Friday, July 11, 2008

Is This For Real?

I can't tell if this is a massive exaggeration of problems at Fannie Mae and Freddie Mac. I simply can't find any evidence that would suggest they are on the brink of bankruptcy. Granted, their liabilities are greater than their assets. But would they really be allowed to fail?

They lend half of the nation's mortgages, about 5 trillion dollars of the 12 trillion dollar market. They provide liquidity to the MBS(Mortgage Backed Securities Market). If they have problems fulfilling these two functions, it means a total meltdown of the mortgage market - beyond what we have seen thus far -, in other words, there would be no way to get a loan to get a house!!! And the banks would suffer much more mortgage losses - with zero hope of a revival anytime soon because the administration's plan was to use Fannie and Freddie as the mechaism for revival.

It would be end game for a long time for the U.S. Economy. It would lead to a massive depression.

This is so serious I almost think it is exaggerated. It's simply too big for me to comprehend or believe.....that no one would do anything to help these companies. If the government nationalized the companies, it would mean, literally a 5 trillion dollar nationalization...on the back of the tax payer, and would double the national debt over night. These numbers are so big that it makes me think commentators and investors are blowing shit out of poportion -but one of these "investors" was a former Federal Reserve President who declared Freddie and Fannie insolvent.

Is this for real?


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