Freddie and Fannie nationalised!

Generali

morg_monster wrote: »

I have just found out there is also a Ginnie Mae and a Farmer Mac...

There are loads of these GSEs. There's a bunch of Federal Mortgage banks too. Most of them were set up as part of the New Deal I think.

Sir_Humphrey

IIRC, Fannie Mae was set up by FDR in the Great Depression. Freddie Mac was set up in 1970 after Fannie Mae was privatised in order to provide some "competition".

There was always an implicit understanding that they would be underwritten by the government given a failure. This implicit understanding has just been made explicit.

Generali

Sir_Humphrey wrote: »

IIRC, Fannie Mae was set up by FDR in the Great Depression. Freddie Mac was set up in 1970 after Fannie Mae was privatised in order to provide some "competition".

There was always an implicit understanding that they would be underwritten by the government given a failure. This implicit understanding has just been made explicit.

Many investors thought the same thing about Railtrack. It was clear that they were very badly run and were dependant on the largesse of the taxpayer to survive but that wasn't reflected in the share price. Until the Government turned the supply of cash off of course.

Both Fannie Mae and Freddie Mac have strong histories of philantropic giving which will be a blow for many charities as that will presumably stop now.

dopester

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.

Financial crisis: Default by the US government is no longer unthinkable

By Liam Halligan

Last Updated: 11:54pm BST 20/09/2008

Check out the chart showing the recent spikes in the US 10-year credit default swap. In other words, the market is now pricing-in the genuine possibility that the US will struggle to pay-back some of its long-term T-bills.That possibility is still deemed to be quite low. But the ultimate financial question - until recently, unthinkable - is now being asked. Yes siree, the mighty US government could default. That's how much the world has changed.

Telegraph link.

There is a lot of foreign money in those T-bills. Foreigners can't vote in US elections.

Chris2685

I find it pretty weird to be honest... How can one of the supposedly richest countries in the world be in so much debt? It is crazy!

http://www.brillig.com/debt_clock/

Is this site telling the truth?

"
[FONT=verdana,arial,helvetica]The estimated population of the United States is 304,764,655
so each citizen's share of this debt is $31,724.30.[/FONT]
[FONT=verdana,arial,helvetica]The National Debt has continued to increase an average of
$1.84 billion per day since September 28, 2007!"[/FONT]

baby_boomer

The US government's decision to create a "bad bank" to take on the worst US mortgage debts is great news for the world economy but it will be seen as a turning point in the slow decline of America from its position as world Hyper-Power.

This decision is probably even more momentous than taking on Fannie & Freddie.

Generali

baby_boomer wrote: »

The US government's decision to create a "bad bank" to take on the worst US mortgage debts is great news for the world economy but it will be seen as a turning point in the slow decline of America from its position as world Hyper-Power.

This decision is probably even more momentous than taking on Fannie & Freddie.

I'm glad I'm not a US taxpayer.

baby_boomer

:eek:

Incredibly his is the same "tax cutting" Republican Party which, in the 1990s, proposed a "balanced budget" amendment to the Constitution on behalf of the US taxpayer and in order to stymie President Clinton's sphere of action.

:rotfl:

But seriously, the UK has done well from this - even though we will feel some of their pain in terms of slower economic growth in the future.

Generali

baby_boomer wrote: »

:eek:

Incredibly his is the same "tax cutting" Republican Party which, in the 1990s, proposed a "balanced budget" amendment to the Constitution on behalf of the US taxpayer and in order to stymie President Clinton's sphere of action.

:rotfl:

But seriously, the UK has done well from this - even though we will feel some of their pain in terms of slower economic growth in the future.

It's brilliant from a UK perspective as every bank will put everything that they can get away with into this new bad bank. Thanks Joe Six Pack.

mewbie_2

This new bank is definitely going to need a new name. Not firing on all cylinders yet, so "Bank of Toxic Waste, the bank that likes to say we're fooked" is my not very good offering.