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Crony Socialism Strikes Back: Geithner Retaliates Against DeMarco; Accelerates Wind Down Of GSE Treasury Backing

Friday, August 17, 2012 10:13

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(Before It's News)

from Zero Hedge

Two weeks ago we reported in Geithner To DeMarco: “I Do Not Believe [Un-Socialism] Is The Best Decision For The Country” that TurboTax Tim did not take lightly to FHFA head Ed DeMarco’s snubbing of the worst treasury secretary ever, when DeMarco refused to comply with Tim Geithner’s “proposal” for mortgage principal reduction in effect forcing responsible taxpayers to bail out irresponsible ones. Lots of media posturing and free-market bashing ensued. Today, Tim has once again taken the offensive, and is announcing plans that the Treasury is accelerating the winddown of its backing of Fannie and Freddie and that going forward instead of a 10% dividend, the Treasury will be entitled to a “full income sweep” of the GSEs on behalf of the US Treasury. One can only hope that the loan loss reserve reduction which was the sole source of Fannie and Freddie “profit” (see Bank of America) will continue. And since it won’t, it is once again Tim Geithner who ends up with the short end of the stick in his idiotic attempt to escalate a matter which is far beyond his meager comprehension skills. And here is the kicker: “The agreements require an accelerated reduction of Fannie Mae and Freddie Mac’s investment portfolios. Those portfolios will now be wound down at an annual rate of 15 percent – an increase from the 10 percent annual reduction required in the previous agreements. As a result of this change, the GSEs’ investment portfolios must be reduced to the $250 billion target set in the previous agreements four years earlier than previously scheduled.” Oops MBS market, unless of course there is someone who will miraculous step up and buy the “excess investment portfolio”… who could that be… who could that be? Ah yes: Giethner just greenlighted the MBS purchases (sorry MBS twist – no cookie for you) portfion of QE3. And finally, following today’s unambiguous renationalization of the GSEs, does this mean that US debt is now $16+6 trillion or over $22 trillion courtesy of the GSEs which are now on the US balance sheet?