[7.62mmFMJ]

Mother of All Bailouts continues.

Where to start! Fannie and Freddie are being taken over by a REPUBLICAN Treasury. 1/2 of all mortgages in the US are being nationalized. Up to $5 trillion will be added to the national debt.


Congressman Confirms Fed Rescue of Lending Giants

Saturday, September 06, 2008

WASHINGTON — A top House Democrat confirmed Saturday that the government is planning to intervene to stabilize troubled mortgage finance companies Fannie Mae and Freddie Mac.

Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, said in a statement that Treasury Secretary Henry Paulson "intends to use the powers that Congress provided it" in a law passed in July to enable Fannie Mae and Freddie Mac to keep functioning.

But Frank, who spoke with Paulson late Friday, said he did not "know the details of the proposed interventions," and a Treasury spokeswoman declined to comment.

A person briefed on the matter Friday said the government was planning to take over both companies, which together hold or back half of the nation's mortgage debt.

The intervention, which could cost taxpayers billions, was expected to include the departure of Fannie Mae CEO Daniel Mudd and Freddie Mac CEO Richard Syron, according to the source, who asked not to be named because the plan was yet to be announced.

Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and James Lockhart, the companies' chief regulator, met Friday afternoon with the top executives from the mortgage companies and informed them of the government's plan to put the companies into a conservatorship as early as this weekend.

Fannie Mae and Freddie Mac have lost a combined $14 billion over the past four quarters as a record number of Americans fell behind on their mortgages and went into foreclosure. While both companies said they had enough resources to withstand the losses, many investors believe their financial cushions could wither away as defaults and foreclosures mount.

In July, Congress passed a plan to provide unlimited government loans to Fannie and Freddie and to purchase stock in the companies if needed. Critics say the open-ended nature of the rescue package could expose taxpayers to billions of dollars of potential losses.

The Bush administration, however, may have little choice but to support Fannie and Freddie.

Their role in the U.S. mortgage market has grown dramatically over the past year as other lenders collapsed under the weight of bad subprime loans. The companies guaranteed about three-quarters of all new mortgages in the second quarter of this year, up from under 40 percent in 2006, according to the trade publication Inside Mortgage Finance.

Fannie Mae was created by the government in 1938, and was turned into a public company 30 years later. Freddie Mac was established in 1970 to provide competition for Fannie.

A government takeover could cost taxpayers up to $25 billion, according to the Congressional Budget Office.

[Birchwood]

many investors believe their financial cushions could wither away as defaults and foreclosures mount.

Ya THINK!? Sadly, that's a prediction they can count on...

Birchwood

[munk]

When loans aren't given to hi risk, low income clients, the outcry comes from the Left that this is unfair and something must be done- and Government steps in. Now when the mess collapses, it'll be the Republican's fault.

If we'd had Democratic tax hikes these last 4 years, this would have come sooner. Oil prices, jobs overseas, lending/loan/mortgage crisis, hurricanes and midwest flood, and the Dems are still going to raise taxes on the filthy rich if they get in this November. That'll show them. Then we can really sink.

We're going to need money to convert away from oil, and the dems won't drill or use nuclear energy- yet.

We saw this coming, it's here.

I hope it doesn't get too bad....now just add one more serious strike by terrorists on US soil, and that'll really get this done. Dont' tell me; someone will riot.


munk

[Nathan C Lewis]

Why should we (tax payers) bail these people out?, they are the ones that messed up:mad: Nate

[OFallon]

This is bad and puts us right on the razor's edge.

[Saunders]

I am afraid if I was in their shoes, I would have to do something to restore confidence.

Sadly there is too much at risk to be philosophical about it at this point.

What bothers me is that we don't seem to learn and keep creating these hybrids and politicize financial matters.

[Dframe]

History repeats. Anyone remember the massive S&L bailout? This is going to make that one look like "chump change". MOAB is a very descriptive title.

[7.62mmFMJ]

Fannie and Freddie were created during the Great Depression by FDR.

Why do they still exist? Another example of GSE creation with no sunset.

They play in the private pond, pay their executives exorbitant amounts of money, and then take on bad debt with "implicit backing" by the Treasury. Now it is "explicit backing." One step away from nationalizing.

Privatize the profit. Socialize the risk. Everybody in the chain made a bunch of profit when they bundled this bad debt.

The Treasury and the Federal Reserve are both worried about the foreign investors. Sovereign Wealth Funds (foreign GSEs) and foreign governments own a significant portion of this bad paper.

[Saunders]

Like it or not, I think we would all be worried about our investments and retirement funds.

[7.62mmFMJ]

Paulson bought a rally with $450 billion.

As it stands now, 9% of mortgages are in default or in some stage of foreclosure.

Fannie and Freddie have $5 trillion in paper. 9% is $450 billion.

It will go higher.

We are bailing out private bankers and investors that took risk.

[Saunders]

Yep, we are.

[7.62mmFMJ]

Just as we are bailing out housing gamblers. Although the true intent of that bailout was to shore up banks.

I was worried about inflation with the government increasing the money supply exponentially to inject liquidity. However, deflation is also a worry. Trillions of "equity" are being wiped out by decreasing property values. If it were only a paper chase, then we would be fine. But debt was accumulated that may never be paid back. So money policy is no intertwined with credit in a huge way.

Deflation is the contraction of the money supply, which includes credit. People spend less because they are poorer, or postpone purchases because the price of stuff will decrease. This is what happened prior to the Great Depression. A more similar model is Japan in 1989.

[Saunders]

Labor productivity is way up which means employers are squeezing out more with the same employment or less. Capital spending is offsetting the rest.

That probably means the Fed does not fear inflation and will leave rates alone.

The question is if unemployment is up because the economy is so weak or is it up because the time allowed to collect benefits was increased?

[Marinesg1012]

I dont think its a good idea for the .gov to do this

[7.62mmFMJ]

US Is "More Communist than China": Jim Rogers

By CNBC.com | 08 Sep 2008 | 05:28 AM ET

The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is "more communist than China right now" but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.

"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it's just bailing out financial institutions," Rogers said.

Stock markets jumped after the U.S. government's decision to launch what could be its biggest federal bailout ever, in a bid to support the housing market and ward off more global financial market turbulence.

But Rogers said in the long term the move spelled trouble.

"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this," Rogers told "Squawk Box Europe."

European stocks soared on Monday, led by banks. UBS was up 11 percent, BNP Paribas up 8 percent, Credit Agricole up 11.1 percent and HBOS up 13.8 percent.

"You certainly gonna see a huge jump in any financial institutions which owned a lot of Fannie [FNM 1.10 -5.94 (-84.37%) ] or Freddie [FRE 1.05 -4.05 (-79.41%) ] … because they don't have to worry about going bankrupt all of a sudden," Rogers said. (Watch the video on the left for the full interview)

"Bank stocks around the world are going through the roof, that's 'cause they've all been bailed out. You don't see the homeowners in Kansas going through the roof 'cause they're not being bailed out," he added.

"A Huge Mess"

However, despite the rally in Asian and European markets, the decision to take over Fannie and Freddie is likely to cause more volatility and needs careful consideration by investors, according to Rogers.

It's rarely good to jump in a moving bus and right now you got a lot of buses moving. I might short some more investment banks in the US, depending on how they rally over the next week, but other than that, I'll just sit and watch," he said.

Rogers, who is short on U.S. bonds, said these are likely to fall while commodities may rally. The two government-sponsored enterprises don't have good loans on their books, because "everybody else took the good stuff and dumped the bad stuff onto Fannie and Freddie," he said.

From 2010, Fannie and Freddie will have to shrink their portfolios by 10 percent a year until they reach $250 billion, to reduce the risk to the taxpayer, according to the Treasury plan. But this may put additional pressure on the housing market, Rogers said.

"That's going to also ensure that house prices continue to go down. It's going to be harder and harder to get a mortgage."

Investors should not pin their hopes on this year's presidential election for a solution to the problems, as none of the candidates is likely to find one, Rogers said.

"This is a big huge mess and neither one of them has a clue what to do next year. It's going to be a mess."
© 2008 CNBC.com

[7.62mmFMJ]

Labor productivity is way up which means employers are squeezing out more with the same employment or less. Capital spending is offsetting the rest.

That probably means the Fed does not fear inflation and will leave rates alone.

The question is if unemployment is up because the economy is so weak or is it up because the time allowed to collect benefits was increased?

Unemployment is up because the minimum wage was increased by decree. Most often forget the effect of the dead hand of government is playing in the market place.

They just extended the UI benefits so expect it to rise further.

[Saunders]

I don't know about the minimum wage but I am pretty sure general business cost increases are putting a damper on hiring.

Fuel, commodities, taxes and so on.

[Fj3fury]

I believe in capitalism, with that said these idiots in banks are killing us. The senators that are bailing them out are assisting in the murder. Why not mandate that people high up in the banks, since they reap the rewards when their risky practices, put up a bond to where if the banks loose money they loose as well? Make those idiots accountable and share the burden of the finances like the american people does when they put a bank under.

[7.62mmFMJ]

The free market has a punishment for this problem. Failure and losing your butt. If we keep bailing these people out, then we cross the moral hazard line and they will keep doing it.

The banks/mortgage companies bundled bad loans (which they never should have made) with good loans, Moody and S&P put a AAA rating on them, investors bought them as AAA paper, and now they find out that they were screwed.

They took the risk. They take the fall.

But in modern America we privatize the profit and socialize the risk.

[Saunders]

I agree Mike but I think the concern is saving all of our butts, not just the investors we are focusing on.

[7.62mmFMJ]

So we avoid pain now so that our kids and grandkids have much more pain?

[Saunders]

I think it is much more than pain. Potential disaster. So, yeah, afraid so.

[7.62mmFMJ]

http://media.townhall.com/Townhall/Car/b/lb0910cd.jpg

[7.62mmFMJ]

I think it is much more than pain. Potential disaster. So, yeah, afraid so.

I have always been a "clean up my own mess" kind of guy.

[Saunders]

Yeah, me too but some messes are too big.

The government keeps creating this **** and you just know it is going to go south and when it does you have to stop the slide.

The left is screaming that we "privatize profits but socialize debt".

This will come to bite us in the butt.

I'd hate to make the call.

[7.62mmFMJ]

http://media.townhall.com/Townhall/Car/b/sst090808bdBP.jpg

[7.62mmFMJ]

I understand that we have to prevent the disaster but we never seem to learn and we never seem to cut other expenditures to cover the disasters.

I think it is past time to fertilize the tree of liberty.

[7.62mmFMJ]

http://media.townhall.com/Townhall/Car/b/sst090808adBP.jpg

[Dframe]

The most infuriating thing about this bailout is the eagerness with which BOTH parties rushed into it. Wasn't there supposed to be something about sound financial principals on the "R" side of the aisle?

[chim]

To add insult to injury, the idiots who helped create the mess are getting $24,000,000.00 in BONUSES!................chim

http://www.wgal.com/money/17430844/detail.html