AboveAverage

Gov't may soon take over troubled mortgage finance giants Fannie Mae, Freddie Mac

Recommended Posts

Hope y'all don't have stock in your retirement portfolios...just about every stock mutual fund has some Fannie or Freddie in it. Those shares will be wiped out if the government places them into conservatorship.

Share this post


Link to post
Share on other sites

That was always the biggest misconception of a misconception.

Many critics always felt that Fannie Mae and Freebie Mac falsely misled the public because so many people thought that they would always be backed by the government in case anything bad happened. They just felt that that would never happen and that these outfits were giving the public a false sense of security.

However, other critics always felt that Uncle Sugar would indeed step in and bail them out whenever they did something stupid.

Share this post


Link to post
Share on other sites

There are no winners here. No matter what happens, the bottom line is that the tax payer will have to shoulder the financial fall out of this mess :evil: . For the folks that own FRE or FNM, yikes!!!! You guys are going to get it twice. The chances of the common stock of these two gse's being wiped out is pretty good. At this point these two have become a long shot lottery ticket.

Obviously this is a complex issue but all I am saying is who is going to be holding the bag when the dust settles, you and I. :twisted:

Share this post


Link to post
Share on other sites

Thank you, once again, to our wonderful Congress. It seems to be the theme these days that nothing ever fails. We just privatize gains and socialize losses. Anyway, should make a really interesting Monday am trading day. Anyone holding Fannie or Freddie common or preferred just got creamed. The feds just crushed equity holders by one massive ongoing dilution, and end to the dividend, and subordination of all classes of shareholders. Ouch. On the other hand, bondholders just WON huge. Bonds which were almost trading at worthless levels now have the backing of the US gov't and they have instantly become collectable. A big windfall for Bill Gross, PIMCO, and many folks buying and crossing fingers for a taxpayer bailout. :evil:

So the treasury will be putting in up to $300 billion...interesting for a treasury that is already insolvent and only paying the curent bills by selling US debt around the world.

The best part of the plan is that starting in 2010 they are requiring Fannie and Freddie to reduce 10% of their portfolio each year until they are a tiny $250billion. Hoping they'll come to their senses and pack the GSEs in entirely.

Nevertheless, with the blackhole of mortgage-backed securities being filled by taxpayer money, the broad markets are ecstatic. I'm thinking the Down opens up 400 points tomorrow. And we see a +800 point week.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCGy_.UswSS0&refer=home

Share this post


Link to post
Share on other sites
:confused: No doubt the traders are going to love good quality banks like JPM tommorow. I am currious about something did you mean to say the preffered in the GSE's is gone also?

Share this post


Link to post
Share on other sites
I'm thinking the Dow opens up 400 points tomorrow. And we see a +800 point week.

No lie, if you are right, you will definitely do all my stock picking. Seriously. I should just fund my investment account, PM you my info and then just have you go to town... :lol:

This whole situation, to me as a layman, definitely tells me that this housing mess will definitely not be going away anytime soon. While I do not have a mortgage yet, I fear that I am definitely going to need to be even more on point to make sure I can get funded for a house.

As for the market itself...the only things I have are retirement accounts (the 457 and IRA) that does not include my pension. We are going to see the pain in the markets it looks like for a "hot minute", but hopefully by the time I'm 60, this would all be like a bad dream.

Share this post


Link to post
Share on other sites

:shock: I just saw the bid/ask on FRE & FNM :shock: . WOW!!! If you own some of this in your portfolio 88-) my heart goes out to you :( .

Looks like the debt is going to be ok.

Share this post


Link to post
Share on other sites

FRE & FNM stock are now virtually worthless.

Haha. This is pretty funny though. Nothing like stating the obvious:

...According to U.S. Treasury data, Japan is the second-biggest holder of U.S. agency debt with $229 billion, after China with $376 billion as of mid-2007.

"Different people may have different responses. From my point of view this is positive." China's central bank governor Zhou Xiaochuan said.

Share this post


Link to post
Share on other sites

http://www.bloomberg.com/markets/stocks/wei.html

The world markets last night...

INDEXVALUECHANGE%CHANGETIMEDJ EURO STOXX 50 € Pr3,320.41134.584.22%08:51FTSE 100 INDEX5,440.20199.503.81%08:51CAC 40 INDEX4,394.12197.464.71%08:51DAX INDEX6,335.92208.483.40%08:51IBEX 35 INDEX11,627.50487.804.38%08:51S&P/MIB INDEX28,653.001,086.003.94%08:46AEX-Index403.2614.043.61%08:51OMX STOCKHOLM 30 INDEX862.0737.064.49%09:06SWISS MARKET INDEX7,234.41257.823.70%08:51

INDEXVALUECHANGE%CHANGETIMENIKKEI 22512,624.46412.233.38%03:00HANG SENG INDEX20,794.27860.994.32%04:10S&P/ASX 200 INDEX5,067.50190.403.90%02:47

Share this post


Link to post
Share on other sites
This whole situation, to me as a layman, definitely tells me that this housing mess will definitely not be going away anytime soon.

That's like seeing fire crews working on a fireline and planes and helicopters dumping water and saying the situation is hopeless.

Without 'em the fire would burn out on its own at some point.

With 'em you can't be sure the fire will be stopped in a reasonable time.

But what you can know is that they know their jobs, they do their jobs, and the fire will be contained and conqured just as quickly as they know how.

The housing mess could in fact be over by the end of the year. Or the pay-option arm bubble (a much smaller one set to crest in the spring) could make things a lot worse.

One thing that's for sure, the pay-option buyers were typically better credit risks to begin with and they bought costlier houses, which means that since the bubble is smaller than the subprime bubble there are fewer properties in that bubble than the numbers suggest.

With any luck, these will be the kind of people who in one way or another can absorb the economic hit. And the number of defaults will be relatively smaller than the number of defaults in the subprime bubble. But only time will tell.

Share this post


Link to post
Share on other sites
That's like seeing fire crews working on a fireline and planes and helicopters dumping water and saying the situation is hopeless.

I get what you are saying, but I never thought it was "hopeless" in regards to the situation of the housing market. But the pain will be with us for some time. In my personal situation, I care more how this will translate in me (or others similar to my financial/credit situation) seeing a mortgage. I could have easily been one of those sub-prime borrowers that helped caused this mess (even though the sub-prime lenders and the prime lenders who packaged those mortgages into securities will be the ones you and others are going to tell me are really the ones at fault).

Thankfully, I'm not...but maybe I should have gotten in when the gettin' in was good......only time will help me decide if I made the right call on that one.

Share this post


Link to post
Share on other sites

Focus on accumulating down payment and cleaning the report. The pressure to get people with decent credit into homes will only increase. Prices will be down, but a larger down payment will be necessary as a cushion against getting stiffed again the way debtors are doing today.

Share this post


Link to post
Share on other sites
I'm thinking the Dow opens up 400 points tomorrow. And we see a +800 point week.

Not a bad guess. Opened 300 points up. Hovering about 140 up for the day. We'll see if your weekly prediction is as close.

Share this post


Link to post
Share on other sites
Focus on accumulating down payment and cleaning the report.

That is pretty much what I'm doing.

I will be watching this Fannie and Freddie drama though....

Share this post


Link to post
Share on other sites

I guess I'm not alone with having real problems with these bailouts. Apparently Jim Rogers agrees:

http://biz.yahoo.com/cnbc/080908/26603489.html

"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this," Jim Rogers told "Squawk Box Europe."

Share this post


Link to post
Share on other sites
"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this," Jim Rogers told "Squawk Box Europe."

First, there is no thought whatsoever that the GSEs will not be able to pay Treasury back. None.

The question is how much will Treasury have to lay out, and how long will it take to get it back.

Treasury will get paid handsomely ... but the Fed will really make out. Remember, the Fed is a group of privately owned banks. The Fed is being cast as the white knight in this. Anytime they're cast as the white knight, what you're really looking at is the actual villain of the piece, and the one who will profit most in the end. The American people will not profit. The people being foreclosed on will not profit. The GSEs will not profit. The holders of stocks and bonds that are more or less worthless will not profit. The Fed, however, will have no problem profiting whatsoever. To quote Reese on the subject of Terminators: "It's what they do ... it's all they do."

Share this post


Link to post
Share on other sites

"From 2010, Fannie and Freddie will have to shrink their portfolios by 10 percent a year until they reach $250 billion, to reduce the risk to the taxpayer, according to the Treasury plan. But this may put additional pressure on the housing market, Rogers said.

"That's going to also ensure that house prices continue to go down. It's going to be harder and harder to get a mortgage."

That sucks.....that really really sucks.

Share this post


Link to post
Share on other sites
"From 2010, Fannie and Freddie will have to shrink their portfolios by 10 percent a year until they reach $250 billion, to reduce the risk to the taxpayer, according to the Treasury plan. But this may put additional pressure on the housing market, Rogers said.

There's no guarantee that more GSEs won't be born to take up the slack. Or the role could easily be filled by U.S. banks or even foreign banks, alone or acting in concert. Where deals need to be done, someone will step forward to do them. If nothing else, the homebuilders will band together and create one or more entities to get it done.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.