http://www.stockpickr.com/view/answers/55818/ This might be a Dow Jones article: NEW YORK -- The U.S. Treasury, while remaining tightlipped around details on its plans for Freddie Mac (FRE) and Fannie Mae (FNM), is quietly working behind the scenes to lend a helping hand to the struggling mortgage finance giants. In recent weeks, Treasury officials have been reaching out to overseas buyers -- including foreign central banks -- of so-called agency securities, or debt sold by the two companies, to reassure them of the creditworthiness of these borrowings. In one such conversation, at the end of August, the Treasury sought to reassure the Bank of Mexico, according to a person familiar with the matter, of the soundness of agency securities held by the bank. The discussion with the Treasury took place as Mexico's central bank, an investor in agency debt, met with Freddie officials to address concerns it had about these investments. Treasury officials have also had similar conversations with Japanese investors who are buyers and holders of agency debt. The moves are an effort to quell concerns of investors amid uncertainty around the fate of Freddie and Fannie. They are also aimed at bolstering demand for this type of financing by the two companies that is critical to their business. Many analysts and investors say that a government bailout is inevitable if Freddie and Fannie, which were chartered by the Congress to fuel home ownership, are unable to tap the debt market for funding. The backdoor workings of the Treasury offer a window into how critical Freddie's and Fannie's access to the debt market is to their functioning. The two government-sponsored enterprises use the funds to finance their purchases of home loans from mortgage lenders. "We are making progress on our work" with the companies' regulator and government officials, said Treasury spokeswoman Jennifer Zuccarelli. For the Treasury, the ability of the pair to keep turning over their debt is paramount. Last month, Congress gave the Treasury Department the authority to lend money to the firms or take an equity stake. While Treasury officials have reiterated that they have no imminent plans to intervene, a deterioration in the housing sector could force their hand if either company can no longer fund itself. It is widely expected that such an intervention will likely render worthless the holdings of existing shareholders. The government is expected to protect holders of the companies' senior debt and the mortgage-backed securities they guarantee to avoid a meltdown in financial markets. A 'Void' If Foreign Buyers Left Continued access to funding is necessary "to generate the revenue to absorb the credit losses," said Jim Vogel, an analyst at FTN Financial. Freddie and Fannie are a dominant source of funding for home loans, owning or guaranteeing about $5.2 trillion of mortgages. They have suffered combined losses of about $14 billion over the past four quarters as they make provisions for the worst wave of defaults in decades. As of Aug. 21, the two companies together needed to refinance more than $225 billion, nearly 87% of which is short-term discount notes, by the end of September, according to a Wall Street Journal report.In the weeks since, this figure has reduced as both companies have successfully refinanced debt on numerous occasions. Both companies sell discount notes weekly to investors, many of whom reinvest money from maturing debt. Risk premiums on this debt have been rising moderately, but buyers continue to snap up securities that theoretically carry little credit risk. Freddie and Fannie spokesmen weren't available to comment. A spokesman for the Bank of Mexico declined to comment. Bank of Mexico Gov. Guillermo Ortiz, in a chapter contributed to the 2007 book, "Sovereign Wealth Management," said the central bank had taken a number of measures to lower the cost of holding foreign reserves, including placing a "relatively small amount" into mortgage securities. "Foreign investors have become significantly more important (and) are significant buyers and holders" of Freddie and Fannie securities, said Richard Hofmann, an analyst at independent research firm CreditSights. "How they respond is very important. If they were to stop buying, it would leave a void." Investors, particularly in Asia, have shown a healthy appetite for agency securities. According to a breakdown of about $484 billion of so-called reference notes sold by Freddie in the last 10 years, about one- quarter of there were bought by Asian investors, according to a Sept. 3 CreditSights report. Slicing the data a different way, central banks were the second-largest buyers of these securities behind investment managers. Since 2006 through this year so far, central banks have increased their investments, buying more than one-third of this type of debt. Asian investors, who had scaled back their purchases over the summer, have come back although they are treading carefully. They bought over one-third of Freddie's $3 billion two-year notes sold Wednesday. "Both Fannie and Freddie need to come to the debt markets on a regular basis, and they need to be able to raise senior debt at attractive rates," said Kathleen Shanley, a senior analyst at research firm Gimme Credit. They are the "two main pillars supporting the housing market right now."
"The plan includes changes to senior management at both companies, according to a person familiar with the plans." they are finished. I'm not covering a share. if it blows on my face then I'm going to lose money
I'm with you Daal. I'm sitting here, watching the train wreck as the stocks approach zero, thinking that I could cover now to take profits. But given that I think the stocks will be worth less than $1 on Monday, I don't have much of a reason to cover.
down both roughly 20%. pimco's gross was saying that the government would be thinking in terms of preventing moral hazzard in terms of the stockholder but not on the preferred. since they are changing management they are effectively controlling the companies. I will be surprised if the deal helps shareholders
didn't cramer predict fnm and fre would be nationalized within 300 days??? guess he got something right. (sorry it might have been housing bottom but i'm pretty sure his prop on the wall is for this)
No, it's really about nationalization and conditioning the population to accept a centralized economy. You gotta understand, "they" don't give a sh*t about our well being and "they" are not affected by economic meltdowns.
"On Friday, a series of high-level meetings were planned between Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, the chief executives of Fannie Mae and Freddie Mac and the companies' new regulator, the Federal Housing Finance Agency." bernanke says wipe out shareholders, paulson says the same. its only a matter of what kind of resistence the management gave. cnbc gave me a heart attack as I read the headline 'fnm and fre soar' geezus
These guys dont have anywhere to go on Fridays huh? What's better than going to a bar and have a beer? A meeting!
so, that's the "creative way"? sounds like the bear sterns deal to me? anyways, congratulate on the ones that make money. and i'm happy that killing them save the market. possibly lower the dollar and save the energy and material sectors too.