July 13, 2008

FLASH: THE UNITED STATES TAXPAYER HAS JUST BAILED OUT THE KINGS OF THE GREAT HOUSING PONZI SCHEME - FANNIE MAE AND FREDDIE MAC

* US Treasury increases credit lines, backed by mortgages that haven't been marked-to-market
* Government to buy shares, existing shareholders to get diluted
* Fed to open discount window and lend money directly to Fannie and Freddie at near 2% that we all know will not get paid back. Loans backed by dodgy mortgages
* Changes to be added to disastrous Dodd/Shelby Housing Gambler Bailout bill
* Senator Dodd's "everything's OK" statement from yesterday looking even more clueless or corrupt tonight
* This is the beginning, the first steps. As home prices keep dropping and people keep walking away from their depreciating debt-traps, it'll only get more interesting from here. Especially if Fannie or Freddie had to mark to market.
* Got gold?

Treasury, Fed move to rescue Fannie and Freddie

WASHINGTON (MarketWatch) -- The White House and the Federal Reserve moved Sunday to prevent Fannie Mae and Freddie Mac from failing.

In a statement, Treasury Secretary Henry Paulson said the global reach of Fannie and Freddie necessitated unprecedented action.

The Treasury has moved to increase its existing line of credit to Fannie and Freddie. In addition, Treasury have been given the power to buy the two companies stock.

In a separate vote, the Fed board of governors voted to open its discount window lending facility to Fannie and Freddie. In return, Paulson asked Congress to rework a measure in the housing bill moving through Congress to give the Fed a formal role to work with the new GSE regulator that the legislation would create.

76 comments:

Ibod said...

B..BU...BUT..the monkey in the White House last month said it was just a "slowdown".

vanilla ice said...

The FED is Predictable and absolutely reprehensible for this disaster.

Anonymous said...

The US dollar is TOAST !

Got gold ?

Afterthought said...

3 points:

1: Are they going to stop trading FNM, FRE? Traders are getting killed by wild rumor-fueled swings EVEN WHEN THEY HAVE THE UNDERLYING CALL RIGHT!

2: The foreclosures to date do not equate to this: therefore something more is happening.

I propose that what is happening is that people have stopped paying mortgages, and banks are looking the other way in order to avoid write downs. That's how bad it is.

Once the typical person living in the shadows hears that his neighbor is saving thousands per month without penalty, they will do it too. This is the underreported story of the year! Remember the 60 minutes piece? I think that touched off a prairie fire.

3: China is paralyzed till after the Olympics... they are bailing out Freddy and Fannie because they know that the Chinese would be forced to retaliate in a major way.

Folks, the Olympics are right around the corner!

Elevator to Hell! Going Down!!!

Anonymous said...

The Monkebama says yes to the bailout of everyone and everything and amnesty for all. Si se puede!!!

Anonymous said...

Big blowout rally on Wall Street Monday. We're saved!!!

I think Hank's new street name should be "Sunday Afternoon".

LOL

mr big said...

Are idol reruns on tonight?

Notice how the news comes out on sunday. Paulson is so full of shit.I wonder if abby joseph still blows him.

Fire up the printing press once again.What a joke this government is.Asleep at the wheel for 4 years and then they figure out what a scheme our economy is.

Got to go cause walmart has a killer sale today.

Anonymous said...

Why is this a newsflash? Did anyone think they would not come out and say they would bail out freddie & fannie? This was the conventional wisdom all long. Ho hum, just pay your taxes and let the gov't line the pockets of their friends with them. Move along, go back to work if you've got a job. If not them just move along to your debt trap until your kicked out. Your gov't only says it cares about you, it really on cares about the wealthy & the powerful, no one else!!

Anonymous said...

SUUUUUUUUUUUU - ZZZZZZZZZZZAAAAAAAAANNNNNNNNNEEE!!!

WE
CAN'T
DO
THISSSSS!!!!!

LibVet said...

So this is what Armageddon looks like.

Funny, I'd always pictured grandmother's in gauzy gowns floating up to heaven.

All we have is the visage of Dick (Deficits Don't Matter) Cheney looking down at those of us who are not rich as if he were the devil himself.

LibVet said...

I had really been hoping against hope that somehow this could be avoided. God know, this kind of thing is well above my pay grade, I am not an economist, just a guy who reads the newspaper.

But I am smart enough to know that this is the straw that will break the camel's back.

Anonymous said...

Keith, you are all wrong. Didn't you hear the news? Both Fannie Mae and Freddie Mac are fully capitalized. Geez

Anonymous said...

Three cheers for FDR's socialist ponzi schemes. Let's run down that morons list of failed socialist ponzi schemes:

Social Security = failing
Medicare = failing
FHA = failing
GSE's = failed
FSLIC = failed
FDIC = failing

Yet the inbred leftwing morons keep clamoring for more "freebies" as if goods and services just fall out of the sky on demand. Nobama wants to give free healthcare and college tuition. Snap your fingers and it's free. What's he going to do about all the people who currently owe tens of thousands in student loans? Will their debt be forgiven? No need to study hard in highschool for that scholarship anymore since it's free tuition now. Everything is a right under the socialists. Even buying a house you can't afford that you didn't work for and don't have a hope of paying for. A welfare queen on crack now has a right to a mansion and free healthcare for her 10 children by 10 different babydaddies.

wottenwascal said...

Nice one. So who's next - Lehman Brothers?

Note to self: Write all MSM and tell them they can no longer use "unprecedented" in these stories.

wotten

Anonymous said...

Just Great. Put the Fed Bank in charge of banking regulatory policy. The fox is guarding the hen house.
Were fooked.

Anonymous said...

The Govt. buys Fannie stock?

At what share price are they stepping in with our tax dollars; $4, $8, $16?

The Housing Bubble Ate My Balls said...

GAME OVER....

Anonymous said...

HA HA HA

Once again HP loses. You dolts don't get it yet do you? The feds won't let any of these companies fail. Now be good little doomers and gloomers and go watch your 13" b&w tv in your shithole 1 bed 1 bath. The grownups have some work to do.

CHUMPS

Anonymous said...

Socialize the banks losses and privatize the profits.

Make sure they still have their golf memberships and their 35 million dollar Manhattan Condos.

The rest of us should not have taken out mortgages we could not understand or comprehend.

Let them (taxpayers) eat cake.

General Van Nuys said...

Welcome to the United Socialist States of America. Who knew W was a closet commie?

Anonymous said...

It is really gonna hit the fan Monday.

therealpeytonmanning said...

That's right ibod, this is the kick off for the 2nd half recovery.

Booyah!

Anonymous said...

TBTF coming to a bank near you. America, get out you checkbook/debit card. I know your credit cards are maxed out.
Pay or die, fools.

james said...

Geee, big surprise. What does this do to the market tomorrow??

Anonymous said...

So how long will it be until other desperate 'too big to fail' institutions come and ask for the same treatment?

Sam Hill said...

http://tinyurl.com/62bt7r

Awesome thread. It is blog war. Seeking Alpha (TBTF proponent) just got a big dose of STFU from John Galt FL and spanked by Market Ticker.
Makes me feel warm and fuzzy all over for the days of

HP vs Greg Swan

and

Exurban nation vs Casey Serin.

Maybe there is hope. Maybe not.

http://johngaltfla.com/
http://exurbannation.blogspot.com/

Hi Mort, Mammoth and Richard.

Anonymous said...

So when does the violent overthrow of the
government start? Predictions?

It's becoming more obvious by the day that Obama and McCain are both going to be in way the f**k over their heads on this one.

Will there be a mass exodus? Who in there 20's or 30's
would want to stick around for a ring side seat to the
long and ugly death of America?

Anonymous said...

Hold on a minute - Paulson is requesting that Congress provide Treasury with the authority to make these purchases/extend these lines/etc. - but he is NOT SAYING that Treasury will in fact move forward with said purchases/extended lines to Fan/Fred.

This is not to say that it won't eventually happen, but for the love of God, at least report on the facts as they are being presented currently: Paulson is requesting Congressional authority to act, he is not necessarily making good on those requests.

There's a big difference.

No Clinton VP said...

Just the fact that these bailouts are necessary every week tells you all you need to know about our corrupt Govt.


The system is broke beyond repair & the only way to save it is by strict term limits to prevent 28 more years like we are reaping the benefits of...(Bush , Clinton , Bush & probably a Hillary VP)

wings said...

KAGUNGA!

YOU KNOW WHAT I'M TALKING ABOUT!

UN FRICKEN' KA-GUN-GA!

Anonymous said...

I thought everything was contained?

Anonymous said...

Well the beginning of the end.

Anonymous said...

This is hilarious! Free market economy? Anyone ever heard of it? Anyone remember what it means?

The govt just killed the FNMA/FDMC shorts. Who would short them when the US govt says "we will buy common shares if the price goes too low".

So, they are going up as the shorts cover (and woe be to the financial system short term if they keep going down!!).

BUT, who is bidding up the dollar on this nonsense? The dollar should be tanking. Give the idiots a few days to buy dollars on this news then watch the dollar crash below 70.

And gold... gold (and oil) should love this.

Weeee! It'll be fun selling some calls to the idiots buying the coming bogus rally. Accumulate LEAPS puts on this bogus rally.

Anonymous said...

Interesting, the govt is choosing to prop up the market / fake rally BEFORE the capitulation. JP likes it now, let's see how EU reacts. I'm really curious to see if Mon is capitulation then rally or just rally. Perhaps they got REALLY scared at S&P 1230, a critical technical level.

Remember, they will let the market crash down, just at a glacial pace. Look at a chart of 2000-2003 to see what will come next (or worse).

Anonymous said...

Have we entered the "panic" stage yet?

ICEMAN said...

Now let's see how the market will take this from here. Seems that this will be there last save. I wonder who will be next in line to fail Lehman, Downey, Washington Mutual or Wachovia?

ICEMAN

Anonymous said...

That's it. Time to stop working on the books.

thomsa jefferson said...

More loans! MORE LOANS! Print that money, PRINT THAT MONEY!
Yee-haw!

LibVet said...

Analysts say more U.S. banks will fail

"As home prices continue to decline and loan defaults mount, U.S. regulators are bracing for dozens of American banks to fail over the next year."
http://tinyurl.com/6ljc5j

ZZwcck said...

We're all saved now that Freddie and Fannie have been bailed out. How quickly was Moody's going to cut the debt rating on US treasuries? How fast is the dollar going to drop at that point?

Used car salesman, I mean Treasury Secretary Paulson, is showing off the latest offering from the US government. Over here we have our best class of products. Customer asks, "Are those AAA rated?" Paulson's response, "Umm, we think they are the best in the world. I own them myself." Customer shrugs and says, "I'm sorry we can only buy AAA rated debt. Do you have any of that?" Paulson knows he won't make a sale so he responds, "If you think you're going to find a better deal take it."

As the customer walks away giving Paulson the bird, "What the heck happened to you guys? You seemed to know what was going on before..."

Anonymous said...

This is the mother of all pump and dump schemes.

I'll bet a lot of US Treasury 'loot' can be traced to 'business interests' in Houston...

Anonymous said...

Move along sheeple, nothing to see here.

Magic 8 Ball said...

I would like to be one of the first here at HP to wish you a
!!! MERRY GRINCHMAS !!!

Anonymous said...

This can't be a good sign either.

http://tinyurl.com/56k7dv

http://tinyurl.com/5zarj3

What exactly does "simultaneous deflation and inflation" look like?

Anonymous said...

And this :

http://tinyurl.com/6eucvl

Please somebody tell me there will be some cards left in the deck of international credit/monetary stability to play with. Of course, some would say the casino is about to close for good...

Lost Cause said...

Could things be more fucked up? This is exceeding my expectations, but the accounting scandals should have sunk them.

guy n. cognito said...

revolution, anyone?

OMG! said...

Financial Armageddon is upon us

http://tinyurl.com/6x3k8f

Lost Cause said...

I KNEW there would be looting. I just didn't expect it like this.

Anonymous said...

Check out this tool over at SeekingAlpha:

http://tinyurl.com/5sowm3

"Supporting Fannie and Freddie may be something Ben Bernanke and Henry Paulson decide we need to do in order to win this keep-the-economy-near full employment game:

* They are not in the business of rescuing feckless financiers from bankruptcy.
* If their actions do have the consequence of rescuing some feckless financiers from bankruptcy, that is a side effect of their keeping the financial crisis from spilling over and destroying the jobs of millions of Americans.
* To have the government step back in order to teach feckless financiers a lesson is simply not worth destroying the jobs of millions of Americans.
* They are grownups with good judgment and as much experience in this business as anybody.
* They are backstopped by committee chairs--Chris Dodd and Barney Frank--of equally good judgment."

Anonymous said...

An epic tale of blunder and despair...
a swan song to America.

Anonymous said...

Welcome to the United Socialist States of America. Who knew W was a closet commie?

That would be the day he said,

"This is an impressive crowd - the haves and the have-mores. Some people call you the elites; I call you my base."


Republican wingnuts of the world, put on your Burberrries! You have nothing to gain except everybody's money!

Anonymous said...


What exactly does "simultaneous deflation and inflation" look like?


It looks like Somalia.

Anonymous said...

NEW YORK, July 13 (Reuters) - U.S. banks may fail in far greater numbers following the collapse of the big mortgage lender IndyMac Bancorp Inc, straining a financial system seeking stability after years of lending excesses.
More than 300 banks could fail in the next three years, said RBC Capital Markets analyst Gerard Cassidy.

Full Article

Anonymous said...

"Anonymous said...
Three cheers for FDR's socialist ponzi schemes. Let's run down that morons list of failed socialist ponzi schemes:

Social Security = failing
Medicare = failing
FHA = failing
GSE's = failed
FSLIC = failed
FDIC = failing"

All were fine until 6 years of Republican goverment. MISSION ACCOMPLISHED!

Adolph H. said...

Got Bullets?

Anonymous said...

Scotty to Capt. Kirk: "She's [aka the greenback] giving all she can Captain! The engines can't take much more!!!!"

The dollar is going to get abused more and more everytime Paulsen and the government go back to the well to bailout anyone and everyone, in ever increasing larger and larger amounts.

Anonymous said...

The time for a new revolution is at hand

Andrew from Russia said...

Bailed out? Sounds like "embalmed" to me.

> * Got gold?

Got C-notes cheap for my wallpapering project.

Anonymous said...

"This really blows away the notion of an implicit guarantee," independent banking consultant Bert Ely said of the Treasury's plan to ask Congress to allow it to make equity investments in Fannie Mae and Freddie Mac. "It suggests a greater concern about how these companies are doing. It says the problems are deeper. It gets to the solvency of the companies, not just the liquidity."

Docat said...

So does this mean that the US national debt increases _overnight_ by $5 trillion, since they are now explicitly saying that the taxpayer is on the hook for every loan backed by Fannie Mae or Freddie Mac? I don't remember agreeing to this....

Anonymous said...

Democratic presidential contender Barack Obama said the government's main concern should be "to make sure that home ownership remains attainable and affordable for American families. Second, any measures should protect taxpayers and not bailout the shareholders and management of Fannie Mae and Freddie Mac."

The Housing Bubble Ate My Balls said...

What exactly does "simultaneous deflation and inflation" look like?

For the super rich everything is a bargain, entire towns can be purchased for pennies...

For everyone else things will be 6000 X more expensive and there will be no jobs at which to earn at anyway.

went2puke said...

afterthought said:

"Once the typical person living in the shadows hears that his neighbor is saving thousands per month without penalty, they will do it too."

This is exactly what's going to happen. The government is basically saying: "it's OK if you don't pay your mortgage. We won't penalize you. Actually, we'll even help you out. But we'll help only if you fail to pay. Sorry we don't reward those who have been making their payments on time."

From now on, folks who continue to pay their lenders should be really dumb!

Anonymous said...

This has been a long time coming, at least 20 years. It is worse than most think. The moral underpinings of our nation have been removed. Check the history. Read about the 1920's. Gambling, drug epidemic, flappers, gangsters, booze, hookers, non stop parties, financial fraud, run away debt, crooked polliticians, real estate collapse, stock market collapes, job losses. Study the history. Every 80 years we have a 12 year depression. Best estimate 2010. Economics is nothing more than people, interacting with people. The doctor rips off the lawyer. The lawyer rips of the mechanic. The mechanic rips off the doctor and on and on. Price inflation. Charge whatever the market will bear until it all breaks down. First the tech stock bubble and Clintonian trickle down immorality. Then the real estate bubble. The gambler/investor class have been trying to bubble the stock market, but no one is biting. Now they are bubbling the oil futures, forcing gas prices though the roof. They run up the prices, sucker the average Joe in, and sell st the top. Joe average takes the loss. Don't fall for it. Always buy low, never at the top. The problem is Joe average is broke and lost his job. His company had to cut back because sales are dropping. Consumer spending is two thirds of the economy and the comsumer already has used up his home equity. Also his home is fifty percent overvalued and dropping. What is he going to borrow against and who is going to lend him the money to keep it all going? Is this too much truth to hear? Wake up

Anonymous said...

Keith you are so transparent dude. Had your pal Barry Hussein been doing this you'd be lauding him and calling him a hero for saving the financial workd from meltdown.

Come on man, admit it, you work for Barry's campaign.

Anonymous said...

So let's sum up:
-Friday:
Stock marcket dips on fear F&F may need a bailout. Government tells 'no bailout!'->Stock dips further

-Today:
Stock marcket surges on F&F bailout

WTF?

emmy said...

So Keith, this time the shit hit the fan after you came back from Russia...
Most people don't understand anything more than gas is up, and doesn't that go back down in th fall? Wow the housing market sure is slow..
I don't know that the big story is that people are foreclosing on purpose, most people seem really stressed out by foreclosure, at least around here. There doesn't seem to be anyway to stop it right now...Maybe your house will get paid off, maybe it will be taken off your hands but a person is going to be left unable to pay for anything else, due to severe inflation.
How awful... how unbalanced... We live in SE michigan, there's been rumours of riots this summer in Detroit, everything is so expensive...

Anonymous said...

How appropriate that this is Bastille Day. Fire up the guillotine!

Anonymous said...

>> Socialize the banks losses and privatize the profits.

Have you even had an original thought this century?

Miss Goldbug said...

Bay area news ***Flash****

Last night, all the local news were running stories of the "mortgage" crisis.

Kicking off the story was the "IndyMac Bank Run" happening down in Pasadena, CA.

Second story about bay area forclosures. The city of Vallejo, CA has homes that were selling at the peak for $374,000 - today are selling for $132,000. This is news. The city of Vallejo has filed BK and laid off most city staff and cut police and fire services.

Second news story: East Oakland's forclosure problem. Showing a tour bus driving around potential buyers vacant, delapadated homes in east Oakland that have been forclosed. City officals directly blaming on TELEVISION mortage brokers, banks and real estate agents for their problems in east Oakland.

Don't think these events will not effect San Francisco, Santa Clara, Palo Alto, Lafayette, Orinda, Alameda....well, think again.

The carnage is coming, and its coming fast...oh, mama mia.

Miss Goldbug said...

Afterthought said:"I propose that what is happening is that people have stopped paying mortgages, and banks are looking the other way in order to avoid write downs. That's how bad it is."

--------
Exactly correct AT.

Last week I opened a cd at a local large bank and of course, the banker associate and I naturally talked about the economy when he was opening my new account.

He was pleasant, and reassured me his bank was safe...anyway, he said here in Alameda and in San Leandro area there are 85 new bankruptsy notices mailed out every week.

He also said, that when a homeowner sees a neighboring house is getting forclosed, these homeowners promptly turn in the keys because they know forclosures dilute the value of everyone elses house on the block, and the homeowners on the brink of forclosure just mail in the keys when they find out there is one in their neighborhood.

It's that bad. Told to me by an employee of a local large bank.

Skaven said...

Explain to me what this has to do with gold? We are seeing massive debt deflation across the board. The bottom is about to drop out of everything, including equities and, yes, precious metals.

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=A1YourView&xml=/money/2008/07/11/cnmoney111.xml

We're so screwed.

Anonymous said...

Anonymous Anonymous said...

HA HA HA

Once again HP loses. You dolts don't get it yet do you? The feds won't let any of these companies fail. Now be good little doomers and gloomers and go watch your 13" b&w tv in your shithole 1 bed 1 bath. The grownups have some work to do.

CHUMPS


--------------

You are 100% correct, but the value of the dollar will be chams after this! Everyone loses you fool!

David said...

Aw, all this stuff is in your heads. We've become a nation of whiners, haven't you heard?

St. McCain and his buddies think everything is just hunky-dory, nothing to worry about, close your eyes and think of Christmas. Just like the last 8 years of "What, me worry?" leadership.

Anonymous said...


I'll bet a lot of US Treasury 'loot' can be traced to 'business interests' in Houston...


You're such a fuckin moron it's not even funny. The money is in Washington DC and Wall Street. You pea-brained moron. You sucker. You idiot. You birdbrain. You kool-aid drinking retard.