Fed Up and Reading Between the Lines

The following is from the New York Times. I am going to break down each paragraph into human English and let you know what I think it all really means. I’m that kind of guy. NYT is in bold. I am in a cheap, short-sleeve button down (it’s Friday).

WASHINGTON — Federal policy makers have concluded that the turmoil plaguing the housing and financial markets is likely to spill deep into 2009, becoming one of the most significant domestic problems to confront the next president when he steps into the White House in January.

Rich dudes are promising the President they can make him look good. First, they have to scare the new president into submission.

Ben S. Bernanke, the chairman of the Federal Reserve, publicly indicated on Tuesday that he believes the problems will persist into next year when he outlined a series of steps the Fed is considering in the coming months.

Everyone knows this problem will last years. No one should be asking the Fed to do anything about it, but that doesn’t matter. The Fed does not need to be asked. They reach out like that. Nice, eh?

One such step would extend low-interest lending programs to Wall Street’s largest investment banks into next year. The programs, one of which was set to expire in September, can continue only if the Fed issues a finding that there are “unusual and exigent circumstances” that justify them.

Basically, one such step would be to give stupid, huge companies your money and risk the ensuing inflation and taxes because fuck you. You are not rich.

Mr. Bernanke also recommended that Congress grant the Fed broader authority to monitor and supervise the financial markets to assure greater stability in the future. But with time running out on this session, lawmakers are unlikely to adopt such legislation before next year.

Bernanke, not content with the fact that the Fed essentially controls the value of our money, wants more power so he can screw stuff up even more without anyone voting for him or anything. But Congress is lazy and probably won’t grant him any power until after another eight week vacation.

Treasury Secretary Henry M. Paulson Jr. said in a speech last week in London that the problems of the housing and financial markets might last longer than originally expected.

He followed up in another speech on Tuesday by saying that the Bush administration was working to prevent as many home foreclosures as possible, but that “many of today’s unusually high number of foreclosures are not preventable.” Mr. Paulson said 1.5 million home foreclosures were started in 2007 and that an estimated 2.5 million more would take place this year.

The Treasury and Fed have no interest in bailing out American citizens who can’t pay their mortgages. They only bail out banks who can’t pay their loans.

Still, the markets seemed reassured that Washington officials were redoubling their efforts to resuscitate the weak housing sector, despite the downbeat comments. The Dow Jones industrial average, which has fallen sharply in recent weeks, closed up 1.4 percent, or 152 points.

Wall Street knows to always back the horse that is loved by the guys with the nuclear missiles.

Mr. Bernanke said that the Fed would issue next week long-awaited rules to restrict new exotic mortgages and high-cost loans for people with weak credit. Such mortgages have been a central cause of the current market problems.

Oddly enough, it was government policy that eased loan restrictions in the first place, begging the question, why the fuck should we listen to these guys again?

The Federal Housing Administration will also begin an expanded effort next week to help a larger group of troubled homeowners refinance their adjustable mortgages. Under the plan, homeowners would be eligible to refinance even if they have missed up to three monthly mortgage payments over the previous 12 months.

The FHA will not pay loans for American citizens, but they will allow banks to refinance the loans so that the banks have more working capital because they love the banks (partly because they, in a strong sense, are the banks).

Homeowners who have fallen behind on their payments because of job loss, declining wages and family illness would also be eligible, even if their rates have not increased. Homeowners are now eligible only if they were current on their mortgages before their interest rate was adjusted upward.

And somewhere in America, there’s a dude behind on his mortgage, asking his boss to fire him. Fuck me.

For its part, Congress is close to completing legislation on a $300 billion foreclosure-rescue plan that would help troubled borrowers refinance into more affordable loans insured by the federal government. The Senate is expected to approve a measure by next week.

Of course they are. Banks and congress are working together to spend your money bailing out banks and giving the government more power over said banks. For those of you who are curious about capitalism, this isn’t it.

The Fed created the lending programs to Wall Street in March as part of a broader effort to prevent financial institutions from collapsing, as Bear Stearns nearly did before it was sold under heavy pressure from the Fed and the Bush administration to JPMorgan Chase.

Yeah. That worked real well. You can tell by how all market indicators fell between eight and ten percent since March. Oh, and by the serious increase in foreclosures, the spike in unemployment, the decline of the value of the dollar and the increased cost of commodities. Good job, guys. You put a band aid on a bullet wound and now you want more money for band aids. Douchebags.

The lending programs to the investment banks, a broad expansion of the Fed’s historic practice of providing loans only to commercial banks that the Fed supervises, are intended to provide confidence to financial institutions that they will have enough cash to meet their daily needs. And by permitting investment banks to post collateral for Fed loans, including hard-to-sell financial instruments backed by mortgages, the programs have helped prop up the enormous and troubled market in securities sold by Fannie Mae and Freddie Mac, the all-important mortgage-finance companies.

Fannie Mae and Freddie Mac both announced today that they lost about half their earnings.

The two buyers of mortgages, which together held more than $1.4 trillion of mortgage-backed bonds as of the end of last year, have struggled in recent months through the wave of foreclosures and declining housing markets. On Tuesday, Fannie Mae closed up nearly 12 percent, and Freddie Mac rose 13 percent, after their regulator said he would probably not force them to raise more capital because of an accounting rule change. The shares of both government-chartered companies had tumbled on Monday amid concerns over the accounting rule and worries that the worst of the mortgage crisis was yet to come.

Half. Their. Earnings.

Officials said that the Federal Reserve remained concerned that the declining housing market would not reach its bottom and financial markets would not become more stable before some time next year, and that the economy would continue to suffer as a result of declining consumer confidence, a sluggish global economy and the widespread effects of the rapid jump in oil prices.

Duh.

“The financial turmoil is ongoing, and our efforts today are concentrated on helping the financial system return to more normal functioning,” Mr. Bernanke said at a forum in Virginia on lending for low- and moderate-income households. He did not provide a forecast of how soon he expected markets would begin to turn.

Normal functioning? What the fuck does that mean? It seems to me that if a bank runs out of money, the normal function would be for the bank to fail because of stupid practices. But banks can’t fail, apparently. It’s in the constitution or something.

“Although short-term funding markets remain strained, they have improved somewhat since March,” Mr. Bernanke said, reflecting both the intervention of the Fed in offering loans to Wall Street and “ongoing efforts of financial firms to repair their balance sheets and increase their liquidity.”

Every financial firm out there overstates their value to look like they shouldn’t go under. Every one. This helps no one. No one is helped by this. The world is fucked because this kind of lying is considered an “ongoing effort.” Fuck you, Bernanke. Fuck you.

Officials said that the Fed privately reached the view some time ago that weakness in the housing and financial sectors would likely continue well into next year. Mr. Bernanke’s comments Tuesday were not intended to signal any change in interest-rate policy.

First smart thing dude’s done since being appointed.

In his speech in London, Mr. Paulson emphasized that the financial markets have yet to adapt to the changing climate. “Working through the current turmoil will take additional time, as markets and financial institutions continue to reassess risk, and re-price securities across a number of asset classes and sectors,” Mr. Paulson said.

Yet to adapt to the changing climate = push bad loans on tax payers. Reassessing risk in this case means “praying to god that these mortgage backed securities will be worth something in a couple of years.”

The Federal Housing Administration’s expanded program to help more troubled homeowners refinance, called F.H.A. Secure, was announced in April at a time when fewer than 2,000 homeowners at risk of foreclosure had been helped by it. Housing Secretary Steven C. Preston said the expanded program would help an additional 100,000 borrowers in crisis by the end of the year. So far, more than 260,000 homeowners have refinanced through the program, the vast majority of them people who have paid their bills on time. Mr. Preston predicted that 500,000 families would be helped by year’s end.

Why, again, are we helping people who can pay their bills on time? Or for that matter, why are we helping people who can’t? I want this explained to me in simple sentences with small words.

Mr. Preston warned, however, that F.H.A.’s efforts could be derailed if Congress passed housing legislation that failed to safeguard the agency’s financial stability. He said he was concerned about efforts to eliminate the agency’s plans to use risk-based pricing, which would allow F.H.A. for the first time to charge higher mortgage insurance premiums to borrowers viewed as presenting a higher credit risk.

In that paragraph, there are like, a billion problems. Here are my main two:

1. That first sentence seems like a threat, as if Mr. Preston is saying, “You guys better protect our stupid agency or else there will be no more pudding pops in the congressional kitchen.”

2. He has a problem with risk based pricing because it… makes sense? I mean, shouldn’t people with shittier credit pay more? Isn’t that why we have pricing in the first fucking place? God, I hate my government.

He said he was also concerned about efforts by some lawmakers to maintain an agency program in which the seller finances the down payment on a mortgage. The program has suffered high delinquency and foreclosure rates in recent years, and the F.H.A. hopes to eliminate it.

This, actually, makes a little sense. If a seller is actually making a down payment on someone else’s mortgage, he is an idiot. And it is apparently our government’s job to protect idiots from themselves.

If the Senate, as expected, adopts housing legislation by next week, differences need to be ironed out in the House, which approved a similar measure in May. Though the White House has expressed some willingness to negotiate, the administration has not rescinded a veto threat.

Yawn. Work it out, old dudes. You’ll get your piece of the pie.

Senator Harry Reid of Nevada, the Democratic majority leader, urged Republican lawmakers to speed up the bill, which has been slowed by a procedural fight despite broad support among lawmakers in both parties. “Since the last stall on the housing bill, 85,000 more Americans have received foreclosure notices — 8,500 a day,” Mr. Reid said. “Tomorrow it will be over 90,000. Every day they squander the Senate’s precious time, the American people lose.”

The American people deserve this, asshole. They deserve to lose. They borrowed money they couldn’t afford to pay and treated their homes like junk bonds in the eighties. Well guess what? The market busted. This is what happens when risk plays a game versus reward. This is why there is no accountability in this goddamn cesspool.

Fuck it. I’m spending my stimulus check on Chinese porn.