Fannie and freddie...govt taken over

Definite doom

I am amazed to watch this happen in the USA
why is it that the American peopel don;t revolt against this government? Howcome they led them take them to the slaughter like lambs? How can you all sit back, eating your fat fastfood, watch your dumb tv and do nothing?!?!?!

What would stop you to get out of your lazy chair today and just march up to Wahsington?

Why not?

What do you have left to loose?

Revolt against the Government are you serious, have you not watched the Conventions how the cops and UN Troops are lined up even using clubs and gas to get rid of the peaceful protest marchers. What do you think they would do in a real rebellion! Most likely shoot them.

What does it mean, please?! I don't know anything about Wall Street. Won't it be okay since the gov is taking it over?

wow its gonna be a BLACK MONDAY now...this aint good folks...

You`re wrong, it`s GREAT. Finally

this is huge....I believe the two entities control
over 1.5 trillion in real estate...this is gonna hurt



Over 5 trillion, and IIRC they are 1.4 Trillion Negative Equity on much of these assets........

Well here we go.....essentially insolvency if I am reading this correctly.....



[link to www.washingtonpost.com]



Fannie Mae, Freddie Mac to be Put Under Federal Control, Sources Say


By David S. Hilzenrath, Neil Irwin, and Zachary A.Goldfarb
Washington Post Staff Writers

Friday, September 5, 2008; 8:33 PM

The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives, and use government funds to prop them up, government officials told the two companies yesterday, according to sources familiar with the conversations.

Under the plan, the federal government would place the firms in a legal state known as conservatorship, the sources said. The value of the company's common stock would be diluted but not wiped out while the holdings of other securities, including company debt and preferred shares, would be protected by the government.

Instead of giving each company a big capital infusion up front, the government plans to make quarterly infusions as the companies' losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue.

As the pace of discussions accelerated today, Treasury officials contacted senior congressional leaders, telling them they might be briefed on the plan this weekend and asking for telephone numbers at which they could be reached.

Fannie Mae and Freddie Mac have backed 70 percent of new mortgages in recent months, but have incurred vast losses on their loan portfolios as the housing market has tanked. Treasury Secretary Henry M. Paulson Jr., the architect of the plan, and other government leaders have said the companies remain vital to preventing an even broader financial crisis and economic downturn.

The chief executives of the two companies were called into afternoon meetings today at the 17th Street NW offices of the Federal Housing Finance Administration, their direct regulator, according to sources familiar with the events.

Executives of the two companies were told to show up without being told of an agenda. Daniel Mudd, chief executive of Fannie Mae, was accompanied by outside lawyers. He showed up at around 3 p.m. for a two hour meeting. Richard Syron, chief executive of Freddie Mac, started his meeting at around 5 p.m., accompanied by several members of the Freddie Mac board.

Paulson, Federal Reserve Chairman Ben S. Bernanke, James Lockhart, the director of the housing finance regulator told the executives of the plan, which would strip them of their jobs.

Heres the part you were speaking of..




Fannie and Freddie rescue dilemma- their stocks and debt are held by other banks
Another perfect example of the impossible state of affairs in the world credit crisis is Fannie/Freddie. And that means that if the Fed/Treasury does a bailout, their stocks collapse in value, and all the other financial institutions take losses on that because they hold lots of Fannie and Freddie stock. Of course the stock is already in the tank, but the issue is still there and shows the interlinkages.

Then there is the question of the Fannie and Freddie bonds out. That is another can of worms, and the Chinese just stated this week that a collapse of Fannie-Freddie could lead to an economic catastrophe – their Central Bank advisor Yu Yongding stated. The Chinese hold hundreds of billions ($376 billion mostly in US agency bonds) of Fannie and Freddie debt and stock.
In many respects, because of all these cross holdings of the Fannie Freddie bonds and stocks by banks everywhere, and by Central Banks, it would seem that the losses cannot really be removed from the financial system – ie purged. If Fannie and Freddie are bailed out, their stocks collapse and those losses now translate to all these other banks and central banks that hold them. It’s virtually a no win situation.

These cross linkages reveal that it is virtually impossible, even with bailouts, to purge the ever growing $500 billion and counting losses of capital from the banking/financial system. The latest numbers being speculated on are the losses will be over $1 trillion (IMF) and $2 trillion or more (Roubini).

Now, maybe $2 trillion doesn’t sound like a lot compared to the entire world economy. The trouble is, that capital is leveraged anywhere from 10 to 50 times by the financial system. Fannie and Freddie have 60 to 1 leverage.

Losing $2 trillion of capital will totally wipe out the entire world financial system for a decade because of the leverage at 60 to 1. Basically, unless those losses can be purged in some way, it has to be earned back over a period of years/decades. That essentially cripples the entire world financial system.

I remember a very well put quote from a banker last Fall 07 about the credit crisis then. (I’m sorry, I don’t remember his name.) He stated “The credit deleveraging will not be denied.” I think that sums things up very well.

It appears that a relentless unwinding of the world credit/finance bubble with many dimensions and twists and turns cannot be avoided, even if the central banks were willing to try. The issue is the cross linkages and the fact that the capital losses in every corner of the world will not and maybe cannot be purged from the financial system, even with big public bailouts. There is possibly no way to do it other than to allow things to just unwind and try to re earn it all back the hard way.

Even if it appeared the central banks could figure out a way to purge the losses from the financial system, and take them on their books, then their currencies are in danger. The capital losses are there – period. The deleveraging of 60 to 1 credit is happening – period. The financial institutions don’t trust each other – period.

The Fannie – Freddie bailout proposals are being discussed in the light that the US government/Treasury can just about double the so called national debt from $9 trillion by possibly adding another $5 plus trillion, as they effectively have to guarantee those GSE bonds. That is now playing into a debate on the US fiscal situation….as if the USD needed another problem.

In short, once again, we see that it appears impossible to purge the effects of so much lost capital to the world financial system. The deleveraging will not be denied. We see this a year after the Credit Crisis I exploded worldwide Aug 07.

End of a huge world bubble

If that is true, then the theory I laid out above, that we are witnessing a peak in a parabolic finance/asset/stock bubble of world proportions, is going to pan out. I think the entire credit crisis can be looked at from that perspective. We are merely witnessing the relentless unwinding of the biggest financial bubble in history. And, ominously, this particular bubble has grown from the end of WW2 to the present. That is one HUGE economic bubble, and this one envelops the entire world. This is not just a bubble in one country’s economy.



The point of emphasizing it’s from the end of WW2 is that we are not talking merely about a banking crisis, or whatever. We are talking about the deleveraging of the greatest economic/finance bubble in history. Once the level of leverage reached 60 to 1, it becomes impossible to stay ahead of the deleveraging, even for central banks. The implications are staggering. Every major economy in the world is involved. The outcomes of deleveraging this monster bubble, represented by the green oval, will be what I term Credit Crisis II. At 60 to 1 leverage, a loss of 1 to 2% wipes out the capital.

Whether it’s the Chinese Central Bank (BOC), the Fed, the ECB, and then all the other world financial institutions of every type, insurance companies, gigantic retirement funds, other banks, you name it, the present losses of capital to the world financial system is pervasive worldwide.
Nobody will escape the wrath of this deleveraging, and that is why I call it Credit Crisis II. Credit Crisis I was only the preliminary round…Credit Crisis II is characterized by the realization that the gigantic losses of capital cannot be purged from the financial system, even with big public bailouts. And that this deleveraging cannot be stopped. There are too many interlinkages. And, without writing a book on this, the next victim when Credit Crisis II unfolds, will be massive world currency instability. This will make any of the banking and currency crises we have seen since WW2 look like child’s play. It is not clear when Credit Crisis II begins but it is threatening already.

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

The section before that was about the Spanish banks and Frankfurt having to hold up the Spanish bank.
(apparently Freddie and Fannie happened first --so lets go with that part of it.

Revolt against the Government are you serious, have you not watched the Conventions how the cops and UN Troops are lined up even using clubs and gas to get rid of the peaceful protest marchers. What do you think they would do in a real rebellion! Most likely shoot them.

agreed. These revolt comments are from euroes who have not stood up to anything in a long time.

The Judao Christians will just sit back and say Jesus is coming back why do anything.

I know the Christians who pay attention to Texe Marrs are wide awake.

Revolt against the Government are you serious, have you not watched the Conventions how the cops and UN Troops are lined up even using clubs and gas to get rid of the peaceful protest marchers. What do you think they would do in a real rebellion! Most likely shoot them.

agreed. These revolt comments are from euroes who have not stood up to anything in a long time.

I know the Christians who pay attention to Texe Marrs are wide awake.

The Judao Christians will just sit back and say Jesus is coming back why do anything. That is exactly what the Government wants you to be don't do anything, just enjoy the sports, soaps and etc. Until Big Brother comes for you.

If the soldiers and cops would turn their guns at the Insiders and at the rich money holders then we could have strength to take our Country back (we need them). I dream for lawmen to say once we the people are taken out then the Insiders will begin eliminating them too. Remember this, their Agenda is to decrease the population 90%. Lawmen, do honestly believe the Insiders give a hoot about you or your family?

tssssss every American has guns at home
you Americans eat and sleep with guns
you are even born with a gun at your belly instead of a navalcord it seems sometimes
and now you wnat to hide behind waiting for police and military?
you peopel are brave enough to slaughter eachother on highschools, in shops or simply on teh street for 5 bucks
and now that yoru future is at stake you hide behind waiting for the paratroopers?!?!?!?
that sounds kinda like a lame excuse and coward

The Judao Christians will just sit back and say Jesus is coming back why do anything.

you need to get over your problems with Christians. Not all of us feel we will be saved from anything.