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WASHINGTON — Senior officials from the Bush administration and the Federal Reserve on Friday informed top executives of Fannie Mae and Freddie Mac, the mortgage-finance giants, that the government is preparing a plan to seize the two companies and place them in a conservatorship, officials and company executives briefed on the discussions said.
The executives were told that under the plan, they and their boards would be replaced, and their shareholders virtually wiped out, but that the companies would be able to continue functioning with the government generally standing behind their debt, people briefed on the discussions said.It is not possible to calculate the cost of any government bailout, but the huge potential liabilities of the companies could cost taxpayers tens of billions of dollars and make any rescue among the largest in United States history.
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This is a great news. The Treasury department should give Fannie/Freddie unlimited line of credit sorta home equity line of credit that needs to be paid back. Way to go Henry Paulson.
Yikes! The shareholders are screwed, and the taxpayers are left picking up the check for this mess? The people who pulled this off should be hung from the highest tree.
George W. Bush recently approved the 300 billion housing bill and now Henry Paulson will push for bailout/unlimited line of credit to GSE's. That's good guys. In less than 6 months, you'll be out of the office anyways. Just do it for the American people.
Treasury Department can print out as much money as they want. If we ever need more money, we can just borrow from China and the Arab Countries. As soon as payback time, we can just show them the middle finger.
Inflation here we come......
Inflation rises, Rents rises. Wohoo!
The whole thing feels so 1987 to me. The Bushys deregulate everything, steal the money, cry for a bailout, then the taxslaves are screwed again.
Bellafonteine, and so will the number of people living in your unit....lol
Hey now. The father and son team did a lot of good things. For example, they initiated war against Sadam the madman.By doing so, they made the shareholders for Hliburton instant muiltimillionaires. Let the average Joe have their fair share.
I think you need to read a little more and learn the history of the Bush family. Anything they ever did was never good for the average Joe.
LOL I was just trying to pull your leg.
oh!! I was ready to google up some good reading for you too about the Bush family!!
Will it affect housing prices?
"Inflation rises, Rents rises. Wohoo!"
Not really, but whatever.
This isn't too surprising. In fact it doesn't really matter. Shadow inventory matters. It's coming, and when it does, it will fist-f*ck the industry like nothing anybody has ever seen.
Actually, this is highly likely to increase *deflationary* pressure, not inflationary. I expect the Fed to be cutting again before the end of year. I also expect that few of us will be cheering, but we'll all be _hoping_ that it works, because the Fed will be using their last few bullets trying to prevent a deflationary spiral. There are lots of signs of deflation already. It's scary. I, for one, will readily admit that I did not see deflation as a likely outcome, but I may be proven wrong. Sadly.
Randy, this one really boggles the mind. On the surface, you could say fannie and fredie will now be sellint T-bills, and that closes the spread. Mortgage rates could drop by say .5% almost instantly on that difference.
However, the real question, is who is going to be buying this now much larger US govt debt rollover at each auction? where is the cash going to come from, and what happens to the dollar due to this pressure? Will the figment of value that has held long term T-bill rates so low, or will that finally fade?
Anyways, where is Krismer to say, 'what credit crunch' as the two largest credit insitutions on the planet get bailed out?
You think they will lower rates again?? Damn it..
Yes, I think they will have to. I actually think they _should_. I know I'll be skewered for that, but I don't want another deflationary spiral depression. At any cost, even debasing the hell out of our currency.
I doubt Ben Bernanke will lower the rates. He'll just ignore it and leave it to 2 pts. I have the feeling that the treasury department will give unlimited line of credit to Fannie/Freddie that will be paid back in time.
well, I would argue for other methods of fighting a deflationary spiral: a big govt spending program on energy for example, and other infrastructure projects. but I don't expect it, I expect tax rebates and rate cuts... live for today screw tomorrow seems to be the new philosophy!
Azrob, we should find some way to meet and share ales to discuss all this. It is truly mind boggling.
My thoughts turn way more philosophical when you get to the "what happens next" level. I see a very likely deflation scenario where the dollar starts strengthening to the point where we can't export anything, yet no one will sell us anything because they're all going down the tubes themselves. That or because we set up massive trade barriers ala Smoot.
My theory is that the "gold standard", as it were, is military power. Sad, mabye. But today, in the modern world, highly mobile, effective, credible military power is gold. That's where the flight to safety will run. I think it's starting to happen already, out of natural intuition.
Housing is the single largest factor in how an average American views their wealth disposition. When housing prices are cut in half, that American feels half as wealthy, and demands half the prices on everything. Coupled with stagnant wages, we have the groundwork for broad-based deflation.
On that, I agree Azrob. Entirely. I've been saying for 10 years that we should build 2 space elevators, as well as launch a "Manhattan Project" on energy.
This will be the real cause for WWIII.
"who is going to be buying this now much larger US govt debt rollover at each auction?"
Nobody? J/K everybody wants a deal, they'll still buy in.
Randy made an interesting remark. I thought there was NO way they would not rase the fed rate, but he would know better than I would.
Hint: space elevators would unlock orbital solar power, if we chose to utilize it.
Deflation in the night,what were the chances?Prices crashing in the night,collapsing tranches.We were printing bucks,but nothing worked we're through!
econ 101 randy? what signs are you talking about? dollar value climbing vs other countries? i get that the value of the dollar is based mostly on dollars per sq foot and that dollars evaporating will cause deflation, but so far everything i have seen (except for housing prices) has still been inflationary...from luxury yachts to a loaf of bread, 1 dollar buys less, not more
although my understanding is that raising the interest rate causes deflation, lowering it causes infaltion... that said in the last year the fed has cut the rate all the way to 2%, if we are seeing deflation the fed needs a new tool box because they can only go as far as zero... or if they wanted to pay people interest to borrow money, that is sure to cause inflation, no?
i prefer 3% deflation to 3% inflation... at least until my first cost of living DECREASE
launch a "Manhattan Project" on energy."
BAHAHAHAHAH! Keep dreaming...
lets cut to the chase and easily build nukes...
all the wind mills and thermo is nonsense...
Get over it and accept the only answer is getting
Nuke plants up an running... and why not?
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