Are Fannie and Freddie The Next Bailout Candidates ???

[seeker6591]

CNN Money reports that S&P raises the possible scenario of a $1 trillion bailout of Fannie Mae and Freddie Mac.


Here is the link for those that are interested:


http://utopiaguide.com/forums/misc.php?do=buddylist&buddies=0+40370+44500



As always, discussion here is appreciated.

 

[seeker6591]

bad link:

here is the correct one:


http://www.bloggingstocks.com/2008/04/22/is-a-trillion-bailout-of-fannie-freddie-imminent/

 

[Slinky Bender]

From 2 years ago:

Back when the NASDAQ tanked, Greenspan sat before Congress (The Senate?) and some Congressman (Senator) asked a great question: if the booming economy was due to "The Wealth Effect" promoting spending, what would happen now with people not spending their stock market profits anymore? Greenspan's answer put a chill down my spine: he said that they had done extensive research and concluded that the spending people were doing wasn't from their stock portfolios, but from tapping the equity in their homes thru refinancing, and that was the money they were spending. ( http://www.freddiemac.com/news/finance/commentary/sp-comm_082203.html , http://www.econ.yale.edu/cowles/news/shiller/rjs_01-11-10_econ_half-truth.htm )

A couple of years later:

http://www.msnbc.msn.com/id/9545234/

http://themessthatgreenspanmade.blogspot.com/2005/06/wealth-effect-on-steroids.html

http://www.federalreserve*****/boarddocs/speeches/2005/200509262/

There was a really good analysis by Bill Groos of Pimco in ?the fall of 2005? but I can't find it right now.

 

[Daddycool]

AP

Fannie Mae loses $2.2B in 1Q; warns of "severe weakness"
Tuesday May 6, 8:14 am ET
By Marcy Gordon, AP Business Writer
Fannie Mae reports $2.2 billion loss in first quarter and warns of "severe weakness" in market

 

[seeker6591]

tick...tick....tock

 

[seeker6591]

I have not been able to confirm this one yet...

but apparantly...Sallie Mae also has some "cracks in the bow" >

 

[seeker6591]

60:1 leverage for fnm and fre ??? more news here.

here is an update on the developing fnm/fre situation.




http://www.bloggingstocks.com/2008/...60-to-1-leverage-could-drive-1-trillion-bail/

 

[Slinky Bender]

http://www.nytimes.com/2008/07/08/business/08fannie.html?hp

 

[jseah]

http://www.nytimes.com/2008/07/08/business/08bank.html?scp=5&sq=indymac&st=cse

This bank will beat them to the bankruptcy court.

 

[aceofclubs26]

http://www.nytimes.com/2008/07/08/business/08fannie.html?hp

"Additionally, Freddie Mac and Fannie Mae were battered by news on Monday that their cost of borrowing, when compared to what the government pays, had increased to their widest spread since March, when it set a 22-year record. And some analysts raised fears that the companies would suffer from chaos in the private mortgage insurance market, where Fannie Mae and Freddie Mac have sought protections from the risk of borrower defaults."

I'm pretty sure part of the problem with relying on mortgage insurance was that many "no money down" loans over the past 5 years were done as two mortgages bypassing the requirement of having mortgage insurance.

 

[Slinky Bender]

yes. they were 80/10's

 

[seeker6591]

the scope of this is simply unbelievable................

Freddie Mac has a loan portfolio of 1.5 trillion dollars and Fannie Mae's is over 700 billion. Together they own or guarantee some 5.2 trillion dollars in loans, or about 40 percent of the total value of home loans in the United States.

 

[fuckingahole]

that is pretty insane... what will all this mean in the long run...

 

[Axe]

that is pretty insane... what will all this mean in the long run...

It means what it always means. The American taxpayer will foot the bill for yet another government fuck-up.

 

[q32003]

So who benefits from this? Serious question.

 

[seeker6591]

thats a great question....but other than system risk issues...I am stumped.


perhaps slinkybender could help here?


thanks.

 

[Monk]

So who benefits from this? Serious question.

From what? From the government bailing them out? Or, from the panic that occurred in the markets last week over all of this?

 

[Boywonder2]

So who benefits from this? Serious question.

Everyone along the way....the initial person who gets a commission for booking your mortgage, the real estate appraiser for overstating the realistic value of the real estate, the entity selling off the loan, the entity buying the loan and packaging it to wall street....and since it was a winfall of cash for everyone and the person getting the loans were happy and landing in a house they couldn't afford or refinancing and pulling money out for other things....taking vacations, buying Escalades, paying off credit cards etc etc and as stated above we the common taxpayer will wind up footing the bill as always.

 

[aceofclubs26]

the person getting the loans were happy and landing in a house they couldn't afford or refinancing and pulling money out for other things....taking vacations, buying Escalades, paying off credit cards etc etc and as stated above we the common taxpayer will wind up footing the bill as always.

Where have you been? These people are the common tax payer. It's amazing how greedy most people are in this country when it comes to spending....

I'd be more concerned about how much higher the interest rates associated with a loan will become or how difficult the credit crunch will be. I'm not just talking mortgages.....I believe student loans, car loans, etc will be tougher as well.

 

[Boywonder2]

Where have you been? These people are the common tax payer. It's amazing how greedy most people are in this country when it comes to spending....

I have been right here.....You said the optimum word MOST.....but not me. I live within a budget that I can afford...