Kinda hard to jive such a measure with their managements’ insistence that “we’re adequately capitalized”.

This is what happens when easy money and bailout nation becomes the governing philosophy of crony capitalism. Billion dollar bonuses for Wall Street elites, millions of dollars of contributions to politicians of both parties and of course the revolving door between regulators, policy makers and Wall Street. Rubin, Paulson, Easy Al.

Now the biggest cheerleaders for “free market capitalism” and the repeal of Glass-Steagall and “risk adjusted capital” make even the marxist lenninist communists blush as they scream for nationalization, backstops and bailouts of their losing positions. But those billions in bonuses based on fraudulent financial performance – that’s in the Cayman!

Yes, the shoe is on the other foot!

I’d like to read that personally. I’m looking for some future predictions on this. Could you post it?

so many question marks:
Who is shorting F&F equity into the ground?
Why now?
What hand is the administration playing here?
How will Schumer/Dodd play along?

It looks like an attempt from the Bushies to kill F&F in a way that brings a lot of profits to bondholders while killing its stockholders. What is the political benefit of it? Money Funds and Banks would look better, Gov Bonds worse.

COuld there be a deal with the Chinese? The shorting started after G-8.
Chinese support Dollar and T-Bonds, Bush guarantess agency bonds and lets BB raise 25 in automn?

And how does OFHEO get off saying that $80 billion capital to support $5 trillion in assets and guarantees is “adequate”? Setting capital requirements is arbitrary, but using the 8% guideline applied to banks, shouldn’t F&F have more like $400 billion capital to support their risky business? (Mortgages inherently have much gnarlier trading characteristics than straight bonds, owing to early payoff risk which is impossible to quantify exactly.)

Tragically and predictably, the “too big to fail” doctrine is already being invoked. But why do we need F&F? Within this decade, both companies got their accounting in a twist over derivatives, had to be audited and restate earnings, dumped CEOs, etc. Now the teetering mismanaged behemoths threaten the dollar and the credit rating of USGOV itself. If this is success, I’d sure hate to see what failure looks like. (A question CONgress should ask itself, with its towering nine (9) percent approval rating.)

I have been looking for an iconic bankruptcy to put a period under this twilight interlude of financial distress — a household-name bank or industrial company. Who would have thunk that it might be Freddie Mac? Freddie, we hardly knew ye!

And, I think, this will be much cheaper to the American taxpayer. Worse for the IBs. That’s a twofer.

It appears you did not look at the activity reports even though the links were provided. They show both purchases and sales broken down by category. There is no evidence of unusual activity in March, April or May, and it would take a higher level of activity to have had much impact. But you prefer theories rather than seeing if the facts bear them out.

You also failed to address what consideration could be offered to the managements of Freddie and Fannie. They so far have been pretty intransigent. Mudd has been pressured to raise equity and has not done so to the degree desired. And as noted, they have only half heartedly (if at all) acted on Congress’ plans to have them rescue housing.

I don’t see how the Feds have any leverage over Freddie and Fannie. They know they will be bailed out. They also know in any kind of rescue scenario. per Paulson insisting on $2 per share for Bear (and recall that deal did require shareholder approval, while the Feds have statutory authority to put the GSEs into receivership) that their equity is worth nada in any kind of bailout. It is a political necessity that the shareholders, including management, are wiped out if taxpayers have to come to the rescue.

Fannie and Freddie hold the cards. They win in a game of chicken until their position becomes completely untenable. No one will shut them down until absolutely necessary. A hedge fund guy sent me a newsletter which worked through what happens if either of the GSEs is put into custodianship or otherwise bailed out. Gold goes through the roof and the dollar and stock markets plummet. The language was far more extreme than what I just wrote, BTW.

So management’s best financial opportunity is to see if they can ride the housing crisis out as a semi-private enterprise. If they do, their stock holdings will recover. And as self-serving as that is, it’s also in our collective best interest.

So their covert resistance to the efforts to make them the rescuers of housing make perfect sense.

In fact, the conspiracy theory I prefer is that this panic actually serves the Bushies’ interests, provided they can contain it (the problem is that Poole, always a loose cannon, weighed in at the worst possible time). They are very anti rescues of the housing market of any sort. If they can make everyone realize that Fannie and Freddie are too wobbly to do much (which is actually true, randomly the Administration does have the correct position on this one), they will be able to block housing bailout initiatives.

FYI, my view has been if one must go this course, (and I am not a proponent) the way to do it would be via a new agency. You can’t muddle the mission of bodies dedicated to at least attempting to do reasonably high quality loans with ones in the salvage business. They require different skill sets, and should have different financial structures too.