The Respectfully Republican Conversation

Susan - my dh has his PhD in Economics and I have been driving him nuts the past few days trying to understand all this stuff - so you are not alone!

Okay - from what I can understand these securities are made up of chopped up mortgages. You go to a bank and get a mortgage for say $200,000 at 6% interest for 30 years. The bank can take your mortgage and chop it up and bundle it with other mortgages that it has and turn these into mortgage securities which are like bonds and sell them to investors, brokerage firms, other banks, etc. Apparently these securities pay some interest and like bonds take a few years to mature. Somehow the interest rate goes up and down with the housing market. Instead of being backed by cash these securities are backed by these mortgages so if the mortgages go south so do these securities. When the housing market was going up these securities fetched a higher price and banks, pension funds, brokerage houses made money on them. Now that the housing bubble has burst - people have lost confidence in these securities so they won't buy them or will not pay much for them. The kicker is that the banks used depositors money, brokers used money from investors accounts to buy these securities. If everyone tried to withdraw their money banks holding lots of these securities would be in big trouble. That is why they need the bailout. There was a push in the 90s to relax lending standards so that more low income people could buy homes - this was okay as long as the price of houses was increasing because if people could not pay they could either sell their home usually for a profit or if they defaulted the bank could sell the house for a profit or break even price. Now that the price of homes in many areas is falling - that is no longer the case. The more empty houses, the lower the property value goes. It started out with poor people and then was extended to middle class people giving them jumbo mortgages so they could buy all the newly built mini-mansions. This started out okay too because housing prices were going up so if someone found they could not afford the price they could sell and pay off the mortgage. Last few years lenders got really greedy and started pitching interest only loans - where you paid just the interest for a certain period and eventually you would have to start paying the principal. People who got stuck with these loans - when home prices started falling had no equity in their homes and would have to sell them at a loss and then come up with the money to pay the bank back the difference. Also there were the late night infomercials on get rich quick schemes - house flipping and some of the people who got in on that the past couple of years have lost their shirts. All of these mortgages got chopped up and repackaged into these securities. So pieces of bad mortgages are packaged up with pieces of good mortgages - that is why they really don't know the cost. I am not sure what the default rate is now, I think about 5% which means that 95% are not defaulting (my numbers may be off).

My poor dh tried to explain to me how Fannie and Freddie are involved in all of this but I cannot keep it straight. Too complicated - only that they seemed to be encouraging banks to give more shaky loans. He thinks we need the bailout otherwise the economy will screech to a halt. He said there would be a long and painful correction of the market with loss of pensions, retirement accounts, jobs, more defaults etc...... He worked 12 hours yesterday so did not get to see the Republicans proposal about the insurance thing and how that would work. I will pick his brain about it when he comes home. He will be so happy when November 4 comes. 

Susie - that is outrageous!

I just got an e-mail from my brother that was forwarded to him - it suggested that instead of bailing out Wall Street everyone over the age of 18 be given a share in the money. The e-mail was talking about the AIG bailout. $85,000,000,000 divided by 200,000,000 (guestimate on the number of people 18+) would equal $425,000. You would pay 30% tax on it so you would end up with $297,500. Married couples would get $595,000. It then goes on to suggest what you could do with the money - pay off your mortgage - housing crisis solved. Buy a car - save jobs. Save for college, pay off student loans, etc. Sounds interesting. Know it would never fly - does not give enough to the power players. 

So glad McCain is going to the debate tonight.

Susie, I heard something about this on Fox..about ACORN.  I couldn't believe it.  I haven't even finished reading your info in your post and I'm mad as heck ALREADY!  I need to go back to YouTube and laugh!

Before I go back to reading that info...I suppose Reid's sing, IT'S MY PARTY AND I'LL CRY IF I WANT TO, CRY IF I WANT TO.  YOU WOULD CRY TO IF IT HAPPENED TO YOU.  That's sung by Leslie Gore...and I'm really showing my age!

Before going back to politics..oh, first of all I WAS TRYING TO POST 2000...shoulda paid more attention.

Okay, I must admit.  I used already grated Parmesan, not the kind in the can though.  I do not import my cheese. I try to by US foods.  LOL  The kind that poisons you.  I used canned tomatoes..no I didn't want to mess with fresh tomatoes.  I did use fresh garlic..not the minced kind you can buy in a jar.  Used fresh Basil...so expensive.  I need to use the rest of it on something.  Should have put more in my recipe. 

Next time I would cut my eggplant around instead of length wise (dh cut it).  And I would cut it a bit thicker..I want to know I'm eating eggplant.

Susie, have you tried making eggplant parm without frying the eggplant.  I believe there's a recipe for that.  You can find anything online. 

Now, according to Edge (Constantine), we who are on AIs should not be eating thyme (I think..have to check), or garlic, cruciferous veggies, and shoot, I need that B12 shot....some other spices. 

Rosemary, we used to post a lot on the alternative thread.  Is there a problem using B12 when one "had" bc.  And, what test do I ask my doctor to do..a B12 test?  Geez, I could surely use some energy.

So, Italians don't use too much sauce.  BTW, gravy to me is like "mashed potatoes and gravy." So, you snobby Italians wouldn't eat my Americanized Italian food.  I bet if you were REALLY hungry you'd eat it.

Like Italians, some parts of our country cook differently than other parts.  Southerners are known for fried chicken..fried anything..greasy seasonings...etc.  I believe Northerners normally cook a little different than Southerners.  One thing I do know.  When I moved to North Carolina and had barbeque for the first time..yuck..it was ground up pork with seasoning..sauce.  In Texas we had wonderful beef sliced barbeque that had not been chew up and spit out.  When I go back home (Texas) I love to eat that good ole Texas barbeque AND Mexican food. The best restaurants for Mexican foods (to me) was little family own ones where they made their on tortillas, ect.  I don't know if there are many of those left.

Now, back to poltics.

Shirley

BinVA - this current mess really has nothing to do with deregulation - rather that bill that passed in 1999 has saved more banks from going under because they were able to diversify their assets. It has allowed JP Morgan to buy Bear Stearns and Washington Mutual, Bank of America to buy Merrill Lynch - without that we would be bailing them out too.

The real problem I tried to state above. Fannie and Freddie are the real culprits. They were the ones encouraging banks and other mortgage companies to give out these loans. Because they were government sponsored enterprises people thought that these mortgage securities were backed by the government.

This article was written in 2003:

What Are the Origins of Freddie Mac and Fannie Mae?

By Rob Alford

Mr. Alford is a student at the University of Washington and an HNN intern.

Editor's Note: This article was published in 2003.

In recent months, the nation's two largest mortgage finance lenders have come under increasing scrutiny at the hands of Congress, the Justice Department and the Securities and Exchange Commission (SEC). The Federal National Mortgage Association, nicknamed Fannie Mae, and the Federal Home Mortgage Corporation, nicknamed Freddie Mac, have operated since 1968 as government sponsored enterprises (GSEs). This means that, although the two companies are privately owned and operated by shareholders, they are protected financially by the support of the Federal Government. These government protections include access to a line of credit through the U.S. Treasury, exemption from state and local income taxes and exemption from SEC oversight. A recent accounting scandal at Freddie Mac that resulted in the replacement of three of the company's top executives has led to mounting concerns over the privileged status these GSEs enjoy in the marketplace.

Fannie Mae was created in 1938 as part of Franklin Delano Roosevelt's New Deal. The collapse of the national housing market in the wake of the Great Depression discouraged private lenders from investing in home loans. Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing.

Initially, Fannie Mae operated like a national savings and loan, allowing local banks to charge low interest rates on mortgages for the benefit of the home buyer. This lead to the development of what is now known as the secondary mortgage market. Within the secondary mortgage market, companies such as Fannie Mae are able to borrow money from foreign investors at low interest rates because of the financial support that they receive from the U.S. Government. It is this ability to borrow at low rates that allows Fannie Mae to provide fixed interest rate mortgages with low down payments to home buyers. Fannie Mae makes a profit from the difference between the interest rates homeowners pay and foreign lenders charge.

For the first thirty years following its inception, Fannie Mae held a veritable monopoly over the secondary mortgage market. In 1968, due to fiscal pressures created by the Vietnam War, Lyndon B. Johnson privatized Fannie Mae in order to remove it from the national budget. At this point, Fannie Mae began operating as a GSE, generating profits for stock holders while enjoying the benefits of exemption from taxation and oversight as well as implied government backing. In order to prevent any further monopolization of the market, a second GSE known as Freddie Mac was created in 1970. Currently, Fannie Mae and Freddie Mac control about 90 percent of the nation's secondary mortgage market.

GSEs such as Fannie Mae and Freddie Mae, with their combination of private enterprise and public backing have experienced a period of unprecedented financial growth over the past few decades. The current assets of these two companies combine for a total that is 45 percent greater than that of the nation's largest bank.

On the other hand, their combined debt is equal to 46 percent of the current national debt. It is this combination of rapid growth and over leveraging that has lead to the current concerns of Congress, the Justice Department and the SEC with regards to the financial practices of these GSEs.

Fannie Mae and Freddie Mac are the only two Fortune 500 companies that are not required to inform the public about any financial difficulties that they may be having. In the event that there was some sort of financial collapse within either of these companies, U.S. taxpayers could be held responsible for hundreds of billions of dollars in outstanding debts. A recent investigation by the Justice Department and the SEC into the accounting practices at Freddie Mac revealed accounting errors in the amount of 4.5 to 4.7 billion dollars and resulted in the termination of three of the company's top executives. Ongoing investigations by Congress, particular the House Finance Services subcommittee that oversees the activity of GSEs, will determine the future role of Fannie Mae and Freddie Mac and the secondary mortgage market that they dominate. (End of article).

It was in 2005/2006 that the bill sponsored by Senators Dole, Sununu, and Hagel could not get out of committee because it was voted down by all the Democrats on the committee. McCain went on the Senate floor to make a case for it to no avail. Interesting to note that the biggest benificiaries of money from Fannie and Freddie are Democrats (second on the list is none other than Sen Obama over $100,000 in his three years compared to $20,000 for McCain over 20+ years). That bill would have prevented a lot of the mess that is going on today.

Hi, Nicki.  Me too..about the debates.  Wanna make a bet?  LOL

So, you're a cheese snob too?  To tell you the truth, there's not much I DON'T like.  That's the problem.  Oh, I do not like blue cheese. 

Shirley - too funny! I try to buy American too when I can even though I know the imported stuff tastes better. I don't think the food restrictions apply to those on Arimidex - at least I hope not. Think I need a shot of B12 too.

IBCSpouse - while I would like to blame the people who took the loans - they should never have been offered them in the first place. People thought property values were going to continue to rise so they did not worry about it. Politicians thought it made them look good - look at the increase in home ownership - UGHHH. Fannie and Freddie were just lining their pockets!

BinVA - business lately has been so-so, picked up a little bit today though. Have one doc who likes to save up her reports and then dictate them all in one day.

Nicki - that McCain ad was truly disgusting. Turns out one of the PAC that sponsored it is run by Howard Dean's brother - how convenient to get around the rules. Guess only NBC has agreed to air it. Haven't heard Obama come out and say anything about it yet (probably waiting to see what effect it has) so I guess that is endorsing it without having that little trailer at the end.

Okay, LINDA, I will always put egg in my Ricotta.  I'm not Italian so I like more sauce. LOL  And, the tomatoes are so good for you.  However, I don't think the recipe I posted was overly saucy.  And, I'm Polish.  I don't know what Polish cooks cook.  My grandmother just cooked ordinary things, but we loved to eat at her house.  She had no air conditioner (luxury when I was a young girl), and she canned preserves and pickles and make homemade coffee cake.  The house she lived in had high ceilings.  I suppose that's what helped make it bearable.  Oh, and I don't really care for Italian sausage.  Veal...can't stand the thought of eating a baby.  I can hardly stand the thought of eating a gorgeous cow. When I see hogs, chickens and cows being taken to the market it makes me want to become a vegetarian. 

Do Italians eat leftover Italian food?  We're eating our leftover American Italian food tonight.   No cooking, hallelujah!

Shirley

Pat, I do not like to cook!  I hated every minute of it yesterday.  I used to like to be creative with food.  Now it's work! LOL

Shirley

Somehow I missed half of this page - pass the B12!

 IBCSpouse - so sorry to hear about your wife - will keep you both in my prayers.

AnneShirley - that pizza sounds wonderful. Would you share your pizza dough recipe? I have tried to use sliced fresh tomatoes and the crust always gets soggy - what am I doing wrong?

Linda - I just read that the Obama campaign has set the bar for McCain really high - called him an exceptional debater and really low for Obama.

Linda, my eggplant lasagna doesn't have noodles in them..LOL

Remember, I don't like you.  Didn't you say you wore a size 8.  I used to wear that size many moons ago.  In fact, I think a siz 8 is a bit to skinny looking on me.  A size 10 would be just fine!  Never happen!

Shirley

Oh, now Greta's going to tell us what Oprah is saying about Palin..Oprah is breaking her silence.  I really don't care why Oprah isn't having Palin on her show.  Who cares!  Geez!  If I were Sarah Palin and if Oprah invited me on her show I'd turn her down.  Yep, that's what I'd do.

Shirley

Well, I'll wait a minute for Greta to come back on so I can tell you what Opray has to say.  Do you REALLY care.  No.  Well, bye then. LOL

Oh, and Oprah ought to ask Obama why he hasn't built that school in Africa that he promised.  Africa is very important to Oprah. 

Okay, let's see what Greta says.  Her hair is pretty.  Okay, she said it came out on the internet that she wouldn't have Palin on her show.  She said there was never a discussion about it.  But, no, she would not have Palin on while the race is on.  She said someone suggested the week before that she have MO on her show..that she made a good speech.... and she said no.  That she wasn't having anyone on while the campaign was going on.  So, like I said..who cares.

Shirley

Linda: Dahlin', you are a Southern Bella!!!

While I cook Italian, Mexican, Southern, French, with a smattering of German, Greek & Spanish, I am a Mistress of Leftovers!!!

We went downtown to see friends visiting from the OC~~at their son's trendy townhouse in a gentrifying area; i.e. is your car still outside? Father's a Republican, claimed everybody else there were Communists!  We edged out; too edgy to watch with the, um,-------------->.

AOL polls favor McCain.

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