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Thursday, February 21, 2013

Obama – Let’s Do Another Fannie

 

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The Treasury Department came out with some proposals today on how to fund infrastructure investments. Nothing new; an infrastructure bank that would borrow money outside of the government using government guarantees, and a newfangled debt instrument called:

 

America Fast Forward Bonds

 

I love the name. AFFs will be the Street name. AFFs will be structured like BABS (Build America Bonds). This is a hybrid security that will be issued by a Muni. It will be taxable (unlike regular muni’s), it will therefore have a premium yield to non-taxable muni paper. The Federal government will pay (1/3) of the interest due on the bonds. There will be no direct Federal Guarantee on the bonds, but there will be a perception that the Feds are behind the notes.

 

The Transportation Infrastructure Finance and Innovation Act (TIFIA) will be expanded and it will provide – “loan guarantees, and lines of credit to regionally or nationally significant transportation projects”. Loan guarantees and lines of credit are off balance sheet financing. (Note: What is TIFIA? Never heard of it)

 

The infrastructure bank the President wants is also going to be involved with raising money outside of the Federal budget and debt limits. According to the White House the new bank will – “invest through loans and loan guarantees.”

 

All of the proposed borrowing will be outside of what is defined at the Debt Limit. These new debts will not be included in the calculation of Debt to GDP.  The President’s proposals are gimmicks to hide debt. The description provided by the White House on how the infrastructure bank would work tells it all. I think there are at least two lies in this statement:

 

The Bank will operate as an independent, wholly owned government entity outside of political influence.

 

This language is very similar to Fannie Mae and Freddie Mac. F/F were supposed to be independent. They were quasi government entities, but politics dictated what they did.

The liabilities and guarantees of the proposed infrastructure bank, and the AFF bonds will be off of the federal balance sheet – identical to what happened with F/F. Every bond that F/F issued said in bold print on the front page: This Bond is not an Obligation of the USA.

Of course the USA was forced step up and assume all $6 Trillion of F/F debt that was issued before 2008. The outcome for the infrastructure bank will be no different. Who was it that said that repeating the same mistake over and over, and expecting a different outcome each time was the true definition of insanity?

 

MonkyBiz

 

 

Comments

  1. Bruce:
    Interesting article as always. What is amazing to me is the brazen quality of the lies. I’m no psychiatrist, but it would seem to me that the effect on society of the saturation lying would have to be extremely counter productive. It’s as if Obama takes some kind of perverse pleasure in his lies.

  2. They’re not insane. They know exactly what they’re doing. As Barry, above, said.

    I have no sympathy for the country. The country looked the other way when a criminal with forged documents was installed, so let the country reap the whirlwind.

    • When I examined the birth certificate of the obama, I saw so many mistakes that I could not understand how the public just accepted the false document. As I remember, the date and doc number did not line up in a straight line. There is zero way for these uneven lines to happen unless the person creating the doc did not take a straight edge when creating the doc. And there were other “features” that did not look correct.

      The only legal question is: If an American citizen has a baby in another country, is the baby still an
      American citizen. I believe the answer is yes. So that might make the forged birth certificate issue a non-starter.

      However, why did obama apply to college as a foreign person. Did he lie to get a free scholarship as a foreign student ? What does that say about his character? And why can’t anyone get his college records? Would they show he applied as a foreign student.

      And if President Nixon was driven out of office by covering up a break-in, why is obama being impeached
      for his lack of response in Benghazi which was much worse and 4 people died including an ambassador.

      We need now more then ever before a Repiblican Senate AND House of Representatives to offset this
      socialists President before he completely destroys the USA – which I believe is his plan.

      StraightTalkwithJyClifford@blogspot.com

      That’s the way I see it…

      Jay Clifford.

  3. Steal from future generations, label it “debt” even though you have zero intention of paying it back yourself. Divide the loot among various government employee unions and political cronies.

    Same crap Washington has been peddling for decades

  4. The demoturd party has planned this monumental takeover of the country since Lyndon Johnson instituted The Great Society in 1960′s. They have gotten as many people as possible into Gov’t jobs, on welfare, or food stamps or SSDI until we currently have more takers than earners in Amerika. Now they have placed an illegal Kenyan in the highest office of the land and neutered the repuglican party without the slightest whimper from the soon to be taxed into oblivion middle class…..I know you don’t want to hear it again, but……You reap more than you sow, later than you sow, etc…..the laws of nature cannot be squashed by the boastful pride of the few rich and powerful idiotic rulers of our land. Be aware of what is coming.

    • I have to agree with everything you said. The only remaining questions are: Can the USA keep from falling into collapse? Will the dollar remain a world reserve currency? Is there any possibility of getting the real deficit below GDP? Is there any possibility of actually reducing the debt instead of ‘slowing the curve’?
      With gold being accumulated by China and Russia and with Germany asking for their gold we supposedly hold for them and with the price of gold dropping fast this last week, are the world’s currencies beginning their final collapse? Straight Talk with Jay Clifford – Check out my blog at name at blogspot. at dot com.

  5. Conscience of a Conservative says:

    I hate gimmicks, and excluded debts taken on by the gov’t sound like a gimmick, just like when the banks issued off balance sheet debt. If the infrastructure spending has a positive ROI fine, if not no. Fannie was a horrible example of a gov’t corporation acting “outside gov’t influence”. Keep it simple. If there are good projects, lets’ have congress approve but hold them accountable, and not create another murky layer of gov’t.
    There are many problems with gov’t, this fixes nothing.

    • Positive ROI? Why wouldn’t private entities fund it if there were the case? Why is the government needed if it’s such a good investment? Are they just that good at identifying opportunities that the private sector can’t see?

  6. Sadly the whole world has gone insane. Yes, as stated, one does eventually reap what one sows. We now have a generation of people who no longer believe that or most never even heard of that statement. How then can they even ask for forgiveness of their insane acts? This is all coming to a very bad end. Those of us who have worked, saved and tried to leave a decent legacy for the next generation will most likely find ourselves victims of the coming holocaust. Why do you think Obama and crew are trying to take away the 2nd Admendment?

  7. Being in engineering, I would personally benefit from more infrastructure spending. But I agree with others that this is a really stupid idea. If a project can’t be funded under the current low interest rates that municipalities and states already have access to, then it is probably a bad project and should not be built.

  8. My current definition of insanity is doing the same thing over and over expecting the same result.

  9. Obama bin Biden says:

    Fanne Mae and Freddie Mac did not carry explicit guarantees from the US government, Ginnie Mae does. How long would it take you to find 10 average citizens who know that? Never mind understanding the difference. All they know is that when the SHTF then Bernanke bails out the politically connected.

  10. It is amazing that so many people di not understand that this is just the ramifications of many bad laws implemented over a very long period of time. Sadly repealing bad laws that give privilege is just not part of our culture and world. Almost everyone I know is guilty in some manner to the current situation we are in. From anyone who pays an income tax (2nd platform of communism) to anyone who maintains a government required license, you are all complicit.

    More like let’s let the American middle class take it up the Fannie Again (AFA Bonds). Americans Fannie Again.

  11. Some once said: “Every country has the government it deserves”

  12. Property requires protection. Protection costs resources. Nobody has enough. More property requires even more protection. More protection requires more organization. Organization requires more resources. Threats to property requires more protection. Organization requires more resources. Organization recognizes that more resources correlate with increased threats to property. Organization informs property of imminent threat. Organization requires more resources. Organization determines additional threats are imminent. Property demands protection. Protection costs resources.

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  15. WOW
    Bruce does it again. So our Govment we are gonna fix things by fixin what is broke. Maybe we should run a Cat thru D.C. and start to rebuild.

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  17. How much profit are Fannie and Freddie going to collectively report for year end 2012? $8B, $10B, $12B?

    If the US never lets F&F go, they’re going to make a fortune off those companies.

    • Freddie just posted profit of $4.5B for the 4th quarter. Shock and awe numbers. If the government steals these companies, they are going to make billions!

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