Fannie Mae, Freddie Mac... US Gov't seized...

[gerbick]

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.

The plan, which was delivered by Treasury Secretary Henry Paulson and James Lockhart, director of the Office of Federal Housing Enterprise, places the twin mortgage buyers into "conservatorship" to be overseen by the Federal Housing Finance Agency. Under conservatorship, the government would temporarily run Fannie and Freddie until they are on stronger footing.

I want one more ****ing republican to say that the economy is as strong as it's ever been. I seriously ****ing dare them. Google McCain and Bush if you're that curious or lacking memory.

Anyway, read more right here.

[Frets]

Why does this not surpise me.

They should be either be permanently absorbed by the government totally or go permanently under.

[CVO Chris]

Northern Rock was saved in the UK. Thanks to the banks careless use of our money I am now having to pay for their failure through taxes. And I don't think a single executive has resigned.

They're quick to charge us rip off fees for even the slightest bit of financial mismanagement yet they get away scott free. It's a funny old world.

[jAQUAN]

I know this is not entirely proven but there are some eery (scary?) similarities here.
http://www.youtube.com/watch?v=lBZne...6572DA&index=1

[gerbick]

I need to see that movie entirely one day.

[jAQUAN]

You haven't!?
It's free on the main site and google video.
The first part gets kinda stupid as many others. The rest is downright alarming.

[hanratty21]

I want one more ****ing republican to say that the economy is as strong as it's ever been. I seriously ****ing dare them. Google McCain and Bush if you're that curious or lacking memory.

This is an interesting scenario. The bailout/conservatorship situation being experienced here is really not economy-related per se. One really doesn't necessarily have to do with the other. I believe the economy has slowed down, but the FNM/FRE mess is really not repsective of that.

Keep in mind that I say this as a shareholder of BOTH of these companies, so my calm demeanor is being tested by a good amount of impending losses. I knew the risks inherent in the stock, so that's my own deal.

The USD has improved greatly against most other currencies in the last month or two, new housing is starting to see some life, money is flowing back into real estate and losses are being pared.

I would also not necessarily say that this is a Republican or Democratic problem. The Dems scream about the economy being nightmarish, b/c they want the oval office so they can 'fix it.' The initial blame has to go, in some part, to Greenspan and his Fed administration. Some back to the Clinton days and some for 'W.' In my opinion, most of the problem has been exacerbated by the greedy real estate/mortgage market. This includes developers, flippers, mortgage brokers, banks, and yes...even some at FNM and FRE, who relaxed their stringent policies in recent years to be able to address the 'exotic' mortgage market as it came to fruition. In the end, you had people buying real estate who should not have been, and that is a shame...as they are the ones hurting the worst.

FNM and FRE are not the economy, but they are the lynchpins of the US's mortgage debt. This is a good thing peeps. Not for me (shareholder) but certainly for the long term success of the entire banking industry.

[Loyal Rogue]

Why does this not surpise me.

They should be either be permanently absorbed by the government totally or go permanently under.

Fannie Mae was originally created as a government entity to save the housing market after the first Great Republican Depression.
It worked just fine until Lyndon Johnson decided to try some "creative accounting" to hide the real cost of the Vietnam War, and privatized it in '68.
Freddie Mac was created as a private entity 2 years later.

They are the only two Fortune 500 companies that don't have to disclose their financial troubles to the public.
This led to some seriously messed up accounting "errors" to the tune of almost $5 Billion.

This is another example of what I call corporate welfare.
Privatize the profits, and socialize the losses.

[gerbick]

Both parties got it wrong, if it were according to me. McCain finally stated that the US is going through a "rough patch"... letting the USD devalue as much as it has - 41% under Bush alone - is really a problem to me while stating very little and doing very little... the Republicans are running things.

Mind you - per usual - I don't mind stating that I could be wrong. But damn... admit something is wrong, do something about it. And that's not what I see right now from the powers that be.

I'll hold reservations about how good/bad this will be. I have good hopes it'll get straightened out.

It just sickens me that stuff like this went on and people are gushing at the new milf-in-charge when her speech really said nothing. But then again, I'll be in the market for a new house soon-ish anyway.

I might get a deal.

[Loyal Rogue]

I might get a deal.

I might give you a good deal on my house down in Florida.
With all the scary shiznit going on around the world with the glaciers and iceshelfs, I might be looking to move to higher ground real soon...

[gerbick]

naw. I still have land in Weld County (Colorado). I'm good on the higher ground stuff.

besides... beaches are good for visits. but beaches come and go...

[hanratty21]

... letting the USD devalue as much as it has - 41% under Bush alone

We should really be using current info to make financial, claims, kids...that article was from early July. Here's a current chart:

Since July, about 15% of those paper losses have been whittled down.

[gerbick]

Start at 2001, and I'll retract my statement.

[hanratty21]

They should...go permanently under.

Frets - it's no secret that I frequently disagree with you and find your alarmist views to be a little, well, alarmist, but this quite possibly be the most amazing (in a bad way) thing you've ever posted here.

They go permanently under, as you say, and you better wish it was 1929 again, because everyone's world as they know it will be a mere pimple on the a$$ of what it was the day before this happens. 1929 will be like Senior Prom compared to the colossal disaster this would cause.

[hanratty21]

Start at 2001, and I'll retract my statement.

You should say early to mid 2002, as that is when there was real move in those numbers. Incidentally, those numbers were just as reflective of booming growth in the EU as they were of whatever it is you are trying to imply that was happening over here.

[gerbick]

True, stuff like Airbus winning major contracts over Boeing, et al. I wish I could find the article I had read last year that quoted that Bush was not yet going to actively do anything about the falling dollar - despite my searches, I'm coming up with the wrong article, I swore it was either The Economist or Newsweek that had the article - right when it was in a 43 (or so) cent slide.

It smacked of irresponsibility and short-sightedness and pointed out how Greenspan was economically at odds with the Bush cabinet - none of that "it's about oil" bull**** either.

The falling dollar could have been slightly, if not majorly averted imho.

[hanratty21]

You know...ironically, the dollar falling will be exactly what end up saving us (no pun) from unemployment nightmares. My company has been offshoring jobs for years. Now, we frequently run through gap analyses to determine whether that's even a viable option anymore given the fact that with such a global economy, you can make decisions based upon where something (including staff) is cheaper. In many cases, the decline in the dollar is helping to make those decisions for us.

<<--perpetually a glass half-full guy.

[gerbick]

haha. I sorta admit that I've now become the "cheap option" for my overseas contracts in a lot of situations. I've gotten busy once more because of it.

But that's a different story in the local housing market... which is in total disarray... which my original post was about - and how the parties both really have it wrong about the status. I guess I need to either have a lot bought for me adjacent to my house by a lobbyist or 7-8 (oh, I forget) houses to claim that I realize where they're coming from. Either way, neither party seems to be on point with how the housing situation truly is.

Now, in continuation of the falling dollar, internationally... it doesn't help us abroad. In fact, it weakens our stance and the people that continue (for now) to trade and buy using the USD.

Simply stated. "Rough patch" indeed. And I can't say that I'm entirely thrilled with being the cheaper option. But, it pays my bills.

[Frets]

Hanratty you made risks with your money. Not mine. Why should I as a tax payer have to bail out your failed investment to save you? With all investment opporitunity comes risk. That risk is supposed to be passed on to the investor not the bystander.

[hanratty21]

Hanratty you made risks with your money. Not mine. Why should I as a tax payer have to bail out your failed investment to save you? With all investment opporitunity comes risk. That risk is supposed to be passed on to the investor not the bystander.

You misunderstand me. My investment money is my issue. My stock ownership will be devalued even moreso now that the government is stepping in. You need to read (on cnn, bloomberg or cnbc, not the tinfoil hat gazette) about what the government 'gets' out of the bailout and what the shareholders 'get.' For me, it's basically the shaft.

That being said, you ALSO need to go do some research to understand what it is that Fannie and Freddie do. They basically (very broad strokes here) guarantee the commercial paper that is what a mortgage loan is based upon. The US Dollar is backed by the US Government and the faith that others have in our ability to make good on our money, thereby making the 'paper' worth something. FNM and FRE basically do the same thing with mortgages.

You buy a home, get most of the help from a bank...the bank you get the loan from will usually sell that loan to FNM or FRE b/c they don't want to assume all of the risk of the loan. Because they are GSE (government sponsored entities) the loans now have 'value' behind them beyond what is assumed to be value based upon your ability to pay the loan back over your 30 years. The concept there is that the government is now saying that any 'investment' people make out of your mortgage (Mutual funds, REITS, Foreign money investments, etc) actually will have a value that is respected, as no one other than the peeps in the CL know who Frets is and therefore would think your ability to pay the paper back is basically, worthless. By the US putting it's stamp of approval in this manner, your loan now has value.

That all being said, your original thought of them 'failing' or 'going under' seems a little ludicrous, no? Do you REALLY want to see that? Basically, the only people benefitting from the tax payer bailout is the holders of the paper, and the people with the mortgages who would be upside down on their mortgage basically overnight once the entire book of mortgages that FNM and FRE hold would hold little or no value. You'd owe 400,000 on a house that is now worth whatever some poacher is willing to come in and pay for it. Sound good to you? Didn't think so.