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Freddie and Fannie nationalised!
Comments
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Oh dear! I just read this on another forum:
today's announcement from the US FED:
http://www.ustreas.gov/press/releases/hp1129.htm
Hard to understand everything through this statement loaded with financial and political double talk (and I have a degree in Economics) but it looks like the common shares are wiped out, the preferred shares (not so clear about this) are also wiped out and the bond holders have been bailed.
The negative impact of wiping out the preferred shares will be felt in the Financial sector where a lot of banks (mostly regional), investment houses and insurance companies hold these preferred shares. Banks have been allowed to show these preferred shares as assets on their balance sheets to meet capitalization requirements. Expect more bank failures in the near future.0 -
This is getting scary now.......where will it end? hyperinflation here we come..
here is some good analysis http://www.tickerforum.org/cgi-ticker/akcs-www?post=59071&page=11
Things are getting very bad in the US and they haven't even had a recession yet. This seems to me like a desperate attempt to avoid deflation.
IMO things will be worse in the UK as we are more reliant on the finance sector for our GDP and tax base. The budget deficit is set to hit £50,000,000,000 this year and will comfortably exceed that next year.
I'm very glad to be off to Aus. If I'm going to be broke I may as well be broke on the beach!0 -
They always 'kind of' guaranteed FMAC so the US government has really moved from an implicit guarantee to an explicit one.
The quoted below is a partial section from a financial assessment book from 1994. Not absolutely current, but could perhaps be projected to where we are now, given the added fury of further of lending, and poor lending standards, on real estate since that time.It insures $800 billion in pension benefits that are indirectly tied to real asset values - as well as the health of the corporate economy.
Even Sallie Mae, the student loan agency, is a major holder of home equity loans - with $35.5 billion in loans outstanding as of 1989. Sallie Mae was an exception in one respect. It had sufficient capital to cover 2.9 percent of its obligations.
Most of the other government-sponsored credit agencies had capital bases so think that they would have been insolvent had they been thrifts. Practically without exception, these government-sponsored agencies are lending at below-market standards, with as little as $1 of capital supporting $160 in loans.
Many agencies fail to document their loans adequately, or even maintain their books. The FHA for example was not fully audited for ten years because of the lack of a usable accounting system.
The full logical implications of the situation are psychologically unimaginable. A 50 percent drop in residential real estate prices could bring the U.S government to the brink of insolvency.
The very idea seems preposterous. Yet if you work through the numbers, it is hard to imagine how even the federal Treasury could fund the guarantees it has given.
Anyone who thinks about the true financial condition of the U.S. government must be frightened. A special committee of the Social and Economic Congress of Japan, including Yoshio Okawara, former Ambassador to Washington, has warned Japanese investors that Congress may default on the national debt.
In effect, the U.S Treasury is like an insurance company without reserves. Congress has gambled the good credit on the country by writing trillions of dollars of coverage against the fall of real estate prices in the United States.
If real estate were to weaken broadly or very far, the consequences could be more serious than most investors have imagined. The avalanche of losses could create a mismatch between current obligations and assets unprecedented since U.S Treasury paper sold for less than fifteen cents on the dollar in the eighteenth century.
To put it another way, the government is like a highly leveraged futures trader who has bet everything on the proposition that a certain price will rise. If the market goes the other way, as we think it will, the power of leverage could be brought in to play to create losses of an unmanageable kind.0 -
Oh dear! I just read this on another forum:
today's announcement from the US FED:
http://www.ustreas.gov/press/releases/hp1129.htm
Hard to understand everything through this statement loaded with financial and political double talk (and I have a degree in Economics) but it looks like the common shares are wiped out, the preferred shares (not so clear about this) are also wiped out and the bond holders have been bailed.
The negative impact of wiping out the preferred shares will be felt in the Financial sector where a lot of banks (mostly regional), investment houses and insurance companies hold these preferred shares. Banks have been allowed to show these preferred shares as assets on their balance sheets to meet capitalization requirements. Expect more bank failures in the near future.
As I understand it, common stock holders will be wiped out (for now - they still hold their stock but as payments to common stock holders are barred under the conservatorship* plan the stock is effectively worthless) and preferred stockholders will be subordinated to a new class of preference stock paying 10% that will be held by the treasury.
The treasury has said that they will help shore up the balance sheet of any bank that is below the capital adequacy rules as a result of the conservatorship plan.
*Conservatorship seems to mean temporary nationalisation. It's hard to say as it's a word that has been made up on the spot so I can't look it up in a dictionary.0 -
amcluesent wrote: »US takes over key mortgage firms
US financial officials have outlined plans for the government to take over the failing mortgage giants Freddie Mac and Fannie Mae.
Figures show about 9% of US homeowners were behind on their payments or faced repossession.
The federal takeover is one of the largest bail-outs in US history. Together, Freddie Mac and Fannie Mae own or guarantee about $5.3 trillion (£3 trillion) of mortgages.
Who is next to go down in Britain?
my god,things are getting really bad now.today i heard my Derbyshire & Cheshire BS a/c's savings are also in the BS & getting taken over :eek:0 -
*Conservatorship seems to mean temporary nationalisation. It's hard to say as it's a word that has been made up on the spot so I can't look it up in a dictionary.
Generali, we've had this conversation before. And that nice Mr. Brown will be very disappointed in you.
It's not nationalisation, it's "taken into temporary public ownership"....much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.0 -
Their children, children's children, children's children's children.
Same as over here then...
IIRC Fannie and Freddie are also the providers of much of the student borrowing in US too. so, in order for the children of the children of the children to pay this back the two Fs need to be able to provide loans. Unless the basketball playing scholarship students who the universities give scholarships are the answer to the mess?
I don't know how financially astute they are (basketball players), but they chose the right way to get their education paid for....and they are very tall.0 -
lostinrates wrote: »IIRC Fannie and Freddie are also the providers of much of the student borrowing in US too. so, in order for the children of the children of the children to pay this back the two Fs need to be able to provide loans. Unless the basketball playing scholarship students who the universities give scholarships are the answer to the mess?
I don't know how financially astute they are (basketball players), but they chose the right way to get their education paid for....and they are very tall.
I think Sallie Mae specialises in student loans.0
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