# Fannie Mae and Freddie Mac??



## ghotib (11 July 2008)

From Alan Kohler in Business Spectator:



> World markets are at new lows and as the first of what should be many profit downgrades are coming through in Australia, a new doomsday scenario is playing out in the US: the insolvency of Fannie Mae and Freddie Mac.
> 
> These are the two government-sponsored enterprises in the US that support the mortgage market. They own or guarantee about half the $US12 trillion in home loans outstanding in the US and are responsible for about 80 per cent of new loans since last August.
> 
> ...



I've never understood the role of these two guys. "Own or guarantee" home loans; "responsible for home loans". What does that mean?  "Government-sponsored"? What does THAT mean in the US context?

You guys put me 12 months ahead of our financial adviser <ahem> on how the sub-prime / CDO mess might play out. I think I might need to think faster on this story though - it's got a kind of critical point feel to it. 

Thanks

Ghoti


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## Sean K (11 July 2008)

*Re: Fanny Mae and Freddy Mac??*

US Gov will bail them out by printing more money than you can imagine.

And then probably lower rates again.

eeeek!!


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## wayneL (11 July 2008)

*Re: Fanny Mae and Freddy Mac??*



kennas said:


> US Gov will bail them out by printing more money than you can imagine.
> 
> And then probably lower rates again.
> 
> eeeek!!



Grapevine says they might be nationalized.


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## Sean K (11 July 2008)

*Re: Fanny Mae and Freddy Mac??*



wayneL said:


> Grapevine says they might be nationalized.



If they do will be good for the make believe stock market.


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## YChromozome (11 July 2008)

*Re: Fanny Mae and Freddy Mac??*



ghotib said:


> I've never understood the role of these two guys. "Own or guarantee" home loans; "responsible for home loans". What does that mean?  "Government-sponsored"? What does THAT mean in the US context?




There is little snippets of information floating around in the media, although nothing 100% clear :



> Although neither Fannie nor Freddie provide mortgages to individuals, they are the linchpin of the US mortgage market, providing liquidity to lenders by guaranteeing $5,000bn (£2,500bn) of mortgages, equivalent to almost half of the US mortgage market.
> 
> They were set up in 1968 and 1970 respectively to provide stability and liquidity to the housing market, and are known as GSEs - government-sponsored enterprises - but are not backed or funded by the US government.



http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/11/cnusmort111.xml


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## professor_frink (11 July 2008)

*Re: Fanny Mae and Freddy Mac??*



ghotib said:


> From Alan Kohler in Business Spectator:
> 
> 
> I've never understood the role of these two guys. "Own or guarantee" home loans; "responsible for home loans". What does that mean?  "Government-sponsored"? What does THAT mean in the US context?
> ...




hi ghoti

I'm not really that knowledgable on the whole thing, but here is some info to get you started

this will give you a basic run down on what they do - 
origins of freddie mac and fannie mae


These 2 articles are also pretty good for gettig an idea of what they get up to(both are old but have some interestig information in them-

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/10/29/BUGV1M0TPD1.DTL

http://www.mtgprofessor.com/A - Secondary Markets/what_do_fannie_and_freddie_do.htm

Can't find the link to the article, but paulson apparently came out and said a few days ago that according to 'normal' accouting practices, these 2 organisations are insolvent. Scary stuff if it's true

From my very limited understanding of all of this stuff, if they are actually insolvent, then the govt(taxpayer) will be the ones that bail them out. Considering they have trillions in liabilities..... you get the picture.

Here's a fresh article from bloomberg about the whole thing - 

Fannie, Freddie Are Too Big to Fail, Lawmakers Say

cheers


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## professor_frink (11 July 2008)

*Re: Fanny Mae and Freddy Mac??*



wayneL said:


> Grapevine says they might be nationalized.




isn't that  how modern "capitalism" works in te US? Privatise the profits and socialise the losses


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## Sean K (11 July 2008)

*Re: Fanny Mae and Freddy Mac??*



professor_frink said:


> isn't that  how modern "capitalism" works in te US? Privatise the profits and socialise the losses



The opposite of Communism perhaps.


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## Sean K (11 July 2008)

*Re: Fanny Mae and Freddy Mac??*



kennas said:


> The opposite of Communism perhaps.



Sorry, I meant Socialism, Communism obviously doesn't work, the pigs just take over.


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## juw177 (11 July 2008)

US = Capitalism for the poor and socialism for the rich.

aw I had massive shorts on fannie and freddie since it was $25. Closed them out way too early.


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## IFocus (11 July 2008)

Here is the weekly chart for Freddy some what of a water fall......

Professor  great quote "Under capitalism, man exploits man. Under communism, it's just the opposite"


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## spooly74 (11 July 2008)

*Re: Fanny Mae and Freddy Mac??*



kennas said:


> US Gov will bail them out by printing more money than you can imagine.
> 
> And then probably lower rates again.
> 
> eeeek!!




U.S. considers takeover 


> Alarmed by the growing financial stress at the nation's two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.




http://www.iht.com/articles/2008/07/11/business/11fannie.php


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## juw177 (11 July 2008)

US dollar is dead.


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## CAB SAV (11 July 2008)

Don't u just luv the name-Fannie- Now it's a dead one


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## mayk (11 July 2008)

I just hope all hell don't break loose today. Fridays are always famous for capitulations.


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## wayneL (12 July 2008)

Holy Sweet Fannie Adams!!!!

Fanny and Freddie fans flee... Fed flummoxed.

Sorry

http://stockcharts.com/h-sc/ui?c=fre

http://stockcharts.com/h-sc/ui?c=fnm


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## wayneL (14 July 2008)

Some analysis on Freddie and Fannie from the Mortgage Implode-o-meter guy:


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## So_Cynical (14 July 2008)

juw177 said:


> US dollar is dead.




And Gold is king.


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## explod (14 July 2008)

wayneL said:


> Holy Sweet Fannie Adams!!!!
> 
> Fanny and Freddie fans flee... Fed flummoxed.
> 
> ...




A sorry dro.p




> Re: Fannie Mae and Freddie Mac??
> 
> --------------------------------------------------------------------------------
> 
> ...




Some of his stock offshoots have drooped a bit too.

Will be an interesting few days to see what the jawboners can do to pump a bit of blood back in.


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## wayneL (14 July 2008)

Uncle Ben just got his checkbook out for Freddie and Fannie.

Party time (put it in the credit card)!


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## onebytwo (14 July 2008)

*Re: Fanny Mae and Freddy Mac??*



professor_frink said:


> Can't find the link to the article, but paulson apparently came out and said a few days ago that according to 'normal' accouting practices, these 2 organisations are insolvent. Scary stuff if it's true
> 
> From my very limited understanding of all of this stuff, if they are actually insolvent, then the govt(taxpayer) will be the ones that bail them out. Considering they have trillions in liabilities..... you get the picture.
> 
> ...




i think you'll find that it was in fact bill poole who said that. the former fed governor for somewhere.


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## pepperoni (14 July 2008)

*Re: Fanny Mae and Freddy Mac??*



professor_frink said:


> socialise the losses




This is really the nub of it isnt it ... these operators set themselves up to outperform in boom and fold under anything less than average conditions, and the US taxpayer picks up the damage bill?


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## Whiskers (14 July 2008)

It had to happen.

Also I read somewhere over the weekend that the the financial instutions borrowed much less from the Fed under the rescue deal in the last couple of weeks.



> *Federal Reserve to rescue US mortgage giants*
> Michael R. Crittenden and Brian Blackstone, Dow Jones Newswires | July 14, 2008
> 
> *US financial regulators will allow ailing Fannie Mae and Freddie Mac to borrow directly from the Federal Reserve.*
> ...


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## dhukka (19 August 2008)

Whiskers said:


> It had to happen.
> 
> Also I read somewhere over the weekend that the the financial instutions borrowed much less from the Fed under the rescue deal in the last couple of weeks.




A brief interruption, now back to the main program:



> *US banks scramble to refinance maturing debt*
> 
> Adding together 10 of the biggest bank borrowers, Dealogic said that maturing bonds total $27bn in August, $52bn in September, $23bn in October, $20bn in November and $86bn in December. The extent of the scramble for funds became clear last week when banks tapped central lending facilities, with strong demand for one- and three-month money lent by the Federal Reserve and the European Central Bank. *US commercial banks borrowed a record daily average of $17.7bn from the Fed last week.*


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## sqwark7600 (19 August 2008)

wayneL said:


> Uncle Ben just got his checkbook out for Freddie and Fannie.
> 
> Party time (put it in the credit card)!





Watched your previous Mr Mortgage attachment a number of times (there's a lot in there) and I think I got some of the gist. 
He seems to be saying to the US Fed and Treasury that Freddie and Fanny CDO holders (professional/sophisticated investment organisations that bought their "interest" risk instruments) should take the hit and then the Government retakeover control and look after the current homeowners by propping up Freddie and Fannie's "asset" base i.e. the residual loan principle which is backed up by homes curently being paid off by their owners. The maths are a bit vague but whatever falls out as a bottom line he seems to be saying is the only a arguable government debt. Sounds reasonable to me. However, not paying unsuspecting CDO investors out was not an option recently given to investment banks. His argument is that these CDOs were risk instruments bought by the "smartest people in the room" so a taxpayers payout is not fair.
Is that your take?
I find this US government muddle very complicated, highly informative yet seriously alarming.


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## sqwark7600 (21 August 2008)

It seems that CDOs are yesterdays news and CDSs (Credit Default Swaps-an instrument used to provide protection/insurance against a creditor default) are about to hit the spotlight. How can we have more credit default insurance than issued credit? How? Just don't regulate the instruments. Yes and you guessed it CDSs are not regulated and are a common banking intermediary instrument. 
By the way there are $45 trillion worth of CDS on issue (more than twice the current value of the US stock market). Yup Freddy and Fanny are in there. Surprised?
So much for corporate governance in the banking sector. It is a term we don't seem to see in the headlines anymore. Check it out, it is an excellent principle (another term we don't come across anymore). :goodnight


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## noirua (8 September 2008)

All but sunk, Fannie Mae and Freddie Mac, bailed out by the Fed.
$300 billion bail out by the Fed:  http://www.bloomberg.com/apps/news?pid=20601087&sid=aCGy_.UswSS0&refer=home

The effect of the virtual collapse will spread worldwide.


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## Knobby22 (8 September 2008)

noirua said:


> All but sunk, Fannie Mae and Freddie Mac, bailed out by the Fed.
> $300 billion bail out by the Fed:  http://www.bloomberg.com/apps/news?pid=20601087&sid=aCGy_.UswSS0&refer=home
> 
> The effect of the virtual collapse will spread worldwide.




Another conservative (not!) money managered success by the Republicans payed for by the world and especially the US taxpayer.


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## Mofra (8 September 2008)

Should we be marking this announcement in our diaries?

This is the exact moment in time where Moral Hazard became standard operating procedure for world financial markets.


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## refined silver (8 September 2008)

noirua said:


> All but sunk, Fannie Mae and Freddie Mac, bailed out by the Fed.
> $300 billion bail out by the Fed:  http://www.bloomberg.com/apps/news?pid=20601087&sid=aCGy_.UswSS0&refer=home
> 
> The effect of the virtual collapse will spread worldwide.




$300b? I've seen idiotic figures in the press of $25b and then $100b. But if they both own $5t worth of mortgages, even a 10% default rate would put them at $500b, and yesterday the news was as at the end of June 9% of all mortagages in US were either in arrears or foreclosure!!!! A 20% default rate by the end of the crisis would mean $1t. ($1,000,000,000,000)

These figures make no allowance for all the opague derivatives - CDOs CDSs SIVs, conduits of any sort, off balance sheet stuff that the previous CEO was fired for, that Fannie and Freddie are leveraged into. You can add a zero to the rate these things rise and fall at compared to the underlying mortgage. The US govt is on the hook for Trillions. 

Not great news for the USD. This co-ordinated 3 month central bank led rally in the USD was probably preparation for this news, so that there was some breathing room, and the $ didn't fall inot the abyss.


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## Trembling Hand (8 September 2008)

refined silver said:


> Not great news for the USD. This co-ordinated 3 month central bank led rally in the USD was probably preparation for this news, so that there was some breathing room, and the $ didn't fall inot the abyss.




And everyone keeps saying they are idiots!


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## refined silver (8 September 2008)

Trembling Hand said:


> And everyone keeps saying they are idiots!




How can they be idiots?

- Multi-million dollars in salary packages and bonuses in the good times, (sometimes tens, sometimes hundreds of millions)
- tax-payer bailouts in the bad times, 
- if things really bad, then they get a fat golden handshake and parachute to bail-out with! 
- If their shares are suffering they pass laws to stop naked shorting in their own firms, but not others. 
- Break the law? Pay fines and settlements, without admitting any guilt. The fines which may seem large - $20m, $50m or $100m, but are related to $8b worth of trades, hence around 1% fines even if you get caught.
- If you break the law, you get the bonus fees and salary increases, but if caught, the company pays the fine. Same with buy-backs of bodgy securities, the company is stuck with the buy-back, you keep the bonuses.
- Even now, it looks like some owners of preferred shares of Fannie and Freddie will be bailed out, so there is no downside risk for these guys.

Them Idiots? We're the idiots! 

(Unless of course there's a God who one day truly balances the books.)


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## Greg71 (8 September 2008)

What's got me is who the hell would call their company by these names?


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## Macquack (8 September 2008)

Greg71 said:


> What's got me is who the hell would call their company by these names?




The Federal National Mortgage Association (FNMA) is commonly known as Fannie Mae. The name "Fannie Mae" is a creative pronunciation of the company's acronym, FNMA, that has been adopted officially for ease of identification. It is more than an informal nickname; FNMA refers to itself by this name.

Similarly, the Federal Home Loan Mortgage Corporation (FHLMC) is commonly known as Freddie Mac.
There are other mae's and mac's eg  ginnie mae, sallie mae and farmermac.
(source Wikipedia)


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## Out Too Soon (8 September 2008)

So as China rockets towards capitalism the U.S plummets towards Socialism.


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## prawn_86 (8 September 2008)

Out Too Soon said:


> So as China rockets towards capitalism the U.S plummets towards Socialism.




Whats to say China isnt plummeting towards capitalism and the US rocketing to socialism? Who says one is better than the other in theory? 

Topic for another thread though....


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## Greg71 (8 September 2008)

Macquack said:


> The Federal National Mortgage Association (FNMA) is commonly known as Fannie Mae. The name "Fannie Mae" is a creative pronunciation of the company's acronym, FNMA, that has been adopted officially for ease of identification. It is more than an informal nickname; FNMA refers to itself by this name.
> 
> Similarly, the Federal Home Loan Mortgage Corporation (FHLMC) is commonly known as Freddie Mac.
> There are other mae's and mac's eg  ginnie mae, sallie mae and farmermac.
> (source Wikipedia)




There you go. I guess someone over there had some spare time on their hands.


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## robots (8 September 2008)

hello,

fantastic news, its time some in the financial game are bailed out

sick to death of farmers and car manufacturers only getting it

thankyou
robots


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## Macquack (8 September 2008)

robots said:


> hello,
> 
> fantastic news, its time some in the financial game are bailed out
> 
> ...




Farmers and car manufacturers do something productive for society which is more than can be said for the financial paper shufflers.


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## robots (8 September 2008)

hello,

lets shut the banks then and see how far they go

thankyou
robots


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## Macquack (8 September 2008)

robots said:


> hello,
> 
> lets shut the banks then and see how far they go
> 
> ...




Thats what irks me with the financial system. The banking sector, the least productive (yet most profitable) hold all other industries to ransom.


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## Trembling Hand (8 September 2008)

Macquack said:


> car manufacturers do something productive for society.




I'm not so sure that is true. How can you say an industry that needs billions in tariffs and "grants" is productive??


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## Temjin (8 September 2008)

robots said:


> hello,
> 
> lets shut the banks then and see how far they go
> 
> ...




Geez, robots, you definitely don't want THAT to happen. It wouldn't DO ANYONE GOOD as it would collapse the financial markets and deflate every known assets. Yes, that's including PROPERTIES IN AUSTRALIA. Credit market collapses, bye bye to all assets. 

It's definitely a moral hazard issue, but it's the least evil of the two paths. Inflate the crap out of trouble and tank the US Dollars or die painfully through massive deflation and create a greater depression.


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## robots (8 September 2008)

Temjin said:


> Geez, robots, you definitely don't want THAT to happen. It wouldn't DO ANYONE GOOD as it would collapse the financial markets and deflate every known assets. Yes, that's including PROPERTIES IN AUSTRALIA. Credit market collapses, bye bye to all assets.
> 
> *It's definitely a moral hazard issue, but it's the least evil of the two paths. Inflate the crap out of trouble and tank the US Dollars or die painfully through massive deflation and create a greater depression.*





hello,

what moral issue?

and plod along like every other day, the world isnt doomed 

thankyou
robots


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## Macquack (8 September 2008)

Temjin said:


> .....or die painfully through massive *deflation*.....




Deflation - "a decrease in the general price level" (Wikipedia) = Increased purchasing power. 

I think I'm prepared to give this "evil" a try.


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## explod (8 September 2008)

robots said:


> hello,
> 
> lets shut the banks then and see how far they go
> 
> ...




In Argentina some years ago all the banks did shut up shop and most ordinary folk never ever recovered thier savings.    So we may not have to worry, they will do it for themselves.

Most of us dont' like history because it tells us clearly what is likely to occur again.

I am sure there many on the forums who know financial history better than I who can elaborate and or correct.


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## robots (8 September 2008)

hello,

wouldnt be an issue today Explod, as no-one saves anymore

thankyou
robots


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## sassa (8 September 2008)

As one financial blogger put it on Naked Capitalism-
"Today equities are going to fly.I cannot predict for how long.The crash is going to be spectacular."
Prediction,of course.


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## wayneL (9 September 2008)

The $64,000,000 question is:

What does this change?


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## Aussiejeff (9 September 2008)

wayneL said:


> The $64,000,000 question is:
> 
> *What does this change?*




Well-l-l-l.....the NEGATIVE side of all this seemingly POSITIVE action according to Bloomberg,

(a) "*Freddie lost 83 percent* to 88 cents, while *Fannie Mae dropped 90 percent  to 73 cents*!!! 

(b) Citigroup and Lehman Brothers Holdings Inc. *lowered their recommendations on the shares*. 

(c) Merrill Lynch & Co. *cut its share-price forecast for Fannie Mae to 50 cents* (a further 32% fall in share "value")  and its *estimate for Freddie Mac to 25 cents* (a further 72% fall in share "value" ).

(d) Banks with large holdings of Fannie Mae and Freddie Mac preferred shares have failed to join in the advance *as the takeover eliminated the two companies' dividends*!!

eg: Sovereign Bancorp Inc., the second-largest U.S. savings and loan, had stakes in Fannie and Freddie valued at $623 million as of June 30. *Sovereign slid 6.6 percent to $9.02* (and will likely slide much more, given Citi, Lehman & Merrill's forecasts!). Gateway Financial Holdings Inc., based in Virginia Beach, Virginia, fell 25 percent to $5.35. Midwest Banc Holdings Inc., based in Melrose Park, Illinois, tumbled 25 percent to $4.48. Note: Gateway and Midwest aren't in the S&P 500.

The Bloomberg report also notes the following "Profound Effect' of the takeover - 

"*The dilution of common equity as well as preferred shares is going to have a pretty profound effect on other financial institutions that carried the preferred and convertible preferred shares as part of their capital base*,'' Michael Mullaney, a Boston-based portfolio manager at Fiduciary Trust Co., which oversees $10 billion".


So, I wouldn't be at all surprised if the current "market euphoria" subsided just a tad, once all the holders of Fannie & Freddie shares tote up their stunning losses going forward!


aj


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## pepperoni (9 September 2008)

What is really troubling me is fannie may and freddie mac have about 5.2 bil in loans a percentage of which are bad and making them insolvent.  Not good. 

BUT the US treasury itself has only 5.5 bil loans some of which must also be bad so they must already be a bit sick if not insolvent like the others???

BUT THEN if the treasury bails out fannie and freddie its really gonna have to be one very sick puppy from this moment until god knows when?  Esp having already bailed out Bear Stearns and some rates and mice?

I would think things have fundamentally gone from very bad to potential doomsday scenarios.

Any yet our market jumped over 3% already?



ONE OTHER FACTOR ... the fin review says china has been pumping tonnes of its reserves into US bonds and the like ... what happens when the US struggles with those commitments?  Do they try to honor them and have China foreclose and put the Entire US of A up for sale?

Or do they wipe the obligations out and let the simmering tensions turn into some real drama?


Dunno how this wil unfold but Im tending to think the US might have been better off in the long run letting the failures die and cop the recession.

Can nationalising huge bankruptcies lead to anything good without the sudden rebirth of a boom envirnment for 5-10 years????

(And yes all this is on a very superficial understanding of the facts_


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## Happy (9 September 2008)

My take on it is just pure assumption.

What if government after taking over will be softer on homeowners?

Scale of people just walking off from impossible to pay mortgages might be greatly reduced.
Hope it doesn’t create boom, but also hope it will avert or at least delay the bust.


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## dhukka (9 September 2008)

pepperoni said:


> What is really troubling me is fannie may and freddie mac have about *5.2 bil *in loans a percentage of which are bad and making them insolvent.  Not good.




I think you mean $5.2 trillion?


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## pepperoni (9 September 2008)

dhukka said:


> I think you mean $5.2 trillion?




Sorry thats correct ... they are both in the 5 trillion range. Not a number I type often


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## robots (9 September 2008)

wayneL said:


> The $64,000,000 question is:
> 
> What does this change?




hello,

not one thing for the average joe, people will continue to lose money on companies,

today its fannie and freddie, tomorrow someone else

its been going for a century

give us a shout when that property goes to 0 or loses 90% in a day

more certificates for the drawer

thankyou
robots


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## cuttlefish (9 September 2008)

wayneL said:


> The $64,000,000 question is:
> 
> What does this change?




I see you've already adjusted it from 64,000 to 64,000,000 to account for inflation but I suspect it might need to be elevated to the 64,000,000,000 question after this is all over.

"Who wants to be a millionaire" will need to be renamed "who wants to be a billionaire".

I think we're in for hard times having to live through all these nomenclature changes and the rewording of some of our common idioms and phrases to adjust for the inflationary impact.  

But apart from that I'd say everthing should be fine really ... yes ... just fine ...


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## explod (9 September 2008)

robots said:


> hello,
> 
> not one thing for the average joe, people will continue to lose money on companies,
> 
> ...




Agree in your idea of advancement, but what a dreadful way to achieve it.

Only someone sick could be impartial to the innocent majority who have been condition to be robbed without any understanding.


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## cuttlefish (9 September 2008)

robots said:


> give us a shout when that property goes to 0 or loses 90% in a day




Already happened in Detroit

Foreclosure fallout: Houses go for a $1

http://www.detnews.com/apps/pbcs.dll/article?AID=/20080813/METRO/808130360/&imw=Y


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## robots (9 September 2008)

cuttlefish said:


> Already happened in Detroit
> 
> Foreclosure fallout: Houses go for a $1
> 
> http://www.detnews.com/apps/pbcs.dll/article?AID=/20080813/METRO/808130360/&imw=Y




hello,

and australia?, you wont find anything because you dont need a 9mm in your pocket to walk down the street here

now lets see, bond, HIH, Allco, B&B (and all associates dropped how much?) one I got hit on MSC, its all a sick joke

thankyou
robots


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## pepperoni (9 September 2008)

Its like allco bailing out centro.

Only way it works is by printing money in zimbabwean proportions???

So just when we thought inflation might abate ...


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## cuttlefish (9 September 2008)

Its going to be interesting to see how much money the treasury will have to inject into the FDIC before this is all over as well.  (on top of Fanny and Freddie).


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## Buddy (9 September 2008)

robots said:


> hello,
> 
> wouldnt be an issue today Explod, as no-one saves anymore
> 
> ...




Rubbish!

Robot, judging by you're other posts you are either the ultimate pessimist, and anarchist, or you're taking the mickey out of us.


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## pepperoni (9 September 2008)

Buddy said:


> Rubbish!




Actually thats a rare robots post I think is right ... saving has been out of fashion for a few years from what ive seen.


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## Buddy (9 September 2008)

pepperoni said:


> Actually thats a rare robots post I think is right ... saving has been out of fashion for a few years from what ive seen.




So, you don't classify superannuation as saving?

In any case, I know lots of people who save (cash that is).  Maybe I hang around in the wrong circles.


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## pepperoni (9 September 2008)

Buddy said:


> So, you don't classify superannuation as saving?
> 
> In any case, I know lots of people who save (cash that is).  Maybe I hang around in the wrong circles.




agree super is saving - forced to some degree of course.

And no id say you are in the right circles.


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## wayneL (9 September 2008)

cuttlefish said:


> I see you've already adjusted it from 64,000 to 64,000,000 to account for inflation but I suspect it might need to be elevated to the 64,000,000,000 question after this is all over.







Sheesh, there are such insane figures being bandied about that 64,000 just seemed so... insignificant.

On another vein, are we showing our age cuttlefish? http://en.wikipedia.org/wiki/The_$64,000_Question


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## Julia (9 September 2008)

pepperoni said:


> Its like allco bailing out centro.
> 
> O



Great analogy.



> The world of finance is rife with numerous examples of moral hazard problems like insurance, lending and securitization, investment decisions etc. The most classic moral hazard issue arises when greedy lenders throw out due diligence standards and pour money at anybody willing to borrow, in the firm belief that the system will not, or cannot afford to, let them fail.


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## refined silver (9 September 2008)

When the brown stuff hits the fan it doesn't just disappear goes everywhere! 

At the moment (with the help of a dumb, and compliant media) everyone thinks it has disappeared. Wait a week of two before people start seeing smelly stuff everywhere.

Eg. The govt has taken over Fannie and Freddie in a "conservatorship"

"







> A conservatorship is an entity established by court order that some property or a person be subject to the legal control of another person or entity. Many jurisdictions use the term "guardianship of the person" to refer to the same legal principle. A person under conservatorship is a conservatee or protected person; a person under guardianship is a ward. In most states, a court visitor or some other investigatory person or agency must review the facts of the case and submit a report, usually required to be in writing, to the court. Court visitors are often required to be experts in some appropriate field, such as social work or law. Additionally, states may require a "guardian ad litem" to be appointed for the person. The guardian ad litem often is an attorney, but has more expanded duties and powers than an attorney. Procedures for conservatorship of an adult are often different from those for minors."




from www.answers.com/topic/conservatorship

Read it carefully. Its not yet a guarantee without reservation, which is what the Chinese, Russians, etc need to keep buying US agency debt and not dump it, which would send interest rates soaring, USD plunging, and US econ, housing, stock mkt, into deep depression.

Also,   

The "conservatorship" counts as a bankrupcy and has triggered a Credit Default Swap (CDS) default. This is a $62t mkt and prob the biggest entity has had a credit event and triggered all the CDSs written against it.

http://www.ft.com/cms/s/ed1e14c6-7d...tml?nclick_check=1&_i_referer=&nclick_check=1

and

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajsxbVS.W2lQ&refer=home

Finally, as mentioned by others, hundreds of US banks hold ordinary and preferred shares in Fannie and Freddie which have just been slaughtered. They were already in trouble, whats this done to their capital base??


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## pepperoni (9 September 2008)

refined silver said:


> Read it carefully. Its not yet a guarantee without reservation, which is what the Chinese, Russians, etc need to keep buying US agency debt and not dump it, which would send interest rates soaring, USD plunging, and US econ, housing, stock mkt, into deep depression.




Id say the world superpowers will be looking very closely at ways the markets can be rigged to their advantage and disadvantage night now.

Next few months could be a sort of new cold war fought in the markets.


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## dhukka (9 September 2008)

refined silver said:


> Finally, as mentioned by others, hundreds of US banks hold ordinary and preferred shares in Fannie and Freddie which have just been slaughtered. They were already in trouble, whats this done to their capital base??




Yep, Wells Fargo will take in excess of *$400* million in writedowns. 



> *Wells Fargo Says It Will Take Third-Quarter Write-Down On Fannie, Freddie Holdings*
> 
> Wells Fargo & Co. said it will take a third-quarter write-down on its investments in securities issued by Fannie Mae and Freddie Mac.
> 
> The nation's fourth-largest bank by stock market value said its perpetual preferred investments in Fannie and Freddie are included in securities available for sale at a cost of $336 million and $144 million, respectively. Those securities now trade at 5% to 10% of their original value.


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## cuttlefish (9 September 2008)

wayneL said:


> On another vein, are we showing our age cuttlefish? [URL="http://en.wikipedia.org/wiki/The_$64,000_Question"]http://en.wikipedia.org/wiki/The_$64,000_Question[/URL] :eek:[/QUOTE]
> 
> 
> [I]The $64,000 Question was a popular United States television game show from 1955 to 1958[/I]
> ...


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## wayneL (10 September 2008)

It seems the fanniefred intervention hasn't lived up to the PollyAnna's expectations.

Cuttlefish,

I only ever saw re-runs.


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## Porper (10 September 2008)

wayneL said:


> It seems the fanniefred intervention hasn't lived up to the PollyAnna's expectations.
> 
> Cuttlefish,
> 
> I only ever saw re-runs.







Thought this was quite interesting.

Basically all the intervention and "good news events",and the price action afterwards.

Anybody see a trend here ?


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## Aussiejeff (10 September 2008)

Porper said:


> Thought this was quite interesting.
> 
> Basically all the intervention and "good news events",and the price action afterwards.
> 
> *Anybody see a trend here ?*





Reminds me a bit of the "Great Aussie Tinny Race" up Darwin way every year. Lots of desperate, frantic - but ultimately fruitless bailing - with only one possible outcome....


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## wayneL (10 September 2008)

Aussiejeff said:


> Reminds me a bit of the "Great Aussie Tinny Race" up Darwin way every year. Lots of desperate, frantic - but ultimately fruitless bailing - with only one possible outcome....








The best allegory I've ever heard. ROTFL


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## CanOz (10 September 2008)

Is this the "orderly exit" that they were all looking for?

Cheers,



CanOz


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