Posts filed under “Taxes and Policy”

Poole: Fannie, Freddie `Insolvent’ After Losses

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This mornings must read article is Bloomberg’s summary of former St. Louis Federal Reserve President William Poole comments on the GSEs:

"Borrowing at Fannie Mae, the U.S. government-sponsored mortgage company, has never been so expensive and it may not get better any time soon.

Fannie Mae paid a record yield relative to Treasuries on the sale of $3 billion in two-year notes yesterday amid concern the biggest provider of financing for U.S. home loans won’t have enough capital to weather the worst housing slump since the Great Depression. The company’s credit-default swaps show traders are treating the AAA rated debt as if it were five steps lower. Fannie Mae shares tumbled 13 percent yesterday in New York to the lowest level in almost 14 years.

Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules, he said. The fair value of Fannie Mae’s assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, Poole said."

 

Sheesh, yet another bailout coming. How about we go back and recover some of that ill-gottenthe bonus money the corporate execs paid themselves over the past decade?

Fannie Mae (FNM) and Freddie Mac (FRE) still have a Aaa rating, according to the the agenices in charge of such things, criminal incompetence notwithstanding (that is an another discussion entirely). But derivatives traders aren’t buying that nonsense, and are trading the GSEs as if they were rated five levels lower.

Phonie and Fraudy (where ever did I steal that from?) also gets front page treatment in today’s WSJ.

I also had a good quote in CNN Money onTuesday: "The only thing surprising is that anyone was surprised by the problems."

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Previously:
Fannie Mae Looks Like Hell  (November 16 2007)  http://bigpicture.typepad.com/comments/2007/11/fannie-mae-look.html

Fannie Mae: Ouch!  (November 20, 2007)  http://bigpicture.typepad.com/comments/2007/11/fannie-mae.html

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Sources:
Fannie, Freddie `Insolvent’ After Losses, Poole Says
Dawn Kopecki
Bloomberg, July 10 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=as4DEc5UFopA

U.S. Mulls Future of Fannie, Freddie
Administration Ramps Up Contingency Planning as Mortgage Giants Struggle
JAMES R. HAGERTY, DEBORAH SOLOMON and DAMIAN PALETTA
WSJ, July 10, 2008; Page A1
http://online.wsj.com/article/SB121564782376340951.html

Fannie, Freddie Downgraded by Derivatives Traders
Shannon D. Harrington and Dawn Kopecki
Bloomberg, July 9 2008   
http://www.bloomberg.com/apps/news?pid=20601009&sid=aY0CwXhA.F3w&

Feeling Fannie’s and Freddie’s pain 
Chris Isidore
CNNMoney July 8, 2008: 4:49 PM Thttp://money.cnn.com/2008/07/08/news/economy/fannie_freddie/index.htm

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Category: Credit, Derivatives, Real Estate, Taxes and Policy

Quote of the Day: Citibank on Glass Steagel

We’re going way back for this one: “With an aggressive legal maneuver, Citicorp is taking another step in the battle to unshackle the banking industry from the restraints of the Glass-Steagall Act of 1933.  The strategy, being watched closely by the entire banking industry, has been used for years to push the deregulation of the…Read More

Category: Credit, Politics, Real Estate, Taxes and Policy

Should Congress Let Home Prices Fall ?

Category: Credit, Economy, Real Estate, Taxes and Policy

How I Spent My Stimulus Dot Com

Category: Economy, Taxes and Policy

No Money Down

Category: Credit, Real Estate, Taxes and Policy

The MonoDuoline Quandry

Category: Credit, Derivatives, Federal Reserve, Taxes and Policy

More “Bang” For The Buck

Category: Consumer Spending, Taxes and Policy

Unemployment Reporting: A Modest Proposal (U3 + U6)

Earlier this week, I received an email from the Real Estate editor of an (unnamed) publication. They wrote: “Just wanted to point out something I read in a Wall St. Journal article that made me think of you immediately. (Home Gauge Climbs Amid Bargains) “April pending home sales—meaning signed sales contracts—rose 6.3% from March to…Read More

Category: Data Analysis, Employment, Taxes and Policy

Hedonically-Adjusted, Well-Spun, Nominal Misery Index

Category: Employment, Inflation, Politics, Taxes and Policy

Pete Peterson on Charlie Rose

Category: Economy, Taxes and Policy