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TMFAleph1 (95.98)

Winners & Losers in the Fannie, Freddie Rescue: Which One Are You?

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September 12, 2008 – Comments (6) | RELATED TICKERS: FNMA , FMCC , LEH

As the dust settles on the first stage of the rescue of Fannie Mae and Freddie Mac (we'll call them F&F), it's time to chalk up winners and losers. Which column(s) are you in? (more)

Alex Dumortier (XMFMarathonMan)

 

6 Comments – Post Your Own

#1) On September 12, 2008 at 6:49 PM, dinodelaurentis (69.10) wrote:

winner. taxpayer.

a pyrrhic victory.

or maybe a tactical victory and a stratigic defeat.

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#2) On September 12, 2008 at 7:27 PM, TMFAleph1 (95.98) wrote:

dinodelaurentis,

Thanks for your comment. I think you've captured it quite correctly -- for taxpayers, the rescue is a tactical victory amid a widescale strategic defeat.

Alex Dumortier (XMFMarathonMan)

 

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#3) On September 12, 2008 at 7:28 PM, TMFAleph1 (95.98) wrote:

dinodelaurentis,

Thanks for your comment. I think you've captured it quite correctly -- for taxpayers, the rescue is a tactical victory amid a widescale strategic defeat.

Alex Dumortier (XMFMarathonMan)

 

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#4) On September 12, 2008 at 10:13 PM, devoish (99.07) wrote:

Taxpayers are winners?! What did we win -- the right to backstop more than $5 trillion in obligations? The fact is we were already backstopping them; it just wasn't acknowledged. The fundamental difference post-bailout is that F&F's balance sheet will now be managed with taxpayers' interests in mind, rather than solely to maximize shareholder returns.

The bailout isn't the problem; it's a result of the tacit suicide pact that bound F&F and the government. Taxpayers are better off now because we are no longer implicitly subsidizing F&F shareholders

It wasn't acknowledged because it wasn't true. In 1968 Fannie's guaranteed mortgages were seperated into Ginnie Mae. Ginnies existence explicitly divided the guaranteed mortgages into Ginnie and the not guaranteed mortgages into Fannie. Any securities broker who implied that Fannie securities were guaranteed was misleading their investor. Whether the investor should have done his due diligence and visited Fannies website or the securities broker should be prosecuted for lying is a matter for the courts. 

PS. Ginnie has almost 500bil of guaranteed principle on its books with just under 3% in US Treasuries to guarantee them.

And the US Gov't does guarantee them. Expliciltly and dozens of times with phrases such as:

"Ginnie Mae securities are among the most secure investments in the global capital market and are the only MBS carrying the full faith and credit guaranty of the United States government. Even in uncertain times, investors are guaranteed payment of interest and principal, in full and on time. This, along with an expected return higher than U.S. Treasury securities, makes Ginnie Mae securities highly liquid and attractive to domestic and foreign investors, who can sell them quickly without significant risk of loss or arbitrage. Particularly in today’s turbulent mortgage industry, the faith in Ginnie Mae is demonstrated by its anticipated 50 percent increase in market share by calendar year end despite overall market decline".

I think if you want to restore faith in the Securities Markets you have to prosecute and jail the Lying P.O.S. (Pieces of sh..) because as long as there is no penalty for lying, there is no faith. Tough Love and all that. Prosecuting the sellers of Fannies securities for misleading investors should still happen.

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#5) On September 12, 2008 at 11:40 PM, dinodelaurentis (69.10) wrote:

"pieces of sh.."?

"i've got a whole bag of sh.. right here!"

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#6) On September 13, 2008 at 2:22 AM, jester112358 (29.01) wrote:

Made lots of cash on my LEH 40 Oct puts, but I'm still depressed by the economic ramifications of the nearly complete failure of the financial system due to so much leverage (and here I am using derivatives to get more leverage!).  After all, the cash profits won't be worth much in the future given the sorry state of the US$.  Trading is fundamentally an unproductive enterprise-doesn't add anything to GDP, just an income transfer from some sucker who sold me the PUTs in April at $5.  But I've been the sucker on most of my commodity calls so far.  Its a zero sum game!

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