S&L in a different package- same result.

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You've gotta love it when a plan comes together.. just another shake down. Loan Giant Overstated the Size of Its Capital Base The proposal to place both companies, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies’ debt might not be repaid. Falling home prices, which are expected to lead to more defaults among the mortgages held or guaranteed by Fannie and Freddie, contributed to the urgency, regulators said. Investors who own the companies’ common and preferred stock will suffer. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives of both companies will be pushed out, according to those briefed on the plan. The cost of the government’s intervention could rise into tens of billions of dollars and will probably be among the most expensive rescues ever financed by taxpayers. NY Times - registration required to read full text ..oh, more good news ..and a surprise!! History in the making!! Mortgage Giants Agreeable to Rescue Plan, but Its Cost Is Unknown WASHINGTON — Fannie Mae and Freddie Mac agreed on Saturday afternoon to the Bush administration’s plan to rescue them, people briefed on the plan said. Under the plan, the Treasury Department will buy billions of dollars in new mortgage securities issued by the companies and inject an unknown amount of capital into them in quarterly installments, according to these people. On Sunday, the government plans to announce that it will take control of the mortgage finance giants, remove the top executives and their boards, and appoint a conservator to begin to nurse them back to health. Senior government officials including Treasury Secretary Henry M. Paulson Jr., Federal Reserve Chairman Ben S. Bernanke, and James Lockhart, the top regulator for the companies, informed their top executives about the plan in meetings on Friday and Saturday. The moves by the Bush administration hold the prospect of becoming the biggest government-funded bailout of private industry in American history. They would put the federal government in control of institutions that finance or guarantee about half of all the mortgages in the country. NY Times - registration required to view full text
 
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Where are you gonna get the money for that ? Interesting that the people being bailed out don't appear to be fully aware of their own position. Luckily, it's not $2.3T that they aren't sure about, and only some billions.
 
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Great, I worked hard to pay off my house, now I get to pay other peoples mortgages. I have a lot of colleagues that bet big on Freddie stock recently. I'm sure glad I stayed on the porch.
 
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It's official. I no longer have a country. Anybody know of a country with low barriers to entry for U.S. refugees? The funny thing about all of this is that financials and the market will probably rally 300 points on Monday. The talking heads on CNBC will probably say the "financial crises is over". That's when smart traders will move into financial shorts like SKF, the gift that just keeps giving ;\) Edit: I'm just joking about skf, don't buy it Monday because I don't want anyone losing money. The rally will be sustained. But at some point, it will be a good buy.
 
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Just reread Gary's post again. Did I read that right that preferred stock holders will lose out too?? Wow. If that's true, than bye bye to many regional banks who are big holders of prefers. I can't believe this is actually what the government wants. Now I have no clue what will happen Monday.
 
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All institutions are reminded that investments in preferred stock and common stock with readily determinable fair value should be reported as available-for-sale equity security holdings, and that any net unrealized losses on these securities are deducted from regulatory capital. In layman's terms, what does that mean?
 
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 Originally Posted By: ToyotaNSaturn
In layman's terms, what does that mean?
Bend over. (to me it means the banks can't count pie in the sky assets, IOW's they need to only count real value)
 
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Gary Allan

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 Quote:
Great, I worked hard to pay off my house, now I get to pay other peoples mortgages.
Brett: I kinda look at it a different way. Someone ..somewhere in this whole mess benefited from it. You're paying for their "opportunity". The principles (the mortgages that you're shoring up and the taxpayers footing the costs) are just part of the billing process in the (a)rear(s). It's all a "phased" relationship of sell and profit now ..but bill later. This is such dark comedy unfolding before our eyes in real time.
 

Gary Allan

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Top executives of both companies will be pushed out
What do they care? The position was just for being at the helm of a ship assured to crash. "Take a hit for the team". I'm sure that their compensation packages were well buffered for this ultimate event ..and/or they will be fitted into some other part of the "League of Distinguished Gentlemen". Then again, they could just be escape goats () that were in the under achiever's section of the country club. "Use Bobby, he's worthless anyway. No one will miss him."
 
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wow, it just doesn't make sense to pay your bills in this country for the past few decades. I've seen people file bankruptcy, have maxed out credit cards, and way too much house than they can afford. all to be bailed out.
 

Gary Allan

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 Originally Posted By: Cutehumor
wow, it just doesn't make sense to pay your bills in this country for the past few decades. I've seen people file bankruptcy, have maxed out credit cards, and way too much house than they can afford. all to be bailed out.
..but in the "quench and purge" of those bouts of ebb and flow of prosperity and decline have been (usually) very small. That is, the default rate over the vast numbers of ..shall we say "earnings" and the watershed from them. Recessions were sensible pauses for realignment of "differentials". The globe, for a very long time, has been run on our credit. The (former) leading economic indicators of a healthy economy were new home starts and auto loans ..and "bigger ticket" consumer items. It was a tertiary view of the underlying health of your TRUE economy. People, generally, spend 100% of their paycheck weekly. It was the commitment to debt that constituted "economic health" (OT, upramp in wages, etc.) and fueled "growth". Then some bozos figured out that you don't need a healthy economy ...you just need healthy looking economic indicators. aka: totally hollow and running on vapor. The recessions were too inconvenient to "raking in the harvest".
 
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 Originally Posted By: ToyotaNSaturn
All institutions are reminded that investments in preferred stock and common stock with readily determinable fair value should be reported as available-for-sale equity security holdings, and that any net unrealized losses on these securities are deducted from regulatory capital. In layman's terms, what does that mean?
It means when banks lose a sheet load of money THEY HAVE TO REPORT IT ON THEIR BALANCE SHEETS! Idiots at Freddie and Fannie and other banks took this country for a ride...
 
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Bloomberg is reporting that the Fed and FDIC will also restore capital to small banks holding significant Phony and Frauddy preferred shares. So that answers my earlier question. There is going to be a rampage in the stock markets next week.
 
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