Rescue Sought for Fannie and Freddie

[MannyGoldstein]

Source: The NY Times

WASHINGTON — Alarmed about the sharply eroding confidence in the nation’s two largest mortgage finance companies, the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac and also lend to the companies to meet their short-term funding needs, people briefed about the plan said on Sunday.

The plan calls on Congress to give the government the authority over the next two years to buy an unspecified amount of stock in the two companies. Over the same period of time, it would permit the companies to have greater access to the Treasury, by expanding the credit line that each company has from the Treasury. Each company now has a $2.25 billion credit line, set nearly 40 years ago by Congress. At the time, Fannie had only about $15 billion in outstanding debt. It now has total debt of about $800 billion, while Freddie has about $740 billion.

Today the two companies also hold or guarantee mortgages valued at more than $5 trillion.

As part of the plan, the administration will also call on Congress to raise the national debt limit, people briefed on the plan said. And it will ask Congress to give the Federal Reserve a role in setting the rules for how big a capital cushion each company must hold. Giving the Fed a consulting role in the companies’ oversight is seen as yet another way to reassure nervous markets.

Read more: http://www.nytimes.com/2008/07/14/washington/14fannieweb.html?hp

---

I'm so &%^*ing happy that our government will invest my tax dollars in something so risky that other investors are fleeing. And I hope this keeps the Predator Class good and wealthy.

[roamer65]

1. "Set those printing presses to warp speed, Scottie."

"Aye captain. She's giving us all she's got, but she can't take much more."

[daleo]

5. Alternatively, Dr. McCoy looks at Freddie Mac

"He's dead, Jim".

[natrat]

2. this ought to be interesting to see the scam they pull with this

[OwnedByFerrets]

3. Yes, lets bail them out while their CEO makes

millions. Fucking privatization of government agencies.

http://www.forbes.com/static/pvp2005/LIRQEZU.html

Daniel H Mudd
Total Compensation: $7.1 mil5,6 (#182)
5-Year Compensation Total: $N/A thou

Daniel H Mudd has been CEO of Fannie Mae (FNM) for less than six months. Mr. Mudd has been with the company for 5 years . The 46 year old executive ranks 12 within Diversified Financials
Interim chief executive.

[Tutonic]

4. What abotu the millions of homeowners being foreclosed on?

You got something for them Bushbutt?!!! My eyes are bleeding from anger!

[lakeguy]

6. is this that 'free market'

i keep hearing so much about?

[Purveyor]

7. Fannie and Freddie are stockholder owned companies if I'm not mistaken.

Will the US taxpayer be 'bailing out' these shareholders?

[soothsayer]

27. yeah, but they also have unique charters to ensure affordable, low cost housing,

and the shareholders don't actually make money off of that part of the mission (though without doubt, SOMEONE does)--so they are a bit unique.

[Purveyor]

8. Paulson's Sunday Evening Statement on Freddie Mac, Fannie Mae: Full Text

July 13 (Bloomberg) -- Following is the text of a statement issued today by Treasury Secretary Henry Paulson:

Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction.

GSE debt is held by financial institutions around the world. Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore we must take steps to address the current situation as we move to a stronger regulatory structure. In recent days, I have consulted with the Federal Reserve, OFHEO, the SEC, Congressional leaders of both parties and with the two companies to develop a three-part plan for immediate action. The President has asked me to work with Congress to act on this plan immediately.

First, as a liquidity backstop, the plan includes a temporary increase in the line of credit the GSEs have with Treasury. Treasury would determine the terms and conditions for accessing the line of credit and the amount to be drawn.

Second, to ensure the GSEs have access to sufficient capital to continue to serve their mission, the plan includes temporary authority for Treasury to purchase equity in either of the two GSEs if needed.

Use of either the line of credit or the equity investment would carry terms and conditions necessary to protect the taxpayer. Third, to protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards.

I look forward to working closely with the Congressional leaders to enact this legislation as soon as possible, as one complete package.

[Tutonic]

10. Henry Paulson should be made to wear a big sign that reads:

"THE DEVIL MADE ME DO IT." After all the only other explanation is that he is incompetent!!

[and-justice-for-all]

9. Fuck'em...let'em drowned.....

They dug their graves, now they can lay in them.

The Government needs to not bail out these zillion dollar companies, they need to rescue home owners, the homeless, the hungry....etc

[Lorentz]

14. "Homeowners" who bought too much home don't need to be bailed out either.

*EVERYONE* who needs to learn a lesson from this should have to learn that lesson.

[paparush]

26. Freddie and Fannie hold or guarantee $5 TRILLION in mortgage debt

That's HALF the US mortgage debt.

It sucks huge..it sucks my son's future, but I'm not sure if letting them fail outright is an option.

[soothsayer]

34. well, they hold not just the debt, but the mortgages, too. So if they had to sell the properties,

they could. Let's say EVERY mortgage they hold goes into foreclosure. What would they lose if they sold every piece of property right now? 20% maybe? They're not just holding paper; their debt is collateralized.

[paparush]

35. Soothsayer - thank you for pointing that out! :-)

[WriteDown]

32. Uh....

They are a government sponsored entity. Just sayin'.

[spinbaby]

11. Wait a minute...

On Friday they were saying that the fundamentals were sound and that Fannie and Freddie didn't need to be rescued.

[indypaul]

12. More of Dr Phil Gramm's "whinners"?

Free market and privitization better explained as
private gain and public risk.

[mbperrin]

13. Is this more of that "mental recession" I'm hearing about?

They never saw a corporation they couldn't shovel more money to, have they?

[struggle4progress]

15. US Treasury ready to put billions into bailout of America’s mortgage system

From The Times
July 14, 2008

Tom Bawden in New York and Gerard Baker in Washington

... In a late-night announcement designed to calm increasing panic on Wall Street before today’s market opening, the US Treasury Department and the Federal Reserve issued a joint statement in which they pledged to spend billions of dollars of taxpayers’ money to bail out the two American mortgage giants that collectively underpin the entire housing market “if needed”.

The Fed said it would offer cheap financing to the giants, Freddie Mac and Fannie Mae, through its so-called discount window. The Treasury separately said that it would propose to Congress that lines of credit to the two should be extended temporarily. Furthermore, Henry Paulson, the US Treasury Secretary, said that the Treasury would purchase equity in both organisations if needed.

The two groups together account for more than half of America’s $12,000 billion of outstanding mortgages. A failure of Freddie and Fannie would drive up mortgage payments significantly as a crucial source of financing dried up and would have a domino effect across the debt market, affecting everything from car loans to student loans ...

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4327506.ece

No more free bailouts: if we buy, we buy ownership

[CatholicEdHead]

16. Fannie, Freddie in Talks With Treasury, Fed Over Funding Plans

Source: Bloomberg

July 13 (Bloomberg) -- Fannie Mae and Freddie Mac are in talks with Treasury, Federal Reserve and White House officials to come up with funding plans should the beleaguered mortgage companies require financing, according to people with knowledge of the discussions.

Freddie Mac is scheduled to sell $3 billion in short-term notes tomorrow. The plans being discussed today may include providing capital in case the McLean, Virginia-based company can't find enough investors for the debt, said the people, who declined to be identified because the negotiations haven't been announced.

Freddie Mac tumbled 47 percent in New York Stock Exchange composite trading last week and Washington-based Fannie Mae lost 45 percent of its value, forcing U.S. Treasury Secretary Henry Paulson to pledge support for the companies. Fannie Mae and Freddie Mac are critical for the housing market because they guarantee almost half the $12 trillion in outstanding U.S. mortgages.

Plans discussed today have ranged from a reiteration of last week's statement to a recapitalization or nationalization of the companies, though Fannie Mae and Freddie Mac want to limit government intervention, the people said.

Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=aBgwUZAQaT_s&refer=news

---

This is going to start the markets off overnight with a bang and will continue through most of the week.

[Tutonic]

17. Henry Paulson and Ben Bernake are tweedle dum and tweedle dee

If these two classic morons are able to produce anything larger than a bowel movement to bail out these two mismanaged lenders, we should take it as a sign of the Apocalypse.

[bulloney]

18. More like tweedle dum and tweedle dumber.

[hedgehog]

19. This is the scariest story on the economy that I've ever seen.

Years from now, July 14, 2008 may be referred to as "Black Monday"!

[PM7nj]

20. Tomorrow is going to be baaad.

It could be definitely another Black Monday.

[CatholicEdHead]

24. CNBC's Jim Cramer on NBC Nightly News says an jump up

Supposedly by more confidence by the relative "stability" of Freddy and Fannie (in that they will not bottom out with the Fed there). So at best it is shored up in the very short term (next couple days to couple weeks) but watch out below later on.

[TroubleMan]

21. Dollar, say hello to the peso. You two will be spending a lot of time together.

Soon you'll have very much in common.

[cal04]

22. Treasury, Fed to help prop up mortgage giants

http://www.msnbc.msn.com/id/25665507/

Propose extending more credit, equity purchase in Fannie Mae, Freddie Mac
The U.S. Treasury and the Federal Reserve are announcing steps to shore up mortgage giants Fannie Mae and Freddie Mac.

Shares of the two companies have plunged in recent weeks as losses from their mortgage holdings surged, threatening their financial survival.

Secretary Henry Paulson said the government is planning to expand its current line of credit to the two companies should they need to tap it and Treasury could buy equity captial in the companies — if needed. The moves will require congressional approval.

The Federal Reserve says in a separate statement that it will lend to Fannie Mae and Freddie Mac if they need additional funds.

[roamer65]

23. This ought to drive M3 money supply growth well beyond 20%.

[ozymandius]

25. I just love it when American capitalism privatizes profits and socializes losses.

:sarcasm:

Great. Just great. The assholes that made this mess still get to keep their millions of dollars of compensation for colossal greed and idiocy. Meanwhile, the mess will be cleaned up with money provided disproportionately through taxes collected from those who were victimized by this scam.

[and-justice-for-all]

28. Tell that to post #14...nt

[Vinca]

29. Unfortunately, if the government doesn't bail them out,

the economy right now is going to look rosy compared to a few months from now. That said, after said "bailout," the deregulation of the past 8 years needs to be reversed. In addition, there needs to be an investigation to weed out the criminals in this operation - and you know they're there - and prosecute them and make them do time in a place other than Club Fed. This is similar to Bush I's S&L crisis and not all that surprising given the son has to outdo the dad at everything from war to debt to misery for the American people.

[MannyGoldstein]

30. We Could Simply Seize Them Instead

The current bailout rewards management and shareholders, while the public foots the bill. We should simply seize the assets - we'd still foot the bill, but at least we'd have the assets.

[mikeytherat]

31. Privatize the profits, socialize the risk. Lather. Rinse. Repeat.

mikey_the_rat

[Yavin4]

33. If They Fail, We'll All Be Living in Tent Cities

Without Fannie and Freddie, ALL housing valuations would plummet to zero. You'd be wiping out the net worth for millions of Americans.