Mortgage bail-out rallies markets, Light at the end of the credit crunch tunnel.

MrMalkin

mewbie wrote: »

What magic beans means is that in my opinion seeing the upside of the bailout is simply nonsense. The reason for it in my opinion was a last ditch attempt by a failing system to rescue itself. There was no choice in the matter - save it and buy more time, or let it go under and collapse the entire worldwide economic system.

Absolutely none of which addresses the point that I was making, which was that in the long term this deal will turn a profit for the US government. The fact that it was a 'last ditch attempt' doesn't mean there can't possibly be an upside in the medium- to long-term, in fact this is an absolute steal. There's no 'nonsense' involved, I note you don't even attempt to explain why it's nonsense.

Now magic beans, there's some nonsense there folks.

Oh and apparently 'pontificating a load of second hand stuff' is worse than offering no supportive arguments whatsoever. Jesus. H. Christ.

Generali

MrMalkin wrote: »

Absolutely none of which addresses the point that I was making, which was that in the long term this deal will turn a profit for the US government.

How do you think this will turn a profit for the US government please?

mr_magoo_5

MrMalkin wrote: »

Absolutely none of which addresses the point that I was making, which was that in the long term this deal will turn a profit for the US government. The fact that it was a 'last ditch attempt' doesn't mean there can't possibly be an upside in the medium- to long-term, in fact this is an absolute steal. There's no 'nonsense' involved, I note you don't even attempt to explain why it's nonsense.

Now magic beans, there's some nonsense there folks.

Oh and apparently 'pontificating a load of second hand stuff' is worse than offering no supportive arguments whatsoever. Jesus. H. Christ.

Yea right, its an absolute steal, same as Northern rock, Bear Stearns and all the financials lining up to be rescued. We taxpayers just love these bargains. Just because they got in when the share value was low don’t mean the huge debts have vanished. Plus over the next 2 years resets from Alt-A mortgages etc are going to kick in big time. Sub prime was a small percentage, as you pointed out, and as the recession kicks in even some top grade borrowers will have difficulty in making payments because of wage cuts, loss of jobs etc
If we were at the bottom you could make that call, possibly, but I don’t think this is anywhere near the bottom yet.
Don’t know much about magic beans but think you’re on the magic mushrooms.

Cannon_Fodder

MrMalkin wrote: »

Remember, the huge liabilities they are assuming will in the most part be repaid with a decent profit to be had. No matter what the doomsayers may think, the vast majority of mortgages issued by Freddie and Fannie are viable and will be paid off as expected, only a small percentage are sub-prime and not all of those will default.

I have trouble getting my head round the idea that these businesses are in such trouble they need multi-hundred-billion-dollar bail-outs, yet are substantially sound and profitable.

If there are future profits to be had, why did 'sharks', asset strippers, private equity funds, whatever etc, not beat the US Gov to this 'fantastic opportunity'?

WTF?_2

There will be profits to be made - once the taxpayers have absorbed the losses.

At which point they'll be sold back into private ownership for a song, if previous privatisations are anything to go by.

MrMalkin

Generali wrote: »

How do you think this will turn a profit for the US government please?

There's two parts to it. Firstly, by stepping in to keep Fannie and Freddie afloat, the government is ensuring that the loans they made to the two companies will be repaid, with interest. It should be noted that Northern Rock is currently paying back its own loans to the Treasury, plus interest.

Secondly, as I've already mentioned, the vast majority of F&F mortgages are completely viable and will continue to be repaid, with interest, over the next few years and decades. The companies were still just about solvent and thanks to this cash injection will remain so.

Sure, in the short term that's a lot of money to hand over, and sure, if it hadn't been done there could have been severe consequences. But fundamentally, it was a cash flow problem that was preventing Fannie and Freddie operating effectively, but now that cash has been found, and provided the credit crunch does not prove permanent I see no reason why they shouldn't trade just as successfully as they did in the not-too-distant past.

edit: of course, the crunch isn't over yet, and there will most likely be more losses to come, and maybe even more money required to keep them afloat, but thinking long term I think they'll get back on their feet.

purch

It would help if people would actually know something that they are pontificating about (and abusing other posters about) before posting

MrMalkin wrote: »

I No matter what the doomsayers may think, the vast majority of mortgages issued by Freddie and Fannie are viable and will be paid off as expected, only a small percentage are sub-prime and not all of those will default.

Fannie Mae and Freddie Mac do not issue Mortgages...

Fannie Mae has a federal charter and operates in America's secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America

http://www.fanniemae.com/aboutfm/index.jhtml;jsessionid=ZPEWO5NLLOZ0RJ2FECISFGI?p=About+Fannie+Mae

Freddie Mac participates in the subprime market by investing primarily in highly rated AAA bonds backed by subprime mortgages. Given our role as a GSE, we chose this financing strategy as a prudent way to provide liquidity to a largely untested segment of the mortgage market. These investments have been critical to our ability to meet our annual affordable housing goals

http://www.freddiemac.com/corporate/about/policy/subprime.html

Then this question;...

will the external investors carry on getting the F&F yield (a higher yield than treasuries) or will it drop close/to Fed treasury rates?

Get's this response;---

If you're talking about dividends, the deal put in place suspends all dividends indefinitely

Yet again showing that there is a huge lack of knowledge behind these pontifications........(the use of the term 'treasuries' might have given a clue !!!)

Fannie Mae purchases mortgage loans from mortgage lenders such as mortgage companies, savings institutions, credit unions and commercial banks, thereby replenishing those institutions' supply of mortgage funds.
The company obtains the funds to finance its mortgage purchases and other business activities by selling debt securities in the international capital markets. Fannie Mae's Benchmark Securities® program encompasses large, regularly scheduled issues of debt designed to provide liquidity to investors.

http://www.fanniemae.com/faq/faq10.jhtml?p=FAQ

MrMalkin

purch wrote: »

Fannie Mae and Freddie Mac do not issue Mortgages...

My point still stands, whether they back these mortgages first-hand or second-hand, my point still stands.

Generali

MrMalkin wrote: »

My point still stands, whether they back these mortgages first-hand or second-hand, my point still stands.

According to The Economist today, 9% of US mortgages are in arrears. There is no way that the US Government is going to make a profit on their interventions in the mortgage market. It may be possible that their support for the MBS market through open market purchases will cause FMx2 to be a profitable investment but they are just giving with one hand and taking with the other.

posh*spice

`The worst in terms of the economy, financial crisis and the banking crisis is ahead of us, not behind us,'' said New York University economist Nouriel Roubini. ``The U.S. consumer is now on the ropes. The only light at the end of the tunnel is that of the incoming train.''

TTFN

Posh