Titanic Concerns over Freddie Mac!

[Neutrino]

undermining the whole Housing Industry



http://www.forbes.com/home/2003/07/14/cz_rl_0714soapbox.html

[ender]

1. up a crick without a paddle.

this is not good. if either of the FM's go kaboom, we are in a serious world of hurt.

[donsu]

2. how close to the edge are they?

that "too scary for public consumption" raised my hair.



"Freddie is like a huge ship plowing through icebergs. The market thinks the Treasury standby credit facility will keep them safe, but it is actually the Federal Reserve Bank that is acting like an icebreaker for them. Their recent pronouncements on keeping interest

rates low, even in the face of strong economic growth, is probably designed to forestall a devastating loss at Freddie. (Don't believe the Fed's cover story about being concerned over deflation; their real concern is too scary for public consumption).

A recent article in the Wall Street Journal pointed out that Freddie's derivative position is so massive, it is impossible to unwind except over an extended period of time. Meanwhile, the accounting recognition of the $6.5 billion in reserves is equivalent to the ship throwing its bilge pumps overboard while Congress and the regulators are busy rearranging the deck chairs."

[Neutrino]

4. Right now there is a serious refusal to turn over information

to the Committee investigating their Derivative mess.
The usual Bush Stonewall that has permeated anything
that has to do with the Economy or the Bush Administration.

But it's gonna come out shortly--and it won't be pretty.

[Tigermoose]

5. If Freddie Mac blows up/implodes/whatever...

then you will see the available money supply shrink up like testicles in the antarctic.

[Nottingham]

3. Is this like the Savings Loan Scandals

:bounce: Its a timebomb

[Neutrino]

6. I think it is like the Saving & Loan Scandal--maybe worse

because of all of the other threats to Economic stability we face--
like the "war". The Housing Industry right now is the linchpin
of the Economy. It doesn't take a Rocket Scientist to figure out
that the Unemployed are homeowners. If you scratch beneath the
surface of the Numbers when they are released, you can see a
weakness. Credit Quality is very poor, with Foreclosures at a
record high--many of which have not been disclosed because there
is a huge backup in processing, and because Banks are soft on
bad news.

We'll all know real soon.

[Tigermoose]

7. The derivatives flooded financial system is like a house of cards

with Freddie Mac being on of the foundational cards holding everything up.

Or, another way to think of it is in terms of the traditional sense of the word "leverage." Due to the genius of modern financial minds, the financial system is soooo frieking leveraged its like a teeter-totter capable of supporting 200000x its weight on one end by 1000lbs on the other. Its a highly tense situation, and Freddie Mac is one of the 1000lb elements leveraging the 200000x. The whiplash effect of Freddie imploding is beyond comprehension.

see The Wizards of Money for more info.