Fannie and Freddie

[david mcgee]

Fannie and Freddie are looking increasingly likely to follow the path of Northern Rock.

 

Anyone that thought the worst of this credit crunch was over was obviously misguided.

[The Brow]

Has that not been in the pipeline for months and months now? Its been on CNN every day for at least 6 weeks. Im no financial whizz (barely pay attention really) but its not the best news....

[coppercrutch]

I think your 'dead cat bounce' is looking very much spot on !!

 

But who knows for sure.

 

The ex head of the IMF thinks that a MAJOR US Bank will go bust pretty soon as well. Rumours abound. Merril Lynch, Wachovia,Lehman BR and Citi have been touted. Again nobody really knows.

 

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4563171.ece

 

Add that to those gone bust already over the water, along with Northern Rock and Alliance and Leicester. (Read their statement today if you think their 'takeover' by Santander is anything other than an arranged rescue)

 

http://news.bbc.co.uk/1/hi/business/7570048.stm

 

Scary times indeed.

 

As for house prices even the Edinburgh cartel are finally admitting the game is up:

 

http://edinburghnews.scotsman.com/topstories/City-builders-hit-a-brick.4399709.jp

 

http://edinburghnews.scotsman.com/topstories/Average-cost-of-Capital-home.4384751.jp

 

If anyone thinks banks are going to be lending huge sums of money to those that can't afford it soon you had better think again:

 

http://business.scotsman.com/personal-finance/The-silver-linings-within-Britain39s.4398527.jp

 

Have a look at the Prices and Mortgage bills section. The Scotsman telling us that rates have been cut a little recently for certain deals - which they have. You will notice something stands out however. "40% deposit" seems to be the norm for getting the best deals now.

 

About 9 months ago it was 5%. Then it went to 10%, then 25% now 40%.

 

That tells you all you need to know about where the lenders think prices are going, and what they are hedging against. If they think prices are going down by up to 40%, then they are.

 

Anyway I think with all this **** getting worse in the US and here house prices are the least of our worries. I would quite like to have a job.

[Nucky Thompson]

Who or what are Fannie and Freddie:confused:

[coppercrutch]

Who or what are Fannie and Freddie:confused:

 

US mortgage lenders. Pretty much provide the backing for most US mortgages.

 

They look like they are about to go under. Even though in reality they probably are already. Ouch..

[Rab]

US mortgage lenders. Pretty much provide the backing for most US mortgages.

They look like they are about to go under. Even though in reality they probably are already. Ouch..

 

It'll never happen, it'd cause the entire mortgage industry in the US to collapse.

 

The Feds will take control, and nationalise them.

[Seats]

I think your 'dead cat bounce' is looking very much spot on !!

 

But who knows for sure.

 

The ex head of the IMF thinks that a MAJOR US Bank will go bust pretty soon as well. Rumours abound. Merril Lynch, Wachovia,Lehman BR and Citi have been touted. Again nobody really knows.

 

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4563171.ece

 

Add that to those gone bust already over the water, along with Northern Rock and Alliance and Leicester. (Read their statement today if you think their 'takeover' by Santander is anything other than an arranged rescue)

 

http://news.bbc.co.uk/1/hi/business/7570048.stm

 

Scary times indeed.

 

As for house prices even the Edinburgh cartel are finally admitting the game is up:

 

http://edinburghnews.scotsman.com/topstories/City-builders-hit-a-brick.4399709.jp

 

http://edinburghnews.scotsman.com/topstories/Average-cost-of-Capital-home.4384751.jp

 

If anyone thinks banks are going to be lending huge sums of money to those that can't afford it soon you had better think again:

 

http://business.scotsman.com/personal-finance/The-silver-linings-within-Britain39s.4398527.jp

 

Have a look at the Prices and Mortgage bills section. The Scotsman telling us that rates have been cut a little recently for certain deals - which they have. You will notice something stands out however. "40% deposit" seems to be the norm for getting the best deals now.

 

About 9 months ago it was 5%. Then it went to 10%, then 25% now 40%.

 

That tells you all you need to know about where the lenders think prices are going, and what they are hedging against. If they think prices are going down by up to 40%, then they are.

 

Anyway I think with all this **** getting worse in the US and here house prices are the least of our worries. I would quite like to have a job.

 

Oh my god - Banks decide to lend sensibly shocker!!! It's lending people 100%+ mortgages and giving money to people who can't afford it that has caused all this trouble in the first place. The banks tightening their belts is a sign of a bit of common sense being applied. Maybe if everyone stopped over dramatising everything and accepted that markets sometimes go down as well as up then things will return to a more stable footing.

[david mcgee]

Oh my god - Banks decide to lend sensibly shocker!!! It's lending people 100%+ mortgages and giving money to people who can't afford it that has caused all this trouble in the first place. The banks tightening their belts is a sign of a bit of common sense being applied. Maybe if everyone stopped over dramatising everything and accepted that markets sometimes go down as well as up then things will return to a more stable footing.

 

I dont think anyone is over dramatising.

 

Quite the opposite infact, banks have been giving misinformation that the worst is over so they can raise capital through rights issues.

Mug punters who have already lost fortunes on banks shares have been hoodwinked into buying more and the shares are about to fall over the cliff.

[Guest gorgie kev]

Who or what are Fannie and Freddie:confused:

 

I thought he was meaning the 2 fuds in charge of the san giro

[coppercrutch]

It'll never happen, it'd cause the entire mortgage industry in the US to collapse.

 

The Feds will take control, and nationalise them.

 

I think you'll find it has happened. The only reason they are still alive is due to tax payers money barely keeping them afloat. Even with that they are about to go under, to be bailed out yet again by the taxpayer. The US deficit of $400 billion is heading towards $1 trillion apparently. What that will do to the US currency who knows.

 

There is only so much cash you can create on computer screens without it coming back to haunt you.

 

I have been reading much about the entire World economic system just collpasing. I have always thought that seemed a little over dramatic but every day things seem to get closer and closer to that scenario.

 

Scary stuff indeed. Not something I want to happen anytime soon !! Us little guys don't have much power though.

[coppercrutch]

Oh my god - Banks decide to lend sensibly shocker!!! It's lending people 100%+ mortgages and giving money to people who can't afford it that has caused all this trouble in the first place. The banks tightening their belts is a sign of a bit of common sense being applied. Maybe if everyone stopped over dramatising everything and accepted that markets sometimes go down as well as up then things will return to a more stable footing.

 

I do agree with you !! However I don't think what is happening is 'over-dramatising' anything.

 

Many people who know a lot more about this than I do think things are close to collapse. I hope not !!

 

Although I suppose it does have to happen one day.

[shaun.lawson]

I think you'll find it has happened. The only reason they are still alive is due to tax payers money barely keeping them afloat. Even with that they are about to go under, to be bailed out yet again by the taxpayer. The US deficit of $400 billion is heading towards $1 trillion apparently. What that will do to the US currency who knows.

 

There is only so much cash you can create on computer screens without it coming back to haunt you.

 

I have been reading much about the entire World economic system just collpasing. I have always thought that seemed a little over dramatic but every day things seem to get closer and closer to that scenario.

 

Scary stuff indeed. Not something I want to happen anytime soon !! Us little guys don't have much power though.

 

Eh?

 

So it'll be very difficult to get easy credit any longer; and house prices will fall. In both cases, thank heavens for that! Memo to coppercrutch: the end of a period of global economic boom and a bit of turbulence does not equal 'the entire world economic system just collapsing'.

[coppercrutch]

Eh?

 

So it'll be very difficult to get easy credit any longer; and house prices will fall. In both cases, thank heavens for that! Memo to coppercrutch: the end of a period of global economic boom and a bit of turbulence does not equal 'the entire world economic system just collapsing'.

 

Please read up on this. It is not me saying these things. Former head of the IMF has already stated we that the Global Financial System 'Came Close to Collapse'.

 

This was in May. It is looking much worse now. Again i don't think people realise the scale of this. This is not 'overdramatising' as far as I can see. Unless it is just one big scam.

 

Real people in real senior positions have said the global system is eeking on the edge of collapse.

 

Not much we can do about it though !!

[davemclaren]

 

Anyway I think with all this **** getting worse in the US and here house prices are the least of our worries. I would quite like to have a job.

 

Jobs are overrated. What happened to your last one - surely not a victim of the credit crunch?

[coppercrutch]

Jobs are overrated. What happened to your last one - surely not a victim of the credit crunch?

 

Nah still got it. But maybe I will get a break soon courtesy of the 'crunch' !!

[Seats]

the whole world cannot go bankrupt. What can happen is that the massively over-inflated values of certain things can come back down to earth. Things like banks, property etc have been massively overvalued and we are now seeing that correction. Yes, people will lose money, yes people will lose jobs, however there is a point where things become interesting again. What has happened recently is politicians have stepped in to try and solve problems where they shouldn't have - Northern Rock would have been an interesting buy if the government had left the market to its own devices, the property market would be a bit healthier if they hadn't been *****ing around with stamp duty etc.

 

Markets, economies etc are all cyclical and need to recover on their own - why can't we just accept that and get on with it instead of bitching about it all the time?

[shaun.lawson]

Please read up on this. It is not me saying these things. Former head of the IMF has already stated we that the Global Financial System 'Came Close to Collapse'.

 

This was in May. It is looking much worse now. Again i don't think people realise the scale of this. This is not 'overdramatising' as far as I can see. Unless it is just one big scam.

 

Real people in real senior positions have said the global system is eeking on the edge of collapse.

 

Not much we can do about it though !!

 

Leading economists say all sorts of things, as do pundits, experts and academics in all other fields too. But usually, the worst case scenario does not come to pass. Are we heading for a slowdown, market correction and a tougher time of things? Sure. But is this 1929 all over again? Hardly.

[coppercrutch]

Leading economists say all sorts of things, as do pundits, experts and academics in all other fields too. But usually, the worst case scenario does not come to pass. Are we heading for a slowdown, market correction and a tougher time of things? Sure. But is this 1929 all over again? Hardly.

 

How do you know ? Far too many have compared it to that period for there to be nothing in those statements.

 

I don't know what will happen. Neither do you.

 

However there will be another period just as bad as the Great Depression. It is due sooner rather than later too. We have had it far too easy for far too long. That will end one day.

 

When it actually happens is the only question. This seems as good a time as any. Things are happening today that haven't happened since back then. That should be enough to get you worried !!

 

Hope we can avoid the next great depression for a good while though !! I can't be bothered with it.

[david mcgee]

Leading economists say all sorts of things, as do pundits, experts and academics in all other fields too. But usually, the worst case scenario does not come to pass. Are we heading for a slowdown, market correction and a tougher time of things? Sure. But is this 1929 all over again? Hardly.

 

This strikes me as a bite yer butt statement. ( there is no hurricane on the way)

[Deodato]

Some interesting comments here, good thread.

 

Would like to offer some of my own.

 

Firstly, careful on the word 'global' - when referring to the credit crunch. It's not a global phenomenon, indeed its not even a western phenomenon. Its really about countries that have been living beyond their means - namely the US, UK, Spain and a long list of others. For OPEC countries, there is no such credit crunch - rather petro-dollars being soaked up to such an extent that Net OPEC Oil Export Revenues for H1 2008 equalled that whole of 2007 - that's worth a pause for thought. Further, the BRICs (Brazil, Russia, India and China) are not affected, and arguably de-coupling from events in the States and Europe - which would represent a paradigm shift for the global economy. For the first time, when the US coughs, many other big players DONT catch a cold, rather they keep on growing.

 

Secondly, the explicit plunge of the dollar, often cited as a crisis, is at last showing signs of helping the US imbalances unravel - exports exceeded imports for the first time in years last month. Its a small sign on a large turning point that the US economy will be correcting itself - but the question rasied in many of the above posts, indirectly, is will it happen in time. Rogoff's comments do raise alarm bells, largley because the fiancial system has been securitising everything and anything for over a decade - take SPVs, which are due to roll back on balance sheet, what are they worth? ...what do they represent? What did they (once) mean? The uncertainty alone could bring a US investment bank to its knees.

 

But, as some posters have rightly pointed out, there is a role for market failure (when bad news is good, or at least deserved) and there is a need to look at the following events through 'market correction' lenses. This isn't the end of the world as we know it, Mr Stipe, rather the market is fleshing out lots of failure, and once the deadwood has been exposed and pruned, can then proceed to correct itself. Its not a demand side or supply side recession we are in, its a deleveraging recession - and those can take years, as opposed to months, to unravel - that's going to hurt, after a while.

 

What's interesting is the stance of central banks - restricitve - and rightly so, as inflation is running at 4.4% here in the UK. But willl they understand what deleveraging means - more money being sucked out of the economy and into paying off debt - which means its a deflationary recession, hence central banks could be accomodative - and cut rates. They won't - from what I've heard, and it leaves the Chancellor, Alistair Darling, really screwed without a paddle, as his boss removed one and lost grip of the other.

 

No time to be at No. 11.

 

 

Deodato

[david mcgee]

Some interesting comments here, good thread.

 

Would like to offer some of my own.

 

Firstly, careful on the word 'global' - when referring to the credit crunch. It's not a global phenomenon, indeed its not even a western phenomenon. Its really about countries that have been living beyond their means - namely the US, UK, Spain and a long list of others. For OPEC countries, there is no such credit crunch - rather petro-dollars being soaked up to such an extent that Net OPEC Oil Export Revenues for H1 2008 equalled that whole of 2007 - that's worth a pause for thought. Further, the BRICs (Brazil, Russia, India and China) are not affected, and arguably de-coupling from events in the States and Europe - which would represent a paradigm shift for the global economy. For the first time, when the US coughs, many other big players DONT catch a cold, rather they keep on growing.

 

Secondly, the explicit plunge of the dollar, often cited as a crisis, is at last showing signs of helping the US imbalances unravel - exports exceeded imports for the first time in years last month. Its a small sign on a large turning point that the US economy will be correcting itself - but the question rasied in many of the above posts, indirectly, is will it happen in time. Rogoff's comments do raise alarm bells, largley because the fiancial system has been securitising everything and anything for over a decade - take SPVs, which are due to roll back on balance sheet, what are they worth? ...what do they represent? What did they (once) mean? The uncertainty alone could bring a US investment bank to its knees.

 

But, as some posters have rightly pointed out, there is a role for market failure (when bad news is good, or at least deserved) and there is a need to look at the following events through 'market correction' lenses. This isn't the end of the world as we know it, Mr Stipe, rather the market is fleshing out lots of failure, and once the deadwood has been exposed and pruned, can then proceed to correct itself. Its not a demand side or supply side recession we are in, its a deleveraging recession - and those can take years, as opposed to months, to unravel - that's going to hurt, after a while.

 

What's interesting is the stance of central banks - restricitve - and rightly so, as inflation is running at 4.4% here in the UK. But willl they understand what deleveraging means - more money being sucked out of the economy and into paying off debt - which means its a deflationary recession, hence central banks could be accomodative - and cut rates. They won't - from what I've heard, and it leaves the Chancellor, Alistair Darling, really screwed without a paddle, as his boss removed one and lost grip of the other.

 

No time to be at No. 11.

 

 

Deodato

 

Agree with many of your comments.

 

However, Brazil, Russia China and most of the world will be effected.

How will they avoid catching a cold?

Their stock markets are already being hit, much of their growth is on the back of selling commodities to the West.

You agree the US and Euro zone face recession so how are the other economies going to sell steel, iron, aggrigate, gas, oil etc at the same volumes and prices?

This credit crunch is self perpetuating, some areas will be less affected but nobody will escape it completely.

[Deodato]

Agree with many of your comments.

 

However, Brazil, Russia China and most of the world will be effected.

How will they avoid catching a cold?

Their stock markets are already being hit, much of their growth is on the back of selling commodities to the West.

You agree the US and Euro zone face recession so how are the other economies going to sell steel, iron, aggrigate, gas, oil etc at the same volumes and prices?

This credit crunch is self perpetuating, some areas will be less affected but nobody will escape it completely.

 

You are kinda right there, but also wrong - in terms of what your proposing.

 

Let me explain.

 

"How will they [bRICs] avoid catching a cold"

 

Well, they represent over 2.5 billion people, are on an upward convergence path in terms of GDP per Capita, have devised export strategies early on - thus created sustainable domestic demand and - importantly - have enough INTRA-BRICs trade to keep the party going whilst many others around them falter. Hope this is clear, as there's a lot of economics in there.

 

A further addition comes from the West's addiction to low inflationary growth - which increases the dependency on China and the like to provide them with it. Hence, you could plausibly argue that (parts of) China will be a net benefactor of a downturn as developed countries push for lower costs in their import portfolios which pushes China further up the value chain (wheras in the past they only built the hull of ships, now they do the topside too).

 

Decoupling is by no means definite - for the reasons you point out - but all the evidence to date shows these countries have roared ahead whilst the US slows down - and there's no sign of them slowing. If you cant do business with the State, do business with OPEC, or do business with BRICS or even just do business with yourself - the point being there's lots of new business to be done, little of it connected to America's housing downturn.

 

Put simply, the global economy has changed. Politics will follow.

 

Good point though, Dave.

 

Deodato

[david mcgee]

You are kinda right there, but also wrong - in terms of what your proposing.

 

Let me explain.

 

"How will they [bRICs] avoid catching a cold"

 

Well, they represent over 2.5 billion people, are on an upward convergence path in terms of GDP per Capita, have devised export strategies early on - thus created sustainable domestic demand and - importantly - have enough INTRA-BRICs trade to keep the party going whilst many others around them falter. Hope this is clear, as there's a lot of economics in there.

 

A further addition comes from the West's addiction to low inflationary growth - which increases the dependency on China and the like to provide them with it. Hence, you could plausibly argue that (parts of) China will be a net benefactor of a downturn as developed countries push for lower costs in their import portfolios which pushes China further up the value chain (wheras in the past they only built the hull of ships, now they do the topside too).

 

Decoupling is by no means definite - for the reasons you point out - but all the evidence to date shows these countries have roared ahead whilst the US slows down - and there's no sign of them slowing. If you cant do business with the State, do business with OPEC, or do business with BRICS or even just do business with yourself - the point being there's lots of new business to be done, little of it connected to America's housing downturn.

 

Put simply, the global economy has changed. Politics will follow.

 

Good point though, Dave.

 

Deodato

 

I hear what you say, but this credit crunch may be built on the catalyst of Americas housing crisis but it has long outgrown that, this is now about the very foundations of global banking and no country in the world can fail to be affected by that.

[Deodato]

I hear what you say, but this credit crunch may be built on the catalyst of Americas housing crisis but it has long outgrown that, this is now about the very foundations of global banking and no country in the world can fail to be affected by that.

 

Which is plausible, but can equally be turned on its head.

 

Will the countries who are not affected directly by the credit crunch uphold the foundations of the global banking system, perhaps?

 

Chicken and egg problems, once again.

 

Deodato

[david mcgee]

Which is plausible, but can equally be turned on its head.

 

Will the countries who are not affected directly by the credit crunch uphold the foundations of the global banking system, perhaps?

 

Chicken and egg problems, once again.

 

Deodato

 

I doubt it since most of the investment banks are based in the Western world.

[Geoff Kilpatrick]

The only way the thirties would return is if the world went completely protectionist and trade collapsed. This could only be initiated by competitive devaluations.

 

There will be a worldwide recession, deeper in some places than others then, as seats says, things will get interesting again.

[coppercrutch]

Very interesting comments. Especially about the 'developing' nations becoming the big boys after all this. Definite shift in power is going on, it already has with China.

 

It is a very interesting debate about deflation or hyperinflation.

 

On one hand you have credit being sucked out of pretty much everywhere an an attempt to balance the books - Deflationary.

 

On the other hand you have the price of a lot of things shooting up. After years of making things on the cheap you have the people of India and China demanding a big piece of the pie. Inflation is rocketing over there and they provide the World with a massive amount of goods and services - Inflationary.

 

Very tricky subject. I go on a few chat boards with people that really know their stuff. They are still debating about the outcome of all this. I think the one I favour (who knows why ) is a few years of huge inflation followed by an even more rapid contraction of credit and a period of deflation the World has never seen before.

 

But in the end who ****ing knows.

 

A great quote from Warren Buffet, I think it was - "The one thing we learn from history is that we never learn from history"

 

I thin everyone who simply says "We are not going to have another 1930's style depression" should think more carefully about why they are so sure of this.

[Gershwin]

I can't access my Alliance and L e-saver account...they better not have gone tits up.

[Deodato]

I doubt it since most of the investment banks are based in the Western world.

 

This misses the point.

 

It does not matter if the bank is based in the Western World, its their portfolio that matters - Standard Chartered. a Western Bank, has its portfolio skewed towards SE Asia (and increasinly Africa - do you think they are as worried about Fannie and Freddie as US and European based banks.

 

I see your point, which is kind of like a domino theory, but you need a differetn transmission mechanism to make it.

 

Deodato

[Deodato]

 

On the other hand you have the price of a lot of things shooting up. After years of making things on the cheap you have the people of India and China demanding a big piece of the pie. Inflation is rocketing over there and they provide the World with a massive amount of goods and services - Inflationary.

 

 

Good point, but its more dynamic than this. Go back to my ship building example earlier (which I learnt from a visit to Keppel Shipyards, Singapore - Int'l trade in your face, full on). If 80% of a ships value is tied up in developed countries (Singapore) and 20% is in developING countries (China) then the price is X. Should you have inflation (not exactly shooting up, but yes there is inflation) in China, but the splits change to 20/80 - then provding China is 'delta' cheaper for their newly aquired share of revenues - the ship is cheaper to purchase. Ouch.

 

Point being, China is racing up the value chain with an increasingly competitive offering - making high value goods cheaper, whilst low value goods creep up. Net-net, its very hard to say that China is importing inflation, just yet. It will - eventually, just not now.

 

Deodato

[Rab]

It'll never happen, it'd cause the entire mortgage industry in the US to collapse.

 

The Feds will take control, and nationalise them.

 

I think you'll find it has happened. The only reason they are still alive is due to tax payers money barely keeping them afloat. Even with that they are about to go under, to be bailed out yet again by the taxpayer.

 

I'll think you'll find that's exactly what I said, and why it will never happen!

[Rab]

Some interesting comments here, good thread.

 

Would like to offer some of my own.

 

Firstly, careful on the word 'global' - when referring to the credit crunch. It's not a global phenomenon, indeed its not even a western phenomenon. Its really about countries that have been living beyond their means - namely the US, UK, Spain and a long list of others. For OPEC countries, there is no such credit crunch - rather petro-dollars being soaked up to such an extent that Net OPEC Oil Export Revenues for H1 2008 equalled that whole of 2007 - that's worth a pause for thought. Further, the BRICs (Brazil, Russia, India and China) are not affected, and arguably de-coupling from events in the States and Europe - which would represent a paradigm shift for the global economy. For the first time, when the US coughs, many other big players DONT catch a cold, rather they keep on growing.

 

Excellent point, some even extend that further to the likes of Mexico, South Korea and perhaps South Africa. Their economic partnerships have for years been decoupling their economies from the US, originally to improve trade bargaining positions, but as you point out this now gives them a level of immunity from the US economic downturn.

[coppercrutch]

Good point, but its more dynamic than this. Go back to my ship building example earlier (which I learnt from a visit to Keppel Shipyards, Singapore - Int'l trade in your face, full on). If 80% of a ships value is tied up in developed countries (Singapore) and 20% is in developING countries (China) then the price is X. Should you have inflation (not exactly shooting up, but yes there is inflation) in China, but the splits change to 20/80 - then provding China is 'delta' cheaper for their newly aquired share of revenues - the ship is cheaper to purchase. Ouch.

 

Point being, China is racing up the value chain with an increasingly competitive offering - making high value goods cheaper, whilst low value goods creep up. Net-net, its very hard to say that China is importing inflation, just yet. It will - eventually, just not now.

 

Deodato

 

Intersting example. Never thought about it that way before. Definite transfer of wealth. But is China not exporting inflation just now ? Is that not the main problem ? Well for us anyway !!

 

I think the transfer of wealth will be the big thing though.

 

The 'West' won't want to give it up. You know what that usually results in...

 

You ever watched the google video 'Money Masters' ? Very interesting stuff.

[coppercrutch]

I'll think you'll find that's exactly what I said, and why it will never happen!

 

I know what you'r saying but in reality it has already happened. They are bankrupt in every way but officially. Same as NR. The US Government is simply creating more money to bail them out. That has to end somewhere !! Something has to give.

 

Never ending bail outs will just collapse the entire country. Unless I am missing something !!

[Rab]

I know what you'r saying but in reality it has already happened. They are bankrupt in every way but officially. Same as NR. The US Government is simply creating more money to bail them out. That has to end somewhere !! Something has to give.

 

Something has already given, the government had to nationalise them! But the obvious result of that is that they will continue to operate (ie not go under) with government backing.

 

Don't get me wrong, I'm not claiming that the above is anything but a last gasp measure and a terrible situation, but the original claim was they'd go under - this won't happen.

 

Never ending bail outs will just collapse the entire country. Unless I am missing something !!

Totally agree. I don't think there was any choice re. Fannie and Freddie, but if it continues it will be fatal.

[david mcgee]

Fannie and Freddies combined losses could top $100 billion according to respected sources.

 

Ouch!

[coppercrutch]

Now they have been put into 'conservatorship'.

 

Temporary control has now been given to a Government department.

 

?2.7 Trillion pounds has now been guaranteed by the US Government.

 

US National Debt has now been doubled overnight.

 

What this means **** knows. It certainly is not good news anyway.

[david mcgee]

The US government gave everyone a hand out of free cash.

Did they tell them to put the money towards their credit cards?

Did they tell them to put it towards their mortgage payments?

 

No. They told them to go out and spend it.

 

Spend it they have, it even made US growth figures look respectable.

Trying to massage figures in order to give the Republicans a chance at the forthcoming election.

 

This crazy short termism will come back to haunt them.

[davemclaren]

The US government gave everyone a hand out of free cash.

Did they tell them to put the money towards their credit cards?

Did they tell them to put it towards their mortgage payments?

 

No. They told them to go out and spend it.

 

Spend it they have, it even made US growth figures look respectable.

Trying to massage figures in order to give the Republicans a chance at the forthcoming election.

 

This crazy short termism will come back to haunt them.

 

Hopefully before April when I visit there. I could do with the dollar weakening by then

[davemclaren]

Now they have been put into 'conservatorship'.

 

Temporary control has now been given to a Government department.

 

?2.7 Trillion pounds has now been guaranteed by the US Government.

 

US National Debt has now been doubled overnight.

 

What this means **** knows. It certainly is not good news anyway.

 

There's a difference between a liability and a contingent liability.

[david mcgee]

Hopefully before April when I visit there. I could do with the dollar weakening by then

 

With the mess the US is in the last thing they need is a visit from you Dave.

[davemclaren]

With the mess the US is in the last thing they need is a visit from you Dave.

 

[Maximus]

I hope all our dough(does)nut disappear like fannie's

[Flux]

[coppercrutch]

There's a difference between a liability and a contingent liability.

 

Well come on then - educate me on this matter please !!!

[Peebo]

Well come on then - educate me on this matter please !!!

 

A dictionary would be a good start.

[coppercrutch]

A dictionary would be a good start.

 

I think Dave will explain it better

 

I assume contingent liability means this cover is only required for contingency situations. I am sure Mr McLaren will confirm !!

 

Either way the debts are backed up now by the US Government. That is pretty scary news. **** knows how the markets will react though. They seem to do the opposite of what you might expect these days...

[Peebo]

I think Dave will explain it better

 

I assume contingent liability means this cover is only required for contingency situations. I am sure Mr McLaren will confirm !!

 

Look up the word "contingent"...

 

Either way the debts are backed up now by the US Government. That is pretty scary news. **** knows how the markets will react though. They seem to do the opposite of what you might expect these days...

 

I suspect they have, in effect, "reacted" already as this move was not unexpected.

[coppercrutch]

Look up the word "contingent"...

 

 

 

I suspect they have, in effect, "reacted" already as this move was not unexpected.

 

I know what contingent means. Just wanting an explanation of how this fits in with this particular situation.

 

I know this move was predicted. However it is still an almighty massive event. I don't think anyone could really 'price' something like this in already...

[davemclaren]

Well come on then - educate me on this matter please !!!

 

I'm sure you know anyway. One is a liability that exists already and one is a liability that you might have. It is contingent on something happening so may well not become an actual liability at all.

 

And that's without the use of a tightrope....