WSJ: Treasury to Issue Statement on Freddie and Fannie Today
Submitted by
CalculatedRisk on Sun, 07/13/2008 - 10:41am (98 comments)
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What does "supportive" mean? Is Paulson going to say he feels their pain?
I LOVE it here!
G'bye, gimme a break. While we're at it, can't wait to hear the fairy tale coming from Treas later.
El Cliffo, supportive means they'll make sure we're bent over a solid counter of appropriate height.
Will Treasury's statement raise investor confidence . . . or lower it?
Hmmmmmmm.....
As I mentioned in the previous thread, the market this month is getting childproof to trade in:
1-Jul-08\t+32.26
2-Jul-08\t-166.75
3-Jul-08\t+73.02
7-Jul-08\t-56.57
8-Jul-08\t+152.25
9-Jul-08\t-236.77
10-Jul-08\t+81.58
11-Jul-08\t-128.48
any bets for tomorrow? LOL
More of the same methinks, this isn't BS and i doubt any statement 'backing' them will alleviate any worry. Heads they win and tails you lose scenario again.
Anyway here's what i think they'll say, there's no bailout on the horizon however private institutions will provide sufficient fundings.
That ought to calm the markets.
It won't be called a bailout, but whatever happens will effectively be a bailout.
Stocks will rise 50 points, CNBC will declare the crisis over, and everyone will ignore the 150 drop the next day in the midst of all the backslapping and self-congratulation over "saving" the economy... for another two days.
What is he planning to do, read us a bedtime story...try to make sure the bears don't wake up on the wrong side of the den tomorrow?
I'd wager that nothing Paulson can say could be that helpful right now. So he might as well pull out all the stops and do a dramatic reading of "My Pet GSE" tonight with Bush.
"Fannie Mae and Freddie Mac are very important institutions which we in the Bush administration fully support and have always fully supported.
Also we are at war with Eurasia. We have always been at war with Eurasia."
Sunday announcements are never good for the tax payer. See Bear Stearns.
My guesses.
JP Morgan buys Fannie for $2.00
GX buys Freddie for $2.00
FED loans $15 Billion
Treasury guarantees all bonds
Geez, I hope I am wrong.
Officials Check on Freddie Mac Securities Sale
Officials Check on Freddie Mac Securities Sale - CNBC
The $5.2 trillion in mortgages owned or guaranteed by Fannie Mac and Freddie Mac dwarfs the size of the savings and loan institutions taken over by the federal government in the late 1980s or the big Japanese banks that required government assistance there in the 1990s.
The bears are hungry again.
FED loans $15 Billion
make that each and you have an exact repeat of BSC.
Troy writes:
FED loans $15 Billion
Don't think this will happen. If it does look for another hairy day tomorrow.
Troy
interesting point...pattern !
I must admit, I'm a bit perturbed by these affairs. The market might rally tomorrow on Paulson's pretty words, but frankly I'm glad to be on the short side. Will F&F equity holders be dilluted by 50% tomorrow? Their shares will crater. Basically the government is saying they aren't prepared to take on the issue of whether they'll guarantee the paper, and they're punting on making a decision. If I owned a bond fund with any exposure to this mess, I'd pull the plug tomorrow.
My advice to people is to buy a shotgun. Seriously.
PM hopes to lift Iraq by doling out cold, hard oil cash
CNN.com - Page not found
The handouts by Prime Minister Nuri al-Maliki and a handful of other top officials are authorized -- as long as each goes no higher than about $8,000, and the same people don't get them twice.
You should be there, now that's a real handout.
@ Pablo:
"My guesses.
JP Morgan buys Fannie for $2.00
GX buys Freddie for $2.00
FED loans $15 Billion
Treasury guarantees all bonds"
My thoughts: Never going to happen. F&F are faar to toxic for this to be a viable option. They would take down GS and JPM in a heartbeat. F&F have taken a slug for the other IBs by continuing to operate -- they are the sacrificial lambs for the slaughter. They are a vehicle to transfer losses from the IBs onto the taxpayers, and the players you mention have NOTHING to gain from such a move, and everything to lose.
I think the FED will merge Fannie and Freddy.
The new entity will be called Fannie Mac and will be available at fast food outlets in your area.
Sorta like a SPAM burger.
SPAM being Sub Prime American Meet.
CR, has there been an update to the graph you posted in May showing the Fed's balance sheet composition?
I think this may be very relevant this week considering all the speculation around various Fed initiatives.
"We have always been at war with Eurasia."
I'm having a big dose of Victory Gin this evening in anticipation of tomorrow's 100pt rise in the market. I love Big Brother.
All I know is they have to do something that will continue to attract new capital otherwise the mortgage market is screwed.
These kind of supportive statements (not just on F&F, but the whole of the Bush/CheneyCo fascade) are fine for the media, which takes good notes at briefings.
When, however, investors are faced with dealing with real (sort of) money, somehow the soothing words don't resonate. F&F bonds may be savable (with a 20% haircut on face value), but the stockholders are SOL. If they don't sell tomorrow and take the stock prices down to
Back in business: IndyMac reopens Monday
IndyMac to reopen 'strong and safe,' new boss says - CNN.com
Customers who found locked doors and armed guards Friday afternoon could use ATM cards over the weekend to get to their money, but an estimated 5 percent of the $19 billion deposited in the bank was not insured by the Federal Deposit Insurance Corporation (FDIC).
The FDIC disclosed last month that it was closely watching 90 financial institutions on its "problem list," up from 76 in the first quarter of 2008. The total assets of "problem" institutions rose from $22.2 billion to $26.3 billion, the FDIC said.
(sorry about not completed above - i used a 'less than' character)
...less than $2.00, then they are delusional along with all the CNBC talking heads.
Okay, I'm waiting for the good to appear in Gordon Gekko's "Greed is good" statement. Lord knows, we've had the greed.....
My guess: Paulson will come out with
a laundry list of legislation that's
needed, including opening up ANWR,
and say it's the democrat's fault if
anything bad happens. He'll make
sure to work in plenty of references
to Schumer.
We're importing 700,000 bbl of Iraqi crude a day.
Giving the Iraqis a $100/bbl citizens' dividend works out to $90 per person per month.
Family size in Iraq is ~5 people, $450/mo is a lot of money for a country with a $90B GDP.
Here's another perspective :-
Long Protected by Washington, Fannie and Freddie Ballooned
Long Protected by Washington, Fannie and Freddie Ballooned - NY Times
Fannie and Freddie were careful to include powerful Democrats and Republicans as executives, board members and lobbyists to make sure they had access to top government officials and clout on Capitol Hill, no matter which party was in power.
needed, including opening up ANWR,
and say it's the democrat's fault if
anything bad happens. He'll make
Bob Brinker had a plant caller on yesterday allowing him to go off on this.
"SEC to Probe Manipulation Through False Information"
Bloomberg
Let's start with the obvious - Paulson, Bernanke... maybe the SEC will arrest them.
We believe in a strong dollar policy.
"My advice to people is to buy a shotgun. Seriously.
Gavshire Hathaway"
For hunting game, or stopping intruders? Seriously.
Will this be prophetic? :-
YouTube - Madtv - Apple I-rack
""My advice to people is to buy a shotgun. Seriously.
Gavshire Hathaway"
For hunting game, or stopping intruders? Seriously."
Both? A source of protection during the collapse of our economic system. A source of food thereafter....
Say, I'm just a newbie/novice in all this hi-fi stuff, but i was wondering if it would be unduly skeptical of me to wonder if, by issuing this statement on Sunday night, the Fed weren't attempting to forestall further domestic stock meltdowns and juice the Monday morning market opening?
I know nobody would ever think of doing anything like that...
"SEC to Probe Manipulation Through False Information"
Bloomberg
Let's start with the obvious - Paulson, Bernanke... maybe the SEC will arrest them.
Here's an idea for that crack team: Figure out who started the Freddie-Fed-Fone call rumor on Friday.
Anon 3:47,both.I recommend the "border patrol" Model from scattergun technologies.
"My advice to people is to buy a shotgun. Seriously.
Gavshire Hathaway"
For hunting game, or stopping intruders? Seriously.
Anonymous | 07.13.08 - 3:47 pm | #
I would say both.
The adults in the room will realize that the GSEs have to be saved, regardless of one's principles about free markets. Given Wall Street's colossal bungling in showing that the free market can create a secondary market that's built to last, the GSEs must be saved. Down the road, we can have a philosophical discussion about government's myriad housing subsidies and about the regulatory environment that we need in order to create a truly private secondary market. Then we can evaluate the merits of an orderly dismantling or privatization of the GSEs. But not now! Not with a lameduck administration of ideologues and an economy that's facing severe headwinds. And rememnber, the GSEs will be highly profitable in a few years--the taxpayers can easily come out of this smelling like a rose!
I assume this will be right before Asia opens up...
Ministry of Peace: Oceania has always been at war with Eastasia, Eurasia is our ally.
On a Sunday.....
Well they have about 4 hours to do it before the Asian markets open.
What wonderful news awaits us??
Ciao
MS
Glossary for today's statement:
Supportive statement = fact
Nonsupportive statement = criminally negligent rumor
Demand for supporting documents to support supporting statement = treaso
I assume there will be a lot of stuttering mixed in with some "umms", followed by some BS about "strong dollar", "we support the GSE's", "ummm", etc...
245 visitors on a Sunday afternoon? Prophetic.
What to look for and how to select your home shot-gun.
Here's some upscale models. And here's one less than HALF THE PRICE that'll do ya just fine...
happy shooting, mon frers et chers...
The adults in the room will realize that the GSEs have to be saved, regardless of one's principles about free markets.
Funny, I would have said: The adults in the room have done the arithmetic and realize that there is no way possible to save the GSEs.
Unless, of course, you consider Roubini's solution a save.
Not that I'm recommending this, but the easiest way to save the entire economy would be to double the mortgage interest deduction benefit.
Right now this is costing around $75B/yr, but doubling the benefit would inject about $1.5T ($75B/5%) in imputed value back into the deflating housing market.
There is a common cyclical nature to Domestic Violence.
From beating to apology to reassurance to romance back to beating.
Everytime I see these guys take the podium it reminds me of how wifebeaters feel the need to talk to the woman they beat just before we cart them away. They feel that words will undue actions since it's worked up to this point...and it usually will work again before court day.
If you think most crooks invoke Miranda and refuse to talk to police, you'd be wrong...they feel they can talk their way out of anything.
Paulson today will be a man of many words and no action.
Not that I'm recommending this, but the easiest way to save the entire economy would be to double the mortgage interest deduction benefit.
And where would you make up the $75B/yr shortfall in the budget?
Crashcadia --
The new entity will be called Fannie Mac and will be available at fast food outlets in your area.
How about Wal-Mac?
crispy&cole --
I assume there will be a lot of stuttering mixed in with some "umms", followed by some BS about "strong dollar", "we support the GSE's", "ummm", etc...
If only the stammering showed up in the press release.
Actually, once it's out, someone should really mark it up in such a fashion...
And where would you make up the $75B/yr shortfall in the budget?
Ummm...get out of Iraq?
Brinker is an idiot.
^ back in November I remember him cooing "The Bears. Were. Wrong!" on his show.
Hah!
Ummm...get out of Iraq?
Make up a shortfall by removing a shortfall? In DC-logic, that makes sense, sadly.
the trade is'nt 'buying shotguns'
the trade is buying ammo.
shells, rounds, etc... lotsa sizes,
why..
one it's cheaper, two it's safer
Anyone else curious about the Nikkei/BSE reaction this afternoon?
The taxpayers will come out of this - smelling like a roast.
Soothing words are probably enough for Asia. It may be enough for Europe.It's not nearly enough for NY. I imagine Treasury will use every hour they can to extract concessions from the politicals in exchange for a capital injection. A little pressure from London may even be a desirable thing.
Unless London starts calling at the top of the dial, any capital injection is most likely to be announced around 7:30 or 8:00 Eastern time (according to my WAG)
Already long guns'n'ammo (and I'm a green card namby pamby Brit!) Bought a 1968 Marlin 336RC Lever action rifle. Shooting it against paper targets was a blast. I hope that's all it's ever used for !
Nikkei futures were down 80 the last time I checked on Bloomberg. Interesting to see how the Treasury release affects that...
"brinker is an idiot"
Agree.
I recall him getting 5 calls in a row in Feb 2006, every caller said the housing bust was coming.
Bob called these people out and said they were dead wrong.
Rol forward 2 years later and he keeps saying "I told you this was going to happen..." IDIOT!!!
The theory behind their "open-mouth" policy is that if they say it enough, the public will believe it, and they may be right, but I don't think Mr. Market will buy their b*lls**t much longer.
"brinker is an idiot"
Then last summer someone called and said this subprime deal was a non-issue and the market would keep going up and BOB AGREED with him.
I have no idea why I listen to him.
Remember just a couple weeks ago investors bought $4b New Lehman at $28 a share, settled on thursday when they could have bought for $23 on the open market, now at about $14, bye bye to $2B, but the "investors" were playing with OPM so what matters.
And Paulson is playing with yours, so what matters?
It's definitely a confidence problem.
Recent research determined that although cuddly names like Fannie May and Freddie Mac were thought to imply friendliness and a certain local flavor to these huge national corporations, nothing could have been further from the truth. Given the least stress, the names connote mindless sluttiness, like Li'l Abner's tart; or the fiendish psychopath from A Nightmare on Elm Street .
Part of the announcement, expected later today, will be the renaming of these two institutions to give a more confident appearance. The front runners for the new names are Auntmom and Uncledad, which is expected to produce real family values feelings.
The United States has the strongest, deepest and most liquid capital markets in the world. As markets around the world strive to reach the U.S. standard of excellence,
no laughing, please
Friedman said that removing the implicit government guarantee or shrinking the firms could change lending risk assessments and "the whole mechanism we built up over the past 30 years for channeling savings into debt against houses is going to have to be either reconstituted or the market will charge a higher interest rate."
So, for 3 decades mortgage rates have been 'successfully' subsidized at below market levels, but after asset prices stopped rising 2 years ago, there has been an accumulating, hidden cost in the process of subsidizing, and that cost has now manifested in the weakened financial structure of the agency that has been providing the effective subsidy, and rather than deal with the ongoing cause of the damage to the GSE, namely the hidden costs of the subsidy in a declining asset market, the leaders choose to do once again what is in the public's short-term interest at the expense of their long-term interest, by propping the weakened financial structure, treating the symptom rather than the cause, and guaranteeing that the problem will continue and future losses worsen.
Ben, Al, this sentence is for you.
What is this implicit guarantee that can't be made explicit? I thought that GSE bonds explicitly deny any guarantee by the U.S. gov? And banks think it's wise to invest in such a shaky over-leveraged company to get a tiny bit more yield vs. Treasurys? There has got to be at least a 10% chance that the gov. will not backstop them. Is that priced in & factored into their AAA ratings?
I agree with a previous poster who thinks Treasury will issue a statement of support, Fed will open discount window officially, and if that doesn't work by tomorrow AM, we'll get an emergency cash injection too.
This will stem the flood in the market, but only temporarily.
OK, let's all be careful now. From Bloomberg: "SEC to Probe Manipulation Through False Information."
The rules don't apply to government officials, of course. So when they come out and say "All is well, folks, move along now," and the markets dutifully respond, that won't be considered manipulation, because it ain't, honest.
What does "supportive" mean?
Like an athletic supporter...
I don't think I'd be all that upset about F & F screwing up if their CEO's had been on the GS scale for the last 40 years...
If they inject cash they have made the "implied guarantee" no longer implied!
"Also we are at war with Eurasia. We have always been at war with Eurasia."
Actually: "We owe to Eurasia, and we may always owe to Eurasia."
On another site someone suggests that we stop buying from China for one month, and see what happens.
Perhaps start by holding your breath for one month, and see what happens?
lolGSEs: I can haz gubbermint cheezburger?
Troy - another way to save house prices, and actualy help the economy in the long run, is to work with the states to change their tax regimens from Real Estate taxes to sales taxes.
Removing real estate taxes would prop up real estate values and the whole financial system, and slow consumption immediately. And really, the US needs to consume less as a nation, so it would be beneficial, maybe we would save and produce more in the end.
On the real estate side, if you take a step back, it seems grossly unfair that our local governments take between 1 and 2% of the value of our home in taxes, every single year!!
On the real estate side, if you take a step back, it seems grossly unfair that our local governments take between 1 and 2% of the value of our home in taxes, every single year!!
LOL, you're talking to one of the few surviving Georgists on the planet here.
I won't bore you with a counter-argument, the link lays it out well enough.
I've got an idea for a funding plan,
'
get raines to give back his millions
Does Paulson inject cash and get stock/warrants from FNM and FRE?
Facing Writedowns, Merrill May Sell Stakes in BlackRock, Bloomberg
Facing Writedowns, Other Merrill Assets Might Be Up For Sale - CNBC
Facing second quarter loss and write downs that could rise above $6 billion, Merrill Lynch CEO John Thain is considering selling MerrillÂ’s stakes in financial information powerhouse Bloomberg lp., and money manager BlackRock, people familiar with the firm say.
another way to save house prices, and actualy help the economy in the long run, is to work with the states to change their tax regimens from Real Estate taxes to sales taxes.
My state (SC) did this a couple of years ago. A tax on discretionary spending kind of sucks in a recession.
"I recall him getting 5 calls in a row in Feb 2006, every caller said the housing bust was coming."
Odd. I know a real estate agent from Irving, Texas, who predicted last October that this was going to happen.
Fed will open discount window officially, and if that doesn't work by tomorrow AM, we'll get an emergency cash injection too.
and that will translate to $x? in the price of oil...
my guess $7, up of course
"SEC Says It Will Probe Efforts to Manipulate Stock Prices Through Rumors "
So we only look at short sellers? What about the run up by longs - See Jim Cramer and all the shills on CNBC!
The reason this is being drawn out so long is to give the rich folks more time to drain the US Treasury. A lot of these rich folks are foreigners. See The Automatic Earth for a couple of good articles. A local anecdote. We live in the least populated County in New Mexico...Catron. We have good water (from the Gila watershed). An Italian/German (person, company...LLC) has bought the San Augustine Plains Ranch...along with thousands of acres of water rights. They now want to drill 36 wells to a depth of 2000 feet and basically drain all the water in the basin...thusly making all the wells in the town of Datil, NM, dry up. This is no funny business. It is being fought by the USFS, the AZDept of Game and Fish, all the Indian Tribes, numerous other organizations, and the Wilderness Defense Council is giving the locals a free lawyer. Coming to a neighborhood near you.
Prairiedog
I've been saying for years that the 'liquid' wars will be fought over water rather than oil.
On a personal note, I've recently bought in Silver--expect to move in the next year, if I can sell my current digs.
Dow Jones News headlines no details yet
WSJ: Tsy To Discuss Credit Lines For Fannie, Freddie -Sources
WSJ: Tsy May Indicate Buying Equity Capital In Cos -Sources
WSJ: Tsy To Reiterate No Plans To Nationalize Fannie,
Freddie Sources
I agree with 76s.
And I don't think one can write intelligently about F&F without getting into a lot of mind-numbing details (which I don't have time to do right now - I'm packing for a trip - don't think I'll be able to take my gun on the plane). At the obvious level - there is common stock - preferred stock - corporate debt and MBSs. But then you have the derivatives markets - both public and private. And the investors in these markets range from hedge funds to bond funds to investment banks to plain old banks.
As with BSC - I think the best course of action is stabilize the patient first - and then worry about the long term treatment. Roby
Treasury may support GSEs with equity stake
| Reuters
UPDATE 1-Treasury may support GSEs with equity stake-sources
Sun Jul 13, 2008 5:39pm EDT
(Adds details from Wall Street Journal report)
WASHINGTON, July 13 (Reuters) - The U.S. Treasury on Sunday may say it is prepared to take an equity stake in troubled mortgage financiers Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) if requested, sources close to talks about the issue said.
Under the plan being outlined, the Treasury Department would give the two shareholder-owned but government-sponsored enterprises an equity infusion if they decided such an investment was required, the sources said.
The Treasury Department declined to comment.
The Wall Street Journal, citing sources, also reported that Treasury will discuss credit lines for Fannie Mae and Freddie Mac in a statement to be issued on Sunday.
It will also repeat it has no plans to nationalize the companies, the report said. Their share prices have tumbled dramatically in recent days amid concern about their ability to withstand the U.S. housing downturn.
The Federal Reserve is expected to make a separate statement about the companies, the report added. The Fed, the U.S. central bank, may have a consultative role in Fannie and Freddie, the Journal said. (Reporting by Patrick Rucker; Editing by James Dalgleish)
Baghdad Bob = Wall Street Hank
Remember, in the big scheme of things, we are merely bacteria on a grain of sand on a nameless beach, next to one of a billion, billion oceans.
We are excited today because it appears that there is less phytoplankton reserves left than we believed. The alpha germ has been studying the situation and will address us later on the solution.
Based upon experience, most of us expect that we will have to sacrifice the lesser bacteria in order to preserve the well being of the most deserved.
Tomorrow is just another day on the ranch.
RE Brinker
I pray that that the blow-hard imbicile is taking his own investment advice and will lose his @ss.
Bloomberg is reporting paulson's statement
Paulson Statement on Freddie Mac, Fannie Mae: Full Text - Bloomberg.com
Quote from Paulson's statement: "Use of either the line of credit or the equity investment would carry terms and conditions necessary to protect the taxpayer."
Oh yeah, like I really believe that he's gonna bargain hard and get terms that protect the taxpayer. Yeah, right, and we're gonna have a strong dollar next week too.
bloomberg reports the statement and treasury doesn't even have it on its website
The account on Bloomberg says Paulson is asking Congress for authority to buy stock (!!!!) in F & F, in potentially unlimited amounts.
Now this is dumb, dumb, dumb.
Instead of guaranteeing the debt and turning the company 100% govt (nationalization), Paulson wants to bail out the shareholders. Buying stock raises the equity price, and puts the US govt in the business of trading on wall street.
Rather than un-mixing F & F to make them either private or public, Paulson is going to deepen the mix and stir.
F & F will be like no other company . . . except maybe Halliburton or the Bush family's enterprises and cronies, in the sense that government and private interests are so jumbled that no one can tell the difference.
Not impeaching these guys (over torture, lying about illegal and dumb wars, letting New Orleans drown, letting Karl Rove mess in the Justice dept, etc and so forth) let them get away to do this.
Sadly, these are very sad times.
Maybe Paulson had an aneurism and nobody noticed... except for the stuttering.
It will also repeat it has no plans to nationalize the companies, the report said
Oh great. The treasury will "invest" capital far above market rates, and won't extract concessions for the gift. You couldn't ask for a balder bailout.