cthree

Looks like fannie and freddie are going to get nationalized this weekend. I wonder how the market will take that news?

mingster

i think it'll be relatively calm - freddie (or was it fannie?) sold off $3B worth of debt fairly smoothly, so i'm assuming the general consensus from the pros is that these 2 companies have a future.

sahtt

Just saw the same thing. Not sure if it's healthy to be checking it at midnight on friday but what can you do. It will be interesting. My thesis is a massive reduction in risk, followed by a slow, painful realization that they didn't do it to "help", they did it because they had absolutely no choice. Many of the core culprits are actually at moderate levels, especially with the late buying of financials today. Wouldn't be the least* bit surprised if that late day buying of financials was not by coincidence.

aklucsarits

Really? Why do you think that? When I heard this, my first thought was that the rest of the financials would have a relief rally Monday...

A Federal takover of FRE and FNM would resolve the single biggest cloud hanging over the housing market. It would ensure that they can continue to operate and make new loans. This move, if true, is going to offer the market the clarity it's been starving for since spring time.

Andrew

cthree

Logically it would be a great thing. I can't say how the market will actually react though. The combined market cap of these two firms is < $10B (today) so it's a small price to pay for taking some trillion $'s of mortgage paper off the market.

lOOkatme

Its a great thing if you live outside the united states.


I am still trying to figure out how the government can step in with public money to save private companies/loans.

I hate to say it...but thats F-ked up!

aklucsarits

The Treasury doesn't have much choice. They cannot allow FRE and FNM to fail. It would result in a global financial catastrophe. They have to give FRE and FNM a capital infusion before their situation gets worse. I don't know what the details are. But as long as the government takes an equity stake in FRE and FNM, it should turn out quite well in the long run. You'll hear howls about government bailouts with tax payer money on blogs and in the press. But in the long term, an equity stake bought by the government will actually likely be quite profitable.

Andrew

[gTr]

The way I look at it is this is just more proof of how bad the situation is and that good times are nowhere near.
I think the clarity issue arises not just from mortgages but also from the pricing of the complex securities sold. I don't think anyone has a good handle on what they should be priced at.

cthree

I don't think the crappy housing market is any secret.

sahtt

They had a choice, now they don't. They allowed them to leverage nearly double what any investment bank does [50:1 vs 30:1] and allowed them to become too big and abstract to fail. The only thing backed by the government that should be too big to fail IS the government. The whole setup is a joke, all these guys Paulson/Benny etc. all knew it was inevitable they were just hoping they weren't going to have to be the paul bearers and leave that to the next round suckers in there.