Fannie, Freddie to be seized

[DanS]

Originally posted by Colon™
I don't see how any outcome other than their elimination would be positive. These companies became huge because of the implicit gov't guarantee on their debt. As long these companies exist the (now rather explicit) guarantee will exist and the GSE's will outcompete other firms. You don't curtail a cancer, you cut it out.

They have a plan to curtail the companies' assets by 10% per annum after 2010. I think that's a realistic timeframe, although admittedly I wonder if there will be continued political will to stick to the timeframe.

[faded glory]

Originally posted by Zkribbler

Statements like yours don't even rise to the level of being uninformed. You're just spewing sewer water. If you pull your head out of your ass, you'll be able to smell the roses. :nodded:

Ya right, Obama is running on a far left platform. The only uninformed one are his supporters. His vague Change slogan is just another of mindless slogans morons like you fall for. He still has only revealed little bits and pieces of what Change will mean.

Its funny how the more we hear the more he fails. Whats the polls say? McCain winning. huh?

Nothing ever really changes. Remember Bush the most divisive president in history, being a uniter, not a divider? . Clinton the biggest liar and crook of them all, brought integrity to the white house? what?

[PLATO]

Originally posted by DanS


They have a plan to curtail the companies' assets by 10% per annum after 2010. I think that's a realistic timeframe, although admittedly I wonder if there will be continued political will to stick to the timeframe.

Initially, FHFA wants to get to $850 billion in MBS by end of 2009 and then reduce at 10% per annum until a target of $250 billion is reached.

Word on the street is that Franks is not completely happy with some aspects of the deal and that some things may still be fluid.

One thing is for sure though...this is a quantum change in business as usual. With spreads on Fannie MBS running up to 207 basis points above similar treasuries recently, there should be a very interesting market on Monday. The spread had been narrowing over the last few days and some insiders are not suprised by this deal.

Look for things to be relatively normal as far as Fannie's operations until the next Congress is sitting. All bets are off then...Depending on who wins the election for Pres, I can see the giants being broken up and sold or them becoming entrenched in the Govie sector. If you hold stock, start calling your Congressman now and tel him to sell...sell...sell!!

[OneFootInTheGrave]

Originally posted by DaShi


It works for China.

[PLATO]

MBS bonds are rallying this morning. Yield spreads are down to about 165 basis points aver treasuries. This is still higher than the average over the last few years, but it is moving rapidly downward. Treasuries are down a bit with yields up slightly.

All in all, it is very good news in the markets this morning on the financial side.

If you are contemplating a new mortgage, then wait a week or two for things to bottom out and then make your move.

[onodera]

Originally posted by OneFootInTheGrave

$#@$!^@$!, when will people learn which way the hammer points?

[Barnabas]

Lol, if some third world country were doing this the IMF would be going crazy on its ass

[DanS]

I'm unhappy about this state of affairs. I might puke. It's like we're the Chinese and live in some bizarre sort of state-directed capitalism.

[Ramo]

From Brad DeLong:

OK. Here is what is going on:

Fannie Mae and Freddie Mac give the Treasury each 80% of their (common) stock and $1B (each).
The Teasury promises to keep Fannie and Freddie solvent according to GAAP by lending it money at 10% per year.

The Treasury promises to keep Fannie and Freddie liquid by buying its MBSs, financing the purchase by selling more Treasury bonds, and then holding the GSE MBSs to maturity.

The Treasury, the Fed, and the FHFA will agree on an additional amount--a "commitment fee"--that Fannie Mae and Freddie Mac must pay to the Treasury starting in March of 2010.

This deal seems to me to be motivated by five things:

Paulson's desire to make sure that there is no way in hell that either Fannie or Freddie can ever be adjudged insolvent according to GAAP--which would trigger all kinds of bond-market unpleasantness.

Palson's desire to make sure that there is no way in hell that either Fannie or Freddie will wind up illiquid--out of cash.

Paulson's desire to make sure that there is no way in hell that Fannie Mae's and Freddie Mac's stockholders profit substantially out of this.

Paulson's desire to make sure that there is no way in hell that the CBO can calculate that this deal is likely to cost the government money--if CBO threatens to so conclude, he can always up the commitment fee.
Paulson's desire to keep the options open for his successor to shape the long-term debate about how to restructure these GSEs.

[PLATO]

Originally posted by DanS
I'm unhappy about this state of affairs. I might puke. It's like we're the Chinese and live in some bizarre sort of state-directed capitalism.

The sad truth. In hindsight, this was probably inevitable from the time they were set up. If you are guaranteed not to lose then someone will eventually push the envelope too far and force that guarantee to be used. Fannie and Freddie's ill advised ventures into lax underwriting and trying to bolster their balance sheets with questionable MBS has led to this.

However, it is what it is now. The question is what happens now. I believe that the quicker the government can get out of managing these companies, the better it will be. I am for the organized sell off of different parts over the next 3-5 years.

The worst part about this is that so many of the large banks have curtailed their lending to agency products only. They are essentially getting guarantees on their mortgage lending now. This is more than a prop up of the two GSE's...this is a full blown takeover of mortgage lending by Uncle Sam. That's a bad thing in the long run. In the short run it will provide some much needed stability, but I doubt the government will know when to exit the stage.

Perhaps Kid's dream will become reality...soon we may all have the "right" to own a house and the government will be "obligated" to guarantee our mortgage. Onward Comrades.

[Arrian]

How about a refinance? Our (30 year) mortgage is just over 1 year old and is at 6%. Great credit and all that.

-Arrian

[Arrian]

Originally posted by DanS
I'm unhappy about this state of affairs. I might puke. It's like we're the Chinese and live in some bizarre sort of state-directed capitalism.

When times get tough, apparently everybody becomes a socialist.

When times are good, it's all "regulation is bad!" "taxes kill investment!" When times go bad it's "help me Uncle Sammy!" (tax dollars, now or later).

-Arrian

[PLATO]

Originally posted by Arrian
How about a refinance? Our (30 year) mortgage is just over 1 year old and is at 6%. Great credit and all that.

-Arrian

30 year rates are as low as 5.625% today. There are several considerations as to if you should refinance or not. Generally, the closing costs of obtaining a new mortgage don't make it worth while unless you can lower your rate by 1% or more. If you are sure that you will be living in the same house for 10+ years, then it may be to your advantage to refinance with a .5% decrease in rate. To be worth it, you should be able to recover your closing costs, with the lower payment, in less than 2 years.

If you, or anybody for that matter, want to discuss specifics of your particular situation, then PM me. I will be happy to provide free advice!

[Arrian]

Originally posted by PLATO


30 year rates are as low as 5.625% today. There are several considerations as to if you should refinance or not. Generally, the closing costs of obtaining a new mortgage don't make it worth while unless you can lower your rate by 1% or more. If you are sure that you will be living in the same house for 10+ years, then it may be to your advantage to refinance with a .5% decrease in rate. To be worth it, you should be able to recover your closing costs, with the lower payment, in less than 2 years.

If you, or anybody for that matter, want to discuss specifics of your particular situation, then PM me. I will be happy to provide free advice!

Thanks. I have the 1% rule in mind already, but it's nice to have some backup. Though we certainly expect to be in the house for more than 10 years...

I like the closing costs in 2 years thing. I'll keep that in mind.

And thanks for the offer for help via PM

-Arrian

[Dinner]

Originally posted by Barnabas
Lol, if some third world country were doing this the IMF would be going crazy on its ass

What's a few trillion dollars in home loans between friends?