Market cap below $5b. Divvy below 3%. Just exactly does freddie plan on using to attract new capital? Oh, I know, they'll charge more for mortgages and bust the demand curve.
Look, we all know where this is going. Let's just dig a little deepr and do it right. Close down the GSEs and run off the assets. At the same time gin up a new GSE; Federal Reserve National Corp. Frankenstein or Frankie to its friends.
"If you're going to take aid to low-income families seriously, then you're going to make riskier loans," Syron said in an interview yesterday. "We have goals to meet."
ouch is right...I wonder why 2007 vintage is sooo bad..is it because they were picking up more junk from others or re-foreclosures workouts gone bad (pg 32)
I'm confused... I thought Hank solved Freddie and Fannie's problems a couple of weeks ago, and financials were up yesterday, too. The numbers must be wrong.
k harris - I is my understanding, (anybody, please correct me if I am wrong), that most CDSes start paying settlements on the spread as opposed to an all or nothing default. If so, does this mean that settlements will start being paid on F&F CDSes?
"Freddie Macs securities are obligations of Freddie Mac only. The securities, including any interest or return of
discount on the securities, are not guaranteed by and are not debts or obligations of the United States or any
federal agency or instrumentality other than Freddie Mac"
Since Tanta will undoubtably set us all straight after we've vented here's my 2¢.
I am serious concerned that the high profile and special status of the GSEs reporting this latest containment breach could alter borrower behavior. Don't call it moral hazard. The problem is all those people out there struggling to make the monthly nut now seeing what looks like a way out; join the tens of thousands already defaulting with so few consequences.
I have no doubt that the worst is yet to come. Problem is, I have a huge debate with myself what is the proper endgame:
Sustained Hyperinflation with currency collapse? (No paper losses, Asset prices propped up by inflation) Standard of living drops. Credit/Debt is inflated away to pennies on the dollar.
Sustained losses in Equities, all Asset classes and Commodities; but mild losses to slight gains in employment. Standard of living drops. Credit living ends. (i.e. Paper losses and lives get harder)
Sustained Deflation with FED's "push on a string". Equities/Paper wealth becomes pennies on the dollar. Credit/Debt becomes a terrifying thing. Job loss, production stops. Standard of living drops off a cliff.
Sustained Nothingburger. We go through years of pain (10 years?) to be exactly where we are TODAY while the world moves on.
could not agree more. I see it almost everyday...It makes me sick that people get a free ride along with the banks at the expense of us responsible people.
Now explain why the dollar is still where it's at?
"join the tens of thousands already defaulting with so few consequences.
Rob Dawg | Homepage | 08.06.08 - 10:05 am |"
It's the American way!
I hate it, but I hate seeing my neighbors struggle with making thier payments. I bought my house before the bubble and they bought right in the thick of it. Now one is trying anything he can to sell it and break even.
Sustained Inflation in low-order raw materials; World also collapse (no export-oriented recovery) Sustained Deflation in Equities, high order finished products, corp profits and wages. Currency drops but don't collapse. Standard of living drops precipitously. Debts becomes unpayable and defaults which causes risk premium to become crazy-high (to today's standard). Like 12% or more.
Do this for 5-8 years, perhaps longer. (this credit bubble as a whole took 30 years to build up, so a 5-8 deflation of the bubble is already quite optimistic. Pessimistically, we can call a whole generation life is over.)
I vote for #5. It seems the govt will put up a fight, that will end up making tax or deficit sky high; which will guarantee #5 happens.
The link between MBS and Treasuries at work today is duration. When yield goes up, as it is on MBS, duration goes down. Long Treasuries serve as a duration hedge. When duration falls, you don't need as much hedge. Same thing happens, for slightly different reasons, when corporations issue new debt. Treasuries get a bid before the fact, lose it after. Portfolio mechanics at work.
Newbie,
Ambac has admitted that its near $1 bln gain on CDS spreads would, at end-July prices, have turned into a $1+ bln loss.
Depends on the point of view of the various people that are impacted. Generally speaking, I could take the following snips out of your list and I would say that:
In light of Denninger's piece yesterday, it would be more accurate to report, "China is planning to slash Freddies dividend to five cents." But in a land of strong dollars, containment, and "possible" recessions, the truth seems hardly a factor anymore.
Interesting Times writes:
stuart - wonder how much is sitting inside the FED window?
Interesting Times | 08.06.08 - 10:28 am | #
Talk about a state secret. That figure is in the vault on the shelf next to the location of the holy grail.
I also have to believe the Fed is cognizant of its inability to "put back" to the banks any of the assets it swapped out/pawned out due to their ongoing destruction of value since they pawned them. The pumping of the banks and deliberate obfuscation of the real net worth of the banks' assets by regulators, financial officials at the Treasury and the Fed I can easily see partially motivated to address just this box the Fed is in. The Fed can't put back if the banks cannot afford to take it back, hence mission 101: inflate the banks at all cost and mission 102: don't let anyone prove this. Conjecture is acceptable, claims of fraud and moral hazard also acceptable, but under no circumstance allow proof to surface. Recruit whatever media source need to continue confidence spin. Perhaps tinfoil, but I cannot imagine nobody inside the Fed hasn't thought about this.
From previous thread... Also later today, Paulson will announce that Freddie`s securities are backed by the good faith of U.S. Air Force. (just in case the Chinese might ask any weird questions) -- Broker
Ambac actually lost $1.53 a share this quarter, they were only able to post a "profit" thanks to a new accounting rule that lets them take into account that the cost to buy back their own debt on the market has decreased. Not PAY back their own debt, mind you, but actually buy the bonds from whomever owns them, since they are selling at a discount currently. Sort of like if you took out a mortgage, and it looked likely you were going into default and would become a foreclosure, and the bank tried to sell your mortgage for pennies on the dollar, and you yourself bought the entire mortgage for less that what it would have cost you to pay it off.
Ambac is effectively writing off the difference as gain, since they could, if they had the money to do so, buy back their own debt for less than it would cost them to pay back principal and interest. It's a neat trick, but a lot like mortgage companies booking negative amortization as future profit -- it's a gain on paper, but the reasoning behind the discrepancy is usually a contrary indicator to actually realizing the gain. Like in the mortgage example, if a borrower can't even pay his monthly mortgage, how is he going to get the money to buy the entire note, even if it is at a discount. Just like, if Ambac's debt is selling at a discount because the company is hurting, where exactly are they going to come up with the money to buy all of their debt back?
Isn't the figure quite small compared to the numbers we see from City, Merrill etc., I think this should be good news considering what housing market is going through.
Although I have not looked through it's release in detail.....the question I have is do they or have they been able to play the booking reduced liabilities as a profit game ala the I-banks??
have to admit I'm not as "up" on the intricacies available to the GSE's.....
Groundhogday writes:
Why would Freddie or Fannie be distributing any dividends at all? They are clearly going to need capital, so why give away cash now?
It also gives the windbags on the teevee something to cling to as they sell confidence to the willfully deluded.
"We need a new bubble--this time one that results in a real product. Energy (clean, abundant,local) is just what the doctor ordered--is it doable?"
Mel,
there is one - and only one - thing that lets the already-built American infrastructure and development pattern remain intact while mitigating the effect of oil blackmail and speculation, and that is a personal transportation vehicle that does not depend upon petroleum. It ought to be the absolute #1 US priority at this moment... but it is hardly even on the radar. Subsidies still go out to preserve the doomed past with no thought to tomorrow.
Close the GSEs and the mortgage industry comes to a halt...
Housing can just become a market of cash transactions. Sure prices will have to fall a little bit more, but before you know it people will think of buying a home like buying a Big Mac. All this talk of housing crises will be over.
China just received permission to open a branch of the Industrial and Commercial Bank of China in New York. When we no longer trust the capitalization of our banks, we can stash our cash with them.
When I first glanced at the headline, I thought it did say 8.21 Billion. What kind of CSS causes the first digit to be larger than the rest of the numbers ?
Are you saying they can do this even without actually buying back the debt? In other words, if they had the money, they would, but they don't, but they still go ahead and write it off as gain? And this is legal?
OFHEO expects that the Fannie Mae enforcement action will be completed through the administrative 30% phase by 2009. Opportunities are available for appeal, and the Department 25% of Justice will represent OFHEO in any appeal to the D.C. Circuit Court. In 2007 these litigation activities represented 25 20% percent of OFHEOs resources, and the agencys FY 2008 budget includes significant resources for this litigation.
In lifting a 2006 consent order, the Office of Federal Housing Enterprise Oversight said Tuesday that "two years of hard work" by Fannie Mae officials had resolved many internal accounting and management problems. Regulators will continue reducing surplus capital requirements imposed on Fannie Mae after the company was forced to restate several years of earnings, OFHEO said. On March 1 OFHEO removed a cap on the size of Fannie Mae's mortgage portfolio -- loans or mortgage-backed securities the company holds for investment.
Re: The Enterprise is cooperating with OFHEO in accomplishing our mutual goal of remediation. As a result of the increased operational risk at Freddie Mac, OFHEO directed Freddie Macto maintain a targeted capital surplus of 30% over their minimum capital requirement. To date, Freddie Mac has maintained a surplus in compliance with this directive. http://www.ofheo.gov/media/pdf/ f...dfinancials.pdf
The problem is all those people out there struggling to make the monthly nut now seeing what looks like a way out; join the tens of thousands already defaulting with so few consequences.
Yep. As horrible and inhumane as it may seem to throw people out of their houses, the breakdown in credit that would occur if there weren't steep penalties for default would be vastly worse. It would effectively mean the end of the prosperity we have today for the foreseeable future.
That fact that penalties for abusing credit must be harsh to maintain the existence of credit looks to be another in a long line of lessons we're intent on re-learning the hard way.
This is sure true where I live. Houses are up for sale priced 100% or more over Zillow estimate. None selling, of course, but asking price never seems to drop.
No, they do NOT have to actually buy back the debt to account for it as income.
The argument for the new accounting rule was that all of these companies had "assets" (money OWED to them) like MBSs, CDOs, etc, and they were being forced to write the decreased market value of these securities as losses, so why shouldn't they be able to write-UP the decreased value of their liabilities (debt they owe to others).
The flaw in that logic is, obviously, that the value of their "Assets" has decreased permanently, because money has in fact been lost, and this is verifiable (mortgages have gone into foreclosure, principal and interest on this debt have been lost) In fact, many, on this board especially, complain that the value of these securities has not been discounted ENOUGH to account for both present and expected future losses.
The discount on the liabilities, however, is temporary -- either the company will survive and pay its debts, in which case the market will revalue the debt, or the company will not survive and the value of that debt will likely become 0.
This correction is more severe than what we've seen in the recent past,'' said Christopher Whalen, co-founder of independent research firm Institutional Risk Analytics in Torrance, California.Both Fannie and Freddie are going to be profoundly insolvent by the time we're done with this.''
How does "profoundly" insolvent compare to "technically" insolvent?
At least they are reducing their dividend; wouldn't want to be paying out taxpayer money when you're going to have government subsidized losses from now until forever. I mean, paying out a dividend now would be a blatant moral hazard, completely corrupt, and an atrocious breach of fiscal responsibility which surely their new stronger oversight would prevent, if not a less corrupt Congress or even basic business ethics.
... oh, what now, they are still paying a dividend? Oh... man... uh, carry on then, I guess goes to cry in a corner.
hc: the answer is #3, deflation, the government can't print enough money to get ahead of the curve of global asset value destruction that is accelerating in earnest, the brief oil and commodities bubble destroyed demand
Its not Syron fault, he is only in charge when there are profits.
Didnt someone from FBR say, just yesterday, they would report a profit?
Down 19% at the ope
Multiply that by ten and I might believe it.
Cmon freddie tell us how much you really need to raise... Over 50 billion...
Moin from Germany,
here comes the Freddie Mac Conference Call Presentation
Ouch....!
c&c,
Yes someone posted that on the previous thread...
You know how for the first few seconds after you have just sliced your finger to the bone...it's only hardly bleeding?
My name is Inigo Montoya. You killed my share price...prepare to die.
only $821 M? pffft! Probably a round-off error.
I'm sorry my actions caused you pain.
Emergency session in Congress to address GSE share price!
My name is Inigo Montoya. You killed my share price...prepare to die.
Love it...
JimPortlandOR writes:
only $821 M? pffft! Probably a round-off error.
No it was an error decimals places...
Are there CDSes written on Fannie and Freddie bonds? Hmm-m-m
10-year is falling (yields are rising) along with the markets. Bad sign?
I wonder whether a Fannie or Freddie sell-off prompts a sell-off in U.S. government debt.
Market cap below $5b. Divvy below 3%. Just exactly does freddie plan on using to attract new capital? Oh, I know, they'll charge more for mortgages and bust the demand curve.
Look, we all know where this is going. Let's just dig a little deepr and do it right. Close down the GSEs and run off the assets. At the same time gin up a new GSE; Federal Reserve National Corp. Frankenstein or Frankie to its friends.
Close the GSEs and the mortgage industry comes to a halt...
Alt-A, Option Arm crisis is starting now!
"If you're going to take aid to low-income families seriously, then you're going to make riskier loans," Syron said in an interview yesterday. "We have goals to meet."
Moin again,
"Market cap below $5b. Divvy below 3%. Just exactly does freddie plan on using to attract new capital?"
The "Treasury/Fed Complex" will buy all of the equity ( i assume it will be much more than $ 5 billion )that will be offered......
What a scam on taxpayers this company is.
I think FRE and FNM is the new Robin Hood ver 2.0:
I think we're in between #2 and #3.
I wanna work there!
"You know how for the first few seconds after you have just sliced your finger to the bone...it's only hardly bleeding?"
Reminds me all those IB CEOs who keep saying, "We are well capitalized."
A guy falls off a one hundred story building. About fifty stories down, he says to himself, "Hmm, this ain't so bad."
Alt-A, Option Arm crisis is starting now!
California alt-A losses
1Q08 = $75M
2Q08 = $188M
Any guesses for 3Q? Damn, what a mess.
Ouch....!
jmf
morning to you too
ouch is right...I wonder why 2007 vintage is sooo bad..is it because they were picking up more junk from others or re-foreclosures workouts gone bad (pg 32)
I'm confused... I thought Hank solved Freddie and Fannie's problems a couple of weeks ago, and financials were up yesterday, too. The numbers must be wrong.
"We have goals to meet."
For we have promises to keep
And goals to meet before we sleep
And goals to meet before we sleep.
safe,
In conjunction with the yen weakening?!
Just when we thought it couldn't get any weirder...
awgee
Freddie's CDS spread was quoted at 45 bps ahead of the release, 48 bps just after. Don't know where it is now.
As Tanta will explain to you later (in a short 50,000 word post) this is a conspiracy against F&F.
k harris - I is my understanding, (anybody, please correct me if I am wrong), that most CDSes start paying settlements on the spread as opposed to an all or nothing default. If so, does this mean that settlements will start being paid on F&F CDSes?
"Freddie Macs securities are obligations of Freddie Mac only. The securities, including any interest or return of
discount on the securities, are not guaranteed by and are not debts or obligations of the United States or any
federal agency or instrumentality other than Freddie Mac"
emminent domain is the wayout
Freddie ate shit and is dying, no surprise.
FRE Rally! Only down 15.2% after 26 min of trade (up $0.23 from low)
These clowns are Cornholiod, which will lead to the US government and by extension the US taxpayers getting the screwing they so richly deserve.
Moin Barley,
especially when you consider the average Fico score of 724 for their their ALT A portfolio.....
awgee,
dunno.
By the way, MBS paper is getting drilled today, and roughing up long Treasuries in the process.
CR,
What is your view on Ambac posting a profit?
newbie
Since Tanta will undoubtably set us all straight after we've vented here's my 2¢.
I am serious concerned that the high profile and special status of the GSEs reporting this latest containment breach could alter borrower behavior. Don't call it moral hazard. The problem is all those people out there struggling to make the monthly nut now seeing what looks like a way out; join the tens of thousands already defaulting with so few consequences.
I have no doubt that the worst is yet to come. Problem is, I have a huge debate with myself what is the proper endgame:
Any ideas?
rob-
could not agree more. I see it almost everyday...It makes me sick that people get a free ride along with the banks at the expense of us responsible people.
Now explain why the dollar is still where it's at?
Ciao
MS
"join the tens of thousands already defaulting with so few consequences.
Rob Dawg | Homepage | 08.06.08 - 10:05 am |"
Welcome to Wall Street!
I think Paulson will need a "Hotel California" approach in regard with F&F.(no shorting, no selling, but you can buy anytime you want)
"Standard of living drops off a cliff."
Have you not seen a graph of USD purchasing power over the last 15 years - it has been all down hill, baby. All down hill.
"By the way, MBS paper is getting drilled today, and roughing up long Treasuries in the process."
First, please excuse if I have too many questions, but I am not sure where else to get this type of info. It is not on Wikipedia.
How and why does a bad MBS paper day have an effect on long Treasuries?
"join the tens of thousands already defaulting with so few consequences.
Rob Dawg | Homepage | 08.06.08 - 10:05 am |"
It's the American way!
I hate it, but I hate seeing my neighbors struggle with making thier payments. I bought my house before the bubble and they bought right in the thick of it. Now one is trying anything he can to sell it and break even.
HC:
I'll predict the "ten years of pain" outcome although I think I'd prefer one good b$#ch slap and get it over with.
Looks like the NYT laughs last.
I forgot a 5th scenario:
Do this for 5-8 years, perhaps longer. (this credit bubble as a whole took 30 years to build up, so a 5-8 deflation of the bubble is already quite optimistic. Pessimistically, we can call a whole generation life is over.)
I vote for #5. It seems the govt will put up a fight, that will end up making tax or deficit sky high; which will guarantee #5 happens.
And does this loss factor in anything that is off balance sheet? Rhetorical...
stuart - wonder how much is sitting inside the FED window?
hc-
That is the Big Question; the one really Big Question ... how does this all play out?
I was torn between 1 and 4, although 2 and 3 have advocates currently scoring big points, so don't count them out.
But then along came 5 ... hmmm.
awgee,
The link between MBS and Treasuries at work today is duration. When yield goes up, as it is on MBS, duration goes down. Long Treasuries serve as a duration hedge. When duration falls, you don't need as much hedge. Same thing happens, for slightly different reasons, when corporations issue new debt. Treasuries get a bid before the fact, lose it after. Portfolio mechanics at work.
Newbie,
Ambac has admitted that its near $1 bln gain on CDS spreads would, at end-July prices, have turned into a $1+ bln loss.
We need a new bubble--this time one that results in a real product. Energy (clean, abundant,local) is just what the doctor ordered--is it doable?
Any ideas?
hc
Depends on the point of view of the various people that are impacted. Generally speaking, I could take the following snips out of your list and I would say that:
*Standard of living drops.
*Credit living ends.
Can we say '70s malaise squared?
In light of Denninger's piece yesterday, it would be more accurate to report, "China is planning to slash Freddies dividend to five cents." But in a land of strong dollars, containment, and "possible" recessions, the truth seems hardly a factor anymore.
Don't cry for me Argentina
The truth is I never left you
All through my wild days
My mad existence
I kept my promise
Don't keep your distance
Interesting how the meme has shifted from comparisons to the mid 90s recession to the '73-'75 era.
Interesting Times writes:
stuart - wonder how much is sitting inside the FED window?
Interesting Times | 08.06.08 - 10:28 am | #
Talk about a state secret. That figure is in the vault on the shelf next to the location of the holy grail.
I also have to believe the Fed is cognizant of its inability to "put back" to the banks any of the assets it swapped out/pawned out due to their ongoing destruction of value since they pawned them. The pumping of the banks and deliberate obfuscation of the real net worth of the banks' assets by regulators, financial officials at the Treasury and the Fed I can easily see partially motivated to address just this box the Fed is in. The Fed can't put back if the banks cannot afford to take it back, hence mission 101: inflate the banks at all cost and mission 102: don't let anyone prove this. Conjecture is acceptable, claims of fraud and moral hazard also acceptable, but under no circumstance allow proof to surface. Recruit whatever media source need to continue confidence spin. Perhaps tinfoil, but I cannot imagine nobody inside the Fed hasn't thought about this.
From previous thread...
Also later today, Paulson will announce that Freddie`s securities are backed by the good faith of U.S. Air Force. (just in case the Chinese might ask any weird questions) -- Broker
Why would Freddie or Fannie be distributing any dividends at all? They are clearly going to need capital, so why give away cash now?
Newbie,
Read this:
Ambac, Using an Accounting Change, Posts Net Income (Update3) - Bloomberg.com
Ambac actually lost $1.53 a share this quarter, they were only able to post a "profit" thanks to a new accounting rule that lets them take into account that the cost to buy back their own debt on the market has decreased. Not PAY back their own debt, mind you, but actually buy the bonds from whomever owns them, since they are selling at a discount currently. Sort of like if you took out a mortgage, and it looked likely you were going into default and would become a foreclosure, and the bank tried to sell your mortgage for pennies on the dollar, and you yourself bought the entire mortgage for less that what it would have cost you to pay it off.
Ambac is effectively writing off the difference as gain, since they could, if they had the money to do so, buy back their own debt for less than it would cost them to pay back principal and interest. It's a neat trick, but a lot like mortgage companies booking negative amortization as future profit -- it's a gain on paper, but the reasoning behind the discrepancy is usually a contrary indicator to actually realizing the gain. Like in the mortgage example, if a borrower can't even pay his monthly mortgage, how is he going to get the money to buy the entire note, even if it is at a discount. Just like, if Ambac's debt is selling at a discount because the company is hurting, where exactly are they going to come up with the money to buy all of their debt back?
No, Mr. Bond. I expect you to die
Auric Goldfinger
Why would Freddie or Fannie be distributing any dividends at all?
Not an expert answer, but from my reading here, below $.05 and institutionals/pensions ??? can't invest in them.
Hope that's the right answer.
Isn't the figure quite small compared to the numbers we see from City, Merrill etc., I think this should be good news considering what housing market is going through.
Although I have not looked through it's release in detail.....the question I have is do they or have they been able to play the booking reduced liabilities as a profit game ala the I-banks??
have to admit I'm not as "up" on the intricacies available to the GSE's.....
Any info. is appreciated
Ciao
MS
Groundhogday writes:
Why would Freddie or Fannie be distributing any dividends at all? They are clearly going to need capital, so why give away cash now?
It also gives the windbags on the teevee something to cling to as they sell confidence to the willfully deluded.
"We need a new bubble--this time one that results in a real product. Energy (clean, abundant,local) is just what the doctor ordered--is it doable?"
Mel,
there is one - and only one - thing that lets the already-built American infrastructure and development pattern remain intact while mitigating the effect of oil blackmail and speculation, and that is a personal transportation vehicle that does not depend upon petroleum. It ought to be the absolute #1 US priority at this moment... but it is hardly even on the radar. Subsidies still go out to preserve the doomed past with no thought to tomorrow.
As posted by Newbie above does this also apply to the GSE's to phrase it differently.....
Ciao
MS
Sorry posted by New Guy...
Ciao
MS
Close the GSEs and the mortgage industry comes to a halt...
Housing can just become a market of cash transactions. Sure prices will have to fall a little bit more, but before you know it people will think of buying a home like buying a Big Mac. All this talk of housing crises will be over.
China just received permission to open a branch of the Industrial and Commercial Bank of China in New York. When we no longer trust the capitalization of our banks, we can stash our cash with them.
Multiply that by ten and I might believe it.
When I first glanced at the headline, I thought it did say 8.21 Billion. What kind of CSS causes the first digit to be larger than the rest of the numbers ?
New Guy,
Are you saying they can do this even without actually buying back the debt? In other words, if they had the money, they would, but they don't, but they still go ahead and write it off as gain? And this is legal?
The new GSE shall be called Fuzzie Mae.
I decree it.
a personal transportation vehicle that does not depend upon petroleum.
I actually do kind of like the new golf-equipped model.
Freddie Mac (FRE) can take as much as $40 billion of "credit pain" through 2009 and still maintain its regulatory capital requirement
market cap is currently 4.5 billion
clearly undervalued if they have a $40 billion cushio
OFHEO expects that the Fannie Mae enforcement action will be completed through the administrative 30% phase by 2009. Opportunities are available for appeal, and the Department 25% of Justice will represent OFHEO in any appeal to the D.C. Circuit Court. In 2007 these litigation activities represented 25 20% percent of OFHEOs resources, and the agencys FY 2008 budget includes significant resources for this litigation.
In lifting a 2006 consent order, the Office of Federal Housing Enterprise Oversight said Tuesday that "two years of hard work" by Fannie Mae officials had resolved many internal accounting and management problems. Regulators will continue reducing surplus capital requirements imposed on Fannie Mae after the company was forced to restate several years of earnings, OFHEO said. On March 1 OFHEO removed a cap on the size of Fannie Mae's mortgage portfolio -- loans or mortgage-backed securities the company holds for investment.
Re: The Enterprise is cooperating with OFHEO in accomplishing our mutual goal of remediation. As a result of the increased operational risk at Freddie Mac, OFHEO directed Freddie Macto maintain a targeted capital surplus of 30% over their minimum capital requirement. To date, Freddie Mac has maintained a surplus in compliance with this directive. http://www.ofheo.gov/media/pdf/ f...dfinancials.pdf
The new GSE shall be called Fuzzie Mae. I decree it. -- Stinky
I was hoping for Freddie MacMansion 'cause I know how that's going to turn out.
Shnaps writes:
a personal transportation vehicle that does not depend upon petroleum.
It's called walking.
The problem is all those people out there struggling to make the monthly nut now seeing what looks like a way out; join the tens of thousands already defaulting with so few consequences.
Yep. As horrible and inhumane as it may seem to throw people out of their houses, the breakdown in credit that would occur if there weren't steep penalties for default would be vastly worse. It would effectively mean the end of the prosperity we have today for the foreseeable future.
That fact that penalties for abusing credit must be harsh to maintain the existence of credit looks to be another in a long line of lessons we're intent on re-learning the hard way.
This is sure true where I live. Houses are up for sale priced 100% or more over Zillow estimate. None selling, of course, but asking price never seems to drop.
Zillow measures homeowners' perception gap | L.A. Land | Los Angeles Times
Curious-er,
No, they do NOT have to actually buy back the debt to account for it as income.
The argument for the new accounting rule was that all of these companies had "assets" (money OWED to them) like MBSs, CDOs, etc, and they were being forced to write the decreased market value of these securities as losses, so why shouldn't they be able to write-UP the decreased value of their liabilities (debt they owe to others).
The flaw in that logic is, obviously, that the value of their "Assets" has decreased permanently, because money has in fact been lost, and this is verifiable (mortgages have gone into foreclosure, principal and interest on this debt have been lost) In fact, many, on this board especially, complain that the value of these securities has not been discounted ENOUGH to account for both present and expected future losses.
The discount on the liabilities, however, is temporary -- either the company will survive and pay its debts, in which case the market will revalue the debt, or the company will not survive and the value of that debt will likely become 0.
Walking?
Blasphemy!
Americans are so f&*ing fat that they can't even walk around Wal-mart. They ride around in those little electric carts.
Walking! You funny man!
That is one Big Mac attack.
From Bloomberg:
This correction is more severe than what we've seen in the recent past,'' said Christopher Whalen, co-founder of independent research firm Institutional Risk Analytics in Torrance, California.Both Fannie and Freddie are going to be profoundly insolvent by the time we're done with this.''
How does "profoundly" insolvent compare to "technically" insolvent?
I'm with ac -- 100% down payments!!!
Hanky better get the check book out.
I wonder if Sheila is responsible for this.
Note the comeback since BFF became a routine event.
hc,
How about this -- We're in #5 and heading for #3, which will ultimately cause the government to engage option #1.
Paulson, quick, get the rumor mill cranking to prop up FRE stock.
You know, the good kind of rumors the SEC doesn't investigate?
CR & Tanta can't handle the TRUTH about the fraud @ FNM!
YouTube - A Few Good Man "You Can't Handle the Truth"
hc: Looks to me like we try like heck to pull off a suicide using method #1 and fail miserably.
3 is our endgame, IMO.
Re: How does "profoundly" insolvent compare to "technically" insolvent?
Profound impacts will be penetrating beyond what is superficial or obvious, i.e, deflation and systemic economic failure as in a cascade of defaults
Watching the market get jammed up on the back of the weakening yen makes me think of geese being fed for foie gras production...
Why are the GSEs paying a dividend? This is outright theft from taxpayers!
At least they are reducing their dividend; wouldn't want to be paying out taxpayer money when you're going to have government subsidized losses from now until forever. I mean, paying out a dividend now would be a blatant moral hazard, completely corrupt, and an atrocious breach of fiscal responsibility which surely their new stronger oversight would prevent, if not a less corrupt Congress or even basic business ethics.
... oh, what now, they are still paying a dividend? Oh... man... uh, carry on then, I guess goes to cry in a corner.
hc: the answer is #3, deflation, the government can't print enough money to get ahead of the curve of global asset value destruction that is accelerating in earnest, the brief oil and commodities bubble destroyed demand