henry M. Paulson, who has been pressing for the power, says the backup plan will help calm investors and stabilize financial markets.

Paulson said Tuesday that the continued operations of Fannie and Freddie - which guarantee or own almost half of the home mortgages in the country - would be "central to the speed with which we emerge from this housing correction."

Paulson made his comments in a speech in New York in which he again sought to reassure Americans that despite the recent turmoil, the nation's banking system is fundamentally sound.

Treasury officials confirmed that bank examiners from both the Federal Reserve and the Office of the Comptroller are currently inspecting the books at both Fannie Mae and Freddie Mac. Paulson said in an interview published Tuesday in The New York Times that he believed the results of those examinations would provide an important signal of confidence for the markets.

After a period of market turbulence in which fears grew about the fiscal soundness of both institutions, the administration on July 13 unveiled a plan to provide unlimited government loans to the two mortgage giants and also to purchase stock in the two companies if needed. Paulson has stressed that the proposal is a backup effort that would be in effect for 18 months as a way to calm investor fears.

The administration and leaders in both the House and Senate have been in negotiations over the plan. Paulson predicted in his speech that Congress would "act to complete work on this legislation this week." The House is expected to vote on the support plan, which also includes a foreclosure rescue for 400,000 strapped homeowners, on either Wednesday or Thursday.

Democrats and Republicans queasy about a federal rescue of the mortgage giants are coalescing around the idea of letting the government slap limits on the multimillion-dollar pay packages of their executives.

Key lawmakers - puzzling over how to explain to constituents why they voted to bail out the troubled government-sponsored firms - see new curbs on compensation for the top officers as a crucial measure to cut down on the cringe factor.

At a time when Fannie Mae's and Freddie Mac's troubles have investors worried and the government ready to jump in with untold sums of cash, the lavish pay of the two companies' executives is increasingly difficult to defend, they say.

Sen. Bob Casey, D-Pa., says Fannie and Freddie "have had their hard-won credibility undermined in recent weeks," on the heels of major accounting scandals at the firms in 2003 and 2004.

"While the subprime mortgage crisis is hardly the fault of these companies, past practices of awarding huge bonuses and higher executive salaries calls into question the prudence of extending an unlimited credit line of taxpayer money to the companies whose management practices have been questionable over recent years," Casey said in a letter to Treasury Secretary Henry M. Paulson.

Casey called for capping the companies' executive pay "at reasonable levels" if they used the line of credit or need Treasury to step in and buy their stock. Casey also said their boards should sue to recover recent bonuses.

Last year, Freddie Mac paid Chairman and Chief Executive Richard Syron nearly $19.8 million in compensation even though the mortgage company's stock lost half its value. During the same period, Fannie Mae President and Chief Executive Daniel Mudd got compensation valued by the company at $12.2 million, including a $2.2 million bonus.

"I would like to know why taxpayers should extend Fannie and Freddie an unlimited line of credit at a time when their stock and investor confidence has fallen precipitously and their CEOs continue to make multimillion-dollar salaries and bonuses," Sen. Chuck Hagel, R-Neb., told Paulson in a letter last week.

Critics of Fannie Mae and Freddie Mac, including Republicans who question the very existence of government-sponsored mortgage companies, have long denounced the firms for richly compensating shareholders and executives in good times while relying on taxpayers and the government to prop them up should they falter.

With the request for a federal lifeline, though, even their biggest boosters are embracing the idea of scrutinizing pay packages.

Rep. Barney Frank, D-Mass., the House Financial Services Committee chairman, said a new regulator for Fannie Mae and Freddie Mac should have the power to approve executive compensation. Frank and Sen. Christopher J. Dodd, D-Conn., the Senate Banking Committee chairman, want to add the controls to a broad housing package that creates a new regulator.

Fannie Mae and Freddie Mac together hold or guarantee $5 trillion in mortgages - almost half the nation's total. Their stocks have plummeted on fears about their financial stability in a chaotic housing market where falling home values and rising defaults have contributed to large losses at the companies.

[keeblers69]

I am guessing both of these guys are toast anyways let them go through the bankrupcy proceedings and they would come out to be better companies in the long run.

[Razzl]

First off, we can dismiss out of hand any Republican complaints, which are always based on ideological hatred of government programs. The public doesn''t agree with them, the public wants Social Security and mortgage insurance programs and, if we could get it, a national health insurance program.

That said, it was obviously a mistake for Paulson to seek this "backup" because it was not immediately needed and the huge pile of inaccurate headlines calling it a "bailout" show how it was destined to be misunderstood by the public and slandered by Republican operatives trying to stir up ideological opposition to the very programs themselves.

When this credit crunch is all over the public is not going to let Congress do away with the home mortgage tax deduction and FHA or VA mortgage insurance or any of the programs that help people get into homes. This public needs the help that government is structured to give in order to take their place in the free-market system and the privileged class that makes up pure free-market Republican ideologues will never get it that that public is awake an will never give those programs up.

[darnbat3]

It is about time that Big Brother stops bailing business''s out of trouble when they get their selves into a bind because of bad business decisions. We can not run our personal households poorly and expect someone else to fix it for us. If the CEO''s of these companies would donate their salaries and bonus'' for a couple of years they could fix their own problem.

[meanbiker]

We can not run our personal households poorly and expect someone else to fix it for us. If the CEO''''s of these companies would donate their salaries and bonus'''' for a couple of years they could fix their own problem.

Posted by darnbat3


YOU ARE SO FRICKING RIGHT!!!!! THIS IS B.S.... The CEO''s should have to give up EVERYTHING THEY OWN TO PAY FOR THIS PROBLEM!!! IT IS THEIR FAULT AND THEY SHOULD TAKE RESPONSIBILITY FOR THIS... IT IS TIME THAT CEO''s become accountable for the companies that they manage..

[Gary Kempf]

Last year, Freddie Mac paid Chairman and Chief Executive Richard Syron nearly $19.8 million in compensation even though the mortgage company''s stock lost half its value. During the same period, Fannie Mae President and Chief Executive Daniel Mudd got compensation valued by the company at $12.2 million, including a $2.2 million bonus.

This reflects Freddie and Fannie priorities, compensation at this level is pure greed at the top.

[old300d]

No problem, the spend happy democratic congress will write a check ! The are loaded !

[nextgenman]

darnbat3, they dont exactly have a choice on hiow they run their business. They had to take on bad mortgages from other banks that have been in trouble to save them. Its all Clintons fault.

Posted by GOP_forever at 10:33 AM : Jul 22, 2008
------------

nice try. But the reality is, the GOP is to blame.

[nextgenman]

No problem, the spend happy democratic congress will write a check ! The are loaded !

Posted by old300d at 10:37 AM : Jul 22, 2008
-------------

nice try. But its the Bush RINO administration asking for this social program bailout with US Tax Payer money.

[outwest6]

As long as Bush-Cheney are in power, we will rescue the rich no matter what their salary. In this case though aren''t we also rescuing all of us saving for our retirement in 401K''s because when big losses occur they will fall on us? Many of our investments have their stocks in large amounts.

CEO compensation has skyrocketed because so many mutual funds don''t care about it and because they own so much stock. After this all said and done these two CEO''s will still be ultra-rich contributers to the GOP and working folks will pay the price.

[oscarez]

This reflects Freddie and Fannie priorities, compensation at this level is pure greed at the top.

Posted by navpro at 10:37 AM : Jul 22, 2008

This is America and these guy are just following Bush and Company to the status of super rich. Now if Bush could just get rid of all federal taxes for anyone making more than $100,000.00 a year he will die a happy man.

[fuzzybear9]

Hello America

Fuzzy what is the topic today ?

Economics 101

$25 billion dollars about the exact same amount that the Pentagon cannot account for in their 2006 war bUdget, remember when $24 billion war dollars could not be accounted for ?

now You recall couple of mounths ago George Bush told us the economy is strong and we need to get some of our money from the foreign countries, Asia, etc.

now they G.W. wants a bail out for Fanny and Freddie investors,

did you know that about 40-50 % of Fanny and Freddie are owned by the Chinese Goverment investments ?

so in reality G.W. is proposing a bailout for the Foreign investors.

are you confused ?

so am I .

and whats more neither McCain or Obamma is any better equiped to answer these questions.

grab the money and run.

sincerely investing my tax dollars in China Bear
Fuzzy

[vnveteran72]

$25 Billion????......Oh No!!!.....This means we''ll have to forgo 10 minutes of Iraq War funding.....We''re Doomed!!!.....

[singingrick]

Here''s how this happened:


These banks spent big bucks lobbying a Republican Congress to deregulate them. They got there way and began engaging in reckless speculative practices. They made billions in the short term and they knew that if they crashed and burned, that the American taxpayer would have to bail them out or the entire economy would tank. So here we are bailing them out.


The same thing happened during the Reagan and Bush 1 years with the 1 trillion dollar savings and loan bailout.


Thanks for voting Republicon.


lol!

[Gary Kempf]

Oscarez
Bush will die wealthy and happy no matter what happens between now and the end of his regime.... Sociopaths have no conscience.

[jediservant]

You know, it is easy to spend 25M when it''s coming from someone else pocket. I bet if their retirement was based on how much money they saved the tax payer you would not see these bail outs!

[starleo146]

Here''''s how this happened:


These banks spent big bucks lobbying a Republican Congress to deregulate them. They got there way and began engaging in reckless speculative practices. They made billions in the short term and they knew that if they crashed and burned, that the American taxpayer would have to bail them out or the entire economy would tank. So here we are bailing them out.


The same thing happened during the Reagan and Bush 1 years with the 1 trillion dollar savings and loan bailout.


Thanks for voting Republicon.


lol!




Posted by singingrick at 11:01 AM : Jul 22, 2008

Great post, and how long, and how much will the tax payer have to pay for this. I can''t take 6 months of this debacle administration, drag him out now

[starleo146]

darnbat3, they dont exactly have a choice on hiow they run their business. They had to take on bad mortgages from other banks that have been in trouble to save them. Its all Clintons fault.

Posted by GOP_forever at 10:33 AM : Jul 22, 2008

Clinton''s fault yea, and just like mc bush says about high gas prices is Obamas fault, who is to blame for Iraq and the the 3 trillion a week over there give me a break stand up your sitting on your brain

[donevis-2009]

Last year, Freddie Mac paid Chairman and Chief Executive Richard Syron nearly $19.8 million in compensation even though the mortgage company''''s stock lost half its value. During the same period, Fannie Mae President and Chief Executive Daniel Mudd got compensation valued by the company at $12.2 million, including a $2.2 million bonus.

This reflects Freddie and Fannie priorities, compensation at this level is pure greed at the top.

Posted by navpro at 10:37 AM : Jul 22, 2008

So how does this make you feel Kids? It will be our money bailing out these rich idiots again. Believe me, when we go for our social Security and pension money it will be all gone, tied up in bailing out these elite people while they''re out on their private islands. "God Speed USA" By the way the checks being issued by IndyMac bank (FDIC) to all those poor people in Calf. aren''t being honored by other banks yet.

[missingamerica]

$25 billion? That''s not so bad...I think Halliburton skims that much...

[generey]

Just great; tax money...again. People are sooo stupid.

[wallyj16]

When are we as citizens going to take responsibility for holding these officials accountable for what is being done? More of this energy here is useful by calling our representatives and letting them know that we have the power to vote them out as well.

[vnveteran72]

The Great Depression will look like a small blip compared to the economic collapse the United States is about to suffer, according to several experts. But Congress refuses to listen and do what%u2019s necessary to stave off disaster.

Worse, Congress has been warned year after year since at least 1992, and perhaps before that.

%u201CThe federal budget is structurally unbalanced. This will do increasing damage to the economy and is unsustainable in the long term. Regardless of the approach chosen, prompt and meaningful action is essential. The longer it is delayed, the more painful it will be.%u201D

Those were the words of the General Accounting Office (now the Government Accountability Office)
Get ready for the really, really, REALLY, bad days....

[culturechang]

Oh I am sure the federal govt is jumping right in to save them. Afterall, the tax payer should reward them for bad behavior. And the feds want to make sure there is enough money for the CEOs to deploy thier golden parachutes. Appearently, Congress is not listening....again.

[missingamerica]

These banks spent big bucks lobbying a Republican Congress to deregulate them. They got there way and began engaging in reckless speculative practices. They made billions in the short term and they knew that if they crashed and burned, that the American taxpayer would have to bail them out or the entire economy would tank. So here we are bailing them out.

The same thing happened during the Reagan and Bush 1 years with the 1 trillion dollar savings and loan bailout.

Thanks for voting Republicon.

lol!

Posted by singingrick at 11:01 AM : Jul 22, 2008

They also got suckered some, rick...they believed that stuff about "a permanent Republican majority".

Given their success at having the Republicans bias lending laws against the consumer - and PARTICULARLY that clause that permits Social Security to be garnished to repay student loans from the student and/or the parents if they co-signed - I am sure that they projected eventually having the Republicans garnish Social Security for housing loans, too.

Given that scenario, any foolish thing that they did would have been guaranteed at least partial repayment, unless you declared the only bankruptcy route left by up and dying on them.

[culturechang]

wallyj16, I agree. I have done that. They dont listen. Appearently, they need to be removed from office.

[culturechang]

A lot of the problem comes from a totally obese federal govt. The govt is the largest in history. Its way way too big and poeple cannot keep track of it when its this large.

[Michael Arnold]

I''ve had enough of these SOCIALIST programs. Let the rats eat their losses and let the market find its rightful place so Americans will have confidence in their homes again. NO BAILOUT OF THESE WALL STREET THIEVES.

[blitzder]

Yeah right!!!
If the Dems had done this, Republicans would be screaming socialists/pinko''s/lefties/liberals, but since Republicans are bailing them out. Its fine!!!!. Another instance of Republican hypocracy.

No matter how you spin it, the bottom line is Bush/Cheney/Rumsfeld and multitudes of their cronies, have bled the nation dry. The irony is with all the mischief and greed perpetrated by them, they are the bigger losers. Most major corporations are all losing money like GM, Airlines, Banks etc and a worthless dollar.

Republicans end up shooting themselves in the foot, over and over again.

[missingamerica]

A lot of the problem comes from a totally obese federal govt. The govt is the largest in history. Its way way too big and poeple cannot keep track of it when its this large.

Posted by CultureChang at 11:34 AM : Jul 22, 2008

Could shrink the government...if they stiffened penalties for businesses that got caught cheating.

As it stands now, you have businesses with battalions of lawyers and accountants hard at work figuring out ways to cheat the government out of taxes and the consumer out of their money - and sometimes even their lives.

That necessitates lots of government to make even an attempt at keeping them in line.

Now if they threw in some death penalty possibilities for C-level executives who cheated people out of their savings and so forth...

[vnveteran72]

wallyj16, I agree. I have done that. They dont listen. Appearently, they need to be removed from office.


--------------------------------------------------------------------------------

Posted by CultureChang at 11:33 AM : Jul 22, 2008
+ report abuse

Our fearless "Representatives" are too busy doing the business of their REAL employers, and it ain''t us....

[missingamerica]

Our fearless "Representatives" are too busy doing the business of their REAL employers, and it ain''''t us....

Posted by vnveteran72 at 11:41 AM : Jul 22, 2008

Makes you wish you could run the FBI for a year, doesn''t it?

Take a page from Bush''s book, and ignore the Constitution and crash the oil company offices...big pharma''s offices...every office on "K" Street...

Just sieze their books - both sets - and have fun...

[afmca]

Just another tax-payer bail-out of another Republican inspired fiasco. After 8 years there is nobody to blame but Bush, Cheney, Rove, etal .. the kool-aid drinkers really cannot keep blaming Clinton. Some are trying to blame Obama and he isn''t even elected yet. All I know is that McCain sips from the same vat of kool-aid. This was put in motion during King George''s first term when he decided to crippled the regulators and allow the inept, immoral, corrupt American CEO free reign. This is the result.

The unregulated speculation by the banks and money lenders led to this.

Under Repub rule money chases other money, but nothing positive results. Bush''s policies has created the stock market slide, the housing market crumble, real wage decline, health care less affordable, and retirement plans to fade away. The Repub goal of crippling middle America is almost complete and still the ignorant and intolerant in the Repub base pay homage to their earthly gods.

I really think it is time to seperate this country and create two distinct entities. I will guarentee within a decade the Repub side will be more feared than any other rogue state in the world. There is a basic ugliness to the Republican base that they rest of the world fears and is learning to hate.

[mrmazerati]

GOP socialism strikes again!

[missingamerica]

I''ve had enough of these SOCIALIST programs.

Posted by tvtoy1000 at 11:36 AM : Jul 22, 2008

People use that word "socialism" too much...this behavior by the Republicans and this Administration does not have a thing to do with any political philosophy.

This is plain old-fashioned "Teapot Dome"-style plundering of the United States Treasury.

That is what this Administration has always been about - but they have managed to use "I do not recall." and "I do not remember the specifics." to raise common criminality into an artform and make the "Teapot Dome" boyz look like a bunch of kindergarteners.

[harpoot]

Great, at least the high ups can get their well deserved bonuses. To be expected from these bandits in D.C.

[missingamerica]

lolll...I should have added..."Catch a clue - Phil Gramm is known to have financed soft-core porn...what does that say about the vaunted morality and integrity of the Republicans?"....

lolllllllll.....

[whitemale08]

Republicans and John McCain should be hiding their heads in the sand. Hell, even junkyard dogs like Sean Hannity and Glen Beck are now calling themselves something different then Republicans but they''re not fooling anybody, they''re still con men.

And it''s going to cost more then $25 billion, we''ve heard this line before about how much Republicans said Iraq cost.

Paulson is laughable and a joke, this clown from Goldman Smacks is a complete idiot. He has no idea what he''s doing. He thinks "trickle-down voodoo economics" is going to fix this garbage.

Why trust these clowns anymore, this party should be dissolved for the betterment of America.

[missingamerica]

This thread is remarkably free of rabid neocon-style responses...

I''m starting to think CBS blocked RNC headquarter''s IP address...

[wardoglrs]

Hey did they fill out there welfare forums?.
That is Corp Welfare.The Tax payer bails them out. God for bib that your own Business could do as they do.
%u201CThe real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the government of the U.S. ever since the days of Andrew Jackson. History depicts Andrew Jackson as the last truly honorable and incorruptible American president.%u201D

I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them. Thomas Jefferson

"Paper is poverty,... it is only the ghost of money, and not money itself." Thomas Jefferson to Edward Carrington,

[wardoglrs]

President FDR (on Fascist rule in a letter to corporate con man %u201CColonel%u201D Edward M. House, a founder of the Council on Foreign Relations and political fixer for the ruling class. House also handled President Wilson for the foisting of the privately rigged %u201CFederal Reserve%u201D Corp bank monopoly. 11/21/ 1933)

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." - Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)

When all government, domestic and foreign, in little as in great things, shall be drawn to Washington as the center of all power, it will render powerless the checks provided of one government on another, and will become as venal and oppressive as the government from which we separated - Thomas

[txgrouch2006]

ibsteve2u wrote
This thread is remarkably free of rabid neocon-style responses...
------------
Oh, SORRY! Didn''t mean to let you down, whiner.

Let''s not forget - MOST of these sub-prime loans were made DURING THE CLINTON ADMINISTRATION. Blame Gramm all you want, President Clinton could have vetoed it. If that failed, he could have issued ANOTHER one of his dictatorial Executive Orders that he was so famous for.

[txgrouch2006]

But really, the headline is what COULD happen? Why not wait until something ACTUALLY happens before you call it "news."

I just a short time, we have gone from being called "whiners" to the journalists BEING whiners.

[gracchus1]

Posters:

If you want to find out the truth, go the archives at Politico.com and look for Lisa Lerer''s article titled "Fannie, Freddie Spent $200 Million to BUy Influence". If you already have read this article then please disregard this post.

[txgrouch2006]

graccus1 wrote
Wow, I guess you cannot post the truth without getting censored.
---------------
The same has been happening to me lately.

It seems to happen if you mention The Big Eye network by name - you know, that three-letter name between the eye and the word "NEWS" in the top left coorner of the screen. Did you include that in your post?

When you say those letters, your post gets noticed by the Company Name detector, and the post gets the SPECIAL ATTENTION of the actual human censors. They seem to be inclined to delete more often than not, because what does it cost them to be on the safe side. And yes, if you put spaces between the letters, the Company Name detector will STILL notice you - I tried it, and the post got deleted.

If you leave out the Company Name, then you are subject only to the automated "offensive word" filter that we all know so well.

[txgrouch2006]

graccus1 wrote
Wow, I guess you cannot post the truth without getting censored.
---------------
And now THAT''S GONE!!!

Wow, your screen name must have gotten on their EXTRA SPECIAL ATTENTION list. They must be scrutinizing ALL of your posts.

[vnveteran72]

People use that word "socialism" too much...this behavior by the Republicans and this Administration does not have a thing to do with any political philosophy.

This is plain old-fashioned "Teapot Dome"-style plundering of the United States Treasury.

That is what this Administration has always been about - but they have managed to use "I do not recall." and "I do not remember the specifics." to raise common criminality into an artform and make the "Teapot Dome" boyz look like a bunch of kindergarteners.


--------------------------------------------------------------------------------

Posted by ibsteve2u at 11:52 AM : Jul 22, 2008
+ report abuse

They more closely resemble Organized Crime than anything else. The CIA started out using the Mafia for Black Ops and they eventually were compromised by them completely. After Kennedy''s assassination, they took over and turned our Government into what we see today. The Bush and Cheney Crime Families are just the visible tip of a Massive Iceberg of Frozen Slime.
They''re the Ruling Elite. Beyond the Law, which they control, and beyond any accountability. Untouchables.

[txgrouch2006]

graccus1 wrote
look for Lisa Lerer''''s article titled "Fannie, Freddie Spent $200 Million to BUy Influence".
---------------
Gee whiz, when did this "No rules, just right" mentality begin?

I think it was about SIXTEEN YEARS AGO. Bush has not done enough to clean up the mess THAT CLINTON CAUSED.

Who''s to blame? If Clinton cut the brake lines on the bus, but Bush is asleep at the wheel and not even trying to step on the brakes anyway? BOTH ARE TO BLAME.

SIXTEEN YEARS OF BABY BOOMERS IS ENOUGH!

[libh8er]

Two fine examples of goverment ''do good'' programs.....donating hundreds of thousands to Jackson''s racist rainbow group whilst losing money hand over fist. We should let them go under.

[harp1963]

Just put it on the "You Got Swindled By George Bush and *** Cheney Taxpayer Credit Card." Soon to come the "Sorry America Your Dollar Is Worth Less Than The Peso Credit Card."

Thanks George. You''ve bankrupted Harken Energy, the Texas Rangers, and now your supreme accomplishment of bankrupting America. Why don''t you cut the taxes some more for the top 1% and then really break it off in us by trying to privitize Social Security again.

And some brain dead Americans want for more years of this by supporting McSenile, sorry, I mean McCain.

[bienhoa1968]

I feel that the ultimate slap in the face to the taxpayers of America is rewarding CEO''s (Bush and Chaney''s Base) for bankrupting companies. They should be fired and not get one thin dime.Last year, Freddie Mac paid Chairman and Chief Executive Richard Syron nearly $19.8 million in compensation even though the mortgage company''s stock lost half its value. During the same period, Fannie Mae President and Chief Executive Daniel Mudd got compensation valued by the company at $12.2 million, including a $2.2 million bonus.