| I am sure hoping you have a missing sarcasm tag.
|
Posted on 07/13/2008 3:31:33 PM PDT by Sleeping Freeper
U.S. rescues Fannie, Freddie Treasury Department raises credit line, has power to buy companies' stock. Fed will open discount-lending to two government-sponsored mortgage lenders. Paulson calls for new regulatory controls.
(Excerpt) Read more at marketwatch.com ...
Fannie & Freddie are technically private corporations, so any profits go to the shareholders. I just looked up both companies on finance.yahoo.com and the US government is not listed as a major shareholder. Someone please correct me if I’ve overlooked something.
I’m pretty confident that common equity will be zeroed out in the rescue.
| I am sure hoping you have a missing sarcasm tag.
|
Capitalism where the risk-takers enjoy the gains, but The People absorb the losses is not Capitalism. It's called Fascism. And no, that's not hyperbole...it's the actual term for what you describe:
"...the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social." --Gaetano Salvemini
No thanks. If you want to take risks and reap the rewards, be my guest--I'm all for it and I'll cheer for you, but don't come to me to cover your losses.
Uncle Sam himself isn't "too big to fail" and if we keep on operating with this attitude, we may end up worse off than Zimbabwe.
Bookmarked for later reading.
Okay, let's say I own some oil. I can sell it or hold it.
If I sell it now, I get cash. If I hold it, I get cash at the future price of oil when I sell it (and there's lots of new customers demanding oil) so I hold it. Supply and demand sends the price up.
Now, do I think I can do better with cash and the interest it gains and hold, or do I think oil will rise in price more and sell?
That's the simplistic view.
If there was commitment and the will to drill offshore Florida and California, develop Utah and North Dakota, ANWR and others, maybe just the threat would lessen my desire to hold onto the oil, and the price would drop IMMEDIATELY, because the futures price would drop!
The rats tell us we can't drill out of this problem. Well, we don't have to.
The downside is that the desire and will aren't there. Congress and this president have sold us down the river, much to the oil companies joy. Sorry, there just isn't room to blame the rats for this, because the pubs had both sides of congress and the white house for years and accomplished nada in terms of our energy self-sufficiency.
The rats have suckled up to the environs, who are funded by the members of the boards of the oil companies.
And... we work all week to pay them for this. Enjoy, here it comes...
Every bank in the country invests in agency paper. Even those that do not do so directly are exposed to it at second order, because they hold claims against other institutions that invest in agency paper. You don't have any bank account, unless your bank has assets to match its liability to you. And it has no assets, unless those it holds claims against, can pay it.
The entire capital of the US banking system is a little less than $1 trillion. That supports a money supply of $7.7 trillion. Agency paper is $5.3 trillion. Freeze the latter, even if eventually most of it can be realized, and there isn't a solvent bank in the country.
The ones running that risk are not restricted to some small class of investors in this or that stock. It is everyone who trusts a bank to pay them back. When you leave money at a bank, you are taking risks for the sake of a gain, too - the gain of a useful form of money, etc. And that is the risk under discussion.
What happens to the shareholders of Fannie and Freddie is a matter of complete indifference, in public policy terms. But failure of their *debts*, failure to meet *creditor* demands on them, means the money supply is gone and the backing system is gone and everyone you know is broke.
Which is what the Treasury, Fed, president, and congress, decided over the weekend not to let happen on Monday.
If they did nothing, it would happen, by Friday or so.
GM and Ford are likely to be next, incidentally. This isn't remotely over, and it isn't remotely about gains or losses to tiny groups of shareholders.
Tomorrow, before the banks open, I’m shorting the Dollar. It’s going into the toilet.
From my understanding, Fannie Mae merely acts as an insurance provider for loans, in exchange for a fee from banks.
If this is true, why can’t the insurance company go belly up and leave the banks with the loans each made on their own credit terms? Some banks will do great. Others will be found to have been too risky in their lending. Big deal. Good banks do great, bad banks do bad. The country goes on.
But if the Fed buys up stocks to shore them up,that makes the Federal Government major a shareholder.
The entire capital of the US banking system is a little less than $1 trillion. That supports a money supply of $7.7 trillion. Agency paper is $5.3 trillion.[...]When you leave money at a bank, you are taking risks for the sake of a gain, too - the gain of a useful form of money, etc. And that is the risk under discussion.
IOW, a wholly irresponsible arrangement, resting upon the backs of the taxpayers, who are being called upon to provide guarantee for overleveraged assets.
This isn't remotely over, and it isn't remotely about gains or losses to tiny groups of shareholders.
Agreed.
And the lesson won't be learned, despite the fact that this is a harbinger of very painful times.
Or decided that buying a home was an irresponsible risk that couldn't be afforded... and now I have to pay someone else's mortgage while I don't even own my own place.
Or decided that building in a floodplain was stupid... and now I have to pay to rebuild someone else's place while I don't even own my own place.
etc.
And yet, the Ostrich Brigade still won't face facts.
Ron Paul proven right once again.
So what if he's right...he's a Kook...a Loon...a Nut...
It's better to send the country down the tubes than to face reality!!!
</sarc>
My guess is that as this is covered in the news and on FR, you'll hear very little about how this matches his warnings and predictions exactly.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
My experience is that the only guys who imagine that everyone else on Earth is a crook, are crooks. Sorry, but I don't board the Evil World Conspiracy train. Have a nice day.