Here come the Freddie and Fannie bailouts...

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<a href="http://money.cnn.com/2008/09/05/news/companies/freddie_fannie/index.htm?postversion=2008090518">Fannie and Freddie Bailout</a>



Looks like it could happen this weekend.
 
Great... my hard earned tax dollars at work to bail out the irresponsible acts of Fannie and Freddie. I wish I could start a company, not get taxed on profits, and have taxpayers bail it out when it suffers astronomical losses! A brilliant business plan!
 
My favorite part of the FRE/FNM saga is the tens of millions spent on lobbyists. It is always wonderful to see a real synergy between the public and private sector.
 
[quote author="redline" date=1220686909]Great... my hard earned tax dollars at work to bail out the irresponsible acts of Fannie and Freddie. I wish I could start a company, not get taxed on profits, and have taxpayers bail it out when it suffers astronomical losses! A brilliant business plan!</blockquote>


What tax dollars? Seriously, where are these supposed tax dollars going to come from? The US federal government is already spending more than it collects, so just what tax dollars are we refering to?
 
Here comes the Obama tax increases. Don't worry guys He will only raise taxes on the so called rich which is anybody that is lucky enough to live in California.
 
hbguybill:

I think you should look at his tax plan more carefully. If you're married and make 250K or more, then you'll be taxed at a higher rate just based off of the income over 250K. Or if you so happen to sell a lot of stocks during this time. Percentage wise, you probably won't pay anything extra, but you could pay some more.
 
FANNIE MAE(NYSE: FNM)

Closed 7.04

After Hours: 5.50 -1.54 (-21.87%) 7:59PM ET



FREDDIE MAC(NYSE: FRE)

Closed 5.10

After Hours: 4.04 -1.06 (-20.78%)7:59PM ET





Monday may not be a good day in the market.
 
Well don't confuse losses in Freddie and Fannie for the market. Remember, a lot of banks are going to get bailed out here because they have the bonds and preferred in thei portfolio. The plan also bails out the preferred from what I read, which would be somewhat unexpected. If they explicitly back the debt/preferred, then they will have the same worth as treasuries. Of course, treasurie should take it on the chin. I'll be interested to see what happens to CDS on US debt on Monday.



It also reads like the equity holders get diluted, but not wipped out either. What the heck kind of bailout is this?
 
Any tax increases because of this bailout are Bush tax increases. Now that he's guaranteed their debt, future Presidents and Congresses will have to pay for it. It doesn't matter who gets elected.



From the WaPo and NYT accounts it's not yet been announced who is getting how much of the bailout. Presumably the big debtholders like China and the hedge funds will be fully bailed out. Common and preferred shareholders may or may not get bailed out. What really scares me is the possibility that the Bush administration has not even <b>decided</b> who's getting bailed out yet (it is a very complex issue). We'll find out more by Sunday - they'd better have all the details announced by the time Tokyo opens or it's going to be total chaos in the markets.
 
[quote author="Schlotkins" date=1220697900]Well don't confuse losses in Freddie and Fannie for the market. Remember, a lot of banks are going to get bailed out here because they have the bonds and preferred in thei portfolio. The plan also bails out the preferred from what I read, which would be somewhat unexpected. If they explicitly back the debt/preferred, then they will have the same worth as treasuries. Of course, treasurie should take it on the chin. I'll be interested to see what happens to CDS on US debt on Monday.



It also reads like the equity holders get diluted, but not wipped out either. What the heck kind of bailout is this?</blockquote>


As of friday night, we have conflicting information on the plan, so we can't be sure. Some newspapers are saying the preferred are bust, others the opposite. All agree that a large amount of dilution awaits the Freddie and Fannie stock.
 
[quote author="FairEconomist" date=1220699458]or it's going to be total chaos in the markets.</blockquote>


It already was.
 
<a href="http://bigpicture.typepad.com/comments/2008/09/here-comes-the.html">From Barry's blog</a>, and I share the same thought...



<em>As to the crappy derivatives that Phony and Fraudy bought when they thought of themselves as giant hedge funds -- the first person in government that suggests taxpayer money be used to cover those losses, I will personally feed into a wood chipper . . . Feet first . . . Slowly.</em>
 
<a href="http://www.nytimes.com/2008/09/06/business/06fannie.html?ex=1378440000&en=bb00f9b875ae704b&ei=5124&partner=permalink&exprod=permalink">NY Times reports that the Fannie and Freddie takeover are at hand.</a>



There goes the neighborhood.
 
[quote author="asianinvasian" date=1220775954][quote author="ConsiderAgain" date=1220697167]

Monday may not be a good day in the market.</blockquote>


Consider again.</blockquote>


Ya well, let's see how good the market feels about this part:



<a href="http://www.nytimes.com/2008/09/07/business/07fannie.html?_r=1&hp;=&oref=slogin&pagewanted=print">Loan Giant Overstated the Size of Its Capital Base </a>



I'm actually surprised accounting rules are so lax that they were allowed to use them in this manner. I mean, come on:



"<strong>For years</strong>, both companies have effectively <strong>recognized losses whenever payments on a loan are 90 days past due</strong>. <strong>But, in recent months</strong>, the companies said <strong>they would wait until payments were two years late</strong>. As a result, tens of thousands of loans have not been marked down in value."
 
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