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Federal Reserve Chairman Ben Bernanke said Friday that the housing finance system being constructed following the collapse of the current system will need better safeguards to allow it to function during times of stress. Whatever shape the new system takes should ensure that the institutions that support the financing of home mortgages do not pose a systemic risk to our financial markets and the economy, Bernanke said in a speech prepared for a housing conference in Berkeley, Calif.
He outlined a number of possible ways to structure housing finance in the future, but did not state his own preferences.
The issue of how financing should be restructured was a good one for policymakers to address during what he called the current "time out" when Fannie Mae and Freddie Mac are both under the control of the federal government, Bernanke said.
The two mortgage giants were placed into conservatorship on Sept. 7, part of a series of events that have unfolded as the biggest financial crisis in seven decades has hit the U.S. economy.
Speaking about the credit crisis that started in August 2007, Bernanke said it began with the end of a prolonged housing boom in the U.S. that exposed "serious deficiencies in the underwriting and credit rating" for mortgages, particularly subprime mortgages, loans made to borrowers with weak credit histories.
Banks and thrifts are still making new mortgage loans during the current credit squeeze but have tightened terms considerably, "essentially closing the private market to borrowers with weaker credit histories," Bernanke said.
But he said the credit problems went far beyond housing.
"The boom in subprime mortgage lending was only part of a much broader credit boom characterized by underpricing of risk, excessive leverage and the creation of complex and opaque financial instruments that proved fragile under stress," he said. "The unwinding of these developments is the source of the severe financial strain and tight credit that now damp economic growth."
He did not make any predictions on when the credit crisis will end or discuss the overall economy more broadly. On Wednesday, the Fed cut the federal funds rate, the interest that banks charge each other, by a half-point to 1 percent, which ties the lowest level seen in the past half century.
While the Fed held out the prospect of further rate cuts to keep the economy out of a severe recession, Bernanke did not address that issue Friday.
He did say that private companies have basically stopped all of their activities to purchase mortgages and collect them into large pools to be sold as securities, something now only being done by Fannie, Freddie and Ginnie Mae. By contrast, private companies accounted for half of the market for mortgage-backed securities in 2005 at the height of the housing boom.
"That experience suggests that, at least under the most stressed conditions, some form of government backstop may be necessary to ensure continued securitization of mortgages," Bernanke said.
Bernanke laid out various options that policymakers could consider for overhauling housing finance, from keeping Fannie and Freddie under government control permanently, to breaking up the two giants into smaller organizations that would be privately owned.
Bernanke did not rank the various options he explored, but said that policymakers must design a new system that would meet the goal of providing adequate financing for home mortgages while ensuring the safety of the entire financial system.
"Regardless of organizational form, we must strive to design a housing system that ensures the successful funding and securitization of mortgages during times of financial stress but that does not create institutions that pose systemic risks to our financial markets and the economy," he said.
© 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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{"commentId":3806894,"authorDomain":"truthtrekkers"}
I know that the statement our Treasury Chairman makes sound cryptic due to the nature of financial jargon and complexeties in those markets but it is and understandable language. My concern is that this has placed Govornment intervention into capital markets in a very highly leveraged sense. We should be very careful how much power we give to our govornment but unfortunatley I think that it is too late for that. They will soon be able to choose for us the American people where we can live if we can own a home what to believe and much much more. Stay on the alert there are always deeper more isidious things ideals at work when it comes to the U.S Gov't.
{"commentId":3806894,"threadId":"405383","contentId":"2060115","authorDomain":"truthtrekkers"}
- 4 votes
#1 - Fri Oct 31, 2008 2:58 PM EDT{"commentId":3808799,"authorDomain":"JoulesBeef"}
well yes and no.. their goal isnt to decide what home you live in. There goal is to relieve you of your wealth.
See thats why paulson gave all this money to the banks with no rules.
You think that the banks were too big to fail before? try a bank or ins company like AIG with billions of our tax dollars.. NOW THEY ARE REALLY TOO BIG TO FAIL.. cause our money is locked up in them.
AIG has already asked for more money and like Amtrak they will never stop.
They really dont care about you enough to care where you should live.
{"commentId":3808799,"threadId":"405383","contentId":"2060115","authorDomain":"JoulesBeef"}
- 1 vote
{"commentId":3807035,"authorDomain":"kbd"}
They will soon be able to choose for us the American people where we can live if we can own a home what to believe and much much more. Stay on the alert there are always deeper more isidious things ideals at work when it comes to the U.S Gov't.
Rather hysteric over reaction.
{"commentId":3807035,"threadId":"405383","contentId":"2060115","authorDomain":"kbd"}
- 1 vote
#2 - Fri Oct 31, 2008 3:06 PM EDT{"commentId":3807266,"authorDomain":"maureen-spiegleman"}
In all of the possible fixes for home financing the one area that no one is addressing is consumer education. Seems to me that if you want consumers to avoid bad lending practices then you mandate consumer education. It would work like this. All first time home buyers must take a class along the lines offered by the Colorado Housing and Finaning Authority (CHFA). It teaches about different types of loans, talks about the home buying process and the loan process, educates borrowers about cash flow and budgetting and THEIR PERSONAL RESPONSIBILITY TO REPAY THE LOAN. The class would also be required for those putting down less than 20%, those with credit scores below 680, those who have had a bankruptcy in the last 7 years, those who have had previous foreclosures, tax liens, etc. If you look at the details leading to default the majority of the characteristics I have mentioned above lead the list. I have probably closed over a hundred loans where borrowers went through home buyer education classes and none of them, to my knowledge, are in default. There are reasons for default that are outside of the borrowers' control such as job loss, divorce and major illness, but if we structured borrowing criteria with consumer education, I believe that going forward we would gradually regain confidence in the mortgage securities. So when you read about guideline revision look for consumer education requirements. If it isn't implemented we will head right down the same path. There will always be corrupt Realtors and lenders but if the consumer is armed with the facts then they become the best defense against fraud and default.
{"commentId":3807266,"threadId":"405383","contentId":"2060115","authorDomain":"maureen-spiegleman"}
- 1 vote
#3 - Fri Oct 31, 2008 3:18 PM EDT{"commentId":3807394,"authorDomain":"kbd"}
mandatory education is crap too. how about this, read the documents before you sign them. if you don't understand them take them to a lawyer or financial consultant and have them explain them to you.
also why should only first time home owners be subjected to having to sit in some god awful class?
{"commentId":3807394,"threadId":"405383","contentId":"2060115","authorDomain":"kbd"}
- 2 votes
{"commentId":3808593,"authorDomain":"winkleeaster"}
I agree D.C. you should read what you sign. I dont know if you own a home or not but, when my wife and I went to sign for our home it was just so cool so overwhelming .I did'nt think we thought about any thing else but,owning our own house. and well that what I think thats what happens to alot of these people.I feal everybody is intitled to a good fixed intrest rate.
{"commentId":3808593,"threadId":"405383","contentId":"2060115","authorDomain":"winkleeaster"}
- 1 vote
{"commentId":3808762,"authorDomain":"kbd"}
.I did'nt think we thought about any thing else but,owning our own house.
that is part of the problem with people. what i thought about was holy crap i am about to take on a 6 figure debt. am i sure i want to do this? am i sure i can afford it? what would happen if i was out of work for 6 months? how long could i afford this place if i was unemployed?
I feal everybody is intitled to a good fixed intrest rate.
if they are credit worthy, yes. but that means if interest rates are high and you can't really safely afford the rate, you don't buy the house.
hopefully you have a 30yr fixed and things are going well with your mortgage.
{"commentId":3808762,"threadId":"405383","contentId":"2060115","authorDomain":"kbd"}
- 1 vote
{"commentId":3808892,"authorDomain":"JoulesBeef"}
geez spoken by someone who doesn't know where the problem came from.
Check out bush's no down payment iniative.. this allowed the super poor that had poor credit get laons without even puttign in any of their own money.
Bush removed all risk from the poor and opened a huge market for the likes of frannie and freddie.
train them all you want.. plaster a signt hat says "this loan is crap"
it doesnt matter when YOU HAVE NO RISK.
and yeah se these failures .. caused the hosuign prices to drop.. causing many of the wealth multi home owners to be in upside down morgages.. and often it was worth it to them towalk away and take the foreclosure and the credit hit.. rather than pay a morgage that costs so much more than the houses value.. all these forclosures flooded the market with new homes.. casuign the prices to drop further.. repeat step two above :P
{"commentId":3808892,"threadId":"405383","contentId":"2060115","authorDomain":"JoulesBeef"}
{"commentId":3808995,"authorDomain":"kbd"}
wow quite a rant. are you attempting to address any specific point that was made in the thread in which you replied or are you just on a rant?
{"commentId":3808995,"threadId":"405383","contentId":"2060115","authorDomain":"kbd"}
- 1 vote
{"commentId":3807435,"authorDomain":"christopherkidwell1"}
{"commentId":3807645,"authorDomain":"ronblack66"}
The federal government can start by keeping politics out of the housing market. So what if whites qualified for mortgage loans at a higher rate than minorities. Blacks qualify for the NBA at a higher rate than whites. It is what it is. The federal government should not dictate to banks that they must lower their lending standards to meet some social engineering goal and likewise, the federal government should not be backing mortgage loans using taxpayer money. If banks know that they will not recoup their losses in case of a loan default, they will pay closer attention to who it is they are providing loans to.
{"commentId":3807645,"threadId":"405383","contentId":"2060115","authorDomain":"ronblack66"}
- 2 votes
#5 - Fri Oct 31, 2008 3:35 PM EDT{"commentId":3807726,"authorDomain":"lprieta"}
Gasp!!!! The "R" word...regulation!
{"commentId":3807726,"threadId":"405383","contentId":"2060115","authorDomain":"lprieta"}
#6 - Fri Oct 31, 2008 3:39 PM EDT{"commentId":3807970,"authorDomain":"winkleeaster"}
the boom in subprime morgage lending? well,that's a nice way to say it. how about "The boom of greed".....heck now it's starting to sound like it was the consumers that screwed up this economy. BERNANKE,said "we will need proper safegaurds during times of stress"I feal better now .how about better safegaurds all the time.FIXED RATE,LOW INTEREST . why does there hav to be 1000 different ways to write-up a contract when they know it's going to hurt the people in the end!!!!!!!!!!! I dont know maybe this is the end.
{"commentId":3807970,"threadId":"405383","contentId":"2060115","authorDomain":"winkleeaster"}
- 2 votes
#7 - Fri Oct 31, 2008 3:50 PM EDT{"commentId":3808146,"authorDomain":"kbd"}
well,that's a nice way to say it. how about "The boom of greed"
agreed. however the greed was far being exclusively limited to the banks and mortgage companies. the people that took out the loans were often greedy too.
FIXED RATE,LOW INTEREST .
that is another way of when interest rates for things other than mortgages are high the banks will not issue mortgages.
there are also plenty of people that had ARMS and it worked to their benefit over having a fixed rate loan.
{"commentId":3808146,"threadId":"405383","contentId":"2060115","authorDomain":"kbd"}
- 2 votes
{"commentId":3808647,"authorDomain":"truthtrekkers"}
I must say that alternative financing is not neccesarily a bad thing but the truth is that they were abused and applied to the wrong people. Financial advisors and Certified Financial Planners are held to certaing licensing standards to protect the clients as well as the broker. These licensing standards are not applied to realestate agents and they are helping people invest large sums of money on every transaction. The agents should be educaed and held accountable.
When providing a reverse Mtg. they should be able to determine what estate needs, financial long term and short term needs are for each client and exlude clients that do not fit the profile, a person who does not need to pass on the property to the children and will recieve the income stream needed to get through the rest of their life. Logic streams are what should be used to determine if a person will be able to afford the baloon payment on a intres only arm.
So how do I feel about Gov't regulation? Well I hope they get their hands out of the cookie jar as soon as possible. If the Gov't tells corporations how to run their business then they can also tell us how to live. This is not a statement to cause hysteria but awareness that We the people of the united states of America are the check and balance for the government. For those who just blatantl trust our government and the corporations we do business with I have news for you that is how we got into trouble in the first place.
{"commentId":3808647,"threadId":"405383","contentId":"2060115","authorDomain":"truthtrekkers"}
- 3 votes
{"commentId":3808886,"authorDomain":"winkleeaster"}
D.C.I agree again some of those were greedy too.But I wonder how many arms v fixed went into forclosure?
{"commentId":3808886,"threadId":"405383","contentId":"2060115","authorDomain":"winkleeaster"}
- 1 vote
{"commentId":3808295,"authorDomain":"rogerjun2"}
You can forget about your house. Obama doesn't care abou you, he cares about the Fanny's and Freddie's that give him millions. All he needs from you is your vote and he's lying to get it. Don't believe it"
The latest hiccup in the Obama campaign message came Friday morning on KOA-AM, when New Mexico Gov. Bill Richardson pegged the middle class as those making $120,000 and under. "What Obama wants to do is he is basically looking at $120,000 and under among those that are in the middle class, and there is a tax cut for those," Richardson said in the interview.
It started at 300K in January, then 250K in the summer, then 200K last month, then 150K last week, now it's 120K.
And you fools just keep on supporting him. And when he's got a Democratic Congress writing the tax laws he's going to sign the $42,000 tax law, just like he did last year, THREE TIMES!! And how's that going to help you on your house payments???
You believe any lie the guy tells in your blindness and also in your hatred for Bush. And what happens when the Bush tax cuts (remember those, the ones that saved you thousands in income tax the last 6 years?) are not extended then your taxes go up even more!!!!!!
And you just blindly follow him over the cliff!!!!!!!!
{"commentId":3808295,"threadId":"405383","contentId":"2060115","authorDomain":"rogerjun2"}
- 1 vote
#8 - Fri Oct 31, 2008 4:05 PM EDT{"commentId":3808530,"authorDomain":"mwhitley5562"}
Roger
Please explain to me which United States you live in. Though I dont't think Obama is the answer either, The last 8 years has found us where? In a Kleptocracy. What? A Kleptocracy. Ruled by thiefs. Our Country is on the brink of destruction from within, not from terrorist from without, but from our own Government. Now is the time to make changes, real changes. Neither McCain nor Obama are the answer, they to are part of the problem. We need to muster up the courage that our fore fathers had and regain control of our Government.
Mike
{"commentId":3808530,"threadId":"405383","contentId":"2060115","authorDomain":"mwhitley5562"}
- 2 votes
{"commentId":3808371,"authorDomain":"mwhitley5562"}
Abolish the Federal Reserve, return our money back to the Gold Standard, do away with interest rates(That is nothing more that toll for profiteering. Creates GREED) If all these lenders want their money back tell them to re-negotiate the mortgages using a simple single profit measure and lowering mortgage payments. This will cost no one anything. Of course it will cost a few Ego's, but lets get going.
There is a movement that has been started (The Re-Establishment Act of the People 2008) There is someone who is ready to stand up and take the initiative to Restore our Government back to its Constitutional status. It is calling for the removal of all Those in Congress that Voted yes on the Bailout, The President, and calling for the Arrest of all the same including Paulson, and Bernanke. We must make and hold them accountable for their actions. There will be a complete unbiased neutral investigation done, (after the Country is Stabilized) To find out just who shall be charged with which crimes. We can use some of the secret prisons that Bush had built to house them in. That should be nice to spend time in a place you built to house the people you thought were wrong. This is not an attempt to overthrow The Government, nor will it be allowed to become that. This is an attempt to restore our Government back to the Constitutional Republic that it once was.
Mike
{"commentId":3808371,"threadId":"405383","contentId":"2060115","authorDomain":"mwhitley5562"}
- 2 votes
#9 - Fri Oct 31, 2008 4:10 PM EDT{"commentId":3808547,"authorDomain":"kbd"}
There is a movement that has been started (The Re-Establishment Act of the People 2008)
Yeah sound like a movement to me. A bowel movement.
Gold standard - laughable.
Get rid of interest - even more laughable.
{"commentId":3808547,"threadId":"405383","contentId":"2060115","authorDomain":"kbd"}
- 1 vote
{"commentId":3808859,"authorDomain":"truthtrekkers"}
Michael I agree with you on many points but I must say that 1 there is not enough gold in the world we would be better off moving to a diamond standard due to the fact that De you know who is way overstocked and second I think throwing Bernanke in jail is a bit harsh. He is not the brightest cookie in the box and walked right into a crap storm created by Mr Green you know who. Notice we do not see Alan in the headlines anymore? We do need to take our country back and one of the best ways is by spending our money localy instead of with large Co. Hit them where it hurts right in the pocket book because they havent started telling us where to spend our money yet and while it is one of our few rights left in this country i encourage every american to exercise it. Think of how fast a local tire shop would grow and how quickly he could get the discounts to you if every one who brought tires at Wal you know who shoped at Bobs or Bills. I am glad to see though that there are others who hope to see revolution in this country and thank God not with violence.
{"commentId":3808859,"threadId":"405383","contentId":"2060115","authorDomain":"truthtrekkers"}
- 2 votes
{"commentId":3849246,"authorDomain":"mwhitley5562"}
DC_123
I may be a bowel movement, so that must make you the toilet paper.
You laugh at the Gold Standard, eventhough it was our original standard, which could only mean that you believe that we are headed in the right direction. Would make you Un American in the eyes of those who do believe.
Interest rates are nothing more than just a wealthy mans tool to rape people of their money. Either you are one of those, or you are a self centered, non caring individual, who really doesn't understand how, and why our Country was established.
Truthtrekkers, thanks, but you must also remember that in order for us to support that local buisness (which I strongly believe in) that business must also support local. If they buy from elsewhere because of prices, then you are defeating the purpose of supporting Local.
To restore our Government to its Constitutional Republic, is going to require the support from the people of this Country. We have to stand together and become the voice that matters. This is not an attempt to overthrow the Government, it is mearly an attempt to restore our Government that has already been overthrown. If we continue to allow the present Government to follow through with their plans then we have no body to blame but ourselves.
Mike
{"commentId":3849246,"threadId":"405383","contentId":"2060115","authorDomain":"mwhitley5562"}
{"commentId":3808599,"authorDomain":"travelinfotog"}
will need better safeguards to allow it to function during times of stress.
No kidding dip@!$%#!.. You sat back and did nothing Bernie! You and Paulson just want to spend billions to get kickbacks..
The problem is and noone will admit it for fear of losing their seat in the House or Senate, is that those homeowners who fudged information about their pay at work are also to blame for the housing problem.
You can't misstate your income to qualify for that house you couldn't afford in the first place!! Sure the banks are also at fault, but it rests on the shoulders of the average American as well..
The $700 Billion would have been better served as a massive Public Works Project that would have brought America together and put Americans back to work, working for America to make her better than before. But NOOOO screw the public and their works and lets help the banks!
{"commentId":3808599,"threadId":"405383","contentId":"2060115","authorDomain":"travelinfotog"}
- 1 vote
#10 - Fri Oct 31, 2008 4:20 PM EDT{"commentId":3811199,"authorDomain":"truthtrekkers"}
You sat back and did nothing Bernie! You and Paulson just want to spend billions to get kickbacks..
The problem is and noone will admit it for fear of losing their seat in the House or Senate,
Hey wait Barney Frank came pretty close. Don't worry I am not going to jump on the other side of the band wagon I just wanted to point out the the people with the loudest mouths opposing the bail out happened to bot be poster children for How Not To Pick a Spokesperson. I mean Barney Frank and Nancy Pelosi speaking out against corruption on capital hill to stop the bail out. wow.
One thing though someone is going to make a lot of money and I have a feeling that the people and the business in america are not going to be the ones. I mean really we have botched up our position and gave all the cards to the Gov't. Well hold on to your hats folks cause it looks like we're in for one heck of a ride.
{"commentId":3811199,"threadId":"405383","contentId":"2060115","authorDomain":"truthtrekkers"}
- 1 vote
{"commentId":3808968,"authorDomain":"kbd"}
.
{"commentId":3808968,"threadId":"405383","contentId":"2060115","authorDomain":"kbd"}
#11 - Fri Oct 31, 2008 4:36 PM EDT{"commentId":3819171,"authorDomain":"charterachart"}
Don't forget this Bernanke was given this job along with a mess that well, to be blunt was already there. Change is what we need. At times I also would like to stand up and say Bernanke why do you speak with such an offset where are the details!! Mr. Bernanke! then when one thinks well, you come to realise hes at work and like many if not all people there is a higher boss watching your every move, so my point is give him a break, we need change. Go Obama!
{"commentId":3819171,"threadId":"405383","contentId":"2060115","authorDomain":"charterachart"}
#12 - Sat Nov 1, 2008 11:51 AM EDT{"canLink":false,"threadId":"405383","isPrivate":false}
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