Comments on: Vote of No Confidence: Dollar Tanks (And More on Fannie and Freddie) http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html Sun, 22 Nov 2009 21:35:21 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Lune http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11404 Lune Wed, 16 Jul 2008 00:26:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11404 There's a troubling inconsistency between the Fed/Treasuries statements. On the one hand, whenever it talks about bailing out the GSEs, they say that the vast majority of the GSE's assets are fundamentally sound, and thus, the govt would only be on the hook for 5-10% of the total assets, which is a relatively "small" amount of $500 billion. On other other hand, when people suggest that the GSEs be allowed to fail, everyone talks about how the world will end because there will be a $5 trillion hole in the world's balance sheet.<br/><br/>Well which one is it? If indeed the expected losses on GSE assets are only in the $500 billion range, then no intervention is necessary. The private markets have already taken $500 bil in losses and are still standing. If $500 bil is chump change for the U.S. govt and the Amerian taxpayer, then it's surely chump change for the global economy. Why the need for bailouts?<br/><br/>OTOH, if the losses are expected to be so staggeringly high that the global economy will come crashing down and we'll all be bartering seashells and goats next year, well then, surely the losses are also too high for the U.S. govt to bear alone. In which case, we have no choice but to let the GSEs fail (and maybe start collecting seashells :-)<br/><br/>Either way, people need to decide on the basic facts. Exactly what losses are the GSEs looking at? And how exactly is that amount too much for the global economy (including a multitude of central banks) to bear, while simultaneously being trivial for a single economy (and one central bank) to bear? That's illogical. There’s a troubling inconsistency between the Fed/Treasuries statements. On the one hand, whenever it talks about bailing out the GSEs, they say that the vast majority of the GSE’s assets are fundamentally sound, and thus, the govt would only be on the hook for 5-10% of the total assets, which is a relatively “small” amount of $500 billion. On other other hand, when people suggest that the GSEs be allowed to fail, everyone talks about how the world will end because there will be a $5 trillion hole in the world’s balance sheet.

Well which one is it? If indeed the expected losses on GSE assets are only in the $500 billion range, then no intervention is necessary. The private markets have already taken $500 bil in losses and are still standing. If $500 bil is chump change for the U.S. govt and the Amerian taxpayer, then it’s surely chump change for the global economy. Why the need for bailouts?

OTOH, if the losses are expected to be so staggeringly high that the global economy will come crashing down and we’ll all be bartering seashells and goats next year, well then, surely the losses are also too high for the U.S. govt to bear alone. In which case, we have no choice but to let the GSEs fail (and maybe start collecting seashells :-)

Either way, people need to decide on the basic facts. Exactly what losses are the GSEs looking at? And how exactly is that amount too much for the global economy (including a multitude of central banks) to bear, while simultaneously being trivial for a single economy (and one central bank) to bear? That’s illogical.

]]> By: Independent Accountant http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11403 Independent Accountant Wed, 16 Jul 2008 00:21:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11403 I have favored something like Hutchinson's proposal for years. I never thought Franklin Raines should have been paid over $150,000 a year. I have favored something like Hutchinson’s proposal for years. I never thought Franklin Raines should have been paid over $150,000 a year.

]]> By: Yves Smith http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11401 Yves Smith Tue, 15 Jul 2008 23:48:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11401 fmbo,<br/><br/>It was a big surprise to demographers that the US showed population growth in the 1990s. It had been forecasted to fall, as it has in most advanced economies. <br/><br/>The reasons for the growth was immigration and comparatively high birthrates among Hispanics.<br/><br/>Moves are afoot to restrict immigration. mainly illegal, but it may redound to legal as well. Birthrates tend to drop in weak economies. And the baby boomers tended to have their kids late, so we are hitting the end of the so-called echo boom.<br/><br/>Long winded way of saying you can't count on continued population growth. fmbo,

It was a big surprise to demographers that the US showed population growth in the 1990s. It had been forecasted to fall, as it has in most advanced economies.

The reasons for the growth was immigration and comparatively high birthrates among Hispanics.

Moves are afoot to restrict immigration. mainly illegal, but it may redound to legal as well. Birthrates tend to drop in weak economies. And the baby boomers tended to have their kids late, so we are hitting the end of the so-called echo boom.

Long winded way of saying you can’t count on continued population growth.

]]> By: fimbo http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11400 fimbo Tue, 15 Jul 2008 22:43:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11400 the GSEs are only the latest victims of predatory lending. <br/><br/>People are talking about these GSEs without regard to the undelying market, same mistake we with oil when it was trading at around 10 dollars.<br/><br/>The demand for homes will continue to grow - there is no way the next generation will settle for renting - while investment in new construction etc will be negative for the decade whatever happens to GSEs. <br/><br/>Imagine what will happen to home prices! the GSEs are only the latest victims of predatory lending.

People are talking about these GSEs without regard to the undelying market, same mistake we with oil when it was trading at around 10 dollars.

The demand for homes will continue to grow – there is no way the next generation will settle for renting – while investment in new construction etc will be negative for the decade whatever happens to GSEs.

Imagine what will happen to home prices!

]]> By: Anonymous http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11398 Anonymous Tue, 15 Jul 2008 22:15:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11398 <i>"but that creditors, who were told explicitly in all offering documents that Freddie and Fannie paper was not an obligation of the US government, take their lumps too."</i><br/><br/>Yes! The buyers of this debt BOUGHT and ACCEPTED the risk of default. The taxpayer didn't - they did. “but that creditors, who were told explicitly in all offering documents that Freddie and Fannie paper was not an obligation of the US government, take their lumps too.”

Yes! The buyers of this debt BOUGHT and ACCEPTED the risk of default. The taxpayer didn’t – they did.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11397 Anonymous Tue, 15 Jul 2008 22:03:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11397 Bailing-out/backstopping Fannie and Freddy is a mistake. It is the function of the GSE's that is systemically too important to fail, not the organizations themselves. As Roubini suggests, the rescue should consist of temporarily nationalizing the GSE's function, bond holders take a haircut, the shareholders should get wiped out, and where called for management should be prosecuted. Bailing-out/backstopping Fannie and Freddy is a mistake. It is the function of the GSE’s that is systemically too important to fail, not the organizations themselves. As Roubini suggests, the rescue should consist of temporarily nationalizing the GSE’s function, bond holders take a haircut, the shareholders should get wiped out, and where called for management should be prosecuted.

]]> By: Yves Smith http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11396 Yves Smith Tue, 15 Jul 2008 20:07:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11396 Great comments. FYI 10:50 AM was spam. Great comments. FYI 10:50 AM was spam.

]]> By: S http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11395 S Tue, 15 Jul 2008 20:04:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11395 Pump failure. market finsihes down after all the talk and the apparent SEC action to halt shorts on PD and GSEs. Lets see GSEs down 27% each today. money center banks down average 5%. Regionals down 2 to 7% across the board. PD with LEh the exception down 1-4%. The market took the vote to the floor today and it failed miserably. Bernpaul 0, Shortsells 1 Pump failure. market finsihes down after all the talk and the apparent SEC action to halt shorts on PD and GSEs. Lets see GSEs down 27% each today. money center banks down average 5%. Regionals down 2 to 7% across the board. PD with LEh the exception down 1-4%. The market took the vote to the floor today and it failed miserably. Bernpaul 0, Shortsells 1

]]> By: malabar http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11394 malabar Tue, 15 Jul 2008 20:01:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11394 I'd like all the super duper experts to tell me why Bill Gross should not get a haircut on the Fannie and Freddie bonds he owns?<br/><br/>After all he made that extra coupon all these years. He's made billions personally. He's got an army of PhDs modeling every scenario known to man. Why does this dude need my meager hard earned dollars to keep his bond investment whole? I’d like all the super duper experts to tell me why Bill Gross should not get a haircut on the Fannie and Freddie bonds he owns?

After all he made that extra coupon all these years. He’s made billions personally. He’s got an army of PhDs modeling every scenario known to man. Why does this dude need my meager hard earned dollars to keep his bond investment whole?

]]> By: Anonymous http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and.html#comment-11392 Anonymous Tue, 15 Jul 2008 19:10:00 +0000 http://www.nakedcapitalism.com/2008/07/vote-of-no-confidence-dollar-tanks-and-more-on-fannie-and-freddie/#comment-11392 It's all about CONfidence, the only thing I'm confident about is the it's going to come down like a ton of crap. It’s all about CONfidence, the only thing I’m confident about is the it’s going to come down like a ton of crap.

]]>