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Paulson Issues Statement On Freddie/fanny

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http://www.bloomberg.com/apps/news?pid=206...&refer=home

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

We'll have to see how the markets respond.......

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Dollar and DOW futures ticked up a bit - 1.5917

Looks like they've tried to avert any sell-off in Asia.

So is it a "save"?

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That sounds very like a blank cheque book opened to the GSEs on the taxpayer's behalf. Effectively nationalising as much of them as necessary.

Shirley this is an inflationary, dollar-weakening measure?

Knowing the way the markets have reacted to the slightest reassurance by the Fed or US govt lately however I won't be suprised if the dollar rallies to 4 euros and gold is 24p a metric tonne by half nine tomorrow.

Edited by mirage

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I made a very ill-advised bet on the last Ashes series. Does anyone have an email address at the US Treasury I can write to for compensation?

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That sounds very like a blank cheque book opened to the GSEs on the taxpayer's behalf. Effectively nationalising as much of them as necessary.

Shirley this is an inflationary, dollar-weakening measure?

Knowing the way the markets have reacted to the slightest reassurance by the Fed or US govt lately however I won't be suprised if the dollar rallies to 4 euros and gold is 24p a metric tonne by half nine tomorrow.

I'm sure the more knowledgeable will correct me if I'm wrong but didn't Uncle Sam just underwrite the entire US mortgage market?

Surely this is inflationary to say the least (can't see what else they would do though)

time to short the US$?

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rolling FTSE up 80 points - The market has seen this as good news

Course they have.

Every time the financials look dodgy papa central banker comes along and makes everything ok again.

The fact that we are going to be buried under piles of worthless inflation doesn't matter.

Yet.

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Guest DissipatedYouthIsValuable

So, they're promising unlimited liquidity injections for Fannie?

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So, they're promising unlimited liquidity injections for Fannie?

And Freddie. Hank likes to spread his love around.

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And Freddie. Hank likes to spread his love around.

He must know he's just signed his own death warrant, surely?

Edit - d'oh.

Edited by Injin

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http://www.bloomberg.com/apps/news?pid=206...&refer=home

We'll have to see how the markets respond.......

It indicates two things

1) The world economy is in unbelievably poor shape. If anyone on here had predicted this one year ago they'd be branded a fantasist.

2) The US will have to underwrite phenomenal losses, and that means taxes (or hyperinflation which makes people poorer too). Good news for shares in companies with rights over assets (oil, mining, chemical production etc.), bad news for any companies closely tied to money or the consumer.

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It indicates two things

1) The world economy is in unbelievably poor shape. If anyone on here had predicted this one year ago they'd be branded a fantasist.

2) The US will have to underwrite phenomenal losses, and that means taxes (or hyperinflation which makes people poorer too). Good news for shares in companies with rights over assets (oil, mining, chemical production etc.), bad news for any companies closely tied to money or the consumer.

Markets should rally tommorow - Asia futures indicate a strong opening -

Yen weak too which is good

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Whatever happens one things for sure more US $ weakness and not looking good for Us Govt finances.

Markets might like it in short term but surely this should signal a major drop in confidence in anything US now.

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The true significance is in the willingness to buy the shares - but that willingness is conditional on a democratic vote in congress.

I was surprised they didn't just announce a plan that only needed an executive say-so, on the assumption that no one would go to the trouble of mounting an effective challenge to such a grab for power.

The American system of checks and balances may yet prove very useful to American taxpayers. This story has a long way to run.

Edited by okaycuckoo

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Ah right.

So, just as with Northern Rock, A profligate and greedy, over-stretched lender is bailed out by inflation inducing tax payers funds, from which tax payers will receive no benefit and we've yet to hear whether those running the ailing company are to be censured, brought to book, held responsible or in any way criticised. It's business as usual: If you are a bank over a certain size, you can act in any damn way you please and if you fail the Government will not only let you off scot free but also chuck you a tanker full of cash so you can carry on being irresponsible, AT EVERYONE ELSE'S EXPENSE.

Sweet.

VP

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If anyone on here had predicted this one year ago they'd be branded a fantasist.

Oh, I've been saying for around eight years that Fannie and Freddie would be Ground Zero in the credit bust.

The most common reaction was "Who?"

A couple years back I was skiing in Vail and shared a hot tub with a couple of hospital Consultants. The conversation came around to comparing the the UK and US economies. He mentioned that he had his pension cash invested in Fannie Mae as a "safe haven". I gave him the "Ground Zero" warning and suggested he "run rather than walk" to jis broker when he got back and sell Fannie Mae. He checked that it wasn't insider dealing or anything and I told him I was just an interested amateur. Nevertheless, he emailed a couple of weeks later to say he'd sold them. They were just under 80 Dollars per at that point IIRC and the start of their considerable decline was about six weeks later.

He may be the only guy in the world who ever paid attention to me.

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Oh, I've been saying for around eight years that Fannie and Freddie would be Ground Zero in the credit bust.

The most common reaction was "Who?"

A couple years back I was skiing in Vail and shared a hot tub with a couple of hospital Consultants. The conversation came around to comparing the the UK and US economies. He mentioned that he had his pension cash invested in Fannie Mae as a "safe haven". I gave him the "Ground Zero" warning and suggested he "run rather than walk" to jis broker when he got back and sell Fannie Mae. He checked that it wasn't insider dealing or anything and I told him I was just an interested amateur. Nevertheless, he emailed a couple of weeks later to say he'd sold them. They were just under 80 Dollars per at that point IIRC and the start of their considerable decline was about six weeks later.

He may be the only guy in the world who ever paid attention to me.

Gosh, that was very fortunate for him, obviously something you said struck a chord. Good job. Must be nice to know you had a hand in saving the dude's pension.

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Potentially, this is the start of the US housing market is being nationalised here.

The starting position (as per our own dear Northern Rock) is that this is only emergency funding. Unfortunatley, the US Govt has inserted itself between the capital market and Fannie Mae and Freddie Mac. The capital market would be willing to lend and invest in Fannie Mae and Freddie Mac but only at penal rates so by stepping in like this the US Govt is effectively agreeing to lend and invest at below the rate that the capital market would charge. Hence, the the capital market players are merely being replaced by Govt subsidised funding - there is no other way of dresisng this up in economic terms.

However, it does not stop there because if US house prices keep on falling the value of the housing stock sitting behind the mortgage book of Fannie Mae and Freddie Mac may be worth less than the mortages. In that case, many people with a mortgage will figure out that they are better off not paying it back but just walking away. That is something that Paulson actually said people were doing in his testimony last week. In these circumstances, Fannie and Freddie will effectively be faced with the prospect of repossessing the entire US housing market. Of course they would not do that - the loans would be forgiven, rolled over, or simply partly writen off to allow the people who bought the homes to stay in them and just pay ( a much lower) rent.

This kind of bailout is what is now what is also effectively being openly discussed in the UK.

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Guest Steve Cook
Course they have.

Every time the financials look dodgy papa central banker comes along and makes everything ok again.

The fact that we are going to be buried under piles of worthless inflation doesn't matter.

Yet.

correct

gold it is then

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At least it kills off any chance that Gordon/Darling could introduce a similiar government backed scheme here. They could hardly introduce a scheme known to fail in such a big way.

Now we have to just rely on the banks to fund mortgages. I wonder if their loans are adequately secured (no need to answer that)

VMR.

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Ah right.

So, just as with Northern Rock, A profligate and greedy, over-stretched lender is bailed out by inflation inducing tax payers funds, from which tax payers will receive no benefit and we've yet to hear whether those running the ailing company are to be censured, brought to book, held responsible or in any way criticised. It's business as usual: If you are a bank over a certain size, you can act in any damn way you please and if you fail the Government will not only let you off scot free but also chuck you a tanker full of cash so you can carry on being irresponsible, AT EVERYONE ELSE'S EXPENSE.

Sweet.

VP

Aren't Northern Shithouse managers still receiving bigger bonuses to deal with cover up the mess they made themselves?

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I want to hear what Peter Schiff has to say about this. His predictions of a crash in the value of the dollar look like they will be spot on.

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Guest Steve Cook
I want to hear what Peter Schiff has to say about this. His predictions of a crash in the value of the dollar look like they will be spot on.

yes

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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