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Author Topic: Fannie and Freddie to become public
Doug
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Babbler # 44

posted 05 September 2008 11:15 PM      Profile for Doug   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
It's been anticipated for a while but now it's actually happening - the US government is taking over a big, big part of its financial market - and without much compensation too.

quote:
Senior officials from the Bush administration and the Federal Reserve on Friday called in top executives of Fannie Mae and Freddie Mac, the mortgage finance giants, and told them that the government was preparing to place the two companies under federal control, officials and company executives briefed on the discussions said.

Henry M. Paulson Jr., the Treasury secretary, and Ben S. Bernanke, the Federal Reserve chairman, were involved in the takeover of Freddie Mac and Fannie Mae.

The plan, which would place the companies into a conservatorship, was outlined in separate meetings with the chief executives at the office of the companiesí new regulator. The executives were told that, under the plan, they and their boards would be replaced and shareholders would be virtually wiped out, but that the companies would be able to continue functioning with the government generally standing behind their debt, people briefed on the discussions said.


Oh, the irony!

[ 05 September 2008: Message edited by: Doug ]


From: Toronto, Canada | Registered: Apr 2001  |  IP: Logged
DrConway
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posted 06 September 2008 06:13 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
Expropriation by stealth by a right-wing government. The irony indeed burns.

I can't wait to see how fast they break Fannie Mae and Freddie Mac; Bush broke the FEMA on purpose in the early 2000s and the result was the monumental fuck-up known as the Katrina aftermath.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
jester
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Babbler # 11798

posted 06 September 2008 06:17 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
Bad news on Friday after the markets close ( or at least the denziens of the street have disappeared for the weekend) and then the rescue on Sunday before the news impacts the markets.
From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
jester
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Babbler # 11798

posted 06 September 2008 06:30 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
quote:
Originally posted by DrConway:
Expropriation by stealth by a right-wing government. The irony indeed burns.

I can't wait to see how fast they break Fannie Mae and Freddie Mac; Bush broke the FEMA on purpose in the early 2000s and the result was the monumental fuck-up known as the Katrina aftermath.


How? The methods of resolving F/F are peddling their mortgage holdings as Agency debt (which no-one wants) or taking the debt onto the federal balance sheet (which will not happen).

The solution is more hocus-pocus from the Treasury whereby the Treasury imposes itself a senior preferred shareholder,wiping out the common shareholders and placing itself first in line for future earnings.

This action is akin to defaulting but can be puttied over with more financial chicanery domesticly. The problem is that if foreign Agency debtholders are disposessed, it is a default on foreign debt.

Conclusion: foreign debtholders are not displaced and Joe Sixpack gets to carry the whole load via another involuntary colonoscopy.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
KenS
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posted 09 September 2008 05:44 AM      Profile for KenS     Send New Private Message      Edit/Delete Post  Reply With Quote 
Yes, its pretty obvious where to invest a big chunk of money for the institutions that have lots.

NOT the stock of the high fliers making big consistent profits like Bear Stearns, Freddie, and Fannie.

But the BONDS of those high fliers are sweet. You get a nice premium and there is no more downside risk than there is in a lower interest earning T-bill when institutions hold debt in companies big enough to cause a train wreck to the economy. Becasue the taxpayers will be stuck with backing the debt.

Thats what makes the whining of the bond trader [of the other thread] so laughable. He and his ilk are not even satisfied with having their asses rescued- they want the government to go beyond rescuing to priming the pump by buying bonds out on the market!

Here's some matches kid.

Occassionaly their shamelessness goes so far that they look like clueless idiots. But when they don't get their way, its just a short blip.


From: Minasville, NS | Registered: Aug 2001  |  IP: Logged
George Victor
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posted 09 September 2008 06:06 AM      Profile for George Victor        Edit/Delete Post  Reply With Quote 
[QUOTE]
But the BONDS of those high fliers are sweet. You get a nice premium and there is no more downside risk than there is in a lower interest earning T-bill when institutions hold debt in companies big enough to cause a train wreck to the economy. Becasue the taxpayers will be stuck with backing the debt.

Thats what makes the whining of the bond trader [of the other thread] so laughable. He and his ilk are not even satisfied with having their asses rescued- they want the government to go beyond rescuing to priming the pump by buying bonds out on the market!
[END QUOTE]

And of course the cons understand how this will go over among the desperate unread in the Heartland, so Dubya goes out there and says that these high flyers on Wall Street should not be bailed out in this way.

And he will be believed because the folk he's addressing are dumb as that sack of hair that Bageant compares them with.

Methinks he doth protest too much.


From: Cambridge, ON | Registered: Oct 2007  |  IP: Logged
jester
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Babbler # 11798

posted 09 September 2008 07:50 AM      Profile for jester        Edit/Delete Post  Reply With Quote 
quote:
But the BONDS of those high fliers are sweet. You get a nice premium and there is no more downside risk than there is in a lower interest earning T-bill when institutions hold debt in companies big enough to cause a train wreck to the economy. Becasue the taxpayers will be stuck with backing the debt.


I'd be really careful with those sweet bonds, Ken.

There are some major misconceptions regarding Fannie/Freddie. While the Fed did bail out Bear Sterns, the 'bailouts' are becoming very illusionary. F/F are basicly 'rescued' by the US government becoming a 'conservator' or legal guardian.

While the Feds are deluging the markets with spin and fancy footwork, the wonks are saying that the only debt guarantees are spin and fancy footwork, there is no written, ironclad guarantee of Fannie/Freddie debt.

The Federal Deposit Insurance Corp started out with $45 billion in reserves and Indymac alone used up $8.3 billion of that. The US Treasury has authorised so much for so many that its global confidence is deteriorating.

China and to a lesser extent, Russia hold a large portion of their reserves in US debt. Russia has reduced its Agency debt to $60 b from $100 b this summer. China holds ~$560 b in US debt and the latest statement from the Vice-Premier of China holds that China will suffer losses whether they reduce holdings of Agency debt or not and they do not want to rock the boat but will if necessary.

The US Treasury is now so stretched that if one looks past the self-serving BS from Paulson, one can ascertaine that the Treasury and Fed will only guarantee debt that threatens US financial stability globally (read China), not debt that they can allow to non-perform.

In that context, look to both domestic debtors and insured depositors being handed non-negotiable 10-20-30 year bonds as compensation in future.

Look to continued spin and bafflegab from the Treasury until after the US election, if they can defy gravity that long, and then expect the other shoe to drop.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged

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