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Post by macrockett on Feb 2, 2010 12:25:06 GMT -6
www.washingtonpost.com/wp-dyn/content/article/2010/02/01/AR2010020103345_pf.htmlSocial Security could be next to need a bailout
By Allan Sloan
Tuesday, February 2, 2010; A13
Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.
A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.
Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.
No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.
The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).
This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance. Social Security hasn't been cash-negative since the early 1980s, when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. Those actions produced hefty cash surpluses, which until this year have helped finance the rest of the government. But even then, it was clear the surpluses would be temporary. Now, years earlier than projected, Social Security is adding to the government's borrowing needs, even though the program still shows a surplus on paper. If you go to the aforementioned pages in the CBO update and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually) for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume. Social Security currently provides more than half the income for a majority of retirees. Given the declines in stock prices and home values that have whacked millions of people, the program seems likely to become more important in the future as a source of retirement income, rather than less important. It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late. Even though an economic recovery might produce some small, fleeting cash surpluses, Social Security's days of being flush are over. To be sure -- three of the most dangerous words in journalism -- the current Social Security cash deficits aren't all that big, given that Social Security is a $700 billion program this year, and that the government expects to borrow about $1.5 trillion in fiscal 2010 to cover its other obligations, about the same as it borrowed in fiscal 2009. But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present. Allan Sloan is Fortune magazine's senior editor at large. The CBO Report: www.cbo.gov/ftpdocs/108xx/doc10871/01-26-Outlook.pdf
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Post by macrockett on Feb 2, 2010 12:37:33 GMT -6
www.washingtonpost.com/wp-dyn/content/article/2010/02/01/AR2010020103527_pf.htmlRising FHA default rate foreshadows a crush of foreclosures
By Dina ElBoghdady and Dan Keating
Washington Post Staff Writer
Tuesday, February 2, 2010; A12
The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market's recovery.
About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency's figures show.
Although the FHA's default rate has been climbing for months and eating into the agency's cash, the latest figures show that the FHA's woes are getting worse even as the housing market shows signs of improvement. The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.
If the trend continues and the FHA's cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses -- a first for the agency, which has always used the fees it charges borrowers to pay for its losses.
As these loans from 2007 and 2008 go bad and clear off of the FHA's books, agency officials said, losses are expected to taper off, aided by the housing market's anticipated recovery and an influx of more creditworthy borrowers, who have flocked to the FHA's home-buying program in the past year.
Agency officials said they have cracked down on poorly performing lenders and announced higher qualifying fees for borrowers. On Monday, the agency projected that the fees should generate $5.8 billion in fiscal 2011, up from $2 billion this year. That would fatten the FHA's cash cushion, used to cover unexpected losses. Beleaguered books For now, just about every major measure of the agency's financial health is worsening.
The FHA does not make loans but insures lenders against losses. And claims have already spiked. The agency had to pay out on 47 percent more loans in October and November than in the corresponding period a year earlier, according to an FHA report. The number of loans in foreclosure, including those that have not yet been billed to the agency, has also increased. They were up 26 percent in the last quarter from a year earlier. FHA Commissioner David H. Stevens, who joined the agency in July, flagged his agency's troubles with the 2007 and 2008 loans in October, when he told a House panel that "rogue players on the margin" immediately migrated to the world of FHA lending after the subprime mortgage market collapsed. Their aggressive lending tactics attracted borrowers with unusually poor credit profiles to the FHA. "That clearly impacted the books of business in 2007 and 2008, and that performance data is showing up very clearly in today's balance sheet," Stevens said at the time. Plunging home prices have exacerbated matters by leaving some FHA borrowers unable to sell or refinance their homes because they owe more than their homes are worth. Yet with unemployment running high, many borrowers can't afford to keep up their payments. Adding to the trouble was a now-defunct FHA program that enabled sellers to cover the down payments of buyers. This meant many borrowers had no skin in the game and were more likely to walk away at early signs of trouble. The program resulted in excessive defaults before it was ended in late 2008, and it is projected to cost FHA an additional $10.5 billion in losses, Stevens said. For all these reasons, the FHA projects that it will pay out claims to lenders on one out of every four loans made in 2007 -- the worst rate in at least three decades. The claim rate should be nearly the same on the vastly larger volume of loans made in 2008. Better borrowers But agency officials said they have reasons to be optimistic. The FHA-backed loans made in 2009 tended to go to borrowers with higher credit scores than in previous years. These borrowers turned to the FHA when the mortgage market collapsed and other lending sources dried up. By then, reputable lenders doing business with the agency were already imposing tougher restrictions on FHA borrowers, further boosting the credit profile of those loans. The average credit score of an FHA borrower is now 690, up from 630 only two years ago, agency officials said. These higher-quality loans are expected to result in lower losses, so the agency should make money on loans issued this year and over the next few years, according to an independent audit designed to gauge the agency's health. The audit, released in November, found that the cash the FHA set aside to pay for unexpected losses had dipped to historic lows, well below the level required by law. As of Sept. 30, those reserves were estimated at $3.6 billion, down from nearly $13 billion a year earlier. The most recent figure represents 0.53 percent of the value of all FHA single-family-home loans -- far lower than the 2 percent required by Congress. But Ann Schnare, a former Freddie Mac official, said the situation could be even worse. She said the audit underestimates future losses because it does not take into account all loans that are now overdue, only those that the FHA has paid claims on. Stevens said his agency has pored over its data to analyze risk and is taking steps to shore up its financial health. "You have a limited set of options under these circumstances: Raise fees [for borrowers] or make policy changes," Stevens said in an interview. "We've done both." The agency banned 268 lenders from making FHA loans last year, more than double the total terminated in the previous eight years. The FHA suspended six other firms. Among them were some of the largest FHA lenders -- Taylor, Bean & Whitaker and Lend America, both of which shut their doors soon thereafter. The agency also proposed a rule that would require banks to hold up to $2.5 million in capital that they can use to repay the agency for losses if they were involved in fraud. Banks are now required to hold only $250,000. Borrowers are also facing tougher scrutiny from the agency. People taking out FHA loans will have to pay higher upfront fees, perhaps as early as this spring. Those with especially weak credit scores will also have to put down at least 10 percent instead of the usual 3.5 percent down payment. The amount of money sellers can kick in toward closing costs and other fees will also be limited.
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Post by doctorwho on Feb 2, 2010 16:01:52 GMT -6
Uncle Sam Wants You
A jobs boom in the federal government.
One of President Obama's tropes is to disavow any desire for bigger government, but the facts in his new $3.8 trillion budget show he is getting it whether he wants it or not. One revealing detail is the boom in federal employment to levels last seen at the end of the Cold War.
"Civilian full-time equivalent employees," as they're known in budgetese, held relatively constant before Mr. Obama came to Washington, but they surged to 1.978 million in 2009 from 1.875 million in 2008. In fiscal 2010, the Administration expects to add another 170,000 workers—a 14.5% leap in two years. The nearby chart shows the trend in civilian executive-branch hiring since 2000, not including the Postal Service.
The 2.148 million federal employees in 2010 will be the largest number since 2.169 million in 1992, when the Clinton Administration started in earnest to unwind the Cold War defense buildup. So perhaps the wars in Afghanistan and Iraq explain the federal jobs boom? Hardly. The military employed some 973,000 civilians in 1992, which declined to some 671,000 in 2008 before climbing back to an anticipated 720,000 in 2010.
The real jobs boom is in the federal agencies, not the military—to 1.428 million in 2010, from 1.204 million in 2008 and 1.09 million in 2001. So, for instance, the Agriculture Department will jump to 101,000 in 2010 from 94,000 in 2008, Justice will surge to 119,000 from 106,000, and Treasury to 114,000 from 107,000. We could go on.
Mr. Obama blames the government's all-time high deficits and other budget predicaments on his predecessor, but no one forced him to hire all these new public employees. Presumably, these tens of thousands of new workers are needed to hand out stimulus grants, or monitor this or that new program, or investigate private business (a 10% increase in SEC staff in fiscal 2011, for example). And that's before health care and cap and tax. No wonder more college graduates are saying they want to head to Washington, and that the Beltway metropolis has been spared the brunt of the recession. That's where all the new jobs are. look at the bene's and pension compaed to private sector - I wouldn't mind one of these myself since the ruling party seems to want to employ everyone anyway.. |
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Post by macrockett on Feb 2, 2010 22:08:41 GMT -6
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Post by Arch on Feb 2, 2010 23:13:25 GMT -6
The problem is that they think they are God when in office.
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Post by macrockett on Feb 4, 2010 16:37:34 GMT -6
Pennsylvania Capital Harrisburg Has Bankruptcy Option (Update1)
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By Dunstan McNichol
Feb. 4 (Bloomberg) -- Harrisburg, the capital of Pennsylvania, will consider Chapter 9 bankruptcy protection along with tax increases and asset sales as options to address $68 million in debt service payments due this year, the chairwoman of a City Council committee said last night.
Every option, including tax and fee increases, bankruptcy and a state takeover through Pennsylvania’s Act 47 municipal oversight program will be considered, said Susan Brown-Wilson, chairwoman of the Budget and Finance Committee, which began a week of hearings last night to consider a 2010 spending plan.
The $68 million in debt service payments that Harrisburg faces in connection with the construction of a waste incinerator this year is four times what the city of 47,000 expects to raise through property taxes, and $4 million more than the city’s entire proposed operating budget.
“We need to see, what does Act 47 do for us; what does bankruptcy do,” Wilson said in an interview during a break in the opening budget hearing at Harrisburg City Hall. “You have to have all of them on the table.”
Harrisburg skipped more than $3.5 million in debt-service and swap payments last year, prompting draws on reserves and back-up payments by Dauphin County, where Harrisburg is located. The county has sued the city to recover its payments.
Budget Proposal
Wilson was among five Council members who voted last year to reject a 2010 budget proposal by former mayor Stephen Reed, who left office last month after 28 years. The proposal would have attempted to cover the debt service costs by selling assets such as an historic downtown market, an island in the Susquehanna River that includes the city’s minor-league baseball stadium, and the city’s parking, sewer and water systems.
The plan to raise $69 million by selling downtown features was reinstated last month by Linda Thompson, the newly elected mayor, in a substitute budget. The seven-member council has until Feb. 15 to approve a final 2010 budget.
Brown-Wilson said she would support leasing only city assets that don’t generate revenue, as the parking and water systems do.
Carol Cocheres, bond counsel for the incinerator’s operator, the Harrisburg Authority, told the city council at a Dec. 14 hearing that the city is already in danger of legal action for payments that were missed last year on $288 million in debt it has guaranteed with its full faith and credit.
“There’s never been a default like this in Pennsylvania municipal history,” she said. “This is all new territory.”
Risking Suit
Cocheres told council members that by skipping payments that are made on behalf of the authority, the city risks being sued and ordered to raise taxes or fees by Assured Guaranty Municipal Corp., formerly FSA Insurance, which has insured the bonds, or by the deal’s trustee, TD Bank.
City Controller Dan Miller, who was vice president of the council until January, has advocated bankruptcy as an alternative to selling assets.
Harrisburg’s credit rating was lowered two levels below investment grade to Ba2 by Moody’s Investors Service in October. The city faces a $164 million deficit over the next five years, mostly because of debt created by the incinerator, according to Management Partners Inc. of Cincinnati, a consulting firm hired to study the city’s finances as part of a state review.
Budget hearings are scheduled to continue tonight at 5:45 p.m. local time in Harrisburg City Hall.
To contact the reporter on this story: Dunstan McNichol in Trenton, New Jersey, at dmcnichol@bloomberg.net.
Last Updated: February 4, 2010 11:53 EST
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Not a good sign, given what transpired in the markets today spooked by the sovereign debt issues of several European countries, principally Greece, but followed by Spain and Portugal as well. The issue in all of this is the impact on counter parties holding the debt.
In the U.S., if Harrisburg moves forward, it would be the second recent filing following Vallejo, Ca., which was allowed by the Court to abrogate its union contracts relating to police and fire.
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Post by asmodeus on Feb 4, 2010 22:00:21 GMT -6
Wouldn't an established revenue stream be a given?
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Post by macrockett on Feb 18, 2010 10:52:15 GMT -6
www.ft.com/cms/s/3/055126f4-1624-11df-8d0f-00144feab49a.htmlFifty Greeces: weakness at the periphery
Published: February 10 2010 09:10 | Last updated: February 10 2010 16:39
Connecticut’s Lisbon, New York’s Rome, Georgia’s Athens and Iowa’s Madrid may lack the sense of budgetary crisis being felt lately in their European namesakes, but America’s states and municipalities could yet spark equally vexing problems for the United States. Like the eurozone’s members, America’s states have no currencies of their own to devalue and must tread cautiously between entrenched public sector unions and irate taxpaying voters.And just as those betting on the health of the euro once paid too much attention to what was happening in its financial centres, without fully appreciating looming weakness at the periphery, the budgetary strains in America’s 50 states and 52,000 municipalities get too little attention.
Though not as profligate as some peripheral European nations, US states spent freely before the recession. In the 30 years ending in 2008, spending grew at a compound annual rate of 6.7 per cent, well above inflation. Even after cutting an estimated $256bn from their budgets from 2009-2011, substantial gaps remain with several states recently identifying other shortfalls. Even this understates the problem, though, as actuaries have identified pension funding shortfalls as high as $3,000bn, or double all annual state spending. Like Europe’s “no bail-out clause”, an explicit federal lifeline is taboo, although states are dependent on Washington. The 2011 federal budget sets aside $646bn for state transfers, including an extra $85bn in Medicare payments. Then there is the estimated $39bn annually in foregone revenue through the tax exemption given to most of the $2,800bn municipal debt market. EDITOR’S CHOICE In depth: The pensions crisis - Jun-16 US states borrow to bridge budget gaps - Jan-07 US public pensions face $2,000bn deficit - Jan-04 10-year plan to close the budget deficit - Jan-04 Lex: US state finances - Jan-08 Public pensions may stress US state finances - Nov-05 But the extra stimulus that has recently covered shortfalls will soon ebb, leaving budgetary holes that may tempt cities into Chapter 9 bankruptcy. With companies and residents free to relocate to any other city state, there is a limit to how deeply services can be cut or taxes raised before this becomes attractive. Timothy Geithner, US Treasury secretary, recently scoffed at the prospect of America losing its triple A rating, but most of its constituent parts already have and some may soon be in outright default.
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Post by macrockett on Feb 21, 2010 9:40:38 GMT -6
www.chicagotribune.com/news/opinion/editorials/ct-edit-hastert2-20100219,0,5984579.story chicagotribune.com Mr. Hastert’s perks
February 21, 2010
"Just like families must live within their budgets, the federal government must live within its means. We have passed appropriations bills that have been fiscally responsible while recognizing our national priorities."
That was then-House Speaker J. Dennis Hastert, congratulating himself and other Republican leaders in the 109th Congress for being frugal.
Such talk of smart spending was a staple of Hastert's rhetoric when he was in office. So why is he still spending taxpayers' money more than two years after leaving office?
Federal law allows a little-known perk for former speakers — a taxpayer-funded office anywhere in the country for up to five years. Taxpayers fund the rent, utilities, staff, travel expenses and other incidentals related to the office, which are intended to "facilitate the … conclusion of matters pertaining to or arising out of" the former speaker's duties in the House.
So, Mr. Former Speaker, conclude already.
The Tribune reported last week that Hastert has taken advantage of that quirky perk to the tune of more than $1 million in taxpayer money. He pays three assistant-type staffers more than $100,000 a year, rents an office for $6,300 per month and travels — staffers in tow — in an $860-per-month SUV.Hastert spokesman Brad Hahn is quick to point out that the former speaker is technically entitled to spend this money, and more. Yes, he's entitled because Congress likes to take care of its own. Congress talks about being frugal, but it's much better at preserving its sense of entitlement.
And what's $1 million to Congress? Like the pennies and dimes you drop in a change jar.
One reason Hastert's no longer speaker: People grew tired of Republican talk that wasn't matched by reality. When Republicans controlled Congress, they spent and spent and spent. They preserved Washington's gross sense of entitlement.
Hastert, who is well into a new career as a lobbyist and business consultant, still believes he's entitled to an office and a car and three staffers, all provided by taxpayers.
He spent years telling us he was opposed to wasteful government spending. It's never too late to make good on his word.
Copyright © 2010, Chicago Tribune ------------------------------------------------ If it walk's like a duck and quacks like a duck...well ....
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Post by macrockett on Feb 24, 2010 19:25:14 GMT -6
www.ft.com/cms/s/32f13b76-217d-11df-830e-00144feab49a,dwp_uuid=24032e94-b4d2-11dd-b780-0000779fd18c,print=yes.html Freddie Mac likely to need more cash support
By Suzanne Kapner in New York and Tom Braithwaite in Washington
Published: February 24 2010 20:07 | Last updated: February 25 2010 00:13Freddie Mac said on Wednesday it would probably have to take more taxpayer cash this year to offset continued losses in a fragile housing market.
The warning by the government-run mortgage financier came as it revealed it lost $7.8bn in the last three months of 2009, compared with a loss of $23.9bn a year earlier. The deficit in the fourth quarter of last year was inflated by a $1.3bn dividend payment to the US Treasury but is still up on the loss of $5.4bn in the previous quarter. Tim Geithner, Treasury secretary, on Wednesday put off until next year a final resolution of Freddie Mac and Fannie Mae, the other main mortgage financier, which back most US home loans and are in a suspended state between full nationalisation or privatisation. Amid Republican criticism, Mr Geithner told a congressional hearing that it was only an “abundance of caution” that led the Treasury to remove in December a $400bn cap on its assistance to the so-called government-sponsored enterprises. At a separate hearing, Ben Bernanke, Federal Reserve chairman, agreed with Republican suggestions that a blueprint for the GSEs should be outlined in the next few months. A rebound in the price of mortgage-backed securities in the second half of last year meant Freddie Mac did not have to tap the Treasury for more money in the fourth quarter, the third consecutive three-month period in which it avoided taxpayer financing. But that streak is expected to be broken in the first quarter of 2010, when Freddie takes an $11.7bn charge related to an accounting change that requires companies to record securitised assets on their balance sheets. Charles Haldeman, Freddie Mac chief executive, said that in spite of some signs of stabilisation “the housing recovery remains fragile, with significant downside risk posed by high unemployment and a potential large wave of foreclosures”.Freddie Mac’s fourth quarter loss included $7.1bn in credit-related expenses and a $3.4bn write-down on a low-income tax credit. Provisions for loan losses fell to $7.1bn from $8bn the previous quarter. Full-year provisions nearly doubled to $29.5bn. Delinquency rates on single family homes rose quarter-on-quarter to 3.87 per cent at the end of December, compared with 3.33 per cent the previous quarter. At the end of 2008, the rate was 1.72 per cent. In another sign the housing market remains weak, new home sales fell 11.2 per cent in January from the month earlier to a seasonally adjusted annual rate of 309,000, a record low, the Commerce Department said on Wednesday. Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
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Post by macrockett on Feb 24, 2010 20:19:13 GMT -6
www.chicagotribune.com/news/opinion/editorials/ct-edit-deficit-20100224,0,2460584.story chicagotribune.com The legacy 5:30 PM CST, February 24, 2010 carlson Pullquote: Will Obama plunge us into a debt crisis, or rescue us from one? Ten years ago, when President Bill Clinton announced his 2001 budget, he stood before a made-for-TV backdrop reading "America: Debt Free By 2013." No, that wasn't a joke. Remember that months earlier Clinton had whipped out a magic marker in a Rose Garden ceremony and had written $115,000,000,000 on a large chart. That was the budget surplus for 1999. Yes, a budget surplus. Only a decade ago. Say what you will about Bill Clinton—and people still say plenty. But love him or loathe him, most people give him credit for working with Republicans and producing American's last surplus. There won't be any such triumphant announcements from President Barack Obama, at least not soon. The federal debt will reach 85 percent of the nation's gross domestic product by 2018, and 100 percent of GDP by 2022, and double that by 2038, the Peterson-Pew Commission on Budget Reform recently projected. Before that happens, the commission said, the U.S. "would almost certainly experience a debt-driven crisis — something previously unfathomable in the world's largest economy." That will be Obama's legacy. He won't be president in 2018. But he will be the president who drove us toward a debt crisis—or saved us from one. Right now, the smart money is on a crisis. Last week, Obama announced a bipartisan commission that is supposed to figure out how to balance the federal budget by 2015, excluding interest on the national debt. (A big exclusion!) It will be led by former Republican Sen. Alan Simpson and Erskine Bowles, the White House chief of staff who helped broker the 1997 deficit reduction law under Clinton. There will be 11 Democrats and 7 Republicans, and it will take 14 votes to approve any recommendations. So they will produce a powerful bipartisan consensus … or dissolve into a puddle. Either way, they're supposed to report by December. There is hope that this group will reprise the success of the bipartisan panel in the 1980s that rescued Social Security from imminent insolvency. That group, led by Alan Greenspan, reached a consensus on raising taxes and trimming benefits … though it reportedly had a behind-the-scenes nudge from President Ronald Reagan and House Speaker Thomas P. O'Neill Different time, of course. Back then, Democrats and Republicans in Washington still talked to each other. And with a Republican president and Democratic speaker of the House, both parties had something at stake. Democrats hold all the power now, and Republicans seem content to let them flail away with it. But nobody can afford to let this debt problem keep growing. By 2014, payments on federal debt are project to be $516 billion, exceeding the spending on all domestic programs outside of entitlements and defense. By 2020, those interest payments will rival the cost of Medicare. The greatest reason for pessimism: Even if Obama gets serious about federal debt, there are no signs that he can expect help from the Democratic or Republican leadership in Congress. There was scant support for a stronger White House proposal for a deficit commission that would have forced an up-or-down vote in Congress on the sum of its recommendations. There's a chance for this if Obama puts as much time and effort into it as he has into health care. If he is willing to call out both parties for their failure to be responsible. If he is willing to bring in Republicans—not just Simpson, and not just at the very end—for a bipartisan agreement. It's going to be his legacy, whether he likes it or not. Copyright © 2010, Chicago Tribune
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Post by macrockett on Feb 27, 2010 9:16:17 GMT -6
online.wsj.com/article/SB10001424052748703940704575089983572747598.html?mod=WSJ_WSJ_US_News_5#printModeThe Wall Street Journal
FEBRUARY 26, 2010, 6:36 P.M. ET
Fannie Posts $72 Billion Loss for '09
By NICK TIMIRAOS
Fannie Mae reported a staggering $72 billion net loss for 2009, underscoring the challenges that still face the nation's largest mortgage financier and offering more grim news for taxpayers who may ultimately pick up the bill.
The Washington-based company posted a $15.2 billion fourth-quarter loss and said it asked the U.S. Treasury for another $15.3 billion to stay afloat, bringing its total bailout tab past $76 billion. The quarterly results were an improvement from the year-ago period, when Fannie reported a $25.2 billion loss, but the annual loss surpassed the year-earlier loss of $58.7 billion. The Fannie Mae earnings release came days after Freddie Mac, its smaller competitor, reported smaller losses. Freddie Mac posted a fourth-quarter net loss of $6.5 billion, didn't ask for more bailout cash and posted a $21.6 billion loss for 2009, down by more than half from a year earlier. Freddie's results have been better, in part, because it has a smaller loan book that has been performing better than Fannie's. But some analysts warn that Freddie's losses could rise. Fannie's losses were driven by $11.9 billion in credit expenses, including souring loans and costs from maintaining a growing stable of foreclosed properties. Fannie also took a $5 billion write-down on low-income tax-credit investments after the government said it wouldn't allow the company to sell them. Those tax credits are worthless to Fannie but could result in lower tax revenues for the government if they are sold. The housing market has shown signs of stabilizing in recent months, but Fannie said that unemployment and continued defaults from many borrowers who owe more on their mortgages than their homes are worth meant that losses would continue through 2010, though at lower levels. While some analysts warn that efforts to modify loans are simply postponing foreclosures and delaying losses, Fannie Chief Executive Michael Williams said the company remained committed to preventing foreclosures. "Our overriding objective is keeping people in their homes whenever possible," he said in a statement. The government took over Fannie and Freddie nearly 18 months ago as rising loan defaults burned big holes in the companies' balance sheets. The government has agreed to absorb unlimited losses for the next three years and up to $400 billion after that. So far, the companies have taken a combined $127 billion in Treasury support, making this bailout one of the most expensive from the financial crisis. The government has relied heavily on the companies to help heal broken housing markets, and they are at the center of the Obama administration's initiatives to rework loans for millions of troubled borrowers to avoid foreclosures. The Obama administration said this past week that it wouldn't propose legislation to revamp the troubled wards of the state until next year. At a Senate hearing on Thursday, Federal Reserve Chairman Ben Bernanke said it was "very important that we move towards clarifying the longer-term status" of the companies. He warned against any overhaul that might reconstitute the "platypus"-like, public-private hybrid structure that defined the companies before conservatorship, and he said that privatizing the firms would be an "interesting direction" to take. Write to Nick Timiraos at nick.timiraos@wsj.com
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Post by macrockett on Mar 2, 2010 20:44:39 GMT -6
We have the trifecta of government waste tonight! The Post Office, Freddie Mac, and HAMP
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Post by macrockett on Mar 2, 2010 20:50:54 GMT -6
I don't make this stuff up folks, it really is a carnival in government. We can only hope that technology progresses to the point that the USPS doesn't have purpose any longer! online.wsj.com/article/SB10001424052748703807904575097204116932126.html?KEYWORDS=post+office#printModeThe Wall Street Journal
U.S. NEWS
MARCH 3, 2010
Post Office Renews Campaign to End Saturday Mail Service
By COREY DADE
The U.S. Postal Service stepped up its campaign to end Saturday deliveries to help stem losses, but the move met with skepticism that signals an uphill battle for approval by regulators and Congress.
Amid increasing financial losses, the U.S. Post Office is proposing to cut Saturday mail delivery and may propose higher rates. WSJ's Corey Dade reports. Postal officials sought support for a broad restructuring from a gathering in Washington on Tuesday that included big postal clients, congressional aides and postal workers' labor representatives. Without the restructuring, the agency potentially faces $238 billion in projected losses in the next 10 years, Postmaster General John E. Potter warned as he released assessments of the agency's operations from three consulting firms.
The recession has worsened the Postal Service's financial condition, and mail volume continued to fall as more letters and documents are sent electronically. It saw a 13% drop in volume in the year ended Sept. 30, more than double any previous decline, and lost $3.8 billion. In the three months ended Dec. 31, 2009—a period that is typically the strongest of the year because of holiday shipping—the Postal Service recorded a 9% drop in volume from a year earlier and a loss of $297 million.It forecasts even steeper drops in mail volume and revenue over the next 10 years. Mr. Potter acknowledged at the gathering for the first time that mail volume is unlikely to return to prerecession levels.
The agency has reduced its work force 25% in 10 years to adjust to lower mail volumes, Mr. Potter said, but "must now make changes to its business model." The Postal Service wants authority to change delivery schedules, raise prices and control labor costs. Congress must approve the elimination of Saturday mail delivery and lawmakers haven't been receptive to the idea.Any changes to employee work schedules, which would result from eliminating Saturday delivery, need to be negotiated with postal workers' unions. Labor leaders Tuesday came out against the plan."We don't think it's necessary," said Sally Davidow, spokeswoman for the American Postal Workers Union, which represents roughly 330,000 postal employees. If not for the Postal Service's obligations to retirees' health benefits, she said, the agency "would be in pretty good shape, actually."
Indeed, the Postal Service's biggest cost burden is a requirement of the 2006 postal reform law that it prepay retiree health benefits at a rate of $5 billion a year. Mr. Potter is lobbying Congress to repeal the law as part of his restructuring plan.
[/b] The loss of Saturday delivery would deal a blow to the biggest postal clients, companies that mail ads to consumers. The segment makes up as much as a third of annual postal revenue. "We really need more information. Almost all of direct marketing is done when it's relevant and timely. If it reaches you three days later, it's not timely," said Linda Woolley, chief lobbyist for the Direct Marketers Association. The federal Postal Regulatory Commission also would be expected to rule on the decision about Saturdays and that outcome would be likely to influence lawmakers. "My inclination is to be skeptical about it," said postal commission chairwoman Ruth W. Goldway. "But I will certainly hear the public about it. If they can show us that the public is supportive and they will really save money without decreasing their volume, then we might accept it." Write to Judith Burns at judith.burns@dowjones.com |
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Post by macrockett on Mar 2, 2010 20:54:05 GMT -6
online.wsj.com/article/SB10001424052748703940704575089983572747598.html#printMode The Wall Street Journal
BUSINESS
MARCH 1, 2010, 9:28 P.M. ET
Fannie Posts $72 Billion Loss for '09
By NICK TIMIRAOS
Fannie Mae reported a staggering $72 billion net loss for 2009, underscoring the challenges that still face the nation's largest mortgage financier and offering more grim news for taxpayers who may ultimately pick up the bill.
The Washington-based company posted a $15.2 billion fourth-quarter loss and said it asked the U.S. Treasury for another $15.3 billion to stay afloat, bringing its total bailout tab past $76 billion. [/b]The quarterly results were an improvement from the year-ago period, when Fannie reported a $25.2 billion loss, but the annual loss surpassed the year-earlier loss of $58.7 billion. The Fannie Mae earnings release came days after Freddie Mac, its smaller competitor, reported smaller losses. Freddie Mac posted a fourth-quarter net loss of $6.5 billion, didn't ask for more bailout cash and posted a $21.6 billion loss for 2009, down by more than half from a year earlier. Freddie's results have been better, in part, because it has a smaller loan book that has been performing better than Fannie's. But some analysts warn that Freddie's losses could rise. Fannie's losses were driven by $11.9 billion in credit expenses, including souring loans and costs from maintaining a growing stable of foreclosed properties. Fannie also took a $5 billion write-down on low-income tax-credit investments after the government said it wouldn't allow the company to sell them. Those tax credits are worthless to Fannie but could result in lower tax revenues for the government if they are sold. The housing market has shown signs of stabilizing in recent months, but Fannie said that unemployment and continued defaults from many borrowers who owe more on their mortgages than their homes are worth meant that losses would continue through 2010, though at lower levels. While some analysts warn that efforts to modify loans are simply postponing foreclosures and delaying losses, Fannie Chief Executive Michael Williams said the company remained committed to preventing foreclosures. "Our overriding objective is keeping people in their homes whenever possible," he said in a statement. The government took over Fannie and Freddie nearly 18 months ago as rising loan defaults burned big holes in the companies' balance sheets. The government has agreed to absorb unlimited losses for the next three years and up to $400 billion after that. So far, the companies have taken a combined $127 billion in Treasury support, making this bailout one of the most expensive from the financial crisis. The government has relied heavily on the companies to help heal broken housing markets, and they are at the center of the Obama administration's initiatives to rework loans for millions of troubled borrowers to avoid foreclosures. The Obama administration said this past week that it wouldn't propose legislation to revamp the troubled wards of the state until next year. At a Senate hearing on Thursday, Federal Reserve Chairman Ben Bernanke said it was "very important that we move towards clarifying the longer-term status" of the companies. He warned against any overhaul that might reconstitute the "platypus"-like, public-private hybrid structure that defined the companies before conservatorship, and he said that privatizing the firms would be an "interesting direction" to take. Write to Nick Timiraos at nick.timiraos@wsj.com
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