Skip to comments.U.S. seizes Fannie and Freddie
Posted on 09/07/2008 9:02:41 AM PDT by CodeToad
NEW YORK (CNNMoney.com) -- Federal officials unveiled an extraordinary takeover on Sunday of troubled mortgage giants Fannie Mae and Freddie Mac, signaling the most dramatic move to date aimed at shoring up the nation's housing market.
(Excerpt) Read more at money.cnn.com ...
Telling the truth will get you in hot water with some here, you see the issue is more important than the facts.
It should be noted that you have not answered post #16.
Now I wonder if the markets knew this was coming and have already compensated for it, or will we see a nasty crash this week.
As a banker, I can tell you there is going to be more devastation in the banking industry in the months ahead. This crisis is far from over. Expect a few big names to diasppear.
Waiting for Feds to take over my credit card balance.....
I am wondering if the feds put a crimp on loans then who can buy another home or sell thiers if people need 20% down with good credit and 30% down with marginal credit? Will the banks simply have to play loose with the numbers, such as take a $400k home and put it on paper as a $500 home to show a 20% down? Will the home market simply grind to a halt as the feds demand liquidity in the market, meaning more cash, which people do not have?
It was reported that the news was to be before the Asian markets open, so watch those today as an indicator of the US market reaction.
The brief summary (as I and some others see it)
On the front page of the prospectuses for this debt, at the top, in big black capital letters, as has been the case for many, many years:
“THE CERTIFICATES AND PAYMENTS OF PRINCIPAL AND INTEREST ON THE CERTIFICATES ARE NOT GUARANTEED BY THE UNITED STATES AND DO NOT CONSTITUTE A DEBT OR OBLIGATION OF THE UNITED STATES OR ANY OF ITS INSTRUMENTALITIES OTHER THAN FANNIE MAE”
But worldwide, wise, experienced, savvy financial gurus apparently misread that and somehow deleted the word “NOT” in its’ two appearances.
Ladies and gentlemen, you and I and every taxpayer in the nation are now going to make these bankers and funds whole for their third-grade reading error. Let’s hope we get free toasters out of it. We are witnessing the single biggest step towards economic and financial socialism this country has ever taken. I’ve read the comments about whom is to blame for this travesty, but frankly, it doesn’t matter. I leave it up to all who may read this to ponder the consequences for themselves.
I'm waiting for the people to take over the feds!
What does this mean?
Ah..Shoot ! Watsa nudder 10% piled on???????? 5 Billion more won’t make no diff....
Like, *PING*, dudes.
It means the debt of the federal government just went up. By how much will be determined by how many loans go bust. It will no doubt be in the billions.
I believe it also means people holding stock in either corporation just lost their money, all of it.
It means tightened credit requirements...and possibly such a squeeze as to kill the housing market as banks fail to completely understand the requirements and loans are denied.
It means the taxpayer is going to bail out poor business practices.
Any banker who gets caught making a 100% loan should have a free ticket to five years in the big house. Any appraiser that makes a false appraisal should share his room.
It means alot of different things, but basically, we’re screwed!
For one example from the article: “Similarly, conservatorship does not eliminate the outstanding preferred stock, but does place preferred shareholders second, after the common shareholders, in absorbing losses. The federal banking agencies are assessing the exposures of banks and thrifts to Fannie Mae and Freddie Mac. The agencies believe that, while many institutions hold common or preferred shares of these two GSEs, only a limited number of smaller institutions have holdings that are significant compared to their capital.”
Sounds reasonable, and it is. The trouble is that many banks have their required reserves IN Fannie and Freddie “preferred stocks.” So, more banks will need to raise capital to replace the losses. Some banks will fail because of this. I have no idea how many. So, ultimately it means that the bank implosion continues.
Good video. Well presented. He makes a great point that this effectively doubles the federal credit trade and forces home prices down significantly. He also points out that on Monday F/F will only take loans with at least 20% down on the loan.
Coming from a banking perspective, what caused the subprime market was affirmative action. The gov’t forced banks to loan to low-income minorities to meet the requirements of the Community Reinvestment Act. Stupid gov’t.
From 1991 to 1998, Fannie Mae was headed by James Johnson, a longtime aide to former Democratic vice president Walter Mondale. Johnsons successor, Franklin Raines, had served as budget director to Bill Clinton. Jamie Gorelick, vice chair of Fannie Mae from 1998 to 2003, served as deputy attorney general in the Clinton administration.