Fannie Mae and Freddie Mac??

[ghotib]

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.

The problem is that they seem to be broke, or at least the market thinks they are. Their share prices have crashed this week and their debt, which is usually rated AAA because of an implied Government guarantee, is trading as if it is rated single A.

This morning the Wall Street Journal is carrying a story that the Bush administration is considering what to do if they fail.

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

 

[Sean K]

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!!

 

[wayneL]

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!!

Grapevine says they might be nationalized.

 

[Sean K]

Re: Fanny Mae and Freddy Mac??

Grapevine says they might be nationalized.

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

 

[YChromozome]

Re: Fanny Mae and Freddy Mac??

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

 

[professor_frink]

Re: Fanny Mae and Freddy Mac??

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?

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

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

 

[professor_frink]

Re: Fanny Mae and Freddy Mac??

Grapevine says they might be nationalized.

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

 

[Sean K]

Re: Fanny Mae and Freddy Mac??

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

The opposite of Communism perhaps.

 

[Sean K]

Re: Fanny Mae and Freddy Mac??

The opposite of Communism perhaps.

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

 

[juw177]

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.

 

[IFocus]

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"

 

[spooly74]

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!!

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

 

[juw177]

US dollar is dead.

 

[CAB SAV]

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

 

[mayk]

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

 

[wayneL]

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

 

[wayneL]

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

 

[So_Cynical]

US dollar is dead.

And Gold is king.

 

[explod]

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

A sorry dro.p

Re: Fannie Mae and Freddie Mac??

--------------------------------------------------------------------------------


Quote:
Originally Posted by juw177
US dollar is dead.


And Gold is king.

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.

 

[wayneL]

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

Party time (put it in the credit card)!