The Times: Treasury rescue for Fannie and Freddie
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CalculatedRisk on Sat, 07/12/2008 - 9:18pm (173 comments)
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Giddy up.
$15 billion when they are holding loans of 5 trillion.
Can you say "drop in the bucket?"
CR welcome back.
Why is it the shareholders that always suffer
Does anyone believe this will be viewed positively by the market, or will they see 15B as insufficient?
Voting shares for all US taxpayers so we can all write off trips to DC for shareholders' meetings, and we get to participate in the upside! Oh Yeah!
Where in the Sierras was the hike? I grew up in Fresno and used to hike all over the Sierras as a kid/teen and into my 20's.
How many bailouts can we afford before this is all over?
And so, when this fails, that's ballgame, right?
Anyone know why $15B? Why not $20, or $10, or $50?
We can afford as many bailouts as we want. Of course, the dollar won't be worth anything afterwards; nor will our standard of living.
This bailout will be the catalyst for a market bounce just like the BS bailout was. Weeks later, the fundamentals will drag the market back down again lower than it currently is. I'd bail on any shorts for now, though. In fact, short covering alone could give a nice bounce Monday.
Paulson is no Mellon, that is for sure.
Which probably means we won't be admiring Paulson's art collection in a museum on the Mall, either.
Serious dilution of shares: FNM and FRE are heading to ZERO ! More negative Sp500 days ahead, Gold $1000 Oil $155..
See ya in the waste lands !
God I hope the market bounces!
$15 B is not nearly enough. Roubini has the right idea.
Isn't Ben forgetting about something ? What about the LEH bailout ? Can't let them implode either. Juggle faster pussycat, FASTER!
Has anybody asked Mr. Paulson where the US Treasury will get the first $15 billion and any subsequent billions?
Pissing in a hurricane.
Greg, I was in Ansel Adams Wilderness. We hiked over to the Iva Bell hot springs and then ended in Mammoth. We put in a few miles with light packs, and I'm definitely going to sleep well tonight.
Now on to the bailouts ...
Best to all.
Hmm.. Can't be true. It's way too little, better to say that they will back them up rather than put a figure which may be too little in the near future.
Not surprisingly, ABX is resuming its cliff diving.
Also, since we're now in Q3, the 08-1 indices are dead and buried.
How much do GSE executives get paid for the wonderful job they're doing? Are they on government scales? Since they are now US government employees they should get paid like enlisted GIs, not professional athletes.
Hey, wait a minute? I believed them way they said that GSEs are in better shape than ever
Did they lie? My feelings are hurt.
Last time I checked the CEO of the USA isn't doing such a great job either. Who is going to bail them out ?
Hey hey...if the US of A gets a controlling stake, then this is after all a re-nationalization? Huh? Shorter distance mentally between the printing presses and the money hole, if nothing else...
Friday, Paulson said that F&F were 'well capitalized'. Monday the Treasury injects a pittance of new capital for what reason? Was he wrong Friday, or just spinning on Monday hoping that the pittance would fool investors and bond holders?
Lies, lies, lies, and more lies.
I'm actually kinda surprised that Treasury isn't sending the cash to China so China could hide the US Gov bailout of the US Gov. Maybe they have, now that I think of it. China will get their preferred shares delivered by the CIA.
Kind of pathetic that this news is broken by a British paper. Where the hell are the American press? Watching "Hellboy 2?"
Sat night (11PM in Calif) and 109 visitors? Wow....
Any ambitious prosecutors out there? Franklin Raines deserves some jail time.
It would almost be worth seeing my taxes pissed away like this to watch Franklin and Angelo breakin' rocks.
argento: US news media sez, nothing happening here, just move along now. This stuff is just paper exchanges and has no signifigance to our essential housing lenders - or anyone else.
This bailout will be the catalyst for a market bounce just like the BS bailout was.
Maybe not. Market behavior's nothing like it was last time. $15B is not half of what the Fed put up for BSC, for heaven's sake, and we're talking trillions in liability here.
Incidentally, is anyone in the media still tracking the FHLB loans to Countrywide in the first "bailout" of this cycle?
At the time the media hardly mentioned it, but I haven't heard whether any of it has been paid back by BoA.
Wow! There is nothing that the US government or the Federal Reserve can't fix.
Maybe not. Market behavior's nothing like it was last time. $15B is not half of what the Fed put up for BSC, for heaven's sake, and we're talking trillions in liability here.
I think it depends on how GSE bonds react. If they get clobbered, the equity markets are not going to bounce.
Yes, awgee, the fix is in.
Speaker73,
GSE bonds? Have you checked Treasury movements lately?
Welcome back, CR.
You didn't happen to be scouting locations for your own bankerdome, did you?
GSE bonds? Have you checked Treasury movements lately?
TJ, yes i have, but I'm not sure what you're getting at?
OT:
Should I be worried now that Wachovia has started a massive TV campaign for its "Way2Save" Program? I've seen the commercial at least five times tonight. Shades of IndyMac's high-yield CD...
http://www.wachovia.com/misc2/0,,1774,00.html
j/k
What they're reading about us with their tea:
People.co.uk - So what's all this Fannieing about?
...
Why is it the shareholders that always suffer
Um, maybe because they're supposed to? Why do you think they call it "equity"?
argento,
that's prophetic.
Government takes them over, provides liquidity, waits until they become profitable again and then sells the shares back to the public. How much would the loss be when all said and done?
It sounds to me like the GSE bonds should thrive here since the govt now is giving an implicit backing to them just in time for the 3B sale of Freddie paper due on Monday morning.
The market will be hard to predict because the shareholders will get screwed in this deal, so I expect Fannie and Freddie to dive-bomb on Monday morning.
It sounds to me like the GSE bonds should thrive here since the govt now is giving an implicit backing to them just in time for the 3B sale of Freddie paper due on Monday morning.
That's what I was wondering. If this is perceived as bullish for GSE bonds, then I think you will see bullish behavior in the stock market, the stocks of FNM and FRE notwithstanding.
If, on the other hand, this is seen as a completely weak response an certain big holders of GSEs decide they need to lighten up further, the equity markets are going to slide too.
I don't trade GSEs and know nothing about the psychology of that market, so I honestly have no idea how it will react, but I do think its behavior will drive equities.
Still wondering how much buybacks are going to turn into bite backs, such as what WSJ reported on Lehman's on June 12 2008:
The firm spent hundreds of millions of dollars to repurchase its own shares, at prices that turn out to be wildly high compared to the stocks current beaten-down status. Lehman repurchased some of those shares as recently as last week.
Thoughts anyone?
Pissing on a 200,000 acre forest fire.
Most of the bad loans at FNM were bought under the watch of Dan Mudd, not Frank Raines. Mudd kept exhorting the troops that FNM wasn't taking enough risk and was becoming irrelevant because of Wall Street's growing market share. He drank the bubbly Kool-Aid.
Should I be worried now that Wachovia has started a massive TV campaign for its "Way2Save" Program?
!!!
5% interest, plus up to 5% of the balance on the anniversary?
They're toast. Burnt toast.
@amdllp
I do not know about the U.S. but in Britain it used to be illegal for a company to buy its own shares. Now it is allowed.
The ancients were not so stupid.
We're all home owners now.
Can anyone point me to the consensus (if there is one) on what kind of losses Freddie and Fannie are sitting on? No matter what bailout numbers get bandied about, everyone says they are too small to matter. What would it take, then?
Dr. Paulson races to the E.R. He sees the victim has suffered a shotgun plast point blank to the forehead and a stab wound to the neck. Dr. Paulson quickly takes out his medicine bag and pops the blister the victim's little right toe.
When Paulson is around, watch your wallet. I have a feeling Goldman is going to profit from all of this turmoil.
Fannie and Freddie: How the Fallout Could Affect You
Fannie and Freddie: How the Fallout Could Affect You - CNBC
The government might take any number of steps to buck up the two ailing entities. The bonds that Fannie and Freddie sell are held all over the world, by mutual funds and foreign governments. Any hint that those securities are in peril could further undermine faith in the United States economy, given that Fannie and Freddie were created and chartered by the American government.
In an election year, meanwhile, with the housing market already lousy in most places, the federal government will almost certainly do everything in its power to make sure that banks have continued access to Fannie and Freddie funds for loans to creditworthy home buyers.
Where's Lawrence Yun when you need some cheering up?
Get out there Larry. Knock 'em in the kishkes, sock 'em in the jaw, time to buy, time to buy, rah rah rah.
Some interesting reading :-
Deep Capture Blog
Zimbabwe here we come.
republicans are traitors writes:
Zimbabwe here we come.
http://www.lonelyplanet.com/worldguide/zimbabwe/money-and-costs
Several years ago a meal at a good restaurant would cost roughly US$3.00 - US$5.00 . Now, you're looking at around US$20.00 . A lodge in Matobo National Park used to cost US$2.00 .
It is now US$112.00.
argento, regarding wachovia, i did mentioned that wachovia and wamu have not contributed to chuckies campaign for 2008 xD
so dont wonder if they go down, just saying that chucky might warn again against certain financial institutions
awgee writes:
"Has anybody asked Mr. Paulson where the US Treasury will get the first $15 billion and any subsequent billions?"
Obviously from the new Federal Consolidated Holding Company - Cornholed Mac - i.e. US taxpayers.
The sheep are in trouble. It's shearing time again. The wolves are hungry. They have a Plan that works. It worked before in the Great Depression. All you need is incredible bloodline wealth in secrecy and hiding except for some meetins sometimes to talk strategy. So basically all it takes is establish central banking everywhere and have the military/police governments work against the people's interests. Throw in incredible war profits. Mix in fear mongering and media control. Beef up surveillance and security. Install another puppet.
And poof the middle class of THIS generation and their savings and assets are gone AGAIN.
The Plan works everytime. All you need is a central banking engineered deregulated bubble, more wars, commodity bubbles driven by speculation...and it's all over for the hopes and dreams of the masses. But the wolves have to have it all and the system is in place to pull it off every single time. Anyway back to bickering and attacking one another. Let's blame the order takers and the suckers.
This is like a James Bond movie with the evil villain taking over the World but this is for real folks...
dont worry guest, the guys who made the mess in west, forgot that for every dollar they outsourced to asia it created two yuan/yen whatever. and since the people in asia are not yet so brainwashed to spend every dime, it ended up by asians having more wealth that the guys who made the mess. and now they are in doodoo, what to do with guys who run the east and are more rich than the guys in the west?
Dear Mr. Risk,
Where does one go to apply for a bailout? does the Fed discount window accept old Pink Floyd LPs?
All I need is a few million to re-capitlize my reserves for the summer.
I am definitly too big to fail, no one will ever hire a fat guy like me if I am broke.
OT: Has anyone seen the new National Guard advertisement playing at the movie theater? They make war and death cool. They have a rock group playing in a war scene. This is worse than George Orwell 1984. Endless war is cool now. My country is sick and getting sicker.
How many bailouts can we afford before this is all over?
Japanese gov't debt per capita: $66,000.
US federal debt per capita: $18,000. If you're California you owe another ~$2,000 in state bonds apparently for a total of $20,000.
In addition we have $13.5T in mortgage debt and $2.5T in consumer debt. Assuming we are collectively 15% in over our heads with mortgages, that's around another $15,000 of per-capita debt, for a total of $35,000.
So, to answer your question, we could DOUBLE our government debt and still only be as bad off as the Japanese.
"Has anybody asked Mr. Paulson where the US Treasury will get the first $15 billion and any subsequent billions?"
$15B is about $17/bbl of oil we are importing from the persian gulf this year. Think they have it in their hearts to kick that back to us?
I hope those Chinese continue to believe in our strong dollar policy.
troy, you could, if you were japan and had CA surplus, because otherwise you will hyperinflate and i dont think the world wants to hyperinflate with you.
What are F&F bonds selling at? I am wondering if the Chinese might not like to sell if the price is decent, to trim their possible losses.
I've asked before, and I'll ask again. How do we go from having OFHEO saying all is well to, we need a bail out, in just a few days. Really I want to know?
Shouldn't these asshats be put in jail...or shot..or something?
Shouldn't we be quite pissed off (full disclosure I am quite pissed, but I'm not talking booze here)!
When is this shit gonna end!
Cheers
MouseJunior writes:
Should I be worried now that Wachovia has started a massive TV campaign for its "Way2Save" Program?
This account is limited to like %500. More like genious PR than toast. LOL.
superduperdave writes:
Can anyone point me to the consensus (if there is one) on what kind of losses Freddie and Fannie are sitting on? No matter what bailout numbers get bandied about, everyone says they are too small to matter. What would it take, then?
superduperdave | 07.13.08 - 4:14 am | #
Let's see if logic can prevail (snicker)
Given that they hold about five tril rated AAA marked to model and some Alt A waste is trading at 8 cents on the dollar, and we apply this to the entire pool evenly then the losses could be all but 400,000,000 for a total loss of 4,999,600,000,000.
I'm daring to look stupid here, but if my math is correct (and it may be wrong, I got really dizzy toward the end there) then that is potentially a lot of money.
Will it be that bad? I doubt it. There's plenty of what's there that will hold up and pay out to maturity just fine.
There goes the dollar...
"Given that they hold about five tril rated AAA marked to model and some Alt A waste is trading at 8 cents on the dollar, and we apply this to the entire pool evenly then the losses could be all but..."
It's a stretch to start using pricing on STRUCTURED PROIDUCTS based on Alt-A's, and then extrapolating that the GSE WHOLE LOAN portfolio.
8 cents on the dollar implies that the entire population of CONFORMING loans defaults and the house prices have dropped more than 90%, without even taking into account the first-loss status of mortgage insurers, GSE equity, preferred and subordinated debt holders.
At this point, it's safe to say that the housing market trends are not yet that bad.
To add some color on some highlighted points:
Whole loans versus structured: When structured product default, the usual recovery rate is 0. Why: you are exposed to losses within a certain range - e.g. 10-15% losses. But if the losses blow through 10%, the odds are they go through 15% as well, so you get a 100% write off. Credit losses on a whole loan are proportional to the average losses across all the loans.
Conforming vs. Alt-A: The GSEs were not making aggressive loans over the past few years, and they also kept a larger margin to account for credit losses. Maybe not enough, but more than than the bubble operators. A good portion of the outstanding GSE debt is based on fairly seasonaed mortgages, when slightly more sensible pricing prevailed.
Troy--
Would you rather owe $35k on gambling debts, or $60k on infrastructure?
I'm not saying I know that Japan's debt was necessarily well-spent. I do know that whether debt is a burden depends a lot on what it was acquired for. A raw dollars-to-dollars comparison doesn't necessarily get at the whole picture. Some kinds of debts are better than others.
someone needs to pick up on my sarcasm
the sad fact is, it doesn't matter how big the losses are
The "Way2Save" thing is Wachovia's answer to BoA's "Keep the Change". Basically, a stunt to get more people using their crappy savings accounts. Just a gimmick.
The really scary bit? W is offering 4.25% APY on 1 yr CDs. IMB was offering 4.15% when they went Tango Uniform...
-Jaso
Remember when the 'international community' was forgiving debt owed by Latim American and African nations?
Well if you've been to Washington, D.C. lately you will notice it has a distinctly third world hue about it.
Why doesn't Condi Rice go to the UN and demand the 'international community' grant debt relief to the United States. We're hurting and the burden of our debt payments is crippling our economy!
"Volker the Viking writes:
someone needs to pick up on my sarcasm
the sad fact is, it doesn't matter how big the losses are"
If the loses were $20, do they matter? No. The magnitude does come in, and if you looked at what I pointed out, the extrapolations being presented by bears for the GSE's may be wildly pessimistic. I picked your post as it was the most recent.
This is not to say the GSE equity holders will survive. But if the report is true, all the Treasury needs to do is stabilize the position of the senior debt and MBS holders.
One possible scenario that such support will drop the GSE's funding costs sufficiently that the extra interest rate margin will cover all credit losses. Keep in mind the first lost status of existing equity holders and mortgage insurers, as well as the existing interest rate margin embedded in the capital structure. In other words, the GSE's could live long and prosper even as the housing market implodes. In that case, the Treasury will have been a very successful vulture investor.
That's probably too optimistic a scenario, but it's hardly impossible.
Even in the case of the Treasury losing money on the capital injections, the losses may be spread over years, as they will only be crystallized as the issued debt comes due. If spread out over a long enough period, they become irrelevent.
bondguy: like Roubini, you're putting way too much thought into this
it really and truly (I promise you, and here I am being as sincere as Hubert Humphrey) does not matter, not one jot, whit or tittle how big the loss is
That story doesn't even allude to any sources. There is this:
Howard Shapiro, a Wall Street analyst at Fox-Pitt Kelton, said: I think it will happen over the weekend. There will be government action but it will be far short of the dire scenarios that people are envisioning. He said there was no question that the two firms were fundamentally sound.
So some guy on Wall St, with no apparent connection to the Treasury Department, and doesn't even believe a rescue is necessary, speculates "it" will happen this weekend?
Pretty convincing.
Anyone care to commment on this comment? (also lifted from across the pond, at the ft.com site:)
As I understand it, Fannie May and Freddie Mac have been functioning as banks, but with high concentration risk as pretty much all their assets are of one type - mortgages. Despite being owned in the private sector, they have benefited from a hazy implied government guarantee which has enabled them to operate with much less capital than a proper bank. This bubble has now burst.
I have read that their capital is only about 1.5 percent of assets. A normal bank is required to have capital of at least 8 percent or so of assets. If their combined assets are USD 5 trillion, this implies a capital shortfall of more than 300 billion.
By normal measures, the troubled state of their chosen sector implies that capital levels should be higher than 8 percent of assets. Against this, they may get by with less for now if the market believes that the US government will help out if needed. However, this cannot be certain, it seems that even the US Treasury would have difficulty writing as cheque for the full shortfall. The size of the apparent capital shortfall does strongly suggest that the mooted government injection of some USD 15 bn would be too little to make a real difference. Indeed, a subsidy at this level might just make matters worse by highlighting the US governments inability to supply enough cash to solve the whole problem.
Posted by: zero charles | July 13th, 2008 at 6:24 am | Report this comment
Is the issue with the GSE's really their current loan holdings and guarantees or is it their future loan holdings and guarantees?
With the GSE's currently underwriting as much as 80% of home sales and with even the FED admitting home prices will fall a further 15% nationally and 20% in California and Florida over the next year how can you with a straight face offer a home loan to anyone paying the current 'market' price much less package those loans up and sell them at face value?
If spread out over a long enough period, they become irrelevent.
Isn't this what's got the US into trouble in the first place? Deficits don't matter.
Kicking the can down the road again?
Bush Administration strategy:
1) Keep lid on US combat deaths between now and January.
2) Keep the stock market propped up between now and January.
3) Keep unemployment respectable between now and January.
4) Keep the dollar somewhere under $2.00 per euro between now and January.
Whatever the least they can actually do and the most they can lie about between now and January is what you can expect.
The pressure is on the press. The press has to cooperate in this venture. Note that the IndyMac failure was strictly page 3.
The market will open down and then climb back with borrowed yen.
But January? That is one hell of a long time away.
And then there's bombing Iran. I would say they will bomb Iran only if they believe that they can temporarily nullify the Constitution with the aid of the Supreme Court and turn the 50 states into Guantanamo.
"Does anyone believe this will be viewed positively by the market"
Depends entirely on which market, which asset classes and in which countries one is talking about, what is seen as a positive for one can hurt another that is much larger and has a much broader negative effect as was seen on Friday. One may be used to effect the outcome in another which is the intended target. Hank is set up for a run on the treasury and the dollar as on after another the TBTF come under attack. This is a financial war. Where's Soros anyway.
George Soros - Wikipedia, the free encyclopedia
BB - Once were dead it is not a problem for us anymore. Kick the can past the grave site like any good Republican would do.
Call me naive, but doesn't a direct appropriation to allow Treasury to buy the new Fannie/Freddie shares have to be approved by Congress?
Not that they have shown any more backbone than a jellyfish, but at some point isn't someone in Congress going to object to the U.S. Constitution being turned into toilet paper (along with the dollar?)
To answer my own question, apparently the dynamic here is that Congress is so timid and fearful that they would rather allow the Executive branch to trash the constitution than go on record opposing a bailout. Note the large number of U.S. Senators who dodged the vote on the last bailout (Friday.) Cowards!
I'll be more interested in the bond market reaction to this than the stock market, as I expect that it will not be pretty.
Deal gets announced tonight. FNM FRE stock drops to $3 Monday Market rallies big Monday. Just a repeat of the action in March after the Bear Sterns deal and the final collapse just gets pushed off into the future.
You go down the tubes (war?) with the treasury (army?) you have!
How much of the drop in share prices is related to naked shorts and not fundamentals?
Good hour audio on financial sense. The greatest crime in history
Financial Sense Newshour
Wait a minute, wait a minute.
Weren't F & F doing reasonably ok until the govmint forced them to buy stuff recently that they didn't want to buy?
Didn't they generate loans of somewhat better quality than the other nincompoops? Didn't they properly drag their feet at issuing loans FORMERLY KNOWN AS JUMBO? Aren't they still doing so? Weren't they trying to clear up their accounting mess, or whatever it was, and almost finished doing so?
Why then should the managers and shareholders suffer more than other financial institutions since they were trying to do the right thing and forced not to do so?
The consequences of letting them fail are devestating for all of us, and I don't think they are all that undeserving.
By the way, we went to see Kit Kitsomething, American Girl, which clearly was confected to be a charming look back to the GD I and one family's successfull attempt to withstand financial pressures of the said GD I. (Set in '34) There's even an abandoned dog they adopt. The owner did not leave him locked up to die, but left him on the sidewalk on a blanket with a sign about how he couldn't afford to feed the dog anymore.
Under the present circumstances, it was eerie. It was like today. Foreclosure signs everywhere. On charming beautiful houses that the people have too much mortgage on. Neighbors being kicked out. People losing jobs (coming to you in the near future).
And most eerily for me, there's a former stockbroker in a hobo camp, wearing a suit, formerly natty, now ratty, who says that he "formerly used to be" in stocks and bonds, but wasn't necessary any more. I have take to saying that I'm a "former" real estate attorney. There are other branches of law and I'm practicing 'em and I'm not destined for any hobo camp any time soon, but I miss being necessary. And I miss using my knowledge.
I didn't like hearing my very words coming back to me from the big screen.
"One possible scenario that such support will drop the GSE's funding costs sufficiently that the extra interest rate margin will cover all credit losses. "
Bondguy doesnt this assume a ceterus paribus conifdtion? In other words at some point the market is going to eacxt its pound of flesh from the Treasury in the form of sharply higher rates. You are assuming the capture the basis but what if the curve shifts out...sure mortgage rates go up byut by the same amount? And wouldn;t such a scenario only add to the price misery in the market causing even greater severity. This is muilt dimensional...there are any number of ways to exact discipline on the gov't. Thisw is merely one more step in the cat ands mouse game.
lrets also not forget that all the major banks and MER report earnings this week. Quite clearly they will announce somehting as the barrage of bad news is likley too unpalatable for a free market.
Housing to enter depression phase in Australia
Property analyst Residex has shown house and unit prices fell in nearly every city and rural centre in June.
The last time all Australian states fell at the same time was just before the Great Depression.
Housing to enter depression phase in Australia
Some more stuff on youtube :-
YouTube - 7/12/08 Mr Mortgage on the Fannie/Freddie Crisis
On another note, came across the phrase 'consumer is resilient'. What does that mean? Down on their knees but not out yet, keep on spending?!
I'm confused as to several aspects. F&F don't carry much paper having sold most off to bond investors who are paid interest in exchange for having assumed that risk. The paper they do retain is backed by both assets and the stock capitialization. The stockholders are paid dividends in exchange for that portion of the risk they assume as well. After these two classes of participants take their loses I just don't see the taxpayer on the hook for very much at all. In fact, this looks like a great opportunity to streamline the workout process. With current prospects I bet the US govt could pick up the outstanding bonds for dimes on the dollar. With Uncle sugar as the note holder workouts can be a simple process of borrower, servicer and federal govt. no more issues of ultimate ownership.
"On another note, came across the phrase 'consumer is resilient'. What does that mean? Down on their knees but not out yet, keep on spending?!"
It's a fairy tale the investment community tells itself to keep the boogeymen away when they go to sleep at night. But the boogeymen always come back.
Japanese per capita debt is 90% owned by .. Japanese.
US government debt is most owned by foreigners, include 22% owned by .. Japanese.
therefore the japanese per capita debt while high is not really as weak an issue as it sounds.
Is this Deep Capture thing for real? I've borrowed my husband's super-duper revved-up tinfoil hat.
WAR is a racket. It always has been.
It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives.
A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small "inside" group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes.
- Two-Time Congressional Medal of Honor Recipient Major General Smedley D. Butler - USMC Retired
Other News, the killed buyout that never quite dies :-
Yahoo Rejects Joint Proposal From Microsoft, Icahn
Yahoo Rejects Joint Proposal From Microsoft, Icahn (Update2) - Bloomberg.com
article
New Keynesianism just blow bubbbles. Great line "Galbraith as saying: Miltons [Friedmans] misfortune is that his policies have been tried. "
Setser is interesting on the international implications of the F&F crisis and the degree to which the US has spewed toxic poisonous waste around the world....and the possible consequences of that. It will for sure end badly, especially for the US that has little leverage in the matter (weak currency, no credit, etc., etc., etc.)
Brad Setser: Follow the Money » Blog Archive
The 2 billion pound financial conglomerate Dawnay Day has this weekend become the latest victim of the credit crunch, the Sunday Times reported.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
WAR, East vs West
YouTube - SINK THE BISMARCK ~ sung by Johnny Horton
Galbraith couldn't hold Friedman's lunch bag.
Retail Sales Probably Rose on Tax Rebates: U.S. Economy Preview
Retail Sales Probably Rose on Tax Rebates: U.S. Economy Preview - Bloomberg.com
More on the resilient consumer.
Kit Kitteridge is a charming look at hard times in the Depression? Pass. I'd rather see a movie like Heroes For Sale. The Depression, still Hollywoodized, but grim and actually made during that time. You get to see men riding the rails, setting up hobo camps, getting run out of every town because there are no jobs and nobody wants them there.
wanna worry about something? worry about this!
Cow farts collected in plastic tank for global warming study - Telegraph
$15B isn't enough to bring the big investors back. It will only bring in the relatively small investors. It might raise the market for one day, but by Friday (or sooner) the Dow will be even lower than it is now.
At this point, none of the big investors care what the Fed does --- they've had almost a full year to slow the downward slide, and they failed.
Soon, the stock market will be a minor story compared to banks and the bond market.
(The frog sits in the water. And the water has almost reached the boiling point...)
With due respect, I think most of y'all are missing the point.
The dollar amount is irrelevant. This move, if the story is true demonstrates that this Administration will not even allow the equity to go to zero, never mind the bonds. (Although central_scrutinizer makes a good point above. Perhaps tonight's announcement would be a proposal that Congress would need to approve.)
The GSEs are not formally insolvent yet. They are not even facing a liquidity crunch, as far as I know. So there is no particular rush to inject the actual capital. This gesture of support would mean more will come; as much as necessary.
Predicting short-term market moves is always a fool's game, but if this plan does get announced tonight, I am going to guess GSE credit spreads down, broader market up, dollar down, long bonds down.
As for FNM/FRE themselves, it depends on what is meant by "hugely dilutive to shareholders", exactly. If I were in charge, the moment even a penny of taxpayer money went into these things, the existing equity would go to zero. And the bonds would take some sort of haircut, too. (I believe in "too big to fail", ut not "too big to suffer any losses whatsoever".) Apparently, the current administration feels differently...
But I will wait for the actual announcement before I grab my musket and join the march on Washington.
km4,
That's quite a quote. You could add the tobacco industry to that. Same business model.
A big part of what's going on in the markets is the confidence issue. Friday -- to me -- anyway was the first time in a long while where I saw confidence in U.S. assets ... virtually ALL U.S. assets ... go out the window in a single day. The dollar fell. Treasury bonds fell. Stocks fell. And gold rose.
The question isn't whether $15 billion is enough to cover actual losses at Fannie and Freddie. It's whether it (or other steps by Treasury, Congress, and so on) can restore CONFIDENCE in U.S. markets and U.S. assets. So if you're trying to figure out whether this is "good" news, not enough, and so on, I'd watch the early action in the dollar. If it tanks again (AUD set a marginal new high on Friday, EUR is getting very close to its high, and so on), that'll be evidence that investors are giving Paulson the "thumbs down"
From the WaPo: Rigging the Monday FRE Auction
Freddie Mac's Next Hurdle: Raise Cash - washingtonpost.com
Treasury Department officials were working the telephones yesterday to make sure that Freddie Mac, one of the nation's two troubled mortgage giants, will be able to sell $3 billion of its securities tomorrow in a previously scheduled sale that has now become a crucial test of investor confidence.
This Story
*
Freddie Mac's Next Hurdle: Raise Cash
*
Ripple Effects From Fannie And Freddie
Though officials said they were optimistic the sale would be a success, anything less would pose new questions about how far the federal government is willing to go to prop up Freddie Mac, its sister Fannie Mae and other faltering financial enterprises.
Officials spoke yesterday with major banks that normally purchase securities, like the short-term debt offered by Freddie, to ensure these firms still plan to place bids tomorrow. This was part of an effort by officials at Treasury, the Federal Reserve and other agencies this weekend to gauge market sentiment and check that investors still have faith in Freddie Mac and Fannie Mae after the steep decline in their stock prices last week.
At the same time, Treasury officials were considering several options to backstop the sale in case they discover that interest in the securities is flagging, according to sources familiar with the discussions. Under one alternative, the Treasury or Fed would purchase the securities directly.
Other possibilities are allowing the Federal Reserve Bank of New York to buy the debt indirectly through private brokers or asking private firms to purchase the debt while extending to them either a public or private assurance that the government would back the securities if Freddie were ultimately unable to cover its obligations.
"Volker the Viking writes:
wanna worry about something? worry about this!" (link to article about cows and greenhouse gas.)
One way or another, there's a tofu steak in your future. Count on it.
The frog sits in the water. And the water has almost reached the boiling point...
This is a neat metaphor but uses a situation that never actually happens in real life.
Frogs will not continue to sit in water until the temp is raised to boiling. At a certain point, when their own internal body temperature reaches X number of degrees, the frog will instinctively seek to extricate itself from the water. The water grow s uncomfortable to the frog.
So only humans are that stupid; don't insult the frogs!
arbogast: my husband was watching MSNBC last night and they blamed the drop in IndyMac's shares on Shumer's letter!!
unit472: what do you think about the Time mag. recommendation re: buy now (printed in Feb) at lower rates, pmt=$994, buy in 12 mos. for lower price, higher rates, pmt=$994. I can comprehend this--I read economics blogs because I'm trying to figure out what I DON'T know.
PS
Bob Dobbs speaks! Enlighten us, give us slack!
There are two real problems, which everyone seems to be dancing around:
So how can the dollar survive?
What concerns me is 'he who pays the piper calls the tune' and in this case will the GSE's transmogrify into a new Countrywide with Chris Dodd as Angelo Mozilo.
If the GSE's are going to be an arm of the US government used to support government policy objectives such as extending credit to borrowers and areas the private sector considers too risky then they should be nationalized.
If they are to be a private corporation then the interests of the shareholders must be paramount which would preclude issuing or underwriting mortgages to high risk borrowers.
So which is it?
Lee--genau!
"Laurie writes:
PS
Bob Dobbs speaks! Enlighten us, give us slack!"
Eschew pinkness, and all slack will be yours.
I'll bet FNM popped up on Sebastian's Wright model B dividend screener. The same one that identified NEW as a screamin' BUY just before he went ALL IN.
SS,
It will be interesting to see if there is a biggish TIO added to the slosh tomorrow to grease the Freddie Mac debt sale...
With the goobermint's plunge protection team refusing to let the market tank, maybe the market has become a place to park your money. Seems like every night one expects the market to crash the next day, but the party keeps on keeping on. By the way, Indymac's failure was listed on page two of our local fishwrap (one million readers) and was described as a "thrift". The words 'bank failure" never appeared in the article, nor did the word "bank".
Laurie, less debt is preferable so even if you have a higher interest rate ( its deductable) you would want to pay the lower price.
is this the master plan? jobs go away, homes are repossessed, slackness is here? what is the relationship of slack and hunger? if you're hungry, you haven't truly transcended society's limits?
ps to you serious commenters, I apologize but you have to "ask Bob" when you get a chance!
Regarding forgiveness of US debts, where's Bono when we need him? They could make videos of how impoverished the US is, and film 'em in NOLA. Clips of the Minneapolis bridge collapse!
Ellen writes:
So only humans are that stupid; don't insult the frogs!
LOL. Frogs have it made, they eat what that bugs them.
Ian M writes:
Serious dilution of shares:...
See ya in the waste lands !
T. S. Eliot writes:
"
A crowd flowed over London Bridge, so many,
I had not thought death had undone so many."
Our zombified finance system......
For now count me as skeptical. Google News lists only UK news outlets flogging this story suggesting that no one in the US media has been able to get any corroboration. Of course it is still early on this side of the pond.
About IMB... I am surprised at how incompetent the FDIC was. You would think they could get a better estimate of the losses and would have lined up a groom, since IMB's been on a heart&lung machine for months. Does't bode well for the rest of the year as we see multiple failures on the same weekend in many geographical areas. Gonna get discouraging...
And, you can re-fi if the rates go down enough, thus lowering your payment. And, if you sell, your required payoff will be lower, and you will be less likely to go underwater.
A mortgage payment seems like rent, but it's not.
My point was that Kit was supposed to be charming fluff.
And turned out to be--not!
The hobo camp was shown in summer, and was bad, but not that bad. What these people would do in winter was of course, not addressed.
I'm sure that the movie you cited was much more realistic. I understand in the 30s people wanted to see glamourous people and screwball comedies to get their minds OFF of the ongoing trajedy.
My mom is 84 1/2 and thus would have been a year older than Kit. She was the relatively rich kid. House paid off; toys; plenty of food. Not rich, but not anywhere near the brink of the precipice. When my grandma was a kid, 1890s?, she relates that she would eat an apple and the other kids would beg for the core. This was Baltimore.
U.S. Treasury Department officials are trying to make sure that Freddie Mac, one of two troubled U.S. giant mortgage firms, will be able sell $3 billion in securities this week at a previously scheduled sale, the Washington Post reported on Sunday.
Officials check on Freddie Mac securities sale
| Reuters
Trying to instill a little CONfidence where none is deserved.
The WSJ has a piece that explains why there are different opinions as to F&F's solvency.
Basically, they are allowed to use some very liberal valuations of both assets and liabilities. Under those valuations, they are barely in the adequately capitalized category.
When times were good, investors didn't worry too much about this. That changed as investors grew more anxious about potential losses from the more than $5 trillion in mortgages the companies hold or guarantee.
Investors began paying closer attention to the GAAP balance sheet and fair-value figures. On that score, Fannie looked decidedly weak; Freddie was a basket case.
At the end of the first quarter, Freddie's regulatory capital was about $38 billion. Yet GAAP total shareholders equity was $16 billion and common equity, or book value, was just $2 billion. On a fair-value basis, the company had negative net worth of nearly $17 billion.
This definitely has nothing to do with the changes made recently allowing them to go into jumbo mortgages, etc. This is something people were warning about 20 years ago.
barely writes:
About IMB... I am surprised at how incompetent the FDIC was.
There's some speculation that the FED would only help member banks, but it's only a rumour.
This is on Al Jazeeera:
Jeremy Batstone, an analyst and head of private client research at Charles Stanley stockbrokers in London, told Al Jazeera that the US government would find it difficult to bail out the companies even if it wanted to.
"The US authorities just haven't got the money. They are as indebted as most of the US population, so there's a crisis," he said.
"If the main two US mortgage lenders are in meltdown then what on earth does that suggest about the health of US residential property market which of course has been in freefall for 18 months?"
No wonder Bush & company don't like
Al J.
They tell the truth.
And why should one have confidence in something that deserves no CONfidence?
Thank's CR and welcome back from the vacation. I think that we have saved the fireworks for you on Monday. I expected a FNM and FRE bailout on Monday and played my CNBC game for this issue. I expect a market pop on Monday but this will not make up for the declines in bonds and dollar. If you look at the 2 yr bond, it has shot up from approximately 2.43% to 2.6% in three days. I suspect that it will more to 2.8% by week end. Welcome back and have a great Sunday. Cheers.
Lawyerliz, did you see this big article in Time about BUY NOW, don't wait for home prices to drop. Disinformation?
They are are so busy sticking fingers in the financial dyke that they have forgotten that the problem is the unsustainable price of residential real estate in and around the big cities. more loans at these still high prices just makes the problem worse. the emergency meetings should have been at the start of the bubble
Begging to eat the core of the apple has been the human lot since the dawn of time. The last 50 years in America have been a golden time. The kind of period that myths and stories will be written of and told to disbelieving children.
I think the current administration wants to do as little as possible to keep things afloat and then let the next group make all of the hard decisions. So look for a series of small moves to string things along. The rest of the world will go along because, what's the alternative? M.A.D.
It will give us in the rest of the world more time to decouple.
TIO? What it is?
Nope, haven't seen that Time piece, but the local fishwrapper is saying that now.
Actually there are some genuine low prices now in various places in space coast Florida, that you could get a positive cash flow on if you were willing to deal with renters, which I'm not.
There is an upscale trailer park, as upscale as a trailer park can be anyway, a mile or 2 from my house. A few weeks ago there was a sign that said houses for sale in the 70s, last week it was in the 60s and this week in the 50s. Somebody's getting desperate.
"The pressure is on the press. The press has to cooperate in this venture."
Don't worry, the press is completely on board with the ongoing con. The corporate owners of the media are fully, enthusiastically aboard because it's in their interests to maintain the very favorable tax and regulatory environment the GOP has given them over the past 14 years, culminating in Junior's two terms of deregulated stink. Thus you have the endless cheerleading and warmongering of Rupert's FoxNews. Meanwhile, the cadre of field-level allegedly professional "journalists" are aware of where their bread is buttered, and are perfectly happy to be lazy and loyal stenographers, being mostly interested in what's for lunch today. The idea that the press is supposed to energetically investigate, identify, and report factual truth would draw only blank stares from the vast majority of "journalists." To them, being a "journalist" means copying something from AP or Reuters or the Administration, adding a few colloquialisms and personal touches of their own, submitting it to their editors for print or broadcast, and then it's off to the local watering hole to endulge in another round of self-congratulations about how great it is to continue the tradition of Geraldo Rivera. If you asked them who Edward R. Murrow was they'd guess he was a lineman for the Packers in the '60s.
fwiw here's the Time mag link:
Ignore the Headlines - TIME
There are 300 million people in the U.S. The federal gov. has run up a debt of over $9 Trillion.
That is $30,000 that each citizen is in debt. $13.5 Trillion / 300 million in mortgate debt = $45,000 per person.
That's $75,000 of debt per person, on average.
That article is from last February, 2008 Laurie.
If you had bought a house or stocks then, you were most likely toast. The article also sez that things are gonna be better soon.
I wish.
Nemo and RobDawg make some good observations.
If we clear out the confusion about just how much risk there would be in a US Govt guarantee of F &F bonds - not $5 trillion of risk, but $5 trillion minus the assets' equity behind the bonds - then we get a different picture of what rumors of govt capital infusion mean.
$15 billion is neither too much money (in relation to risk) nor necessarily too little to keep F & F afloat for the near term (since their near term issue is cash flow to keep all their bond obligations in good standing and keep above regulatory requirements for reserves).
But, as I see it, the injection of any amount of cash leaves too much uncertainty. To much uncertainty about the future of F & F, about the commitment to clean up the underlying structural problems, about the extent of the implied govt guarantee (i.e., still implied and denied at the same time), etc.
So, as I see it, this is a quintessential example of FAILURE OF LEADERSHIP. Sorry for the screaming capital letters, but they are a bit of a joke since no more examples of faulure of leadership were necessary from the gang that let New Orleans drown and destroyed our future with the Iraq War.
Real leadership would take the reins from F & F, whether by nationalization, conservatorship, receivership, or some other means. Lots of room to sort the details in different ways. But real leadership would have had a plan ready by now and would have called in all the powerful parties to get them on board and/or tell them how it is going to be. And that could very well include getting some of our foreign friends to accept a small haircut on their bond holdings.
Obviously this is beyond the powers of GWB. Just think about him going into foreign capitals (China, Russia, Germany, Japan, anywhere) and asking for help! Sheeeeeeeit, he can't even get the govt he installed in Iraq to do what he wants them to do.
Just to be fanciful for a moment, suppose that Obama gets received by millions of admiring citizens on his European tour, and suppose that at least a touch of that warmth exists for him in Japan. . . I know, I know, we want a president who is hated by the rest of the world because that confirms that we are the children of light fighting alone against evil darkness. But, suspend your disbelief and imagine the unthinkable scenario in which the US actually needs help and cooperation from foreign governments to get our economic house in order. . . perhaps by convincing foreign central banks to accept a few percent haircut or a workout plan on the debt we owe them............
Of course, a President held in such international regard would be against our traditions. Still, it could help solve the problem.
Here are some excerpts from an analyst who says FNM and FRE are nowhere near being insolvent, and won't get there under any conceivable scenario.
This research is privately published, so no links, sorry. All the data used is public, however. This would suggest that there in nothing more going on than panic and/or manipulation among equity investors. There doesn't appear to be any panic, or even much concern, among bond holders.
As of the end of Q1, both companies carried significant capital in excess of both their minimum and critical capital levels, $26 b in excess of the critical level for FNM and $24 b in excess for FRE. If we tax effect these amounts, we see that the level of losses to reach critical capital levels is $40 b for FRE and $37 b for FNM. This assumes losses occur immediately and that there are no offsets from revenue growth.
What would this imply in terms of claim rates, HPD and severity?
In the case of FNM, we would need to assume HPD of roughly 40% nationally and 50% in CA and claim rates nearly 60% higher than the worst seen in the 1990s CA downturn (5% on 2006 and 2007 vintage loans) to get to these levels. How reasonable is this? Another way of looking at this is to see what kind of increase in delinquencies/foreclosures it would take to get to a 5% claim rate. Currently FNMs delinquency rate is 122 bps of which 40-50% actually go to claim. So to get to a 5% claim rate, we would need to see the current delinquency rate increase by 8-10x, or to 9.76%-12.2%. We believe this is very unlikely.
In the case of FRE, we would need to assume a more draconian scenario given differences in exposure and sizeclaim rates of 5.5% and steeper HPD. Here, too, we would need to assume an immediate increase in the delinquency rate-- to 13.75%-- to arrive at this kind of claims rate.
We would like to emphasize that losses even of this magnitude are unlikely to occur all at once. This gives the GSEs the benefit of time during which top line growth will continue and even accelerate. Currently, revenues are running at about and $8-12 b annualized run rate (depending on whether one uses GAAP or operating earnings). This suggests total revenues of between $24-60 b over the 3-5 year time frame over which losses are likely to occur.
If we add together their statutory surplus, current loss reserve and estimated revenues, total claims paying resources for FNM are $56-92 b for FNM and $52-88b for FRE. If we tax effect these numbers, we see that FNM can sustain losses of $85-141 b over 3-5 years and FRE losses of $80-135 b.
It was reported the last round of bailout pledged 1/2 the money supply.
With this how much more of the money supply is pledged?
Let's get those $ printing presses ready!
Video - Breaking News Videos from CNN.com
suze: Why aren't the regulators in jail? [2:30]
The big story here for me is the lack of credibility of the govt and the media. No matter what was said, the Freddie and Fannie stocks kept plummeting.
The public relations spin isn't working anymore. Sure lots of ordinary people are surprised but many who follow the markets closely now do NOT believe anyone in the govt. or the mainstream media who have kept trying to minimize the financial meltdown. They've completely lost their mojo.
Currently FNMs delinquency rate is 122 bps of which 40-50% actually go to claim. So to get to a 5% claim rate, we would need to see the current delinquency rate increase by 8-10x, or to 9.76%-12.2%. We believe this is very unlikely.
That analyst gets paid real money? That's a pretty braindead assessment. 1.22% is the current delinquency rate. The relevant rate for solvency is the lifetime delinquency rate. If delinquencies resolve in 6 months on average and the rate merely doubles from present, FNM is broke in 2 years. And, of course, there would be a collapse in confidence and severe regulatory shortfalls well before Fannie's checks started bouncing.
It's Sierra, one s.
Uileam,
Trust me, I was brought up in Spanish. Una sierra, dos sierras, las sierras.
The federal gov. has run up a debt of over $9 Trillion.
That is $30,000 that each citizen is in debt. $13.5 Trillion / 300 million in mortgate debt = $45,000 per person.
That's $75,000 of debt per person, on average.
That $9T is counting the SS surplus, which is not correct to do since that is overtaxation of the past (+ interest we have paid to ourselves) intended to be spent in the future (2020-2040).
It is true that mortgage debt is $13.5T but the bulk of that is capitalized rents that will flow through to GDP as OER over the years.
People say we are "out of money" but the asset side of the Federal Flow of Funds report says we've got a LOT of cash and savings. We need to tax the wealthy -- who own the bulk of these savings -- to keep this ship afloat. Sweden and the other Nordic countries have zero government debt.
Government debt is deferred taxation. The time to start taxing is now.
Canadian watching with popcorn,
There has got to be a fair bit of schadenfreude in the land of the maple leaf. Not only does Canada have incredible natural resources it also has large swathes of unused arable land. Unless the USA invades you guys should make out like bandits.
Lawyerliz-
In the majority of trailer parks you do not own the land, therefore, it is impossible to quantify a CAP rate or ROI.
anonymoose writes:
As per the analyst who has been long and strong and dead wrong here is the analogy about his time is on their side mantra: the same can be said for a brain dead human on the heart and long machine. THis is the terry schiavo analysis. Pathetic.
Lawyerliz-
True the Time article is 5 months old.
But if you wait for home prices to drop and pay higher interest rates, THEN hope RATES drop so you can re-fi, is that realistic?
Aren't our rates like astonishingly, untenably low?
robdaI agree with your premise. People are making the assumption that this is pure debt, no assets? Kind of strange when you here 5 trillion/. That is the portflio amount. Sure the equity is worthless, but the assets and combnined $1.4 trillion in parent co debt is not. Obviously there are severity issues to resolve which time will do, but in all liklihood, the portoflio isn;t going to zero. If it does, it will be the last of our worries. The bigger issue is the collateral damage to lending and prices that a fundamental rethink of these entities will have. Average joe should be far more worried about that than whether the gov buys the debt at a 5 or 10% disco.
With the GSE's currently underwriting as much as 80% of home sales
No source here, but read very recently that while F&F historically made 80% of mortgage loans under $417K, nowadays about 98% of new loans end up in F&F's hands, likely due to the desperate need for liquidity on the part of the banks.
And this type of government intervention/corruption keeps me from holding any short position over the weekends
All this talk about how Japan is gonna do vs. the American Empire. The analysis must discard old concepts such as patriotic nationalism for a global perspective. Depressions are global or international. No nation can hide as U.S. consumers can't hide their assets.
The PTB or power elite have tanked various national currencies in recent years...Asian, Russian, South American...and now it's time to tank the 'world's reserve currency' and default on all the government and private asset debt to the people of the U.S. But this is happening in Europe and Asia with increasing inflation which undermines fiat currencies or the financial collapse(credit contraction mixed with bizarre swap-o-rama Fed fund swaps for garbage) will happen wherever there is central banking control...basically everywhere.
Wars are waged against nations without central banking. Military/finance terrorism!
The concept of nationalism is as obsolete as the Marxist concept of socialism for the workers. This is International central banking Socialism for the super wealthy or power elite. Yes. Yes it is.
It's time to watch some baseball and then go buy some more rice!
No matter how you all 'crunch' or 'massage' the numbers, a global Depression is in the works and has been for a while now. This generation is 'unlucky' to come into retirement years in the 'bust' part of the engineered, unregulated bubble cycle.
Suze Orman wants to go after the 'regulators' or the servicers and administrators of this mess. We need to go to the very top of the heap or pecking order to find the elite money driving these central banking cycles. Think outside your MSM or disinfo box. There's a chain of command. You are going after the order takers and suckers at the bottom and leaving the Power Elite unaccountable. Those lowly bureaucrats or 'regulators' aren't at the top of the food chain or pecking order. Study some evolutionary biology and apply it to financial system evolution.
Social Darwinism IS at work here. The concentration and consolidation of wealth is a central banking administrative system serving the Masters of War and Wealth. There is a class system...it's just more pronounced and planned than we thought! There is a 'Socialist' system but not for the workers! The super rich have taken over governments and economies to increase their capital. Chow.
Privatize profit and socialize risk. That's the U.S. system since Reagan. When will the public wise up?
Hangtown: "With the goobermint's plunge protection team refusing to let the market tank, maybe the market has become a place to park your money. Seems like every night one expects the market to crash the next day, but the party keeps on keeping on. "
That was true up until about the first week in June. Since then, though, watch out below.
"Unless the USA invades you guys should make out like bandits."
Based on recent performance, if we do invade, Canada will end up owning us. Be kind to your colonists, please.
It's time to watch some baseball and then go buy some more rice!
The local Smart and Final store still has their sign about their limit of 3 bags of rice per purchaser, and if it ever comes down, that could be taken as a good sign...............................
I am losing count. After the FED bailout of the investment companies (how'n the hell they're called "banks" I know not) for 500 BILLION dollars (that's half a trillion for the mathematically challenged), articles indicated the FED had remaining in its piggy bank 250 BILLION dollars (that's one quarter trillion for the mathematically challenged). Perhaps the relatively piddling amount the FED is handing out to Fannie and Freddy indicates the well is running dry. Additionally, perhaps good ole' Ben is worried there is more financial crap comin' down the line.
In any case, what're Fanny and Freddie gonna' do with the cash infusion? Unca' Ben's track record on this ain't too good. Shortly after the last time Unca' Ben doled out the dollars, food riots broke out in numerous countries, although we all know investors had NOTHING to do with the rise in food prices. Wink, wink, nudge, nudge. Oh yeah, didn't Unca' Ben also start talkin' 'bout inflation 'bout the same time? Hmm, this oughta' be good. Stay tuned, campers.
Privatize your profits, nationalize your losses. A capitalist in need is a socialist indeed.