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Paulson Gets One Right

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July 12, 2008 – Comments (2)

Paulson: No Shareholder Bailout

Secretary Paulson is insisting that any potential rescue plan for Fannie Mae and Freddie Mac not benefit the companies' shareholders.

I'm not sure it should bail out anyone else, either. If taxpayers need to guarantee those MBS, then taxpayers should get the payback. How hard is that? Why should folks who are only providing part of the capital get all of the payout?

Sj

2 Comments – Post Your Own

#1) On July 12, 2008 at 11:12 AM, TDRH (99.46) wrote:

Kind of makes you wonder why the Congress, Fed, Paulson all stood buy and or encouraged this groups exposure to JUMBO loans, extending their maximum from $417 to $600+-?    This for a couple of companies that could not even file their annual report properly.  

Bent, do you see a light at the end of the tunnel?    I don't want to sound like chicken little, but as you outlined earlier, the Fed rate is decoupled from long term rates.   With the dollar continuing to slide, inflation running rampant, and long term interest rates moving higher on their own I think the Fed has to raise rates.    This will not improve the employment situation and as unemployment continues to rise, the rate of foreclosures will increase as well. 

Not sure why anyone would want to grow up to be president, and I pity whomever inherits this economic cycle.   What hope do you see?   What steps would you take?  

Imagine it is exactly the wrong thing to do, and would   accelerate the crash, but the first thing I would do if the government has to take over is raise the % of skin that borrowers have to have in the game for any loan guaranteed,.    For home mortgages it would be 20%. For home mortgages over $417,000 it would be 40% for the balance over $417.000.  There would be panic in the streets and financial collapses, but it would seem the path the Fed is following is to erase the bad debt by inflating it away.   Rip off the bandaid, expose the wound and let it heal before gangrene sets in and rots the economy away. 

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#2) On July 13, 2008 at 7:56 PM, TMFBent (99.81) wrote:

Need to take this back. Paulson choked and the Feds gave Fannie and Freddie a free pass: taxpayer guarantee on their garbage securities, billions more in cheap loans, and an equity purchse "if necessary."

 

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