Fannie Mae, and Freddie Mac

[Davestone]

For the first time ever there is a very real possibility these two institutions will fail,they hold billions in inflated declining mortgages.The govt. will bail them out, or restructure them, but at what cost? This could be the death blow to any real estate come back for some time.

[cx]

Originally Posted by Davestone

The govt. will bail them out,....

And "The Government" just loves it when you talk like that, Stoner. The Government can't bail anyone nor anything out. You will provide the bail-out for Freddie and Fanny.

It helps to keep things in perspective when you state it more accurately. The Government will force you and me and all our neighbors at gunpoint to provide money to bail out still another of their mistakes.

And once again we'll let them. That's the sad part.

[ceramictec]

Fannie, Freddie shares drop as worries of government rescue build amid ongoing housing woes

WASHINGTON (AP) -- Fears that the government will be forced to rescue Fannie Mae and Freddie Mac could well become a self-fulfilling prophecy.

Shares of the government-chartered mortgage finance giants plummeted Thursday and are trading at levels last seen in the early 1990s. If the prices don't recover, it will be harder for the two companies to raise more money through stock sales to compensate for losses from the housing bust. Investors are afraid their stakes will vanish if the government is forced to rescue the companies.

"The government has to step in and do something," said Friedman, Billings, Ramsey & Co. analyst Paul Miller.

Freddie Mac shares fell $2.26 or 22 percent, to $8, after sinking as low as $6.75 earlier in the day. Shares of Fannie Mae fell $2.11, or 13.8 percent, to $13.20, after earlier falling to $11.70.

Testifying on Capitol Hill, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke sought to calm investor jitters about the financial health of Fannie and Freddie.

They are "working through this challenging period," Paulson told lawmakers. Asked whether such companies could pose a risk to the U.S. financial system, Paulson replied: "In today's world, it is not helpful to speculate about any financial institution and systemic risk."

[sandbagger]

the interesting thing here is that these are private companies, and there really isn't any obligation for the Feds to bail them out. These are not gov'mint backed loans. Problem is in the perception of gov'mint backing, and perception usually trumps reality.

and fwiw, I'm obligated to point out that both organizations were inventions of Democrats, not the GOP. But they were created by Congress in bad years for the GOP resistance - 1939 and 1970. That's what happens when the balance of power gets out of whack.

[JTG]

Art
Can I point out that both were doing fine until we got this Republican administration!
Turn their heads so their buddies can make record profits off of mortgage scams and we will all have to pay while they are off on their fancy boats, planes and cars to lavish places in exotic locations.
What is wrong with this picture?
JTG

[ceramictec]

Stocks fall sharply on Fannie, Freddie worries
Friday July 11, 1:28 pm ET

Stocks tumble on worries about Fannie, Freddie; Dow falls below 11,000 for first time in 2 yrs

NEW YORK (AP) -- Wall Street sank further into a bear market Friday as investors dumped stocks in response to troubles at mortgage companies Fannie Mae and Freddie Mac and oil's continuing climb into record territory. The Dow Jones industrials at times fell more than 250 points and slid below the 11,000 mark for the first time in two years.

[SteveVB]

Can I point out that both were doing fine until we got this Republican administration

!

And which party blocked legislation on more restricitons for Freddy and fanny, complaining that the "underserved " would be hurt back in 04 or 05?

It was great giving loans to anyone and everyone who could sign their name- made great headlines- increased homeownership etc... but too bad someone has to pay for it all.

There is plenty of blame to go around.

[Davestone]

Well it's here.Funny how they wait till a Friday afternoon to really come out with it.I hope this doesn't do the damage i think it will.We are headed for mortgages most of you have never heard of...two step,balloons,five year..all these mean you'll be faced with refinancing frequently, adding to inflation and more financing costs.I am very worried about this,this is even worse than the savings and loan debacle where i lost all my investment properties.

[cx]

I love it when y'all argue about them two political parties as though there were actually substantive differences betwix them.

It's like arguing the relative merits of two Mafia families as though they weren't both involved in organized crime, eh?

[SteveVB]

Everything is going to get more expensive- you got that right Dave.
The rates and loan/financing products we have enjoyed for the last decade will be gone, the products that enabled the easy credit EVERYONE enjoyed, are going to be repriced in recognition of the risks, some will disappear. The fall out will take years to undo, housing, business financing is going to be materially different in the coming decade.
If you can hedge against rising rates take the opportunity....


Back to the blame game : Jerry wasn't Raines the head of Fannie back in the last FNM crisis a Clinton Guy? Late 90's into 03 or 04? When he was brought up on the hill for managing to profit from options grants, and accounting problems or something with FNM- so there were problems before the "republican administration".
Lots of talk back then about the risk that holding all of those notes would fall on the government if the mortgages couldnt be resold, and the large amount of mortgages they held with low capital requirements.

[Davestone]

Indymac being taken over by feds,the largest single bank failure to date.33 bil. in assets.I hate to keep harping on this housing thang, but i've been saying it forever, things are going south,this in my opinion is something we've never seen, it ain't a depression, not a recession, not stagflation, it's gotta have a new name.Terrafirmaflation is what i'm callin it.

[SteveVB]

Dave ,
Indymac was a plain old run on the bank- ala "its a wonderful life" , instigated by Chuck Schumer?

People talking about outcomes that could be, but that are not certain, spread at the speed of light to everone with eyes and ears, but not enough knowledge to use the information they have, leading to emotional decisions.

Depositors wanted their money back after talk about being a going concern. People in high places need to put a bit more thought into what they are saying and realize who is listening. This is a dangerous time.

Watch "its a wonderful life" for a simple primer on banking.

[Davestone]

Saw the movie many times,when you hear a bell an angel gets his wings.Don't know much about New York politics,don't want to, but i know the bank was in much trouble, and not the only institution that way, or going under.They are falling like dominoes,and i've heard the t.v. purists putting a happy face on it, i'm tired of it.If something had been done to help people refinance two years ago this might not have happened,but nobody cares about the little guy losing his home,only the people lending the money, that made the mistake in the first place.They are the (experts) in finance and mortgage,and debt and liquidity,not the poor schmuck trying to get a bigger home or a piece of the pie.The real estate flippers,and investors jacked up the prices to a ridiculously inflated pinnacle,and the mortgage companies,banks,realtors,and blind eyed politicians with zero economic sense let it go on.I saw it coming and sold my house at the top of the market, even then i said bad things were coming but nobody believed it, and kept holding out for more money.I have had realtors assuring me they could get me into a house i could ill afford, but i'm not stupid, i had a real estate license,and own a few homes of my own,now someone with less experience would have fallen for it and wound up upside down.And i got real tired of hearing them say this housing is nothing but a sidebar to the economy, we've got it under control, it's quarantined to subprime mortgages.

[sandbagger]

Can I point out that both were doing fine until we got this Republican administration!

sure, you can point it out if you want - doesn't mean anything. Correlation does not equal causation. These things don't happen overnight, as Jerry has pointed out nicely. You often have to trace back many years through many events. Even with a bad foundation a house will often look just fine for a long time. But one day the ground shifts a little and POP! walls and floors follow. Doesn't take long before the value of the house drops through the floor. Is it the fault of the current owner? Not unless he was also the original builder, or unless he ignored advice to shore up the foundation.

yes, there's plenty of blame toss around, but the last guy in the house is usually perty far down the list.

[jvcstone]

difference here Art is that shoddy construction or not, there is some substance in that house.

What is happening now is the result of a 25 -30 year bing of creating wealth out of nothing, and now all those folks with their hands so deep in the cookie jar want you and me and every other working stiff to take responsibility for their excesses and pay the band for them.

This is not elephant or donkey ---it is the direct result of we the people letting our government become what it was never ment to be. Any one who believes that anything that goes on with in the "beltway" has the best interests of the people in mind needs to pull their head out from wherever they have it stuck. It has been a long time since we had a government of the people for the people by the people, and unless there is some fundamental change of the system as it now is, America is fast becoming the government we supposedly spent much of the last century fighting against.

Only good thing about it-- we are now seeing the beginnings of the ultimate financial demise that ends the reign of every empire. Time to give sound money, small government, individual choice, and a sane foreign policy a chance--obviously what we have been doing since 1913 hasn't worked out very well.

JVC