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Us Government Prepares To Sieze Fannie And Freddie


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Some tricky questions for the Fed:

How does the Govt avoid owning 25% of the US housing stock after a wave of defaults?

How does Govt deal with the politics of repossessing people?

How does the Govt finance this?

Will Govt be willing to wipe out all ordinary stock and preferred stock holders?

There are still some tough choices. Both McCain and Obama have not appeared at all well disposed to just keeping these organisations going in their current form.

The stockmarket had a bit of a relief rally on the rumours of this on Friday but I have to say I cannot see anything good or positive coming out of this. Think about it - the two largest retail financial institutions in the US and the largest private bond issuers in the world are effectively unable to continue trading with Govt support.

Indeed, the major question now is now who will be lending on mortgages in the US?. Surely the Fed must put these institutions into run off and not allow them to lend out anymore? Liquidity in the US mortage market has just collapsed even further.

Edited by Wad
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I had to laugh at Bloomberger the other day when they had a US 'expert' saying the UK's recession problems were only down to policy.

Apparently if we change policy all will be rosy. If only...

Worth watching only to laugh at all the pinstripes lining up to kid themselves into believing there is good news around the corner. They'd have been spinning on the 1929 crash if they'd been around then.

Edited by sikejsudjek
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Bloomberg - another day ,another narative fallacy


Reminds me of that South Park episode (Cartoon Wars) where they took the p*** out of Family Guy by making out its writers were all manatees who write the show by picking random 'idea balls' and combining them with a 'joke ball' on the other side of the fish tank. Maybe that's how they work at Bloomberg

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It is also expected to involve the government injecting capital into Fannie and Freddie. That could happen gradually on a quarter-by-quarter basis, rather than in a single move, one person familiar with the matter said.

That is always what I have expected them to do.

Fannie and Freddie shares, which were up during the regular session Friday, dropped 25% and nearly 20% respectively in the after-hours session.

Looks like this may need to be tied up before Monday. This news prevented the DOW falling under 11,000 yesterday imo. July 15th rescue announcement led to a 1,000 point bounce. So where are we going Monday guys and gals?

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The most telling part of that article is in the last paragraph.

"Congress created Fannie as a government agency in 1938, during the Great Depression, to buy government-insured mortgages from lenders, providing them fresh money to make more loans."

The penny's dropped. Fannie Mae, and more recently Freddie Mac, has been nothing more then a huge 70 year prop for the

American economy. Unfortunately it can no longer take the strain and will collapse under the

mountain of debt that is never going to be repaid.

Looks like we might be returning to times of hardship which ultimately probably means war at some

stage. Not 'phoney' wars like we are witnessing in Iraq and Afghanistan (and I don't wish to disrespect

those have fought in those countries), but global conflicts.

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