Bailout of FNM/FRE = Great Depression!!!

Discussion in 'Trading' started by gastropod, Sep 7, 2008.

  1. newbunch

    newbunch

    That is the quote of the day! I'll print that out and tape it on the wall next to my computer.
     
    #11     Sep 7, 2008
  2. Link has gone.
     
    #12     Sep 7, 2008
  3. #13     Sep 7, 2008
  4. #14     Sep 7, 2008
  5. dubes

    dubes

    Freddie and Frannie guarantee trillions of dollars in mortgage backed securities, they don't actually own all of the securirties.

    The 850 billion dollar figure is referring to the value of the securities they are allowed to own.
     
    #15     Sep 7, 2008
  6. gastropod,

    Paulson said that they would start reducing portfolios with 10% per year starting 2010 ...
     
    #16     Sep 7, 2008
  7. I see it this way. Those who side with the bulls would argue that the public, including traders, is naturally stupid and they tend to suffer from attention-deficit syndrome. As a result, they believe if the problem can be postponed long enough until everyone forgets about it, then the problem is no longer a problem. Just witness the lingering worries about Ambac a few months ago. Who the hell brings up anything about Ambac these days? It's a nonevent.
     
    #17     Sep 7, 2008
  8. This is not a dramatic rate. Mortgages run off faster than that normally, the average 30 year mortgage only lasts about 7 years due to refinancing and moving. With the screwed up housing and mortgage market the runoff might be slower than average (even with defaults), but the point is that a mortgage portfolio shrinks pretty fast naturally. In normal times they would maintain the portfolio size by reinvest the proceeds from mortgages that payoff into new ones, when they want to start shrinking they will probably just pay down debt instead.

    If they wanted to reduce 25% per year that would be a different story - they would need to sell lots of mortages and flood the market, competing with new mortgages and driving rates up.
     
    #18     Sep 8, 2008
  9. Very, very true.
     
    #19     Sep 8, 2008