Full faith and credit for F & F paper -- God bless you, Secretary Paulson. I am short the 30-yr. from this AM and loving this announcement oh so much. ;>)
P.S. Bill Gross may be a PigMan but its not wise to fade him.
Good news? You're kidding, right? Our government is scary clueless and Hank is a complete moron.... Anyone buying into this pathetic attempt to cure fnm and fre deserve to lose everything.......
U.S. Treasury Department spokeswoman on Friday declined comment on a Wall Street Journal story saying a plan was near completion for a financial backstop for mortgage finance companies Fannie Mae and Freddie Mac.
Treasury spokeswoman Brookly McLaughlin said "we're not going to comment on rumors" and offered no other details.
How does this bounce the XLF ? Banks are sitting on a shitpile of FNM/FRE preferreds? Presumably the preferred get wiped out or at least a severe haircut. Did they advance notice from Hank and dump the preferreds to offshore interests?
WASHINGTON (Dow Jones)--The U.S. Treasury Department is close to finalizing a plan to help shore up mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), according to people familiar with the matter.
Precise details of Treasury's plan couldn't be learned. The plan is expected to involve a creative use of Treasury's new authority to make a capital injection into the beleaguered giants.
The plan includes changes to senior management at both companies, according to a person familiar with the plans.
An announcement could come as early as this weekend. (This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)
On Friday, a series of high-level meetings were planned between Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, the chief executives of Fannie Mae and Freddie Mac and the companies' new regulator, the Federal Housing Finance Agency.
The Treasury Department has been working with bankers at Morgan Stanley to use its newfound authority, granted by Congress in July, to devise a way to prop up the mortgage giants, which have been pummeled by investors in recent
weeks.
The two giants are vital cogs in the U.S. housing market and their financial woes have threatened to increase the damage from the bursting of the housing bubble.
"We are making progress on our work," said Treasury spokeswoman Jennifer Zuccarelli. She declined to comment further on Treasury's plans.
Not quite sure how you could have a "failure bubble." Don't we always have an oversupply of that? What is the market clearing price of failure? Do they come in six-packs?
Why don't we just adopt Monopoly money as legal tender?
That's a good idea. Monopoly money, unlike other international currencies, has held a stable value since it was introduced in the 1930s. Boardwalk still costs $400, just as it always did, and you still get $200 as you pass GO. There's no inflation, and there never has been.
Okay. I may be talking out of my ass but what the hell.
This is how the Treasury is going to re-capitalize FRE and FNM.
They are going to run a apecial promo - actually it's a 2 part promo.
The first part will be a BOGO - yes just like you see on Slickdeals and Fatwallet. Buy One Get One share dealio on FRE and FNM.
Now if that's not enough to get the Slickdealers and Fatwalleter's all over it they're also going to offer a mail in rebate entitling the purchaser to 5 Free Blu Ray movies - yes that's right 5 Free Blu Ray movies easily a $100 value. No word yet on what movie selection will look like but chances it will include such classics as:
Desparately Seeking Susan (the little known cousin of Fannie and Freddie that never did get the attention she deserved or the capital)
Waterworld (a true primer on all things liquidity related)
and lastly the film whose existence has been widely rumored but never confirmed
PIMPCO ( a classic covering all of Wilhem Grosse's attempts to cajole, beg, borrow and steal pimping Fannie all over da' street).
Once this hits the deal sites Fannie and Freddie easily go to $50/share.
Just out of curiosity, does anyone see this story as a reaction to the news that M. Trichet is forcing a bit more of a haircut before Euro banks can trade their garbage to the ECB?
I don't know how much the eurobanks hold in GSE debt but this would certainly be a clever way of bailing out those banks without having to do much on the ECB's part.
This is very exciting news! Most likely, the equity holders will be zeroed out. I'm sure Bill Miller and David Dreman regret having having heard of Fannie and Freddie. It was a joke that Congress wanted them to have an expanded role in the mortgage crisis. These companies were risk repositories for whole mess. This news makes my day.
Too bad the GSEs could not make it until January. What a travesty this is, hell of a lot of banks out there a lot sicker than these 2. Bizarro world (again), stocks up Monday....I swear about 70% of the up volume in the last 12 months has been rate cuts on option expiration days, alphabet-facilities to prop up all of the bonus babies on Wall Street, or nonspecific plans about restructuring the GSEs. What a clusterf*ck. I need a beer.
The plan is expected to involve a creative use of Treasury's new authority to make a capital injection into the beleaguered giants.
Here's creative (and fair): 100% equity for the tax payers. Loans at 10yr treasury interest plus 500 bps. Tax payer is in a super senior position on all loans with real estate as collateral. Any home owner loans are not dismissable in bankruptcy. Universal default terms with 19% interest.
Treat the financial system like someone with bad credit.
If we are going to nationalize then let the profits accrue to those taking on the risk and burden - the taxpayer.
I, for one, don't see why they need a bailout currently. I mean, they just rolled over their debt with success, and it's not like they can't borrow more money. As long as they are paying a decent spread above treasuries, and the Fed is taking their bonds as 97% collateral for the backdoor bailout loans, they should be able to borrow as much as they want. After all, the privileged banks with access to the Fed window are making 17% on the money they put up as the 3% collateral; no reason they wouldn't finance as much as the GSE's wanted to borrow using the Fed's money.
I mean, if it's about their ability to continue borrowing, the backdoor bailout has got them covered... why screw with a "good" thing?
That's like saying the FDIC seizes banks before they really need it.
The regulator knows they need it well before we do.
The bond switch wad must have been shot getting the last debt auction through.
Printing money? We haven't seen anything yet. Doesn't matter which changemaker makes it into that little white house. Making change takes a lot of money.
I, for one, don't see why they need a bailout currently.
You should check out Brad Setser. The real problem is that the Foreign Central Banks are not investing in agencies anymore. A creditor nation without a willing lender is in deep dodoo.
They are "close to completing a plan" = that does not say they are ready to implement one at a specific date IMO
"The meetings come a month after Paulson hired Morgan Stanley to advise on any use of taxpayer funds to recapitalize Fannie and Freddie, and before the FHFA releases an assessment of their capital. INVESTORS HAVE PRESSED FOR CLARITY on how any intervention WOULD work, spelling out what WOULD happen to current and future stockowners, bondholders and other creditors."
... so here it sounds like getting a plan ready to "help" investors
on the other hand the article also says:
The Treasury wants to get in front of this and to inject some capital before the markets tend to take it the wrong way,'' Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, said in a Bloomberg Television interview, referring to the capital assessment. "There's probably a 95 percent chance that the moment that something will happen is Sunday or Saturday,'' he said, DECLINING TO COMMENT ON WHETHER HE CONSULTED WITH TREASURY OFFICIALS".
.... so the rumor comes from Gross? (roflmao)
then:
"Paulson has made no public comment on the backstop for Fannie and Freddie since Aug. 10, when he reiterated he had no plans'' to use his authority... since then investors and analysts called for Paulson to clarify his intent"We are making progress on our work with Morgan Stanley, FHFA and the Fed,'' Treasury spokeswoman Brookly Mclaughlin said today in Washington
Also
"The FHFA WAS SCHEDULED TO RELEASE ITS OWN ASSESSMENT of the companies' capital levels as early as this week as part of a quarterly appraisal of their finances"
"A specific fallback plan should Fannie and Freddie fail may enhance their ability to raise new private capital", said Alex Pollock, fellow at the American Enterprise Institute... ``If Treasury makes it clear they have a plan ready to go, that would certainly help.'' (the debt market)
So may be they will announce a profile of a plan, rather than an actual (bailout) with a date
Meanwhile, after hour FNM down over 10%
I am interested to see how many law suits would mushroom if the news turned out to be "firm" and FMN opens that much lower on Monday am
instead of halting trading pending news, these days they float an unsubstantiated rumor instead of halting?
Just add it to our unfunded tax liability. Fisher from the Dallas fed says it's already at $99 trillion. Why not just add another $5 trillion more. It can't be paid back anyway, just keep kicking the can down the street. Well, it could be paid back, but if every working American gave another 10% off the top of their paychecks it would take 250 years to do it. Or, take 25% of your checks and it only takes 100 years to pay back this total unfunded tax liability of the United States. Wait, or how about 100% for 25 years? Pick your payment!!!
Remember the mantras:
-Bank gains are private, losses are public.
-There is no inflation.
-The dollar is strong.
My guess is they are going to announce something this weekend. It would be pretty senseless of them to release this rumor at 5:22 pm on Friday otherwise. The timing is too precise.
It seems like the classic pitch to blow off as much steam over the weekend as possible before the markets open. I would also bet they already have the plan figured out. They're just timing it's release very carefully.
"Under the plan, the federal government would place the firms in a legal state known as conservatorship, the sources said. The value of the company's common stock would be diluted but not wiped out while the holdings of other securities, including company debt and preferred shares, would be protected by the government.
Instead of giving each company a big capital infusion up front, the government plans to make quarterly infusions as the companies' losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue. "
Treasury's likely plan is supported by Federal Reserve Chairman Ben Bernanke and James Lockhart, chief of the Federal Housing Finance Agency, according to people familiar with the matter.
Can't beat that kind of reporting! I hope Tanta's head does not explode.
first
Anon, get a handle, there are too many using it;-}
Besides Shiela already knows who you are!
I hope Bill Gross is in the meetings and gets all that he asks for, poor guy has been on a losing streak for awhile now.
More bailouts for greed and stupidity, what a great country we live in!
Just in case folks were wondering about printing money...
This pretty much fits the bill.
Of course, Hanky P is going to screw it up with kinda GS BS.
Guaranteed.
This is the next big housing fix.
Doomed to failure, but failure will be on the next watch!
Someday this war's gonna end...
Creative authority is a good way to describe the Bush administration.
AllenM aka Joliet Jake are you calling a "failure bubble"?
I don't thin we are close to the top on failure yet.
I love the runups in the zombie banks and homebuilders that this is going to bail them, out.
Given Paulson's history, I bet on a takeunder with Blackrock managing the portfolio and Fannie and Freddie going into runoff.
A new super GSE would then be born, and lend freely with proceeds from the new giant Postal Savings Bank of the United States.
Er, or something.
Bailouts for all!!!
Um, bet glod and sliver catch a massive bid on this news.
Someday this war's gonna end...
Finally!
Some good news for a change...
I wonder what this would do for the dollar...
Full faith and credit for F & F paper -- God bless you, Secretary Paulson. I am short the 30-yr. from this AM and loving this announcement oh so much. ;>)
P.S. Bill Gross may be a PigMan but its not wise to fade him.
The dollar's decline will be temporary...
Bazooka Hank's legend as the savior will live forever!
Good news? You're kidding, right? Our government is scary clueless and Hank is a complete moron.... Anyone buying into this pathetic attempt to cure fnm and fre deserve to lose everything.......
MoT,
no bubble, just a continual low burble of failures.
Dean, if you think this is good news, you haven't been reading this site long enough.
This is a stupendous moment of historical intervention in the government sponsored enterprises.
This proves the failure of the gse model and of wall street led disintermediation.
Finerman sees the truth.
Too late babe.
Someday this war's gonna end...
funny.
Economics and Politics - Paul Krugman Blog - NYTimes.com
Good news? You're kidding, right?
Wonderful news for savers. Look for rates to gap up next week -- hat size bond Trashury yields in 2009. What's not to like?
Why don't we just adopt Monopoly money as legal tender? It would be a lot easier and have the same end result.
I see the fade in Govies, but what happened with the Agency spreads? did they whipsaw in?
anyone see? Swaps to Ginnies as well?
Doesn't anyone recognize sarcasm anymore?
/sarcasm
Looks like it is true:
Treasury won't comment on Fannie, Freddie story
U.S. Treasury Department spokeswoman on Friday declined comment on a Wall Street Journal story saying a plan was near completion for a financial backstop for mortgage finance companies Fannie Mae and Freddie Mac.
Treasury spokeswoman Brookly McLaughlin said "we're not going to comment on rumors" and offered no other details.
Did anybody believe this wasn't going to happen?
How does this bounce the XLF ? Banks are sitting on a shitpile of FNM/FRE preferreds? Presumably the preferred get wiped out or at least a severe haircut. Did they advance notice from Hank and dump the preferreds to offshore interests?
The gimme-a-bazooka-so-I-won't-have-to-use-it theory held up for less than 2 months. Why am I not surprised in the least?
WASHINGTON (Dow Jones)--The U.S. Treasury Department is close to finalizing a plan to help shore up mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), according to people familiar with the matter.
Precise details of Treasury's plan couldn't be learned. The plan is expected to involve a creative use of Treasury's new authority to make a capital injection into the beleaguered giants.
The plan includes changes to senior management at both companies, according to a person familiar with the plans.
An announcement could come as early as this weekend. (This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)
On Friday, a series of high-level meetings were planned between Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, the chief executives of Fannie Mae and Freddie Mac and the companies' new regulator, the Federal Housing Finance Agency.
The Treasury Department has been working with bankers at Morgan Stanley to use its newfound authority, granted by Congress in July, to devise a way to prop up the mortgage giants, which have been pummeled by investors in recent
weeks.
The two giants are vital cogs in the U.S. housing market and their financial woes have threatened to increase the damage from the bursting of the housing bubble.
"We are making progress on our work," said Treasury spokeswoman Jennifer Zuccarelli. She declined to comment further on Treasury's plans.
Ministry:
Not quite sure how you could have a "failure bubble." Don't we always have an oversupply of that? What is the market clearing price of failure? Do they come in six-packs?
That's the creative part, bearly - they get to move to Level 3 and keep at original book value...
Bill Gross gets his way again. When will it end? Hyperinflation is in the cards now.
I moved my house to a Level 3 asset on my personal balance sheet. My banker took one look at my books and he refinanced me on the spot.
/sarcasm
Woot!
Can I put a new mark on some expired calls and puts?!
Booyah! Mo' cowbell!
SKF going on sale AH.
In all seriousness why is everyone surprised that the implicit guarantee became explicit.
It has been part of their WACC for years.
Barry at TBP suggested the following haircuts for its owners.
Equity = 100%
Perfered = 25%
Bond = 10%
I hope that the first two do get a trim... (I actually hope the equity gets wiped out)
The debt not so much....
...........
LMAO.... more bailouts from people who preach free-markets
LMAO.....Is it 100% of the country or just 95% that are hypocritical lying fraudsters
Hat tip to MS.
He sniffed this one with the (lack of) repo's
Canadaman-it is 100% of the politicians. Most of the rest of us are just born and bred dopes (hat tip Jas).
Why don't we just adopt Monopoly money as legal tender?
That's a good idea. Monopoly money, unlike other international currencies, has held a stable value since it was introduced in the 1930s. Boardwalk still costs $400, just as it always did, and you still get $200 as you pass GO. There's no inflation, and there never has been.
Booyah indeeed.
More bailouts FOR people who preach free-markets
It makes you wonder if this is the first step in Nationalizing Fannie and Freddie.
Accrued Interest: GSE Bailout: It's not impossible
Accrued Interest: GSE Bailout: Episode III
the Final Plan.. will it be a final solution?
Okay. I may be talking out of my ass but what the hell.
This is how the Treasury is going to re-capitalize FRE and FNM.
They are going to run a apecial promo - actually it's a 2 part promo.
The first part will be a BOGO - yes just like you see on Slickdeals and Fatwallet. Buy One Get One share dealio on FRE and FNM.
Now if that's not enough to get the Slickdealers and Fatwalleter's all over it they're also going to offer a mail in rebate entitling the purchaser to 5 Free Blu Ray movies - yes that's right 5 Free Blu Ray movies easily a $100 value. No word yet on what movie selection will look like but chances it will include such classics as:
Desparately Seeking Susan (the little known cousin of Fannie and Freddie that never did get the attention she deserved or the capital)
Waterworld (a true primer on all things liquidity related)
and lastly the film whose existence has been widely rumored but never confirmed
PIMPCO ( a classic covering all of Wilhem Grosse's attempts to cajole, beg, borrow and steal pimping Fannie all over da' street).
Once this hits the deal sites Fannie and Freddie easily go to $50/share.
Kiss 'em goodbye them if it's anything like Bear Sterns.
They deserve to be out of business.
If lending freezes up for a few months until they're replaced, so be it.
Maybe it would encourage private lenders like the S&L's of the 40's and 50's.
Disgusting. Just another taxpayer ripoff.
Just out of curiosity, does anyone see this story as a reaction to the news that M. Trichet is forcing a bit more of a haircut before Euro banks can trade their garbage to the ECB?
I don't know how much the eurobanks hold in GSE debt but this would certainly be a clever way of bailing out those banks without having to do much on the ECB's part.
This is very exciting news! Most likely, the equity holders will be zeroed out. I'm sure Bill Miller and David Dreman regret having having heard of Fannie and Freddie. It was a joke that Congress wanted them to have an expanded role in the mortgage crisis. These companies were risk repositories for whole mess. This news makes my day.
Schaudenfreud supreme!
Too bad the GSEs could not make it until January. What a travesty this is, hell of a lot of banks out there a lot sicker than these 2. Bizarro world (again), stocks up Monday....I swear about 70% of the up volume in the last 12 months has been rate cuts on option expiration days, alphabet-facilities to prop up all of the bonus babies on Wall Street, or nonspecific plans about restructuring the GSEs. What a clusterf*ck. I need a beer.
I love this country. I love this market even more.
Two months left, then we get new rebate checks. I want a bigger flat screen to watch the end of the empire.
The plan is expected to involve a creative use of Treasury's new authority to make a capital injection into the beleaguered giants.
Here's creative (and fair): 100% equity for the tax payers. Loans at 10yr treasury interest plus 500 bps. Tax payer is in a super senior position on all loans with real estate as collateral. Any home owner loans are not dismissable in bankruptcy. Universal default terms with 19% interest.
Treat the financial system like someone with bad credit.
If we are going to nationalize then let the profits accrue to those taking on the risk and burden - the taxpayer.
Angry Saver --
Nice idea, but a pipe dream. They cannot wipe out the preferred without crushing the regional banks and Bill Gross. Won't happen.
My guess is they do a new preferred issue and allow the existing preferred to "invest alongside the bazooka" proportional to their existing holdings.
The common shareholders, on the other hand, have seen their last dividend for a long time.
So where are we in the slow-motion train wreck?
I, for one, don't see why they need a bailout currently. I mean, they just rolled over their debt with success, and it's not like they can't borrow more money. As long as they are paying a decent spread above treasuries, and the Fed is taking their bonds as 97% collateral for the backdoor bailout loans, they should be able to borrow as much as they want. After all, the privileged banks with access to the Fed window are making 17% on the money they put up as the 3% collateral; no reason they wouldn't finance as much as the GSE's wanted to borrow using the Fed's money.
I mean, if it's about their ability to continue borrowing, the backdoor bailout has got them covered... why screw with a "good" thing?
...but I thought FNM's CEO said they were well capitalized?!
That's like saying the FDIC seizes banks before they really need it.
The regulator knows they need it well before we do.
The bond switch wad must have been shot getting the last debt auction through.
Printing money? We haven't seen anything yet. Doesn't matter which changemaker makes it into that little white house. Making change takes a lot of money.
I, for one, don't see why they need a bailout currently.
You should check out Brad Setser. The real problem is that the Foreign Central Banks are not investing in agencies anymore. A creditor nation without a willing lender is in deep dodoo.
Paulson Meets With Bernanke, Fannie, Freddie Chiefs
Paulson Meets With Bernanke, Fannie, Freddie Chiefs (Update3) - Bloomberg.com
They are "close to completing a plan" = that does not say they are ready to implement one at a specific date IMO
"The meetings come a month after Paulson hired Morgan Stanley to advise on any use of taxpayer funds to recapitalize Fannie and Freddie, and before the FHFA releases an assessment of their capital. INVESTORS HAVE PRESSED FOR CLARITY on how any intervention WOULD work, spelling out what WOULD happen to current and future stockowners, bondholders and other creditors."
... so here it sounds like getting a plan ready to "help" investors
on the other hand the article also says:
The Treasury wants to get in front of this and to inject some capital before the markets tend to take it the wrong way,'' Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, said in a Bloomberg Television interview, referring to the capital assessment. "There's probably a 95 percent chance that the moment that something will happen is Sunday or Saturday,'' he said, DECLINING TO COMMENT ON WHETHER HE CONSULTED WITH TREASURY OFFICIALS".
.... so the rumor comes from Gross? (roflmao)
then:
"Paulson has made no public comment on the backstop for Fannie and Freddie since Aug. 10, when he reiterated he had no plans'' to use his authority... since then investors and analysts called for Paulson to clarify his intent"We are making progress on our work with Morgan Stanley, FHFA and the Fed,'' Treasury spokeswoman Brookly Mclaughlin said today in Washington
Also
"The FHFA WAS SCHEDULED TO RELEASE ITS OWN ASSESSMENT of the companies' capital levels as early as this week as part of a quarterly appraisal of their finances"
"A specific fallback plan should Fannie and Freddie fail may enhance their ability to raise new private capital", said Alex Pollock, fellow at the American Enterprise Institute... ``If Treasury makes it clear they have a plan ready to go, that would certainly help.'' (the debt market)
So may be they will announce a profile of a plan, rather than an actual (bailout) with a date
Meanwhile, after hour FNM down over 10%
I am interested to see how many law suits would mushroom if the news turned out to be "firm" and FMN opens that much lower on Monday am
instead of halting trading pending news, these days they float an unsubstantiated rumor instead of halting?
what a can of worms...
Just add it to our unfunded tax liability. Fisher from the Dallas fed says it's already at $99 trillion. Why not just add another $5 trillion more. It can't be paid back anyway, just keep kicking the can down the street. Well, it could be paid back, but if every working American gave another 10% off the top of their paychecks it would take 250 years to do it. Or, take 25% of your checks and it only takes 100 years to pay back this total unfunded tax liability of the United States. Wait, or how about 100% for 25 years? Pick your payment!!!
Remember the mantras:
-Bank gains are private, losses are public.
-There is no inflation.
-The dollar is strong.
My guess is they are going to announce something this weekend. It would be pretty senseless of them to release this rumor at 5:22 pm on Friday otherwise. The timing is too precise.
It seems like the classic pitch to blow off as much steam over the weekend as possible before the markets open. I would also bet they already have the plan figured out. They're just timing it's release very carefully.
more "news":
U.S. Nears Rescue Plan For Fannie And Freddie - washingtonpost.com
"Under the plan, the federal government would place the firms in a legal state known as conservatorship, the sources said. The value of the company's common stock would be diluted but not wiped out while the holdings of other securities, including company debt and preferred shares, would be protected by the government.
Instead of giving each company a big capital infusion up front, the government plans to make quarterly infusions as the companies' losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue. "
Somehow, I don't think that is something that will make me go long financials
I've lost all respect for Gross. How the mighty have fallen. And I used to think he was an untouchable.
From TFA:
Treasury's likely plan is supported by Federal Reserve Chairman Ben Bernanke and James Lockhart, chief of the Federal Housing Finance Agency, according to people familiar with the matter.
Can't beat that kind of reporting! I hope Tanta's head does not explode.