Good set of interviews with NYU Professor Nouriel Roubini
Bear Market Only Half Over, But It’s Not Armageddon
More Than $1 Trillion Needed to Solve Housing Crisis
‘They’re All Toast’: Roubini Says Brokers, Even Goldman, Can’t Stay Independent
Video Interview on Tech Ticker: Roubini: "Bear Market Only Half Over, But It’s Not Armageddon"
Nouriel Roubini | Jul 22, 2008
I am disheveled looking because it was pouring on the way over, the audio guy had a hard time with mike, my collar was a mess, they got the firm’s name wrong, and oh, I was so late this morning (due to a family issue) that I didn’t have time to shave.
Other than that, it was a good appearance!
Let’s call this a bit of counter programming to all of our negative coverage of Fannie Mae (FNM) and Freddie Mac (FRE):
Bill Gross, who manages the world’s biggest bond fund, said it’s not possible for government sponsored mortgage-finance companies Fannie Mae and Freddie Mac to raise capital without the Treasury Department’s support.
"Let’s be blunt: to the extent the Treasury suggests they’ll never have to use their authority, that’s a sham,” said Gross of Pacific Investment Management Co. "It’s fallacious to suggest that the agencies could issue capital, preferred stock, without the co-participation of the Treasury. I don’t think that’s possible.”
Freddie Mac said on July 18 that it intends to proceed with a $5.5 billion capital-raising plan it announced in May that will include both common and preferred securities. Pimco wouldn’t buy the companies’ stock without the Treasury’s involvement, Gross said, in a Bloomberg Television interview from the firm’s headquarters in Newport Beach, California.
Treasury Secretary Henry Paulson is pushing Congress to authorize the Treasury to purchase equity stakes in Fannie Mae and Freddie Mac and expand government-backed credit lines to them amid concern that they don’t have enough capital to weather the worst housing slump since the Great Depression. Freddie Mac shares have tumbled 74 percent this year and Fannie Mae has dropped 65 percent. The companies make money by guaranteeing mortgage-backed securities they create out of loans bought from lenders and sell to investors worldwide.
Mortgage-backed bonds issued by Fannie Mae and Freddie Mac are “an excellent buy” compared with debt of the agencies, Gross said.
Bill Gross, who manages the world’s biggest bond fund at Pacific
Investment Management Co., talks about Treasury Secretary Henry
Paulson’s plan to rescue Fannie Mae and Freddie Mac, the outlook for
U.S. home prices, Federal Reserve monetary policy and the bond market.
00:00 Passage of GSE rescue plan is "critical."
01:03 Recapitalization of Fannie and Freddie
01:49 Fannie and Freddie mortgages are "excellent."
02:55 Government’s GSE model "has to be amended."
03:54 Outlook for the U.S. housing market, prices
04:58 Capital-raising efforts by Fannie and Freddie
06:00 Rate hikes by Fed would be "wrong approach."
07:17 Treasuries and TIPS; measures of inflation
09:23 Relationship of credit turmoil, home prices
10:36 Investment in bank debt; U.S. dollar value
12:53 "Inappropriately" valued U.S. Treasuries
Pimco’s Gross Says Fannie, Freddie Need Treasury
Kathleen Hays and Sandra Hernandez
Bloomberg, July 21 2008