Is Fannie and Freddie a Nookliar WARNING SHOT????
The government’s planned takeover of Fannie Mae and Freddie Mac, expected to be announced on Sunday, came together after advisers poring over the companies’ books for the Treasury Department concluded that Freddie’s accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.
"overstated its capital cushion"
For two years I have been analyzing homebuilders and pointed out that HBs were overstating their asset value. Any analyst could have seen that the "one time" write offs were going to be a regular quarterly event......but Wall Street played the charade of just this time as prices kept crashing.
Clearly Wall Street had an interest in hiding this fact because Real Estate, and debt associated with Real Estate is the single largest asset class in America. More importantly, it is the assets class that supports and collateralizes most of banks assets.
If banks assets fall below a certain level, they must raise capital in order to remain compliant. The problem over the past year is that banks' asset values are crashing. This has been especially evident over the past three months.
Perky Pauly and BS Benny have done their best to try calm the country as they bail out their buddies and let the rest of America fail. First it was supposedly contained to residential subprime. Then it was for a Fall Recovery. Then it was just this or that. NOW IT IS EVERYTHING. Commercial and Residential Real Estate, Corporate Debt, Credit Card Debt, and Auto Debt.
A few in CAPs know that many regional banks are understating their reserves to make their asset base look stronger. Anyone think this is contained just to regional banks?
The assets for Fannie and Freddie are probably much stronger than the assets of many banks. This Fall, many banks are going to have to come much cleaner than they have as asset values deteriorated materially over the summer.
Some people think the government backstopping a few trillion of debt concentrated in a few hands is going to help America in general???? Just between Japan, China, and Pimco......we are probably looking at over half of what is being bailed out....the rest of us...we are paying for that backstopping.
Any bets it will be HARDER to get a mortgage after this nonsense???? That will be just great for homebuilders and people trying to sell their homes. If my analysis is correct, after this unwind is complete....home prices could drop to 1980 to 1985 pricing.
As more businesses shut down, more people lose their jobs, more houses get foreclosed...banks' asset values will continue to fall in value. As bank assets fall.....Get ready to hear these words: "overstated capital cushion" over and over again.