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we're in bad shape, $8t funding shortfall for mortgages

The value of real estate must fall, the government refuses to let it, investors want .gov protection.  Just totally wacked out situation.


About nine in 10 new loans are currently backed by Fannie, Freddie or government agencies........................


The National Association of Realtors, for example, is asking the Treasury to reduce interest payments Fannie and Freddie must currently make to the government, arguing that easing the firms' expenses could produce more flexible lending standards. In a letter to Mr. Geithner this month, the organization said the Treasury should retroactively lower the 10% dividend the firms must pay on the $148 billion in taxpayer aid they have used.....................................

Some investors and academics say a government backstop is needed if the U.S. wants to facilitate securitization markets, where investors buy bonds backed by pools of mortgages. While mortgages were once funded primarily through the banking system, securitization fueled the growth of the nation's $10 trillion mortgage market over the past 30 years, dwarfing the capacity of the nation's banking system to fund loans.

"To suggest the private market can come back in and take the place [of the government] is simply impractical. It won't work," said Pacific Investment Management's Bill Gross at last week's summit.

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Senior Advisor

Re: we're in bad shape, $8t funding shortfall for mortgages

TARP was only a down payment, and a very small one at that. Who would be surprised? We still have the same people, in the same positions, doing the same things they have always done, privatizing their gains while they socialise their losses.


Re: we're in bad shape, $8t funding shortfall for mortgages

We'll get to pay union pensions too.


A bill introduced by Sen. Bob Casey (D-Penn.), and a bill from Rep. Earl Pomeroy (D-N.D.) in the House, would for the first time put taxpayers on the hook for these underwater union pension plans. 

The union multiemployer pension distress was not caused by the recent economic woes but by mismanagement.  The economic downturn has only exacerbated the problem.

The proposed bailout would create a new fund at the Pension Benefit Guarantee Corporation  (PBGC).  The PBGC is a government entity currently using premiums paid by private pension funds to insure a minimum pension benefit guarantee ($12,870 annually) to participants should a plan become insolvent.  The PBGC itself already sports a reported $21 billion deficit.

The Casey and Pomeroy bills would inaugurate the use of taxpayer dollars to guarantee the minimum benefits -- which Casey’s bill ups to $21,000 annually -- creating incentives for the multiemployer union pension fund trustees to dump the plans on taxpayers. 

Moody’s Investors Service estimates a whopping $167 billion price tag for these underfunded union pensions.