U.S. Considers Takeover of Two Mortgage Giants

U.S. Considers Takeover of Two Mortgage Giants

www.nytimes.com

Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.

(visit the link for the full news article)



Related AboveTopSecret.com Discussion Threads:
And now a bank run
Global Economic Crash Late July!

Well, this is starting to gain steam quickly. Want to know where all the bad mortgage paper that the Fed hasn't taken in collateral in their lending facilities. Well now you know. Wanna know who is going to pay for it. If you are a US taxpayer look in the mirror.

Freddie and Fannie are quasi-governmental entitites that have an implicit backing from the US Government. Both are publicly traded and have been literally butchered lately in regards to share price. I've heard that the two of these companies together have almost as much debt as the US government itself. A bailout of these two could easily cost taxpayers a TRILLION dollars. I've heard that the two together may have up to 5 Trillion in liabilities.

www.nytimes.com
(visit the link for the full news article)

[edit on 10-7-2008 by jefwane]

Hey its laisse-faire capitalism at its best . Private companies make risky or what some might call crazy or criminal investments and lose their shirts...simply have the American taxpayer bail them out. It is the free market American way. Government subsidizing private industry!! Straight from Ronald Reagan!! I don't mind lining these CEO's golden parachutes they deserve it they work soooooooooooooooo hard!!!!

[edit on 10-7-2008 by Leo Strauss]

Welcome to the United States of Corporations, where you, the tax-paying peon, get to bail out the billionaire fraudulent lenders. Corporate Fascism at its finest.

You are quick-draw McGraw today jefwayne! Good catch!

Off topic, sometimes I hate posting in breaking because there are so many people who find the same things I do almost as quickly. When I do I often feel rushed and don't go into as much of a detailed opinion or cross reference as many additional resources or threads.

Officials have also been concerned that the difficulties of the two companies, if not fixed, could damage economies worldwide. The securities of Fannie and Freddie are held by numerous overseas financial institutions, central banks and investors.

This is the $5 Trillion gorilla in the room. If it's as bad as I think it may be the ramifications could be global.

Wow, this is really unbelievable. I remember a thread I was on last month about Obama's staff member that was in charge of picking his VP, James Johnson. I was reading about him because he was a Bilderberg attendee. While researching, and stumbled upon this article, that talked of him being in charge of Fannie Mae when a huge Enron like scandal broke out there, and although reaping 3.3 million dollars, was never accused of wrong doing.

www.washingtonpost.com...

Basically, in the end, two executives ended up getting fired for the horrible corruption. I find it a little suspicious that this guy was the advising Obama, and not a month later, the government is stepping in to bail out their losses at the tax payers expense. I'm can almost guarantee that there are also connections between the Republicans and Fannie Mae also. Nevertheless, its quite ridiculous the government is thinking of forcing taxpayers to pay debts off for such a scandal filled company.

But the plot gets even thicker than that. I'm now looking more into this scandal, and I find this:

Meanwhile, several Senators and Congressmen have signaled their intention to tighten federal controls on both Fannie and Freddie which enjoy certain perks not available to their competitors. In return for these privileges, both have numerous mandates from Congress and other agencies to increase home ownership, particularly among low income and minority citizens.

www.mortgagenewsdaily.com...

Now maybe this isn't news to some, but it is to me. If I'm not mistaken, one of the things I hear repeatedly about why the US (even from Congressmen) is in such financial trouble is that loans were carelessly given to low income people that couldn't afford to repay them. Apparently, that is exactly what the government was telling them to do. Now that its hit the fan, the government is going to take over.

Did the government purposefully get Fannie Mae and Freddie Mac to give out loans that couldn't be repaid, so that they could get control of these companies? Or even more sinister, did they do it to purposefully help tank the US economy for some reason? Suddenly, all of those theories about the government wanting to tank the economy to fuel support for war and the Amero seem all the more plausable.

welcome to the 21st century, where 'asymmetrical warfare' includes the largest battlefield of all: the economic one.

i truly believe the subprime disaster is part of the 'occult war'. i mean goldman sacs practically sunk UBS, one of the oldest banks in the world (created by the knights templar), with investment vehicles they created which were heavily weighted with subprime, which UBS spread throughout Europe. i've heard stories of little European towns that lost their pensions b/c they bought these vehicles.

fannie & freddy hav lost 90% of their value. and it's getting no press. [[none of my friends who are 'sleepers' the guys with careers and families and a lot invested in the fraudulent meme called 'the american dream' want to hear about it. all they care about is sports and drinking and thier jobs and kids.]]

the world-wide economic situation is so obviously the 'frog in the pot' analogy. or, the one i use [b/c our situation is very explosive, much bigger than a f*&king stupid frog in a hot pot]: you know how they strip mine? not one huge explosion, but thousands of little ones. the end result is the same.......destruction

keep your eye on 2008 oct......i was told in 2002 that the economic expansion that begun in 1946 will come to a shocking end then. i was told to be debt free, hav cash/gold/guns/food and be living in the mountains if i could. i can't believe we're here already.

the funny thing?
not so shocking will it be.....

by then people will be so negative and beaten down that a crash will be accepted as the only logical outcome. good luck ladies & gentlemen.

~my only advice is God & Magick~

Originally posted by jefwane

Well, this is starting to gain steam quickly. Want to know where all the bad mortgage paper that the Fed hasn't taken in collateral in their lending facilities. Well now you know. Wanna know who is going to pay for it. If you are a US taxpayer look in the mirror.

Freddie and Fannie are quasi-governmental entitites that have an implicit backing from the US Government. Both are publicly traded and have been literally butchered lately in regards to share price. I've heard that the two of these companies together have almost as much debt as the US government itself. A bailout of these two could easily cost taxpayers a TRILLION dollars. I've heard that the two together may have up to 5 Trillion in liabilities.

www.nytimes.com
(visit the link for the full news article)

[edit on 10-7-2008 by jefwane]

The thing is, if the Government doesn't step up to back these companies then the stock market will lose much much more than we'd have to pay in taxes....meaning more people would lose capital from 401Ks than they would from their tax payments. If these two companies honestly went under with no support, we'd have a 1987 style crash, pretty much guaranteed.

Originally posted by yellowcard

The thing is, if the Government doesn't step up to back these companies then the stock market will lose much much more than we'd have to pay in taxes....meaning more people would lose capital from 401Ks than they would from their tax payments. If these two companies honestly went under with no support, we'd have a 1987 style crash, pretty much guaranteed.

Conversely if the government does back these companis there is a real possibility of a 30's style bond market collapse. Further degradation of the dollar guaranteed along with higher oil along with it. Fannie and Freddie are the housing market right now. Very few loans are being made that arn't sellable to one of these two right now. S&P recently put out a report that a bailout of these two could cost the US its AAA credit rating, causing interest rates across the board to rise signifigantly. There is a real posibillity that the taxpayer could be on the hook for TRILLIONS if these GSEs need bailing out.

I live in the so called "Fastest growing Cities in the US" during this time of crazy growth in home prices. Does anyone here know the main Culprit???

This Company has been brought up by me in a couple of other posts and it seems to have been "under the radar".

Ameriquest Mortgage was the big player in our City becoming the second fastest growing City in the US behind Las Vegas and the State of Florida. Hawaii was also a big player in this deal. Ameriquest in my City was doing fraudulent loans like you wouldn't believe during the last three years.

Take a look at who the Ambassador to the Netherlands was recently Roland Arnall

This guy was Evil. Not only was he the one to push the policies of Ameriquest throughout the US, but if you didn't do the things that Ameriquest wanted you to do as a Loan Officer or Processor during this time of GREED you were fired.

Someone needs to look into the dealings of Ameriquest but I doubt it will happen. Since Roland payed a settlement to cover there A$$.

Originally posted by jefwane

Originally posted by yellowcard

The thing is, if the Government doesn't step up to back these companies then the stock market will lose much much more than we'd have to pay in taxes....meaning more people would lose capital from 401Ks than they would from their tax payments. If these two companies honestly went under with no support, we'd have a 1987 style crash, pretty much guaranteed.

Conversely if the government does back these companis there is a real possibility of a 30's style bond market collapse. Further degradation of the dollar guaranteed along with higher oil along with it. Fannie and Freddie are the housing market right now. Very few loans are being made that arn't sellable to one of these two right now. S&P recently put out a report that a bailout of these two could cost the US its AAA credit rating, causing interest rates across the board to rise signifigantly. There is a real posibillity that the taxpayer could be on the hook for TRILLIONS if these GSEs need bailing out.

You are forgetting that the two companies used to be Government backed and it appears you have no understanding of the bond market or mark to market accounting

Reply to yellowcard
Ok, then tell me where I'm wrong here. US govt doesn't have a rainy day fund. So the only way to bail these two out, is to issue more debt. More debt equals greater supply of bonds in the system. Greater supply equals lower prices. Lower prices equals higher yields (interest rates).

I'm not even going to get into the possibillity of capital flight right now but here is an article from back in April referencing the implications of a GSE bailout.

S&P added that saving Fannie (FNM) and Freddie (FRE, Fortune 500) might cost so much that the federal government's AAA credit rating, the top possible rating, might even be at risk. If that was lost, then all federal government borrowing would become more expensive

Also I'd like to compare national debt levels to when they were government backed compared to now.

If they do bail them out the common stock will be worth little to nothing. The stock isn't the issue anyway it's all the bonds they have out held by pretty much everyone.

[edit on 11-7-2008 by jefwane]

[edit on 11-7-2008 by jefwane]

US mortgage firms' shares slump more than 40%

In response to reports that the Treasury was planning some kind of government-led rescue, Treasury Secretary Henry Paulson said: "Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission."

Following Mr Paulson's remarks, Fannie Mae shares were trading 35% lower and Freddie Mac's shares were 40.5% down.

Just the latest example of "socializing the risk/loses and privatizing the profits".

Suckers are we.
.

Unfortunately I missed this thread and started another. Apologies.

Here's the excellent news article I based it on in any case:

news.bbc.co.uk...

If I am understanding this correctly, it would seem we are in a no win situation.

If the goverment bails out these two companies, the US inccurs a boatload of new debt. (on top of the serval boatloads we already have) This would devalue the dollar even further & it would drop a ton of burden on the average taxpayer because someone has to pay off all this new debt.

And if the goverment does nothing, millions could loose their homes, the US market will suffer greatly & inflation of epic proportions will ensue.

I admit, I don't know a whole lot on the workings of the market so my question is this.

If the goverment does bail out these companies, and in effect, bails out millions of people who over-spent on their homes, then won't these people be in the same position of not being able to afford their mortgage payments? If this is the case, how is this helping the situation? In the current economic situation, wouldn't the shortfall they feel grow & make it so they loose theirs homes anyway?

I seriously don't see how a bail-out is the better option at this point. Heck, neither option really looks good from what I see.

The article I put up two hours ago has now been revised.

The subheading now reads

Shares in US mortgage firms Freddie Mac and Fannie Mae have fallen by as much as 50% in volatile trading in New York amid concerns for their future.

A couple of hours ago it said "by up to 44%". A further 6% is a massive change for such vast companies if you ask me.

Anyone who wants to suggest this is a temporary blip: are you prepared to buy shares in these companies? (After all, you must believe they are now massively undervalued!)

What is more, are you seriously prepared to invest in stocks at all?




[edit on 11/7/08 by pause4thought]

Don't underestimate the power of short sellers and hedge funds here. Jim Cramer himself has remarked how, when he ran a hedge fund, a carefully planted rumor would move stocks the way he need them to go.

In large part, this episode today took off with a rumor involving Pimco. This was an excellent bounce play, particularly Freddie Mac. Just look at the intraday chart and you'll see. The low of the day was right after the market opened and from thereon it recovered.

I'm not saying that Frannie May and Freddie Mac aren't in trouble. Truth is, they are bound by outdated liquidity rules that today's banks far exceed. We still haven't seen the end of this, or the bottom as it's called; but days like today are excellent daytrade oppportunities. You could have started an account, funded it, bought Freddie Mac at $5.00 and flipped it a few hours later for a 50% profit. People did, trust me. This is how your retirement funds can grow in a bear market. I sit in cash most of the time, just waiting for days like today. I'm only holding 15% in positions overnight currently. The rest is greenbacks.

[edit on 7/11/2008 by titian]

President Bush has changed his tune concerning Fannie and Freddie.

Discount window is now open to Fannie and Freddie.
Will markets view this as positive?

We still have time to rally! lol!

Freddie is now up.





[edit on 11-7-2008 by whiteraven]

reply to post by jefwane

Two words

Fiscal Conservative???

Originally posted by yellowcard


The thing is, if the Government doesn't step up to back these companies then the stock market will lose much much more than we'd have to pay in taxes....meaning more people would lose capital from 401Ks than they would from their tax payments. If these two companies honestly went under with no support, we'd have a 1987 style crash, pretty much guaranteed.

The question of the day is where are we going to get the money? Are we going to borrow more? How about create more? We dont have the money to continue to throw these people. These are bandaids but they are not fixing the problem and that problem is our fractional reserve system. 25% of our government income goes to pay the interest on the money we have borrowed. Soon this debt will crush us. Where does this madness end?

How fair is it to ask the taxpayer to bail out these banks and other businesses while the executives still reap in 10 to 30 million dollar a year checks. This to big to fail is bull crap and shows you how we really have a LACK of free market and more of a monopoly system. In a free market with plenty of competition there would not be to big to fail. If we have to bail these guys out then we might as we nationalize. I hate to say it but its not fair that smaller businesses continue to go under while the big banks get bailed out. Where the hell is the bail out for the smaller businesses?