Use access key #2 to skip to page content.

alstry (35.02)

Is Fannie and Freddie a Nookliar WARNING SHOT????

Recs

10

September 07, 2008 – Comments (3)

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.

http://www.nytimes.com/2008/09/07/business/07fannie.html?_r=1&hp&oref=slogin

"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.

3 Comments – Post Your Own

#1) On September 07, 2008 at 11:50 AM, dinodelaurentis (74.68) wrote:

isn't this what was meant by "trickle down economics"?

Report this comment
#2) On September 07, 2008 at 1:02 PM, alstry (35.02) wrote:

 ``It is necessary to take action,''

Paulson just admitted that Fannie and Freddie were capital deficient........how many banks in America are hiding capital deficiencies???

 We just added $5 Trillion dollars to the balance sheet.....what do you think this is going to do to treasury rates and in turn.....mortgage rates?

If you think it was getting more difficult to buy a home last Friday.....just wait until next month.....

This was a move in desperation....the world now KNOWS we are desperate......so maybe its time to start a WAR and get Oil prices up over $200 per barrel?

For those of you geopolitical buffs...things are really getting interesting right now.

Iran's armed forces will begin three days of war games on Monday involving anti-aircraft defense systems, Iranian media said on Sunday.

http://www.haaretz.com/hasen/spages/1018815.html

MOSCOW_ In the aftermath of last month's war between Russia and U.S.-backed Georgia, Kremlin-watchers in Moscow are worried that Russia and America are closer to direct confrontation than at any point since the end of the Cold War.

The rhetoric coming from the Bush administration — and presidential hopeful John McCain — suggests that tensions are still on the rise.

During the Cold War, "the sides were very careful of each other. They were careful not to come too close," said Alexander Pikayev, a prominent military analyst in Moscow who works for a government-funded research center. "The risk of direct military clashes is (now) much higher. . . . This situation is much riskier than the Cold War."

http://www.mcclatchydc.com/world/story/51913.html

Looks like McCain really wants to get elected.....let's hope we won't be a glowing constituency.

 

Report this comment
#3) On September 07, 2008 at 2:42 PM, daayoo (< 20) wrote:

A vote for McCain is a vote for WWIII.

Report this comment

Featured Broker Partners


Advertisement