If they do then expect this to be printed: FED saves FRE & FNM and destroys US sovereign rating in the process. http://www.telegraph.co.uk/money/mai...2/cndow112.xml ....The fears of a banking crisis gripped Wall Street, Lehman Brothers shares fell 22pc. Investors have been spooked by a filing this week showing that the bank still has $41bn of mortgage debt and other "toxic" Level III assets. Lehman now risks the same spiralling loss of confidence that engulfed Bear Stearns, though the Federal Reserve's emergency lending window for broker-dealers offers a lifeline. The credit default swaps on Lehman debt leapt 55 basis points to 380, flashing an extreme stress signal. The implosion of Fannie and Freddie is disturbing. Neither has exposure to sub-prime loans. "The situation is far more serious than Bear Stearns," said Bill King, chief strategist at Ramsey King Securities. Under the US stimulus plan the pair have been deployed as lenders of last resort to the housing market, carrying out a quasi-official rescue mission on behalf of Congress since March. Now the rescuers themselves need rescuing. Charles Schumer, chair of the Senate banking committee, said: "Fannie Mae and Freddie Mac are too important to go under. If they need additional support, Congress will act quickly." If Washington does take on the liabilities of the two, this would double the US Treasury's outstanding debt load at a stroke and raise serious concerns about the triple-A sovereign rating of the US itself. There may be no choice. Bill Gross, head of the bond giant Pimco, said a default by the two agencies would set off a "firestorm of intolerable proportions". Standard and Poor's said in a recent report that Fannie and Freddie posed "a large contingent fiscal risk: if the risks were to translate into increased government debt, they could hurt US credit standing". The markets have already begun to sense danger. The cost of insuring against default on 10-year US Treasury bonds surged from 8 basis points to 15 at one stage yesterday. "America's 'AAA' rating has become a joke," said Peter Schiff, head of EuroPacific Capital. "I believe the losses from Fannie and Freddie alone could reach $500bn to $1 trillion dollars. '' The US government will not be able to meet repayments on its debt once interest rates rise," he said. Mr Schiff said a big chunk of the agency debt is held by foreigners. A collapse of confidence could set off a dollar exodus. It is unclear if Mr Paulson can delay a state bail-out for long. "There is concern that Fannie, Freddie, and Lehman will not be around on Monday," said one analyst. Ironically, Fannie and Freddie shares, having halved in value at one stage, recovered slightly after Mr Paulson's comments. Investors were relieved the agencies might yet be spared a state seizure aimed at limiting "moral hazard". This is what occurred in the Nordic financial rescues of the early 1990s, which left shareholders with nothing.
private bankers own the "system" and print money and loan it to the member banks WITH INTEREST a nice racket if you got in at the start http://land.netonecom.net/tlp/ref/federal_reserve.shtml
Not sure about that. FED reptratited around 35 Billion to Member Banks last year as dividend profit, if im not mistaken. Rebate to the Treasury is wholly unauditied by any organization other than the Fed or Treasury. We just have to take their good word for it! Sure, they say most profits are forwarded to the Treasury whereupon that money is extinguished (destroyed). But no one knows FOR SURE how much is tranferred, how much is destroyed, how much is repatriated to Member Banks. Its all Take Our Word For It. What other Institution Operates that way? Only those with something to hide... Makes one wonder why Americans pay interest on debt created out of nothing if that money is eventually destroyed anyway?! Only so the Federal Government can have the convienence to print money at a moments notice, finance their re-elections with deficiet spending and rob the plebs both ways - inflation then income tax that pays interest on BS debt thats eventually destroyed. Fantastic system. Lets not forget the Banks who take a big cut off bs profits and fractional reserve lending. This is just a replica of the Bank of England. Btw, ever research who chartered the B of E? Who were the Founding Shareholders?
cant see why the Federal Reserve would want to take over anything since it's in their best interest to wait for a crash and buy assets for pennies on the dollar. let the stooge taxpayer and the FDIC hold the bag while things sort out..
The FED doesn't own much of anything. Its the Banks that own the FED that call the shots. And those Banks are still holding mountains of junk CDO. If FannyMac go under, CDO markets crash and freeze as creditors liquidate Trillions in CDO's. Major Banks then suffer huge paper writedowns on their existing CDO stockpile as the market is pushed down hard. Another Trillion in writedowns will destroy most major banks caught on the wrong side. Also, more writedowns just deepens the credit crisis. Fed Funds at 2% and 30-year fixed at 9%. The economy wouldn't respond too well to that. Nor will the international market for American CDO paper. Economy slows at 9%, similtaneously, CDO's aren't worth crap cause everyone knows the American economy will slow and experience major mortgage defaults when no ones buying homes (cause 30-year fixed are at 9%).... lol. It becomes a self-fulfilling recession. And the banks stand to go under if they let the market play itself out. So, to save their own ass, they vote the FED to prop all these failing banks to prevent a cascading forced liquidation that will eventually precipitate their own demise. Either via immediate writedowns or slow death from untenable rates > no housing > further econ slowdown > more and more defaults foreclosers... The FED isn't really an institution onto itself. Its a Tool - a condusit - used by the Major Banks for their own survival and profit.
level 3 debt was created as an off balance sheet entry since it has no bid and who would dare bid on it since that would set in motion the very write downs that the banks can't handle. so look for the banks to create level 4 if they have to account for level 3 debt the reason the market is tanking FNM, FRE and LEH sharks have teeth for only one purpose an opinion of course
hmmm........lets see 5 trillion of debt. a 1 trillion dollar loss=20% forclosure. oh wait. isn't fannie backing a loan which has a house? meaning if "1 trillion dollars defualt" that at least your getting 50 cents back on the dollar? Or basically you would been about 40% of houses to default. most of the loans fre and fnm gave where are PRIME loans. once again doom and gloom on ET. the world is coming to an end
economics 101. lets say in 2008 we will have REAL GDP at 1%. lets use your "10% using 1980's era cpi" that means the economy grew at a rate of 11% using nominal gdp. we both know nominal gdp means nothing BUT it does when taking into consideration the 9.5 trillion dollars you owe. Now if we are running a 3% deficit of gdp, and are are growing at a rate of 11% as you state inflation of 10% and a real rate of 1% then that 9.5 trillion is only worth 8.46 trillion next year. Meaning a 3% budget deficit when your growing much faster (nominally) isnt a big deal.
Fitch S&P and Moodys ALL came out today(7/11/08) and affirmed USA debt rating. even if they had to take fre and fnm on there books. Can all the rating agencies all put FNM and FRE at AAA, knowing there not a AAA company without the "implied government backing". And at the same time rate the USA AAA thinking the debt that fre and fnm are not there's? prob not unless there is another conspiracy theory on ET. On Friday, July 11, the pandemonium surrounding Fannie Mae and Freddie Macâs fall from financial grace prompted some panic-stricken citizens to ask the most dreaded of all questions: If the U.S. government is forced to bailout the fledgling mortgage giants, will the leader of the free world lose its coveted AAA status? To which leading ratings service Moodyâs Inc. responded -- fat chance. In their professional opinion: âEven under a real stress scenario, US debt is well within the guidelines for the top credit ratingâ¦
Are these the same agencies which gave the monolines AAA ratings until recently? The only opinion that matters is the market. Credit default swap prices are grading FNM and FRE at way below AAA.