Freddie/Fannie are Toast?

Unless of course, another bailout. Private investors won't touch it now, and if Buffet gives it a thums down, as he did, well, what's left?

Freddie/Fannie Woes

Freddie spokesman Douglas Duvall confirmed to The Associated Press Friday that the company's management has been in talks with potential investors this week as part of ongoing discussions to raise capital. He declined to give any details about the meetings, possible investors or structures. The Wall Street Journal reported on the talks Friday.

Freddie promised in May to raise $5.5 billion to shore up its finances, but hasn't yet and its declining share price makes raising that money far less feasible.

But here's a familiar note. *extreme sarcasm*

Investors appear to believe existing common stockholders would get nothing if there is a government bailout, a view Buffett also shares. What remains unclear is whether investors in preferred shares - a type of investment that incorporates elements of both stocks and bonds - will also be wiped out.

On Friday, Moody's cut its ratings on the companies' preferred stock five notches to "Baa3" from "A1." A rating of "Baa3" is one notch above junk status. It also put them on review for possible downgrade, saying they each have limited ability to raise equity. The ratings agency believes the likelihood of government intervention has risen.

Don't they publish a list at the end of each year for new terms? I'll be darned if the word "Bailout" isn't on there with a new definition "Corporate Welfare"

And now the global ramifications (remember folks, everyone else is invested in our worthless securities.

Failure could be World Catastrophe

Aug. 22 (Bloomberg) -- A failure of U.S. mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system, said Yu Yongding, a former adviser to China's central bank.

``If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,'' Yu said in e-mailed answers to questions yesterday. ``If it is not the end of the world, it is the end of the current international financial system.''

Buy it or not, you best think about this, especially because we can't keep bailing out everything that's failing. I think this has to hit the fan, but it's going to have a large impact if we do and a large impact if we don't.



[edit on 8/23/2008 by Relentless]

Short video for some more perspective on Fannie:




Woohoo! I finally linked a video



[edit on 8/26/2008 by Relentless]

reply to post by Relentless


Saw that video yesterday Relentless, I almost posted it myself.

Even the shills on CNBC have pretty much conceded that the common stock for FAN/FRE is most likely a zero after Paulson fires his bazooka. What happens to the preffered and more importantly the debt out there is really where the question lies. Will all prior debt issued be made whole or will there be a substantial haircut to it? Though I'm totally against the taxpayer being left on the hook for past debt(the prospectus for that debt explicitly stated that it was not explicitly backed by the Gov), I can deal with it being backed at somewhere in the 40-60 cents on the dollar level. It's a given that debt going foward will be fully govt backed like GinnieMae, I can deal with that as well as long as some real changes take place in the regulation of the GSEs takes place and they stop acting like hedge funds.

I think I've heard you say that you work in the real estate industry in some level. I'm hearing that the mortgages that they are currently writing, are some of the best they've done in years. Do ou have any thoughts on that?

Private investors won't touch it now, and if Buffet gives it a thums down, as he did, well, what's left?

Can't blame them really. It was a bad business decision of their part - and "natural selection" of the business sector should be allowed to take its course

Drive through main street of any small town in America and you'll see, among other things, tall brick buildings with old signs painted on them saying things like "FURNITURE" and "PHARMACY" or perhaps a barber shop, etc

They are businesses that have long since diminished because? Bad business choices. If they were a successful business, they'd still be there.

Freddi and Fanny should suffer the same fate.

Its like a parent spoiling their child:

If your kid keeps getting into trouble, and you keep sticking up for him without any type of disciplinary action in return

you are letting that child know they can get away with anything, as long as they still meet approval in your eyes



Freddie and Fanny should become toast - burnt beyond recognition as to serve to a warning for all future lenders.

Stop taking advantage of the little guy - because this is how it will end up

sure - the little guy signed the contract


but if you throw a steak in front of a dog - do you really think he's going to think twice about eating it?

offering a cash loan or a home loan, etc, to someone who has next to nothing is no different. You see it all the time when broke families get a little money - they go blow it because it makes them feel a little more human

Companies like freddie and fanny exploited that impulse and now they're reaping what was sewn

I'll gladly ride out the poor economy and wait for happier days to see these two mega-lending cess-pools cave in on each other.

[edit on 8/26/2008 by Andrew E. Wiggin]

Keep your eye on Sept 30th. If they can't raise some 250 billion is capital, then the SHTF.

Well then the SHTF......unless, honest to god if some stick safe comes out of this, we really got to search it out, cause it's not going to be a clean deal if you ask me.

reply to post by Andrew E. Wiggin


I'm with you, we need to let them go down the toilet, but it's going to hurt all of us bad.

Ready and waiting - just get it over with already

Originally posted by jefwane
I think I've heard you say that you work in the real estate industry in some level. I'm hearing that the mortgages that they are currently writing, are some of the best they've done in years. Do ou have any thoughts on that?

Not seeing it myself, if anything credit is getting too tight for your average bear (pun intended).