I am on NPR radio discussing the Fannie/Freddie bailout, as well as the Housing market and economy.
The bailout does not save the Housing market, which remains distressed — but it stops an immediate further damage from the mortgage giants to the real estate market.
Housing still has 4 problems:
1. There is still way too much inventory for sale; (not counting the "Shadow Inventory")
2. Houses remain too expensive, by either Median Income to Median Home Price, or by Rental prices to purchase expenses;
3. Millions of home owners who cannot afford their homes have yet to short sell/walk away/foreclose;
4. The Economy is entering a recession;
So much for a relaxing weekend! We spilled plenty of pixels on Fannie (FNM) & Freddie (FRE)this weekend, as did lots of other folks. What follows is all of the relevant commentary I could scratch together:
Here’s TBP recap:
• Fannie & Freddie Bailout: In terms of Conservatorship, Management, Shareholders, Mortgages, Legislation, Foreign Holders, Financial sector, Politics, Timing, & GSE Insolvency
All of the Treasury, Federal Reserve and FDIC news releases:
Treasury Department Reports (PDFs):
- FHFA Director Lockhart Remarks on Housing GSE Actions
- Fact Sheet: FHFA Conservatorship
- Fact Sheet: Treasury Preferred Stock Purchase Agreement
- Fact Sheet: Treasury MBS Purchase Program
- Fact Sheet: Treasury GSE Credit Facility
- Freddie Mac Warrant to Purchase Common Stock
- Freddie Mac Certificate
- Freddie Mac Senior Preferred Stock Purchase Agreement
- Fannie Mae Warrant to Purchase Common Stock
- Fannie Mae Certificate
- Fannie Mae Senior Preferred Stock Purchase Agreement
FDIC React to Takeover
Fannie Mae & Freddie Mac Shareholder Ownership, via MSN:
Treasury News Conference:
GSE Bazooka Fired Ticker Forum, Karl Denninger (Video)
Wall Street Research
First thoughts on the market impact of the Treasury’s GSE plan, Goldman Sachs (PDF)
Paulson Begins Gradual Wind-Down of GSEs within Conservatorship, Institutional Risk Analyst
What the Mainstream Media had to say:
Monday, September 8, 2008
Mounting Woes Left Officials With Little Room to Maneuver WSJ
U.S. To Take Over Mortgage Giants Fannie, Freddie NPR Audio
The Dilemma of Fannie and Freddie NYT
In Crisis, Paulson’s Stunning Use of Federal Power Washington Post
The How, Why and What Of Fannie-Freddie Plan MORNING BRIEF
Here are the official statements on the Fannie & Freddie bailouts:
Statement by Secretary Henry M. Paulson, Jr. on Treasury and Federal
Housing Finance Agency Action to Protect Financial Markets and Taxpayers:
Good morning. I’m joined here by Jim Lockhart, Director of the new independent regulator, the Federal Housing Finance Agency, FHFA.
In July, Congress granted the Treasury, the Federal Reserve and FHFA new authorities with respect to the GSEs, Fannie Mae and Freddie Mac. Since that time, we have closely monitored financial market and business conditions and have analyzed in great detail the current financial condition of the GSEs – including the ability of the GSEs to weather a variety of market conditions going forward. As a result of this work, we have determined that it is necessary to take action. (continued after jump)
-Treasury Department, September 7, 2008
Treasury Department Reports:
September 5, 2008
The Honorable Henry M. Paulson, Jr.
Secretary United States Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Re: Fannie Mae/Freddie Mac Restructuring
Dear Secretary Paulson:
We understand that a Treasury plan for Fannie/Freddie ("the GSEs") may be announced this weekend. We thought you might find useful some further thoughts on potential GSE solutions.
As you are likely aware, we had previously distributed a proposed restructuring plan for the GSEs. In that plan, under a prepackaged conservatorship, equity interests would be extinguished, subordinated debt would be exchanged for warrants, and senior debt would be exchanged for new senior debt and common equity in the newly recapitalized entities. The government would write a put to the new common equity holders which would expire in three years.
It appears, however, that the GSEs may need help more quickly, and conservatorship may not be triggered until the GSEs are formally determined to be undercapitalized. As such, in the event the government needs to inject capital immediately, we suggest you consider the following transaction ("the Transaction").