On Aug 17, 4:04 am, "Default User" <defaultuse...[at]yahoo.com> wrote:
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www.dallasgasprices.com has a message board on which numerous people
have reported prices as low as $1.96 to $1.99 at both Wal-Mart and
Costco. Admitedly, the average price reported is closer to $2.50.

Elizabeth Richardson wrote:

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That's not a public source.



Brian

--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)

"Default User" <defaultuserbr[at]yahoo.com> wrote in message
news:5ijl7kF3pf7drU1[at]mid.individual.net...
- quote -

My sister-in-law lives in Dallas and says she pays $1.99 at Costco.

Elizabeth Richardson

Oh sorry, the disclosure...

1. Bachelor of Science in Economics.
2. Staunch Libertarian

By providing a "guarantee" that these securities will be repurchased,
FNMA reduces the risk taken on by the lender. As we well know, lenders
take on risk in exchange for interest. Less risk = lower interest, and
vice-versa. In the absence of FNMA the lenders would have no guarantee
that the mortgages would be bought and therefore assume more risk.
Naturally, they would charge a higher interest rate. In this way it is
a gov't subsidy. Like JOE said, subsidies require a wealth transfer,
and there is one here too. Just not on the surface. FNMA takes money
from taxpayers and gives it to borrowers in the form of an interest
rate that would otherwise be higher.

My econ professors always told me to always ask: In the absence of
gov't intervention, would all parties still act in the same manner?
If FNMA were a non-gov't agency and they weren't backed by the US
Gov't would they still engage in this action? Probably not. If they
would we wouldn't need a gov't agency with red tape and inflated
budgets in teh first place. Smart entrepreneurs everywhere would be
chomping at the bit to buy these mortgages (at these rates, risk
levels, etc).

http://www.tutor2u.net/economics/con..._subsidies.htm
has a pretty clean explanation. In our case the variable cost is the
cost (or expected cost) of default. Obviously, producers expand their
output by lowering interest rates to entice borrowers.

Elizabeth Richardson wrote:

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Where are these places? The cheapest listed anywhere in Texas here:

<http://www.texasgasprices.com/
Is $2.38.



Brian

--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)

joetaxpayer wrote:
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Joe,
If you buy into the fact that there should be a difference in yields
between corporate bonds and Treasury bonds, it's essentially the same
idea. Interest rates on mortgages that can be sold to the GSEs are
lower, because there's this "implicit guarantee" that the federal
government would bail out them out (using our tax dollars). The result
is that the GSEs (and their shareholders) make more money.

A similar scenario is FDIC protection. FDIC-insured money-market funds
pay lower interest rates. Put another way: the lenders can borrow money
from depositors and pay lower rates, earning more net interest income
when they then loan that money out. Those lenders are receiving a
subsidy because FDIC, historically, hasn't been self-funding (S&L crisis
for example).

Bond subsidies happen as well at the local level with municipal bonds,
and the macro effect is more visible. General obligation (GO) munis are
backed by the taxing power of the local municipality, whereas revenue
bonds are backed by revenues of a specific project, such as an airport.
When a new GO offering is authorized, it affects the credit rating of
the issuing municipality. With more GOs tied to a given tax base, future
bonds must offer higher interest rates, which is to say, the local
taxpayers need to pay more of their tax money to borrowers (as interest)
over the life of the bonds. So if an airport bond is GO rather than a
revenue bond, the airport is being subsidized by local taxpayers.

Elle -- sorry, it's not me, it's just Econ-101 terminology. Don't
believe me though, try editing out that Wikipedia page towards your
narrow view of "subsidy" and see how fast some PhD from Wharton undoes it.

-Tad

Mark Freeland wrote:
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First, Mark, thanks for the link. You continue to amaze me with the
information backing up your position. I find this one line curious;
"The study also suggests that these institutions [FNMA and FHLMC] pass
little of the benefit of their government-sponsored status to homeowners
in the form of lower mortgage rates." And elsewhere in the quote it
offers a best estimate of 7 basis points for the savings to the
homeowner. A savings of $280 on a $400K mortgage.

I'll concede that it may indeed be a subsidy, if only because The
Maestro says it's so.

JOE

joetaxpayer <joetaxpayer[at]nospam.com> writes:

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And it happens all the time. All those jumbo loans,
for example. Some of the banks hold on to them and
most are sold into the secondary market. To see the
size of the subsidy, compare rates on a conforming
loan against a non-conforming one. A two second
glance at Bankrate.com shows the current premium
to be about 0.84%, which is actually at the very
high end of the range - over most of the last 20
years, it's been closer to 0.5% on average and
as tight as 0.25% (IIRC).

- quote -

It's a subsidy in the economic sense - there's an implied
guarantee. Kind of like an insurance policy - even if
it's not exercised, it has a value. Someone's absorbing
that risk.

- quote -

(by "higher rating" you probably mean "tighter spread" but okay).

The problem is one of feeding your production pipeline - finding
such mortgages being sold of into the secondary market.


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
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"Elle" <honda.lioness[at]nospam.earthlink.net> wrote in message
news:13c8oprc68eeu24[at]corp.supernews.com...
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What part of the first quote above doesn't refer to geographic differences
not being called subsidies? No, kitten kaboodle wasn't a post-o, just an
error. My post was neither an error nor a post-o.

Elizabeth Richardson

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message
news:R%Zwi.38611$ax1.13906[at]bgtnsc05-news.ops.worldnet.att.net...

- quote -

And I might edit to add that the example difference is nearly 14%, where the
comparison was to an expensive part of the country. The disparity grows if
you want to compare to places in Texas where the price of gas is under
$2.00. At that point, you can say this disparity is more than 33%, hardly
splitting hairs with your 5-10% assertion.

Elizabeth Richardson

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:24SdnZaAzYWU_FnbnZ2dnUVZ_hqdnZ2d[at]comcast.com...
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"Given [Fannie's and Freddie's] ties to the government and the consequent
private market subsidized debt they issue ...

"[Fed Reserve economist] Passmore's analysis suggests ... the associated
present value of homeowner savings is only about half the after-tax subsidy
of these GSEs are estimated to receive. ... A substantial portion of these
GSE's implicit subsidy accrues to GSE shareholders in the form of increased
dividends and stock market value. Fannie and Freddie, as you know, have
disputed the conclusions of many of these studies."

Alan Greenspan, 2004.
http://www.federalreserve.gov/boardd...24/default.htm

In other words, the quasi-governmental nature of the GSEs accounts for
lower-than-market costs of the loaned money - this is more than your "good
housekeeping seal of approval" due to mortgages meet higher standards. Some
of that subsidy accrues to shareholders, some to homeowners. What appears
in dispute is that partitioning, and not the existence of the subsidy.

Mark Freeland
BnetOnewX[at]sbcglobal.net

"Elle" <honda.lioness[at]nospam.earthlink.net> wrote in message
news:13c8ok1jn01p69d[at]corp.supernews.com...
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Yes, you were saying 5-10%, I was saying more than 10%, or more than double
the difference of 5%. Is that really splitting hairs? I think not, else you
have a very different definition of splitting hairs.

Elizabeth Richardson

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote
- quote -

Of course, Elizabeth. My post does not assert what you
mistakedly (post-o for you?) inferred.

I think Tad's poor (IMO) choice of wording led to opening a
can of worms. By his reasoning, there is one heckuva lot in
the markets that could be called a "subsidy," due to
government presence or abscence.

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote
- quote -

That's still close, IMO, and well-known, too. I think you're
splitting hairs, particularly when the context indicated we
were speaking of differences on the order of factors of
five-to-ten.

kastnna wrote:

- quote -

I get it, maybe. Maybe I am hung up by the fact that this could have
happened completely without government involvement. Securitization of
mortgages requires no government guarantee, just, perhaps, a third party
auditing to be sure the mortgages were originated using certain
guidelines. If that were the case, the word 'subsidy' would just strike
me as odd. It appears intuitive to me that these mortgages are more
easily repacked into notes.

On the other hand, say I now create a process where I offer to package
mortgages which have a loan to value of 50% or less. It would stand to
reason that those notes should have a high rating even for a larger
value. Would this be a subsidy? It gives those an advantage if they are
able to put 50% down, and disadvantage to the lower down payment mortgages.

Maybe I am looking at this too simplistically, but it looks to me a bit
like 'the good housekeeping seal of approval'. One has an an advantage
by getting that seal, and I suppose a disadvantage if they do not. But a
riskier product doesn't deserve it. And the higher value mortgages
should have a bit lower rating all in all.
JOE

"Elle" <honda.lioness[at]nospam.earthlink.net> wrote in message
news:13c8lp08dbk2l64[at]corp.supernews.com...
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There are a number of places in this country where federal employees receive
a non-taxable cost of living adjustment. Washington, DC, Hawaii, and Alaska
are 3 locales that I know about; I believe there are others. In the case of
DC this is a 25% COLA. And remember, I said non-taxable! Wouldn't you call
that a subsidy?

Elizabeth Richardson

"Elle" <honda.lioness[at]nospam.earthlink.net> wrote in message
news:13c8m23qdmvg5ec[at]corp.supernews.com...

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This is incorrect. California has much higher taxes than other states, so
gas prices there are generally much higher - more than 10% higher in most
instances. Right now, however, gas in San Diego, usually a very high-priced
locale and in the recent past had higher gas prices than here in southeast
Alaska, is under $3.00/gallon, while gas here is $3.45. Groceries here have
generally been about 10-15% higher than Seattle where I've done price
comparisons, although in recent years the spread has narrowed.

Elizabeth Richardson

"Bucky" <uw_badgers[at]email.com> wrote
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I think the only way they can is if the free market is not
allowed to work. Perhaps the reason groceries and gas do not
get too out or whack geographically speaking is because of
the fact we are linked geographically. Gas station X is
one-half mile west of Y which is 25 yards west of Z... all
the way from Maryland to California. They're all competing
against each other. Hence prices are close.

Also, laws against, for example, monopolies and gasoline
price gouging, are present.

"TB" <borekfm[at]pacbell.net> wrote
- quote -

So am I. The wiki definition is the usual one. Nor does the
wiki article make any claim that the geographic differences
in cost of living for the conforming mortgage result in a
"subsidy."

Social Security, for one, is not indexed by geographic
location, either. I am sure there are other forms of
government assistance (or non-assistance) and regulation
that result in the same "disparity" to which you object. But
we don't call the geographic differences "subsidies," unless
we are arguing for some sort of odd leveling that, in turn,
is also a subsidy for those choosing to live in the more
expensive parts of the country. This would be a subsidy,
too, and one whose fairness is as debatable as anything else
in this thread.