Fannie Mae and Freddie Mac??

[onebytwo]

Re: Fanny Mae and Freddy Mac??

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

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

 

[pepperoni]

Re: Fanny Mae and Freddy Mac??

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?

 

[Whiskers]

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.

The dramatic move to help stabilise the two mortgage giants also includes a proposal to give the Treasury Department the authority to take an equity stake in the companies.

http://www.theaustralian.news.com.au/story/0,25197,24015819-20142,00.html

 

[dhukka]

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.

 

[sqwark7600]

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.

 

[sqwark7600]

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

 

[noirua]

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.

 

[Knobby22]

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.

 

[Mofra]

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.

 

[refined silver]

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.

 

[Trembling Hand]

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!

 

[refined silver]

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.)

 

[Greg71]

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

 

[Macquack]

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)

 

[Out Too Soon]

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

 

[prawn_86]

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....

 

[Greg71]

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.

 

[robots]

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

 

[Macquack]

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

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

 

[robots]

hello,

lets shut the banks then and see how far they go

thankyou
robots