Posts filed under “Bailouts”

Here Comes the Half Trillion Dollar Fannie/Freddie Bailout!

A series of high-level meetings between Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and the chief executives of Fannie Mae (FNM) and Freddie Mac (FRE), along with the companies’ new regulator, the Federal Housing Finance Agency took place today.

Rumors of the meetings had obviously leaked out earlier in the day, as the Financials and Homebuilders ramped up into the afternoon. Beazer Homes gained +8%, and Lennar popped 8.5%, despite the 4 million plus homes in inventory. 

The announcement is more likely to be modest — $35-50 Billion dollars — but that is a mere bandaid. Once the initial bolt is shot, it will be back to the well, over and over again. $5 to 6 Trillion move back on to Uncle Sam’s balance sheet, plus whatever losses that accrued from buying the bum mortgages  — figure a few $100 billion. (Hey, it must be nice to be Pimco!)

As to the crappy derivatives that Phony and Fraudy bought when they thought of themselves as giant hedge funds — the first person in government that suggests taxpayer money be used to cover those losses, I will personally feed  into a wood chipper . . . Feet first . . . Slowly.

Bloomberg reported some of the rumored details:

"The Treasury Department is close to finalizing a plan to help shore up
mortgage giants Fannie Mae and Freddie Mac, 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.
Treasury Secretary Henry Paulson met with regulators and executives of
Fannie Mae and Freddie Mac today amid speculation the Bush
administration is near completing a plan for an injection of government
funds in the companies.
Paulson gathered with Federal Reserve Chairman Ben S. Bernanke, Fannie
Mae Chief Executive Officer Daniel Mudd, Freddie Mac CEO Richard Syron
and Federal Housing Finance Agency director James Lockhart in
Washington. Mudd and his aides have also been meeting at the FHFA,
which oversees the two firms, with catered food scheduled for delivery
at the agency through the weekend."


I suspect this will be another hugely expensive and ultimately unsuccessful attempt to bailout our prior irresponsible profligacy. Ultimately, we pay for this through 1) the massive printing of more dollars; 2) some corresponding form of hyper inflation; and 3) the kindness of not strangers but our overseas overlords.

That’s right — we have no money for rebuilding our infrastructure, for any form of National Heath Care, for fixing/saving social security, but a bunch of rogue traders  and Alan Greenspan, under the guise of "Deregulation" can leverage up and lose trillions, which you the taxpayer is on the hook for!

Free market my arse!

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Here are your weekend questions:

How much is this going to cost the taxpayer? 

Is this anything more than a temporary band aid?

Does this do anything for the Housing Market? For other Financials?

What is the political fall out from this?

What say ye?

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Sources:
U.S. Near Deal on Fannie, Freddie
Options Include Injecting  Capital in Mortgage Giants; Management Shakeup Coming
By DEBORAH SOLOMON and DAMIAN PALETTA
WSJ, September 6, 2008
http://online.wsj.com/article/SB122064650145404781.html

Paulson Meets With Bernanke, Fannie Mae, Freddie Mac Chiefs
By John Brinsley and Dawn Kopecki
Bloomberg, Sept. 5 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=ax0ft0S9hVYk&

Category: Bailouts, Credit, Real Estate

What Up With Pimco?

WTF is up with PIMCO ?

Strange things are afoot at the biggest bond fund in the world. A weird sense of panic seems to be emanating from the West Coast fixed income specialists.

I suspect it may have something to do with with the fact they are loaded to the gills with paper from Fannie & Freddie (FNM & FRE) — a trade that has worked out exceedingly well. Despite this — or perhaps because of it — the latest noise from the boys from Newport Beach is increasingly odd, even desperate sounding.

I do not know if they are genuinely terrified of a major meltdown in the global economy, or worried about their book. Maybe they are looking for an exit, and not finding one.

The WSJ noted about PIMCO:

The bond-management firm has posted good gains since the
credit crunch began last year, in part by betting big on mortgage debt
tied to Fannie Mae and Freddie Mac — whose implicit government backing
and relative safety compared with other securities has helped keep
their bond returns in the black.

Now as both entities show continued financial weakness and many
parts of the bond market remain pressured, a main challenge for Mr.
El-Erian, 50 years old, will be sustaining Pimco’s winning returns.

Then came the very strange commentary Bill Gross posted at the PIMCO site
– a weird, quasi-homage to Cramer, which then reiterated the
expected pain of a deleveraging and asset liquidation.

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Gross: Please Bailout Frannie!

click for video

Gross

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Category: Bailouts, Credit, Fixed Income/Interest Rates, Investing

Can the Fed Save the (Financial) World?

Category: Bailouts, Corporate Management, Credit, Derivatives, Federal Reserve, Taxes and Policy

Fannie + Freddie = Frannie ?

Category: Bailouts, Credit, M&A, Real Estate

The Federal Reserve & Moral Hazard

Harvey Rosenblum, 38 Year veteran of the Fed, and now head of Research of the Dallas Fed.

click for video
Harvey_interview

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The Money Quote is:  The Job of Federal Reserve of the is to create Moral Hazard

fascinating stuff . . .

Category: Bailouts, Credit, Economy, Federal Reserve, Video

The Big Freddie Mac

Category: Bailouts, Credit, Inflation

His Name is Mudd

Category: Bailouts, Corporate Management, Credit, Legal, Real Estate, Valuation

Category: Bailouts, Credit, Taxes and Policy

Bernanke Bailout

Category: Bailouts, Economy

China’s View of US SubPrime Issues

Category: Bailouts, Credit, Derivatives, Economy, Real Estate