Barney Frank Rebuffs GSE Reform Efforts, Says Fannie And Freddie Bondholders Will Not Be Made Whole
Courtesy of Tyler Durden
The latest update in the ongoing GSE drama comes from Barney Frank who during a conference of black, Hispanic and Asian Realtors in Washington said the following: “Please don’t think this is federally guaranteed, I don’t think it is, I don’t think it should be, I don’t feel any obligation to bail you out.” Well, that comes almost two year two late after the government already made all GSE lenders whole. Barner’s posturing is merely in response to Republican efforts to account properly for GSE liabilities which, courtesy of their conservatorship status, are explicitly backed by the government. Of course, should the GSEs be put on the budget, the US debt/GDP, as pointed out previously on Zero Hedge, would surge by nearly 50%, from 90% to 140%. But Barney Frank, just like Peter Orzsag, is all about semantics.
A “whole range” of options is being considered for investors in the two government-seized companies, “from paying nothing to a haircut to whatever,” Frank said.
Representative Scott Garrett, a New Jersey Republican, is pushing legislation that would bring the companies’ debt obligations onto the federal budget, which Frank said would result in explicit government backing.
“We’re not remaking Fannie and Freddie,” Frank said. “We’re going to start from scratch and do housing finance.”
So the government is intent on “strating from scratch and do housing finance.” This is troublingly along the lines of a Barney Frank proposal of redoing housing from politicians who can’t read good and want to regulate all other stuff good too. Will someone please send Mr. Frank Seth Klarman’s lessons not learned from the financial collapse: it appears the government is still hell bent on doubling down on its all in wager with the economy, in futile hopes that Keynesianism will make everything ok at the end of the day. In the meantime, with the UK buying US debt, and vice versa, everything is proceeding exactly as the Fed has foreseen.
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