Bailouts To Continue

[BoberFett]

Originally posted by: ericlp
Don't worry, LK will come in and tell you how it's gonna work out and everything smells like roses!

😛

Just Nod in agreement! There that wasn't so hard? Now take a DEEP breath ... Ready? The feds are gonna butt f**k the american people again... Enjoying it yet?

Heh, I kind of wonder how long it will take for LK to come in here, tell everyone here that we're wrong, that this a necessary move, and that it all would make perfect sense if only we had his experience in finance.

 

[HeXploiT]

Originally posted by: Golgatha

Originally posted by: Perry404

Originally posted by: Engineer

Originally posted by: child of wonder

Originally posted by: mxyzptlk
or is this "bailout" just for CEO's and investors??

This.

Politicians jerk off execs, execs jerk off politicians... one big circle jerk. That's how the world works. The rich and powerful take care of each other to make sure they stay that way.

From the looks of this. the government is looking at taking over Fannie/Freddie in which case the stock would be WORTHLESS. Of course, the government would then be responsible for trillions of debt in case of default by those having a mortgage.

I've never thought about that before!:Q
What happens to the stock if the government takes them over?
Interesting.

It will become a government ran conservatorship and the stock will become a penny stock.

Are you being serious?
I've never heard of this before. Are there any examples of this in the market today?

 

[BoberFett]

Originally posted by: Perry404
Yesterday Ron Paul questioned Treasury secretary Henry Paulson and Federal reserve chairmen Ben Bernanke. In his questioning Paul mentioned that the fed has printed $4 Trillion dollars out of thin air in the past three years and neither Bernanke nor Paulson denied it.
If this is not a good enough confirmation for those of you who don't believe there is a magic money machine then you are fooling yourselves and you will never be convinced.
C-Span Video Congressman Paul speaks at 1:26.

EDIT: I don't know why but I can't get the link to load.
If you copy and paste this into your browser it should work.
rtsp://video1.c-span.org/project/economy/econ071008_financial.rm

Ron Paul is a kook, we should be listening to people who work in the finance sector like LegendKiller. They've built a solid foundation for the US economy, why start doubting them now?

 

[LegendKiller]

Originally posted by: Perry404
Yesterday Ron Paul questioned Treasury secretary Henry Paulson and Federal reserve chairmen Ben Bernanke. In his questioning Paul mentioned that the fed has printed $4 Trillion dollars out of thin air in the past three years and neither Bernanke nor Paulson denied it.
If this is not a good enough confirmation for those of you who don't believe there is a magic money machine then you are fooling yourselves and you will never be convinced.
C-Span Video Congressman Paul speaks at 1:26.

EDIT: I don't know why but I can't get the link to load.
If you copy and paste this into your browser it should work.
rtsp://video1.c-span.org/project/economy/econ071008_financial.rm

Where does he get his numbers?

If RP were to walk into the chamber and ask where the UFO from Roswell is located, what do you think they'd answer with?

 

[HeXploiT]

Originally posted by: LegendKiller

Originally posted by: Perry404
Yesterday Ron Paul questioned Treasury secretary Henry Paulson and Federal reserve chairmen Ben Bernanke. In his questioning Paul mentioned that the fed has printed $4 Trillion dollars out of thin air in the past three years and neither Bernanke nor Paulson denied it.
If this is not a good enough confirmation for those of you who don't believe there is a magic money machine then you are fooling yourselves and you will never be convinced.
C-Span Video Congressman Paul speaks at 1:26.

EDIT: I don't know why but I can't get the link to load.
If you copy and paste this into your browser it should work.
rtsp://video1.c-span.org/project/economy/econ071008_financial.rm

Where does he get his numbers?

If RP were to walk into the chamber and ask where the UFO from Roswell is located, what do you think they'd answer with?

I don't know where he gets his numbers. I'd love to know. Paul is on many congressional committees and obviously has access to information we do not.
Are you going to tell me right now that you believe that if Paul made this up they wouldn't call him on it and laugh? Do you actually believe the treasury secretary, Ben Bernanke and the entire congressional committee would let such an outrageous statement pass without comment if it were a lie?

 

[emfiend]

Originally posted by: Perry404

Originally posted by: Golgatha

Originally posted by: Perry404

Originally posted by: Engineer

Originally posted by: child of wonder

Originally posted by: mxyzptlk
or is this "bailout" just for CEO's and investors??

This.

Politicians jerk off execs, execs jerk off politicians... one big circle jerk. That's how the world works. The rich and powerful take care of each other to make sure they stay that way.

From the looks of this. the government is looking at taking over Fannie/Freddie in which case the stock would be WORTHLESS. Of course, the government would then be responsible for trillions of debt in case of default by those having a mortgage.

I've never thought about that before!:Q
What happens to the stock if the government takes them over?
Interesting.

It will become a government ran conservatorship and the stock will become a penny stock.

Are you being serious?
I've never heard of this before. Are there any examples of this in the market today?

Yeah. This is absolutely correct. Should the government take over Fannie and Freddie, they would likely be rolled up under the FHA. You can't hold stock in government institutions.

 

[Slew Foot]

The Fed has opened the discount window for Freddie and Fannie, step one of the bailout is in place

 

[LegendKiller]

As far as Freddie and Fannie, this whole thing was triggered by an announcement from LEH that the GSEs would need to raise 75BN if FAS140 were eliminated.

1. FAS140 should be admended to remove the travesty of OBS entities in their current form.

2. There isn't any certainty that current FAS140 structures would have to be brought on balance sheet, requring the raising of capital. Most likely they'd be grandfathered in. Any new issuance would need to be done through a FIN46 trust.

If FAS140 were wholesaley eliminated it'd cause not just Fannie/Freddie to raise billions in capital, but hundreds of other companies. The FASB would never allow this.

3. Even if FAS140 structures weren't grandfathered in (which is highly unlikely), FIN46 might cover the GSE securitization structures, stopping any further needs for capital.


The fact of the matter is that precipitous releases of information outside the core competency of the analyst causes panics. It's obvious the LEH analysis didn't include a full scenario analysis of FAS140. Equity analysts are just that, equity, they rarely go into the realm of securitization.

What's funny is that most people here are the same and are regurgitating the same bullshit, except they understand it even less.

 

[LegendKiller]

Originally posted by: emfiend


Yeah. This is absolutely correct. Should the government take over Fannie and Freddie, they would likely be rolled up under the FHA. You can't hold stock in government institutions.

You can't, but they can pay the shareholders.

 

[LegendKiller]

Originally posted by: Slew Foot
The Fed has opened the discount window for Freddie and Fannie, step one of the bailout is in place

Not sure, it all depends on whether they draw on the window.

There's two ways of looking at this. It's step 1 of a bailout. Or, it's step 1 of shoring up confidence so that things don't get too irrational.

 

[LegendKiller]

Originally posted by: Perry404
I don't know where he gets his numbers. I'd love to know. Paul is on many congressional committees and obviously has access to information we do not.
Are you going to tell me right now that you believe that if Paul made this up they wouldn't call him on it and laugh? Do you actually believe the treasury secretary, Ben Bernanke and the entire congressional committee would let such an outrageous statement pass without comment if it were a lie?

What would be the point? Laugh at him? one who is a government appointee doesn't call out a congressman, whether they are wrong or not.

There's a lot of outrageous statements Congress has allowed to be made.

 

[Taejin]

Originally posted by: NaughtyGeek
Link to NYTimes

WASHINGTON ? Alarmed by the growing financial stress at the nation?s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.

The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.

Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee ? which could be staggering ? would be paid by taxpayers.

Why, oh freaking why does this come back on us? I didn't make a poor lending decision. I didn't borrow more than I could afford. So why in the name of all that is capitalist do I have to pay these freaking people's bills? How can this BS even be considered? Does it not fly in the face of our entire economic system? Where is the price for failure on the folks that got these companies into this position? Are they going to prison and having all their assets seized? When does it end?

Let's see...bail them out or watch our financial institutions crumble..

I don't think this is a matter of what SHOULD happen but rather what we want to happen.

 

[HeXploiT]

Originally posted by: Taejin

Originally posted by: NaughtyGeek
Link to NYTimes

WASHINGTON ? Alarmed by the growing financial stress at the nation?s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.

The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.

Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee ? which could be staggering ? would be paid by taxpayers.

Why, oh freaking why does this come back on us? I didn't make a poor lending decision. I didn't borrow more than I could afford. So why in the name of all that is capitalist do I have to pay these freaking people's bills? How can this BS even be considered? Does it not fly in the face of our entire economic system? Where is the price for failure on the folks that got these companies into this position? Are they going to prison and having all their assets seized? When does it end?

Let's see...bail them out or watch our financial institutions crumble..

I don't think this is a matter of what SHOULD happen but rather what we want to happen.

So it's better for the banks to survive than the people?
How about we begin being fiscally responsible and start putting limits on fractional reserve banking. Anything less will result in history repeating itself and ultimately the failure of yet another currency that has no spine.

 

[emfiend]

Originally posted by: LegendKiller

Originally posted by: emfiend


Yeah. This is absolutely correct. Should the government take over Fannie and Freddie, they would likely be rolled up under the FHA. You can't hold stock in government institutions.

You can't, but they can pay the shareholders.

Yeah, but I think that would be egregious misuse of gov funds. Bailing out of individual shareholders wouldn't be taken lightly by most voters, IMHO.

 

[Fern]

Originally posted by: Slew Foot
Told you the taxpayers were going to be on the hook for it, but noooooooo one would listen to me.

Rumors are that Freddie and Fannie are leveraged 50-1, all it takes is a 2% loss to completely wipe them out.

If those leverage numbers are anywhere near accurate, thy're fvcked.

I suppose that's what's hammering the NYSE today.

Fern

 

[BoberFett]

Originally posted by: Taejin

Originally posted by: NaughtyGeek
Link to NYTimes

WASHINGTON ? Alarmed by the growing financial stress at the nation?s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.

The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.

Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee ? which could be staggering ? would be paid by taxpayers.

Why, oh freaking why does this come back on us? I didn't make a poor lending decision. I didn't borrow more than I could afford. So why in the name of all that is capitalist do I have to pay these freaking people's bills? How can this BS even be considered? Does it not fly in the face of our entire economic system? Where is the price for failure on the folks that got these companies into this position? Are they going to prison and having all their assets seized? When does it end?

Let's see...bail them out or watch our financial institutions crumble..

I don't think this is a matter of what SHOULD happen but rather what we want to happen.

Here we go again. :roll:

If banks are too big to fail, they need to be nationalized and opened up so that everyone can see every loan. Log into a website and see how much your neighbor borrowed to buy his house, and what his credit rating and income are. How else are you supposed to protect yourself from shady buyers and lenders swooping in and destroying your property value with foreclosures.

If our nation is so dependent on banks that we will prop them up no matter how poor their decision making process is, then they can't be allowed to exist without absolute transparency and they need to answer directly to the taxpayer, since that seems to be who is funding their misadventures anyway.

 

[ggnl]

Originally posted by: Fern

Originally posted by: Slew Foot
Told you the taxpayers were going to be on the hook for it, but noooooooo one would listen to me.

Rumors are that Freddie and Fannie are leveraged 50-1, all it takes is a 2% loss to completely wipe them out.

If those levegae numbers are anywhere near accurate, thy're fvcked.

I suppose that's what's hammering the NYSE today.

Fern

From WSJ:

One big problem is that the companies never have been required to hold much capital, partly because regulators and Congress used to believe that there wasn't much risk of wide-spread defaults on home mortgages. As of March 31, the companies reported combined capital of $81 billion, only about 1.6% of the mortgages they own or guarantee.

 

[Fern]

Originally posted by: LegendKiller

Originally posted by: Slew Foot
The Fed has opened the discount window for Freddie and Fannie, step one of the bailout is in place

Not sure, it all depends on whether they draw on the window.

There's two ways of looking at this. It's step 1 of a bailout. Or, it's step 1 of shoring up confidence so that things don't get too irrational.

I hope it's the latter.

Fern

 

[Taejin]

Originally posted by: BoberFett

Originally posted by: Taejin

Originally posted by: NaughtyGeek
Link to NYTimes

WASHINGTON ? Alarmed by the growing financial stress at the nation?s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.

The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.

Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee ? which could be staggering ? would be paid by taxpayers.

Why, oh freaking why does this come back on us? I didn't make a poor lending decision. I didn't borrow more than I could afford. So why in the name of all that is capitalist do I have to pay these freaking people's bills? How can this BS even be considered? Does it not fly in the face of our entire economic system? Where is the price for failure on the folks that got these companies into this position? Are they going to prison and having all their assets seized? When does it end?

Let's see...bail them out or watch our financial institutions crumble..

I don't think this is a matter of what SHOULD happen but rather what we want to happen.

Here we go again. :roll:

If banks are too big to fail, they need to be nationalized and opened up so that everyone can see every loan. Log into a website and see how much your neighbor borrowed to buy his house, and what his credit rating and income are. How else are you supposed to protect yourself from shady buyers and lenders swooping in and destroying your property value with foreclosures.

If our nation is so dependent on banks that we will prop them up no matter how poor their decision making process is, then they can't be allowed to exist without absolute transparency and they need to answer directly to the taxpayer, since that seems to be who is funding their misadventures anyway.

Yes, change the banks etc blah blah (insert solution here) but to let them CRUMBLE?

 

[Golgatha]

Originally posted by: Perry404

Originally posted by: Golgatha

Originally posted by: Perry404

Originally posted by: Engineer

Originally posted by: child of wonder

Originally posted by: mxyzptlk
or is this "bailout" just for CEO's and investors??

This.

Politicians jerk off execs, execs jerk off politicians... one big circle jerk. That's how the world works. The rich and powerful take care of each other to make sure they stay that way.

From the looks of this. the government is looking at taking over Fannie/Freddie in which case the stock would be WORTHLESS. Of course, the government would then be responsible for trillions of debt in case of default by those having a mortgage.

I've never thought about that before!:Q
What happens to the stock if the government takes them over?
Interesting.

It will become a government ran conservatorship and the stock will become a penny stock.

Are you being serious?
I've never heard of this before. Are there any examples of this in the market today?

http://www.bloomberg.com/apps/...g.ckVnwp9b8&refer=home

Bush administration officials are considering putting at least one company under the full control, or conservatorship, of government regulators, Rosner said.

Under a conservatorship, the companies would be run by their regulator, the Office of Federal Housing Enterprise Oversight, which could require them to raise capital ``through any means,'' New York-based Fox-Pitt analyst Howard Shapiro said in a report yesterday. ``This is the situation that would put common shareholders at risk of complete dilution,'' Shapiro wrote.

Read the whole article though. This situation is very unlikely for a number of reasons. However, I don't think it is fair to the taxpaying public to have to bail out a private corporation. Freddie Mac and Fannie Mae aren't explicity (only implicitly...this is news to me too if you didn't know this BTW) government backed securities, and IMHO shouldn't be treated differently than other lenders. If they're mismanaged into bankruptcy, so be it IMO.

 

[LegendKiller]

Originally posted by: Fern

Originally posted by: Slew Foot
Told you the taxpayers were going to be on the hook for it, but noooooooo one would listen to me.

Rumors are that Freddie and Fannie are leveraged 50-1, all it takes is a 2% loss to completely wipe them out.

If those leverage numbers are anywhere near accurate, thy're fvcked.

I suppose that's what's hammering the NYSE today.

Fern

They are actually 20:1. There are plenty of companies with 0 or even negative TNW. Just because equity is wiped out doesn't mean they don't have cash to cover liabilities. I don't know what amount of debt is actually corporate debt, vs secured debt.

If it's secured debt then that leverage ratio could be far lower.

 

[Slew Foot]

Originally posted by: ggnl

Originally posted by: Fern

Originally posted by: Slew Foot
Told you the taxpayers were going to be on the hook for it, but noooooooo one would listen to me.

Rumors are that Freddie and Fannie are leveraged 50-1, all it takes is a 2% loss to completely wipe them out.

If those levegae numbers are anywhere near accurate, thy're fvcked.

I suppose that's what's hammering the NYSE today.

Fern

From WSJ:

One big problem is that the companies never have been required to hold much capital, partly because regulators and Congress used to believe that there wasn't much risk of wide-spread defaults on home mortgages. As of March 31, the companies reported combined capital of $81 billion, only about 1.6% of the mortgages they own or guarantee.

Hmm March 31 they had 81 bill, and last week been noted as needing upwards of 70 billion in capital. They blew through their almost entire capital in 4 months? Wow, and these guys back half of the home value in the US?

 

[Golgatha]

Originally posted by: emfiend

Originally posted by: LegendKiller

Originally posted by: emfiend


Yeah. This is absolutely correct. Should the government take over Fannie and Freddie, they would likely be rolled up under the FHA. You can't hold stock in government institutions.

You can't, but they can pay the shareholders.

Yeah, but I think that would be egregious misuse of gov funds. Bailing out of individual shareholders wouldn't be taken lightly by most voters, IMHO.

Especially since Freddie and Fannie are each 95% institutionally owned. Really, only corporations, hedge funds, and folks like Warren Buffet stand to lose much. I know I'm going to be pissed if they transfer the working man's dollars to the corporations and ultra rich.

 

[GTKeeper]

I would start bracing for massive inflation with all the money we are printing. Buffet is warning against it, and he's not wrong too often.

 

[LegendKiller]

Originally posted by: Slew Foot

Originally posted by: ggnl

Originally posted by: Fern

Originally posted by: Slew Foot
Told you the taxpayers were going to be on the hook for it, but noooooooo one would listen to me.

Rumors are that Freddie and Fannie are leveraged 50-1, all it takes is a 2% loss to completely wipe them out.

If those levegae numbers are anywhere near accurate, thy're fvcked.

I suppose that's what's hammering the NYSE today.

Fern

From WSJ:

One big problem is that the companies never have been required to hold much capital, partly because regulators and Congress used to believe that there wasn't much risk of wide-spread defaults on home mortgages. As of March 31, the companies reported combined capital of $81 billion, only about 1.6% of the mortgages they own or guarantee.

Hmm March 31 they had 81 bill, and last week been noted as needing upwards of 70 billion in capital. They blew through their almost entire capital in 4 months? Wow, and these guys back half of the home value in the US?

$70Bl was *ONLY* if FAS140 structures were brought completely on-BS and only then if they aren't grandfathered *AND* aren't covered under FIN46.

So, in other words, it's highly unlikely that they have to raise that much.