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anyone buyin freddie mac and fannie mae 2 replies

fannie and freddie are insolvent

  • #1
  • First Post: Jul 12, 2008 1:29pm Jul 12, 2008 1:29pm
just when i thought we were nearing the end of the credit crunch i find out that the backers of HALF the mortgages in america are insolvent

this aint no 1 day story here...no no no...this is as big as the subprime mess itself. if freddie and fannie cant give loans anymore, that would cut the home buyer pool by 30% in my estimation. and with a housing market already desperate for buyers, this could be blow the roof off the industry (pun intended ).

the big question now...will they be bailed out?

if the treasury and fed toss out a life raft i will be highly disappointed. fannie and freddie were created in the 30's to serve a purpose that has been irrelevant for the last 40 years. there is no point in saving them now. they have proven they cant run a decent business by loaning money based on the premise that the housing market will always rise. the faster we let these businesses die, the faster the economy can get back to growing again, and that goes for all companies in trouble now. any bailout would just extend this crisis imo.
Relax and be happy.
  • #2
  • Jul 12, 2008 3:43pm Jul 12, 2008 3:43pm
Paulson's come out and publicly said that the Treasury isn't a free clinic for Fannie and Freddie to get money from. Citigroup's analysts sent out a memo saying that the doom and gloom for the two is overdone and that they should remain solvent due to raising $20bio in cash between the two of them in the last few months. We shall see.

Just one quibble, Freddie wasn't born until 1970, but Fannie is from the 30's as you said.
Never underestimate the powers of the Force.
  • #3
  • Jul 12, 2008 3:54pm Jul 12, 2008 3:54pm
fannie... freddiethose names sounds stupid names for a serious bank name.

Geroge Soros was saying that the situation is bad and it will get worse... just when everybody was excited to see a little recovery... and then the dow crashed... I will have more attention to Soros words in the future...
  • #4
  • Jul 12, 2008 4:21pm Jul 12, 2008 4:21pm
I just don't understand Americans... seems to me that ALL YEAR on CNN, all you can see is discussion about people running for president... at any time of day... except Lou Dobb's hour.. .that guy is an idiot, I don't think I've ever heard him say "China" without prefixing it with "Communist"... but at least he changes the subject away from the presidential race.

I mean really they talk about the most miniscule things about Obama or whatever on days when they should be covering the implications of this Fannie Mae / Freddie Mac thing... they say "Issue #1" is the economy... but umm, I fail to see how if they hardly ever talk about it... I think they under some delusion that it really matters if you choose one side of the coin or the other for president, as regards fixing the economy...

I pine for the days of non-stop, wall-to-wall Natalie Holloway coverage... (which seemed ridiculous at the time, but man was so much better than this Obama 24hr coverage)
  • #5
  • Jul 12, 2008 4:35pm Jul 12, 2008 4:35pm
Quoting ycomp
I just don't understand Americans... seems to me that ALL YEAR on CNN, all you can see is discussion about people running for president... at any time of day... except Lou Dobb's hour.. .that guy is an idiot, I don't think I've ever heard him say "China" without prefixing it with "Communist"... but at least he changes the subject away from the presidential race.

I mean really they talk about the most miniscule things about Obama or whatever on days when they should be covering the implications of this Fannie Mae / Freddie Mac thing... they say "Issue #1" is the economy... but umm, I fail to see how if they hardly ever talk about it... I think they under some delusion that it really matters if you choose one side of the coin or the other for president, as regards fixing the economy...

I pine for the days of non-stop, wall-to-wall Natalie Holloway coverage... (which seemed ridiculous at the time, but man was so much better than this Obama 24hr coverage)
it happens everywhere... don't tell the population what is happening in the world.. or the entire system will go to hell. Give them sports and garbage television to maintain them occupied and not thinking about the system.. because they can't understand the system.. they only have to work and maintain the system.. without understanding it.
  • #6
  • Jul 12, 2008 6:54pm Jul 12, 2008 6:54pm
Quoting ycomp
... except Lou Dobb's hour.. .that guy is an idiot
You got that right.

But then MSNBC got Keith Olberman and Fox got Bill O'Reilly.
Idiots all around.

Now just don't think we Americans have some kind of monopoly on Idiots though. Read Reuters Oddly Enough News or other news outlets.
  • #7
  • Jul 12, 2008 7:37pm Jul 12, 2008 7:37pm
Quoting emda
fannie... freddiethose names sounds stupid names for a serious bank name.
Those aren't the names. Those are the nicknames.

The names are The Federal National Mortgage Association and The Federal Home Loan Mortgage Corporation

+ + +


A good laugh. If you go to the Fannie Mae website and click current stock information you get -

Page Cannot Be Found

The page you are looking for might have been removed, had its name changed, or is temporarily unavailable.
Click << Back to return to the page from which you came.

I wonder why ?
  • #8
  • Jul 12, 2008 8:32pm Jul 12, 2008 8:32pm
I don't deny that Fannie Mae or Freddie Mac are in trouble, however I do have a semi-interesting insight from one of the directors at Fannie Mae, John C. Sites Jr.

It's an election year. Neither candidate will want to be associated with the loss of so many homes due to foreclosure, and--as he sees it--will do what they can to sustain those companies. He suspects that come inauguration, whichever candidate wins office will first try to push forward or otherwise defer the current crisis. One way is of course to bail out those companies as the fed did to Bear Sterns, another would probably be to offer more incentives to various banks to spread the load.

This all brings me back to a book I read two years ago called "Rich Dad's Prophecy" by Robert Kiyosaki. Apparently there is this financial storm coming around, all as a result of a pending market correction. The supposed cause of this storm would be of a little-known law called ERISA, for Employee Retirement Income Security Act. With that law, senior citizens over the age of 70.5 years must start regularly withdrawing from their 401K accounts. Why is this? 401K accounts I believe are tax-deferred. That means that the capital gains taxes would not have to be paid until the funds are withdrawn from the account. The federal government wants that money, and the IRS is eager to collect.

Now, these 401K accounts are generally invested in the stock market. If the 75 million or so baby boomers start withdrawing $1,000 a month (for mathematics sake), the stock market could stand to lose an amazing 75 BILLION a month. When money leaves the stock market, the overall value and price go down.

I suspect a big portion of this real estate flipping boom was spurred by the low interest in the hands of the baby boomers, who--buoyed by the momentum of certain markets--achieved high returns no matter what they did.


With all that in mind, I'm wondering how much more there is to see. As far as I'm concerned, this is the tip of the iceberg with many more fiscal troubles to follow--and with that--more opportunities to make money.

Now, with the extra 270 billion or so in tax revenue per year from all these draining 401K accounts, I'm wondering where it will be spent. Any thoughts?
  • #9
  • Jul 12, 2008 9:01pm Jul 12, 2008 9:01pm
Quoting Ronald Raygun
This all brings me back to a book I read two years ago called "Rich Dad's Prophecy" by Robert Kiyosaki. Apparently there is this financial storm coming around, all as a result of a pending market correction. The supposed cause of this storm would be of a little-known law called ERISA, for Employee Retirement Income Security Act. With that law, senior citizens over the age of 70.5 years must start regularly withdrawing from their 401K accounts. Why is this? 401K accounts I believe are tax-deferred. That means that the capital gains taxes would not have to be paid until the funds are withdrawn from the account. The federal government wants that money, and the IRS is eager to collect.

Now, these 401K accounts are generally invested in the stock market. If the 75 million or so baby boomers start withdrawing $1,000 a month (for mathematics sake), the stock market could stand to lose an amazing 75 BILLION a month. When money leaves the stock market, the overall value and price go down.
Re-check that math. There might be 75 million baby boomers but their ages are spread out over a couple of generations. So how many are over age of 70.5 now or coming years and how many of them would fall into the category of required withdrawal of X amount of dollars a month.
  • #10
  • Jul 12, 2008 9:20pm Jul 12, 2008 9:20pm
Quoting SunTrader
Re-check that math. There might be 75 million baby boomers but their ages are spread out over a couple of generations. So how many are over age of 70.5 now or coming years and how many of them would fall into the category of required withdrawal of X amount of dollars a month.
You're right about the math. Allow me to re-assess that.

A quick google search tells me there are 50 million baby boomers with 401k accounts.

Let's assume that they still withdraw that $1,000 a month.

Let's assume that at the peak of this boomer-withdrawal (sometime around 2016-2020 I'd say), all 50 million are regularly withdrawing.

So yes, while 75 billion a month is a worst-case scenario, 50 billion a month is still significant. I'm not saying this 50 billion a month will be sustained over the course of the baby boomer generation, but I figure that if that peak period lasted a year...could the stock market suffer a 600 billion withdrawal?

With prices falling, I doubt that future generations would want to buy (can't go short if there is nobody that owns the stock). So assume a negligible addition to the market.
  • #11
  • Jul 12, 2008 9:33pm Jul 12, 2008 9:33pm
Well I am a boomer myself and yet I have 20 years before I will reach 70.5 or around 2038 timeframe. There is also many millions born after me that will not turn the magic number into the '30's. There are many other factors to consider how much money this all would represents.

But doom and gloom scenarios like this somehow the genius' in DC find solutions for eventually. Just like the (AMT)alternative minimum tax. They haven't fixed that one yet either but they will.

Otherwise there is always Geneva, Cayman Islands, Jersey Islands etc etc.

  • #12
  • Jul 12, 2008 10:22pm Jul 12, 2008 10:22pm
Quoting SunTrader
Those aren't the names. Those are the nicknames.

The names are The Federal National Mortgage Association and The Federal Home Loan Mortgage Corporation

+ + +


A good laugh. If you go to the Fannie Mae website and click current stock information you get -

Page Cannot Be Found

The page you are looking for might have been removed, had its name changed, or is temporarily unavailable.
Click << Back to return to the page from which you came.

I wonder why ?
yes... tell me about other nicknames of other corporations... and we will see if they are so funny names... maybe we could make an strategy to trade based on nicknames...

unavailable charts? lol. this could be the black monday tomorrow...
  • #13
  • Jul 13, 2008 11:52am Jul 13, 2008 11:52am
They are solvent and if you don't think middle east money would love nothing more than to buy up 15% of these two companies you haven't been paying attention. http://www.bloomberg.com/apps/news?p...NCI4c&refer=us
Paulson said they are still GSE's and there is no plan to change that. If you don't know what that means do your homework.

50billion a month is sustainable regarding 401k draws. Currently the government is shouldering 12billion a month in Afganistan and Iraq wars which does not directly come back to the economy. By 2016 we'll use 20-30% less oil which will free up discretionary income which drives the stock market and GDP.
It really is that easy.
  • #14
  • Jul 13, 2008 11:56am Jul 13, 2008 11:56am
Quoting The Fxorce

50billion a month is sustainable regarding 401k draws. Currently the government is shouldering 12billion a month in Afganistan and Iraq wars which does not directly come back to the economy. By 2016 we'll use 20-30% less oil which will free up discretionary income which drives the stock market and GDP.

I, for one hope you're right.
  • #15
  • Jul 13, 2008 1:12pm Jul 13, 2008 1:12pm
Quoting merlin
just when i thought we were nearing the end of the credit crunch i find out that the backers of HALF the mortgages in america are insolvent

this aint no 1 day story here...no no no...this is as big as the subprime mess itself. if freddie and fannie cant give loans anymore, that would cut the home buyer pool by 30% in my estimation. and with a housing market already desperate for buyers, this could be blow the roof off the industry (pun intended ).

the big question now...will they be bailed out?

<snip>
This is exactly what we are currently enjoying in the UK. The demise of Northern Rock has pulled 20% of the lending capacity. A significant number of the remaining lenders have burned fingers from the US debacle, and are over-exposed in the UK buy-to-let debacle -- so they are not lending without a significant margin. Most would-be entrants to the housing market barely have enough to cover professional fees so they have been effectively removed from the market. Oh, and market prices are falling.

The lack of purchasers (for whatever reason) has put the skids under the house builders. As a result a huge number of tradesmen (carpenters, electricians, bricklayers, and any other construction services) are losing jobs or going onto short-time. The legal services and other financial support has no business so there is contraction there also (I know, it is difficult to feel pity for a lawyer ) and that is feeding into consumer sentiment - so retail is struggling. This could get very ugly.

Quoting EMDA
unavailable charts? lol. this could be the black monday tomorrow...
Oh no! ...I'm short the Euro
Minesweeper target: 284
  • #16
  • Jul 13, 2008 3:07pm Jul 13, 2008 3:07pm
Quoting The Jedi
Freddie wasn't born until 1970
i should know that, i can even vaguely remember when freddie was setup
Relax and be happy.
  • #17
  • Jul 13, 2008 3:15pm Jul 13, 2008 3:15pm
Quoting The Fxorce
They are solvent and if you don't think middle east money would love nothing more than to buy up 15% of these two companies you haven't been paying attention.
interesting idea

i dont disagree that they have options, but the situation they are in is the kind that perpetuates worsening conditions. just the fact that they are in trouble will do damage to the housing market, which in turn will be worse for their balance sheets. its a bad cycle to be in and i dont see how they can break out of it. these companies are done imo, just a matter of time.
Relax and be happy.
  • #18
  • Jul 13, 2008 3:26pm Jul 13, 2008 3:26pm
Quoting ycomp
I just don't understand Americans...
what makes you think we care? and what does your hatefulness have to do with trading? what i dont understand is people who cant separate their emotions and politics from their trading.
Relax and be happy.
  • #19
  • Jul 13, 2008 4:52pm Jul 13, 2008 4:52pm
Quoting merlin
interesting idea

i dont disagree that they have options, but the situation they are in is the kind that perpetuates worsening conditions. just the fact that they are in trouble will do damage to the housing market, which in turn will be worse for their balance sheets. its a bad cycle to be in and i dont see how they can break out of it. these companies are done imo, just a matter of time.
Thus is why the US is in "CHECKMATE",, Guess who ultimately will pay for this?
Check Mate GAME OVER
  • #20
  • Jul 13, 2008 4:57pm Jul 13, 2008 4:57pm
We can theorize but until it happens, who really know who will pay ?
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