Fannie and Freddie

[BYU71]

Originally Posted by Cali Coug

The government had to step in if they cared at all about market stability. Fannie and Freddie have issued over $5 TRILLION in agency paper. That is a HUGE amount of cash, and the government can't afford for Fannie and Freddie to look like they can't cover the paper. If they did, the dollar would be weakened tremendously, markets would seize up, money supply would tighten, etc. It would have been a disaster. I also think the government structured the "takeover" very well. The deal created a new class of preferred stock that will be issued to the government. In effect, by becoming a preferred stockholder, the government told the markets that the paper will be covered no matter what. In a liquidation, creditors are paid off first, followed by preferred stockholders, followed by common stockholders. By becoming a preferred stockholder, the government preserved the interests of the debtholders first, and we know the government isn't going to allow a default for the debtholders when it means the preferred stockholders (i.e., the government) would get nothing back.

The markets love the move so far. They have to. There was too much at risk if Fannie and Freddie went under.

Market fall out of love fast. Have you seen today. How about Lehman down to about $7. The greedy SOB's on wall st have totally messed up the financial structure. Before you blame Bush, why don't you check out the party ID's of some of the biggest Wall St. players.

Especially the ones that come up with these f'ed up schemes every so often.

[MikeWaters]

I learned something important in the past several months. The hard way.

Never have most of your retirement in a bank stock.

[cougjunkie]

Originally Posted by BYU71

Market fall out of love fast. Have you seen today. How about Lehman down to about $7. The greedy SOB's on wall st have totally messed up the financial structure. Before you blame Bush, why don't you check out the party ID's of some of the biggest Wall St. players.

Especially the ones that come up with these f'ed up schemes every so often.

I have some insider trading tips on Lehman brothers. Their rates suck!

[MikeWaters]

I'm glad things are looking up for CJ. BYU71, I am not investing too much concern. He filched on a hot dog.

[Cali Coug]

Originally Posted by BYU71

Market fall out of love fast. Have you seen today. How about Lehman down to about $7. The greedy SOB's on wall st have totally messed up the financial structure. Before you blame Bush, why don't you check out the party ID's of some of the biggest Wall St. players.

Especially the ones that come up with these f'ed up schemes every so often.

Lehman is bad, but they have been bad for a while. I think they are about to be sold (their stock price is moving very tightly right now). I bet you see a private equity firm take them over shortly. Maybe Al Gore's group.

[Mormon Red Death]

ok here are my thoughts.

In the short term (1-2 years) this will help mortgage industry. In the long term this will be an albatross on our society. As my quote from TMQ says above the standards for giving out loans which have tightened over the last year or so now get thrown out the window because the government owns it. Not to mention the debt future taxpayers will need to pay.

The really bad thing about this is the precedent it sets. We've become a nation standing in line for bailouts.

[MikeWaters]

Originally Posted by Mormon Red Death

ok here are my thoughts.

In the short term (1-2 years) this will help mortgage industry. In the long term this will be an albatross on our society. As my quote from TMQ says above the standards for giving out loans which have tightened over the last year or so now get thrown out the window because the government owns it. Not to mention the debt future taxpayers will need to pay.

The really bad thing about this is the precedent it sets. We've become a nation standing in line for bailouts.

the loans were guaranteed by the govt. anyway. In other words, the U.S. Taxpayer was still on the hook, bailout or not.

[Solon]

Originally Posted by Mormon Red Death

The really bad thing about this is the precedent it sets. We've become a nation standing in line for bailouts.

Yeah, that's it. Everyone wants "relief." While in principle I feel bad for families (esp. kids) who lose their homes, I don't feel bad for people who make bad investments (with full knowledge, etc. Obviously, the cases where brokers lied or misled borrowers are a different issue.). To quote INXS, "Sometimes you kick. Sometimes you get kicked."

I recently read somewhere (was it on this board?) that a major difference between this economic downturn and ones past is the amount of consumer debt Americans (and Brits, and other Europeans) are carrying. They have little wiggle room to handle the painful economic adjustments that are going on. When things finally finish re-setting, with higher fuel, food, and credit prices, they're going to have a really hard time making it work.

While it's obvious the gov't. had to do something with Freddie and Fannie, this mentality is killing me. From Bear Stearns to this, the Feds may be trading short-term stability for long-term suffering. Once they start trying to control and regulate risk, we're all screwed.

But it's not like I have a better idea. Just 20-20 hindsight.

What a mess.