FANNIE & FREDDIE "INSOLVENT" - bloomberg

[Mike Kennedy]

video.......

Statement by Poole, former head of St. Louis Fed Reserve Bank


http://www.mortgagenewsdaily.com/video/embed.asp?id=1684


Are Freddie and Fannie Insolvent? Thu, 10 Jul 2008 07:49:35 EST

Financial news outlet CNBC was reporting early Thursday that Freddie Mac and Fannie Mae, the two corporations around which much of housing recovery has been structured, may be technically insolvent.
The claim came from William Poole, former president of the St. Louis Federal Reserve. Poole told Bloomberg News that Congress should recognize that the two are technically insolvent and the odds are that the U.S. may have to bail them out. Others disagreed, saying that there would have to be sudden losses of $40 billion between the two to trigger insolvency.

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[Mystery man3]

Appraiser Overvaluations

Until the incentive for appraisers to overvalue properties is ended you will see continued bank failures. They are still funding bad loans. You think they would learn. Idiots!

 

[Alison Swain]

Even if the big boys have either learned or left, the minions at the bottom still need their fixes. Until they clean out the commissioned junkies, they're gonna keep putting the screws to us.

 

[23Degrees]

By some estimates a trillion or more needs to be wrung out of the system. This represents the eventual total write-down sum. To date it looks like about $400 B is in the wipe out column in formal write-offs with inflation making some headway towards the total as well due to Fed policy last year so we might be half way there. This $1T figure represents in large part the funds sucked out by those that benefited from inflated profits and commissions during the housing ponzi scheme of the last decade. This wringing out would appear to be taking place primarily via a combo of inflation of consumables and asset depreciation. By not lowering interest rates at the last meeting it looks like the fed realizes they have played the inflation card as far as they can for now as the gas price and food price hollering was achieving crescendo. With the dollar fairly stable vs. the euro since March after a total 30% hit from March of 2006 the signal for now appears to be that the overt dollar beating might be done, particularly with Bernanke making a point of emphasizing dollar stability last month. That leaves asset depreciation in full play unless hindered by moral hazard inducing bailouts of homeowners. Even that probably won’t stop the freefall for long.

Can the GSE’s survive an unhindered freefall of real estate without becoming nationalized? I would not make that bet and those trying to keep housing values propped up are running out of cards to play. Fannie was a government agency until 1968 when they gained the current chimeric status so they still have the playbook somewhere.

Private reward balanced against public risk with foxes on guard duty at the henhouse – no other way this could have played out.

Thank you Mr. and Mrs. Taxpayer – first stop, FDIC goody bags at IMB.