July 14, 2008
– Comments (2) |
RELATED TICKERS: FNMA
What is FNM's mandate? Profide liquidity in order to make housing more affordable. And how has that worked out?
On top of that, they're not even profitable.
But getting rid of them, especially right now would exasserbate many of our current problems. I'm glad I'm not the "decider" of these things.
I'm just glad I've worked hard to reduce the risk in my personal finances as well as my investments.
I think this kid sounds dazed and confused. Pretty representative of most investors nowadays.
Hey kiddo: They had no choice but to intervene in the Fannie and Freddie situation. Debt issued or guaranteed by Fannie and Freddie is in large quantities at literally every financial institution in the U.S. If you look at the FDIC data you will see that 15-25% of almost every bank's assets are held in Agencies. If they hadn't backed up that debt the entire banking system would have failed as it did in 1929.
Most people that understand this situation knew that intervention had to happen, there was simply no other choice but for government to guarantee the debt of the GSEs. I was surprised that they may bail out shareholders, that makes no sense at all.
As far as the Fed printing money, etc... what do you expect? They already tried the other approach and ended up with the deflationary spiral of the Great Depression. I'm confident given a choice this Fed will choose to print money left and right in hopes of avoiding the deflationary spiral. Read Bernanke's "helicopter" speech and you'll know his playbook.