Bailng out Fanny Mae and Freddie Mac  | | 
July 11th, 2008, 06:45 PM
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#1 (permalink)
| | Ultimate Member
Join Date: Oct 2001 Location: 30-41,000ft
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| Bailng out Fanny Mae and Freddie Mac
I think the Fed is close to exhausting its existing, legally sanctioned financial resources.
If they need to bail out these mortgage giants, they will need to directly create fiat dollars out of thin air, i.e. print money. They've already spent most of their nominal "assets" bailing out the investment banks.
If they do this, then they will have officially begun the process of "monetizing the debt" by creating money out of thin air and using inflation instead of taxation to pull value from dollar owners instead of taxpayers. Monetizing our debt. Think about that.
The Dollar is gonna TANK.
We could see oil stay at present levels with a stable currency such as Euros yet still hit $200 or $250 a barrel from monetization of our official (and semi-official, such as Fannie and Freddie) federal debts. Talk about vapid Vapor-Ware.
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Last edited by Toadman : July 11th, 2008 at 06:47 PM.
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July 11th, 2008, 07:16 PM
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#2 (permalink)
| | Ultimate Member
Join Date: Oct 2001 Location: 30-41,000ft
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| The midnight hour for Fannie and Freddie - Jul. 11, 2008
The two companies underpinning much of the global capital markets debt and derivative trading are in a world of pain, and various media outlets reported that the government officials were considering several options for intervention.
So what would government relief look like, and is it really necessary?
The current thinking, according to senior mortgage executives who describe themselves in frequent contact with Fannie Mae and Freddie Mac, centers around the U.S. Treasury Department's offering some form of a guarantee to $1.5 trillion of their debt. Perhaps more important, such a guarantee would also extend to the $2.3 trillion worth of derivatives that both companies are party to in some fashion.
Another idea making the round of trading desks and hedge funds Friday includes a more "moderate" direct-investment from the Treasury of up to $10 billion for each company, perhaps in the form of buying triple-A debt securities directly from their portfolios.
The problems with this are obvious: Putting more mortgage credit risk on the taxpayer's back is likely to be politically unpopular in the short term and would only immediately benefit the company's shareholders.
The perception of shareholder benefit from government intervention is something that policy makers were greatly concerned about during the Bear Stearns crisis in March. As such, any plan to help Fannie or Freddie, real or prospective, is almost certain to wipe out the value of their common stock A helluva day
Last edited by Toadman : July 11th, 2008 at 07:23 PM.
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July 11th, 2008, 08:33 PM
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#3 (permalink)
| | Light to Counter the Dim
Join Date: Oct 2001 Location: Long Island, NY, USA
Posts: 6,701
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This morning I wanted to buy Feddie for $4.50 a share. By the afternoon it was over $8.
The problem seems to be that the ideology that didn't believe in regulation did the public a great disservice. The choice is either bail them out or create tremendous economic upheaval.
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July 11th, 2008, 10:01 PM
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#4 (permalink)
| | A hero in training
Join Date: Oct 2001 Location: Norfolk, VA
Posts: 26,826
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What I have learned in the last couple of months. No matter what stupid crap I do finically the government will bail me out!
yay for not having to be responsible! When in doubt just print more money!  | |
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July 11th, 2008, 10:49 PM
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#5 (permalink)
| | Ultimate Member
Join Date: Sep 1999 Location: Jackson,MS
Posts: 5,314
| Quote:
Originally Posted by GroundZero3  What I have learned in the last couple of months. No matter what stupid crap I do finically the government will bail me out!
yay for not having to be responsible! When in doubt just print more money! | Do you have a link where I can get an application to get a grant for my irresponsibility ???? 
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July 11th, 2008, 10:55 PM
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#6 (permalink)
| | Light to Counter the Dim
Join Date: Oct 2001 Location: Long Island, NY, USA
Posts: 6,701
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Originally Posted by GroundZero3 What I have learned in the last couple of months. No matter what stupid crap I do finically the government will bail me out! | Only if you're a billionaire. | |
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July 12th, 2008, 11:05 AM
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#7 (permalink)
| | Ultimate Member
Join Date: Oct 2001
Posts: 5,424
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And you have Ronald Reagan and Phil Gramm to thank for the mortgage deregulation legislation that made it possible for the fat cats to get fatter and the little guys to loose their homes.
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"Education: That which discloses to the wise and disguises from the
foolish their lack of understanding."
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July 13th, 2008, 05:01 AM
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#8 (permalink)
| | Ultimate Member
Join Date: Feb 2005 Location: Australia
Posts: 2,573
| Quote:
Originally Posted by TOAD6147 And you have Ronald Reagan and Phil Gramm to thank for the mortgage deregulation legislation that made it possible for the fat cats to get fatter and the little guys to loose their homes. | It's good to see Phil Gram helping the McCain presidential run.
Maybe he'll be put in charge of the nations finances if McCain wins. As a pay off for all the money he helped the bankers and hedge fund managers make before the bubble burst. | |
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