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Freddie Mac has largely been held responsible for the foreclosure crisis and is expected to take steps to improve the health of the market by granting affordable loans but a recent investigation has found that it goes against the basic interest of Freddie to grant such loans.

Freddie Mae and Fannie Mac were rescued in 2008 with the bailout money coming from the taxpayer’s kitty. Since they insure the bulk of mortgages of USA, they play a pivotal role in the housing market. When they agree to insure, the banks are more likely to lend. It is the rules of the company that have the final say regarding granting of loans and its terms.

The FHFA in effect serves the work of the board of directors of Freddie Mac and is the ultimate authority responsible for the decisions of Freddie. Currently at the helm is Edward DeMarco, the acting director. He cannot be asked to go by the president unless the situation is extraordinary.

Freddie’s shying away from refinancing is negatively impacting not only on individual house owners but on the broader economy. A broad refinancing schedule that would help million would also put back the economy on its rails. Christopher Mayer of Columbia Business School said that if such an effort came forth from Freddie, it would “help the economy and put tens of billions of dollars back in consumer’s pockets, the equivalent of a very long-term tax cut. It also is likely to reduce foreclosures and benefit the U.S. government”. In the long run the losses would have been lowered.

When the government took over the mortgage titan the understanding was that it would try to reduce its portfolio on investments. But the trades being followed now increases the risks for Freddie because the securities purchased by it are volatile and difficult to sell commented mortgage pundits.

The 2008 financial crisis worsened when the traders of Wall Street betted against their clients and the American people. Today the similar type of behaviour is being observed with the traders in government-owned Freddie. Leverage is being used that increases the possibility of profits but invites risk of mega losses. Mayer said even after three years of the takeover Freddie has been following complicated and highly levered transaction against the interests of the house owners. These things had caused the “trouble in the first place”.

Source: http://www.articlesbase.com/finance-articles/freddie-mac-has-largely-been-held-responsible-for-the-foreclosure-crisis-and-is-expected-to-take-steps-to-improve-the-health-of-the-market-5747666.html

Although the Senate Banking Committee gave the nod to the nomination of Ben Bernanke as chairman of the Federal Reserve for a second term he is facing loud opposition. Measures to rein in the authority of the central bank are gaining strength.
There were 6 Republicans and one Democrat voting against Ben Bernanke (56 years). Legislators from both parties lauded Bernanke for the steps taken to stop the free fall of the economy and sliding into another Great Depression.
Senator Chris Dodd (Democrat) the chairperson of the committee said, “I happen to believe that had he and others not acted at a time of critical importance to our country we would be looking at a far more dire situation.” However he added that the Federal Reserve had “failed in its oversight and consumer protection responsibilities.”

Bernanke was roundly criticized for not being able to nip in the bud the meltdown initially by lowering interest rates even when the bubble in the real estate grew. He was also blamed for tolerating toxic mortgages as well as rampant investments by financial giants. Many citizens are furious that these very corporations have been given millions as bailout money while the ordinary hardworking America lost hearth and homes.

In all probability the appointment of Bernanke for the second term would be confirmed by the Senate in January. Critics could either delay the vote or stipulate the placing of the Federal Reserve under strict scrutiny – an unprecedented move.
Sen. Bernie Sanders bill that would impose audits by the Congress on monetary policies of the Feds like lowering interest rates etc. has gained support and was passed last week by the House – it being part of drastic reforms being envisaged. Bernanke is loudly opposing the step arguing that it would the independence of the Feds would be compromised by this. It had the potentiality to inject politics into important financial decisions. But supporters of the bill contend that it would remove secrecy surrounding the activities of the central bank.

Senators Jim DeMint (Republican) and David Vitter (Republican) are planning to block the nomination of Bernanke until the audit bill is given the green signal by the Senate. Sanders too will hold back the nomination. It means 60 senators would have to give the nod to the measure to enable the measure to move. However Sanders has not linked his holding back with the audit legislation. DeMint feels that the measure would not be stopped as “there is a broad bipartisan coalition.”

Source: http://www.articlesbase.com/finance-articles/ben-bernanke-gets-the-backing-of-senate-panel-for-a-second-term-as-chairman-of-federal-reserve-5690462.html

After having agreed on the new austerity plan, Greek economy is far from being rescued as analysts and EU members have declared. 

The new bailout cuts, worth £110bn, represents in fact a new starting point for Greece as the country tries to follow Troika’s guidelines and attempts to rescue its economy from insolvency. The austerity measures are in this sense a precondition imposed by the European Union in order to release the funds.

What is Greece expected to do?
Greece now has two days to solve two vital points addressed by the EU and the IMF, which are:

to explain how it will manage to rescue €325m of the €3.3bn in budget saving

to provide an official written confirmation that the austerity measures will be applied regardless of the result of the next general elections, which are due in April 2012

However, many members of the current coalition seem reluctant to agree to the tough measures imposed by the EU, aiming at reviewing them in order to soften some parameters and allow economic growth, yet it seems impossible that this can happen under the current circumstances. Amongst those opposing to the austerity plan is Antonis Samaras, the leader of the conservative New Democracy party, who is most likely to win next general elections, even though they are without a strong majority. According to Samaras the guidelines addressed by the EU and the IMF are offensive as they show a lack of respect for the Greek population, which is seeing its minimum wage cut by 20% to about €600 (£500), further pension cuts and 15,000 less public sector jobs which will lead to an overall cut of approximately 150,000 public sector jobs.

General elections, due in April, will follow a key date for the future of the Hellenic peninsula as by March 20th it has to meet debt repayments which amount to €14.5bn (£12bn). If this does not happen, Greece will have no other solution but to admit the default and leave the EU. The main issue that remains now is: how to convince Greek people that bailout cuts and suffocating measures imposed by technicians (who have not even been elected but ‘imposed’ by the EU) are better than the default? At this point it would be beneficial to study an example from the not-so-remote past: Argentina.

In the meantime markets in Europe seem to have responded positively to the announced bailout cuts on Monday, with the Euro to Dollar exchange rate hitting a two month high at $1,324.

Source: http://www.articlesbase.com/finance-articles/greece-is-far-from-from-being-rescued-5659445.html

AP – Stock markets in Europe traded in fairly narrow ranges Monday as Germany’s leader warned that Greece may not get its next batch of bailout cash. Chinese shares surged after authorities pledged to increase bank lending to entrepreneurs.

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AP – The stock market took a late afternoon fall Monday after European Union finance ministers failed to come up with the full amount of money pledged for a bailout fund.

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AP – Stock indexes edged higher Tuesday after the previous day’s big declines. Strong participation from buyers at a bond sale backing Europe’s bailout fund and at an auction of Spanish government debt helped reassure investors.

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AP – DOWNGRADE THREATS: World markets sank overnight after Standard & Poor’s said it might downgrade 15 nations that use the euro, including AAA-rated Germany. S&P also threatened to downgrade Europe’s main bailout fund, which is propping up weak nations such as Greece and Portugal.

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AP – The Dow Jones industrial average closed up 52 points following a report that European leaders are considering more aggressive programs to bail out weaker countries in the region.

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