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WSJ Tearing Mudd and Syron a Pair o' New Cornchutes Too



August 20, 2008 – Comments (4) | RELATED TICKERS: FNMA , FMCC

So Merrill's houses are worth 22 cents while Fannie and Freddie's are worth a buck?...

simply nobody believes a word Fannie's Daniel Mudd and Freddie's Richard Syron are saying, because their interest now is in delaying recognition of any losses and gambling on a turnaround, using the government's credit card.

That gamble may be looking more hopeless by the day, judging by their share prices. But Congress just increased the size of the mortgages they can buy. Washington has all but thrown itself on their mercy to keep the housing market afloat. In theory, Fannie and Freddie can now Ponzi themselves to the sky -- the capital markets will continue to finance them no matter what losses they store up, or even whether they appear to be solvent.

Get your front row seat here.

And remember, these guys earn tens of millions because they have exploited an implicit (now explicit) taxpayer backstop that absolves them of any responsibility from screwing up royal, so long as they screw up royal enough (as they have) to pose a risk to the entire financial system.

4 Comments – Post Your Own

#1) On August 20, 2008 at 12:13 PM, kdakota630 (29.12) wrote:


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#2) On August 20, 2008 at 2:28 PM, dth20k (72.92) wrote:


"FDIC Unveils Mortgage Modification Plan for IndyMac Borrowers" 

This is awesome!  If you were dumb enough to take out a dumb loan at a dumb bank, the gov will be bail you out!  Who says two wrongs don't make a right!  Who says up is up and down is down!

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#3) On August 20, 2008 at 3:08 PM, Gemini846 (34.45) wrote:

Do we have any recourse as taxpayers against Paulson's Fed? Can we impeach him, or do we have to lynch, feather, or otherwise shoot him?

For the record my house rep voted against this garbage bill. Rep Bill Young you have my vote.  My senators (FL) will need a good looking at come election time.

I'm surprised the WSJ didn't bother to explain how Merrill's loans were only worth 22c. See the house was worth $0.40 the subprime loan was uncollectable but given to the deadbeat borrower at $0.60. Then it got sold on the market getting marked up 10c each time and then Merrill got it. So what they were calling $1 is really $0.30 and loosing value every day as both the collateral looses value and more people in the bond default.  It's not really a "sale" otherwise Merrill would just keep the paper.

Now why the boys from FNM/FRE think those papers are still worth $1 is beyond me.

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#4) On August 20, 2008 at 7:42 PM, Imperial1964 (94.60) wrote:

I've got a question, what happens if FNM and FRE don't blow up until a new administration comes in?  Paulson is almost certainly gone in January.

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