Free Republic

Ok folks, its time for a long sit-down type of Ticker - the sort that I usually don't write. Let's start with Fannie and Freddie. As anyone who has been reading The Ticker knows, I have been saying for quite some time that Fannie and Freddie are in fact "short to zero" candidates for the common stock. This is simply due to the mathematics of their financial situation - they are levered up anywhere from 60 to more than 200:1, depending on what you include and exclude from "capital" and "credit book." I use the worst-case set of numbers, because...

IMF welcomes US rescue plan for Fannie, FreddiePosted: 25 July 2008 0152 hrs WASHINGTON : The International Monetary Fund on Thursday welcomed the US government's plans to aid mortgage finance giants Fannie Mae and Freddie Mac and ease the housing crisis. "The announced measures on Fannie and Freddie go in the right direction and are consistent with approaches that the Fund has supported," IMF spokesman David Hawley said at a news conference. "And we agree that public sector intervention is warranted, accompanied by improved supervision." His comments in response to a question came a day after a wide-ranging housing rescue...

Angelo Mozilo was in one of his Napoleonic moods. It was October 2003, and the CEO of Countrywide Financial was berating me for The Wall Street Journal's editorials raising doubts about the accounting of Fannie Mae. I had just been introduced to him by Franklin Raines, then the CEO of Fannie, whom I had run into by chance at a reception hosted by the Business Council, the CEO group that had invited me to moderate a couple of panels. ....... I've thought about that episode more than once recently amid the meltdown and government rescue of Fannie and its sibling,...

As financial storm signals appeared the past 18 months, some Bush officials urged drastic reform of Fannie Mae and Freddie Mac. But, according to internal government sources, Treasury Secretary Henry Paulson objected because it would look "too political." The Republican administration kept its hands off the government-backed mortgage companies that are closely connected to the Democratic establishment. Paulson is a Republican, but as head of the Goldman Sachs investment bank he had close ties with Democratic-dominated Fannie Mae.

Mortgage giant Freddie Mac -- emboldened by emergency regulatory actions that have triggered a two-day rebound in its battered stock -- is considering raising capital by selling as much as $10 billion in new shares to investors, according to people familiar with the matter. The high-stakes maneuver would have the potential to avoid a full-blown government rescue for Freddie Mac and Fannie Mae, twin keystones of the U.S. housing market. The publicly traded, government-sponsored companies own or guarantee about $5.2 trillion of home mortgages, or nearly half the total outstanding, and are at the center of government efforts to prop...

U.S. SEC Emergency Rule to Curb 'Naked' Short Sales Reuters Tuesday, July 15, 2008; 2:40 PM WASHINGTON - The U.S. Securities and Exchange Commission will issue an emergency rule later Tuesday to stop "naked" short selling in major financial firms, including Fannie Mae and Freddie Mac, the SEC said. Short sellers borrow shares they consider overvalued and sell them. If the price drops, they repurchase the shares, return them and pocket the difference. In a naked short sale, the investor sells stock that has not yet been borrowed. Sellers sometimes deliberately fail to deliver securities as part of a scheme...

Big Business: The US Government is the New Bank of America Government as the Big Lender Massive new US bank formed: Gosbank USA By PETER S. GOODMAN For millions of Americans, the government has morphed from lender of last resort into effectively the only lender. Today the GSEs Fannie Mae and Freddie Mac merged with the Federal Reserve Bank, the US Treasury Department, Goldman Sachs, Citigroup and JP Morgan Chase to form Gosbank USA Capping a year of crisis in the credit markets and global financial system that led to the nationalization of banks in Europe and England, the US...

(2008-07-14) — The Bush administration’s plan to use the Federal Reserve and the U.S. Treasury to save two mismanaged quasi-governmental mortgage companies has already revived confidence in the U.S. free enterprise system both at home and abroad. “This just proves that American capitalism works,” said an unnamed analyst from Bear Stearns. “The self-correcting mechanism of free markets still happens as if guided by an invisible hand. This week we caught another glimpse at that hand. Too bad Adam Smith wasn’t alive to see it.” Around the globe, investor faith in the U.S. economy was buoyed by the news that the...

Washington takes on the shorts Treasury bails out Fannie, Freddie, while SEC declares war on rumors By MarketWatch Last update: 8:49 p.m. EDT July 13, 2008WASHINGTON (MarketWatch) -- The U.S. financial system has lost hundreds of billions of dollars on stupid investments, but don't worry: The federal government has found someone to blame: Rumor-mongers and short-sellers. Sunday the 13th was a very unlucky day if you've been shorting Fannie Mae, Freddie Mac, or a host of other financial firms. Washington has put you on notice: If you don't have something nice to say about banks, don't say anything at all....

The U.S. Treasury Department and Federal Reserve on Sunday announced sweeping measures to lend money and buy stocks if necessary in embattled mortgage lenders Fannie Mae (FNM.N) and Freddie Mac (FRE.N). ADVERTISEMENT Acting before a key $3 billion sale on Monday of short-term debt by Freddie Mac, Treasury and the Fed unveiled a series of measures that made clear they want the shareholder-owned lenders to continue their pivotal role in U.S. financial and housing markets and to remain in private hands. "(Their) continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore,...

In good times, they were superfluous. Now they're only as good as their U.S. guarantee Are Fannie Mae (FNM) and Freddie Mac (FRE) really too big to fail? That's certainly a widely held assumption across much of the political spectrum. Republican Presidential candidate John McCain voiced the conventional wisdom on July 10 when he said, "They must not fail." Democrat Charles Schumer, the New York senator, agreed, saying: "Markets should be assured that the federal government will stand by Fannie Mae and Freddie Mac." On July 11, shares in the two companies briefly dropped about 50%, but recovered late in...

They own or guarantee $5 trillion worth of mortgages­ - nearly half of all the country's outstanding home loan debt - and they're crashing. Big time. Fannie Mae and Freddie Mac are struggling with an investor loss of confidence so great that, while they're unlikely to go under, they could conceivably see their ability to function impaired. That would wreak yet more havoc on an already wrecked housing market- making loans tougher to come by and possibly pushing hundreds of billions of dollars in cost onto U.S. taxpayers. How could the companies end up in such awful straits? ... as...

Fears about Fannie Mae and Freddie Mac retreated somewhat Tuesday after their federal regulator, OFHEO Director James Lockhart, said new accounting rule changes should make "no difference in the risks of the two firms."On Monday, Freddie and Fannie shares plummeted after a Lehman Brothers analyst said a new FASB rule could require the two firms to write-down as much as $75 billion.Rather than the accounting rules, what's really got investors spooked is a growing realization the government will have to nationalize Fannie and Freddie, says Kevin Depew, executive editor of Minyanville.com.The two mortgage lenders are simply too big to fail...

Reuters) - Mortgage lenders Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) are "insolvent" and may need a U.S. government bailout, former St. Louis Federal Reserve President William Poole was quoted as saying in an interview with Bloomberg. "Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer," Poole was quoted as saying in an interview held on Wednesday. Chances are increasing that the government may need to bail out the two mortgage companies, Poole was quoted as saying. Shares...

The two largest U.S. mortgage finance companies on Wednesday won approval to pump up to $200 billion into the distressed U.S. mortgage market, the latest step in government efforts to stabilize credit markets and save the economy from recession. Policy-makers at the Federal Reserve, regulatory agencies and the Treasury Department have let loose a flood of measures to battle rising home foreclosures and stabilize shaky markets, but some still see the need for a more direct government hand. The Office of Federal Housing Enterprise Oversight said it was immediately easing restrictions on Fannie Mae (FNM.N) and Freddie Mac (FRE.N) to...

Fortune) -- Freddie Mac and Fannie Mae can only make it through a prolonged credit crisis if they raise billions of dollars of new capital. That, in a nutshell, is what the plunging stock prices of both mortgage buyers are saying Tuesday. Freddie accounted for a sharply higher batch of bad loans in its third quarter earnings, a little more than a week after Fannie did the same thing. But Freddie said that it would move quickly to raise more capital through a large issue of preferred shares. It added that it was seriously considering cutting its dividend - another...

NASHVILLE — Some new details about the personal life of Republican presidential candidate Fred Thompson are emerging — including that his first name is actually Freddie, not Fred. In an article on the newly announced candidate’s early years in Lawrenceburg, Tenn., the Los Angeles Times reported Thursday that birth and marriage certificates reveal his full name is Freddie Dalton Thompson. He started using Fred after developing an interest in politics, the article said. The candidate’s son confirmed the report in an interview and that his own proper name is Freddie Dalton Thompson Jr., though he’s known as “Tony” — a...

The 45% drop in earnings at Freddie Mac, for a quarter that ended in June, predating August’s intensification of the mortgage market crisis, indicates an uncomfortable reality. President George W. Bush may attempt to hold back the tide of foreclosures by handing out yet more federal guarantees to subprime borrowers, but that will only delay the inevitable. Far from being able to assist the mortgage market by purchasing yet more mortgage backed securities, Fannie Mae and Freddie Mac are about to fight for their lives. The more interesting question is what should be done about it if they perish. -...

WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan again pushed for limits on the multibillion-dollar mortgage holdings of Fannie Mae and Freddie Mac, saying such restrictions would not hurt the thriving housing market. Greenspan, who has been pressing Congress to limit the holdings of the two mortgage giants, warned on Thursday that their debt poses a risk to U.S. financial markets. As Fannie and Freddie grow ever larger, their ability "to quickly correct a misjudgment in their complex hedging strategies becomes more difficult," Greenspan said. "We are thus highly dependent on the risk managers at Fannie and Freddie to do...

WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan issued a fresh call on Thursday for Congress to limit the multibillion-dollar holdings of the mortgage giants Fannie Mae and Freddie Mac, warning that their huge debt could hurt U.S. financial markets. Greenspan's comments came in a speech that focused on the broader issue of the growing use of complex financial instruments, known as derivatives. The Fed chief, as he has done in the past, saw problems with the use of derivatives but also warned against increased government regulation in this area. Concerns about potential market disruptions posed by the two mortgage...