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Fannie & Freddie Mac May Need 75 Billion in Capital
marketwatch.com — "Shares of big U.S. mortgage buyers Fannie Mae and Freddie Mac tumbled in trading Monday after Lehman Brothers analysts raised the possibility that accounting-rule changes in the works could require both companies to raise billions of dollars in capital." And since they are guaranteed by the government, that new capital may be coming from you.
StingingNettle- 52 diggs
- digg it
- yellowcakewalk, on 07/07/2008, -0/+11Of course it come to us taxpayers. Under the Market Marxism system, losses are always socialized. Assets are privatized. It's a mixed system.
- edstate, on 07/07/2008, -0/+2And which "system" is our supposed to be?
- Cryptocracy, on 08/17/2008, -0/+5whatever the banksters want when they want it.
- edstate, on 07/07/2008, -0/+5Weird. Now I can see Conservatives and Socialists actually agreeing on something: stringing these guys up.
- Hangly, on 07/07/2008, -0/+4Our economy has been "Keynesian" since Breton Woods system was implemented. It's not Marxism exactly, but it is very much state-interventionist and not at all free-market.
http://en.wikipedia.org/wiki/Bretton_Woods_system
"The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.
Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944.
Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Bank for Reconstruction and Development (IBRD) (now one of five institutions in the World Bank Group) and the International Monetary Fund (IMF). These organizations became operational in 1946 after a sufficient number of countries had ratified the agreement."
See also
http://en.wikipedia.org/wiki/Bretton_Woods_II
"In 2005, Roubini and Setser argued that the system is unsustainable:
If the US does not take policy steps to reduce its need for external financing before it exhausts the world’s central banks willingness to keep adding to their dollar reserves – and if the rest of the world does not take steps to reduce its dependence on an unsustainable expansion in US domestic demand to support its own growth – the risk of a hard landing for the US and global economy will grow. The basic outlines of a hard landing are easy to envision: a sharp fall in the value of the US dollar, a rapid increase in US long-term interest rates and a sharp fall in the price of a range of risk assets including equities and housing. The asset price adjustment would lead to a severe slowdown in the US, and the fall in US imports associated with the US slowdown and the dollar’s fall would lead to a global severe economic slowdown, if not an outright recession.[3]"
- edstate, on 07/07/2008, -0/+2And which "system" is our supposed to be?
- caferrell, on 07/07/2008, -0/+11FTA - "On Monday, a note from Lehman Brothers analysts said a pending change to a Financial Accounting Standards Board rule could result in Fannie Mae needing to raise an extra $46 billion in capital and Freddie Mac needing to raise $29 billion.
The Lehman Brothers analysts also said they believe it is likely Fannie and Freddie would be granted an exemption to the FASB rule change"
So a rule change is going to keep them from bankruptcy?
Everyone knew this was coming as the government used the two to pick up bad mortgages and thereby prop up the financial sector. But every little sleazy trick employed must be paid for. These little arrangements are going to keep popping up. Its like whack-a-mole, but we don't have many whacks left....- StingingNettle, on 07/07/2008, -0/+7Exactly, if an accounting rule exposes their crappy books, were they realy any less screwed before?
- Hangly, on 07/07/2008, -0/+6The Chinese free money factory just called. They say they're out of free Chinese money.
- bcomeaux, on 07/08/2008, -0/+2Anyone know exactly which FASB rule may change? Hopefully, it's the level 3 asset, "mark to make believe" rule. Why do we allow illiquid investments to be misstated like that? So much for the old accounting rule of sticking with the most conservative approach. I'm guessing we won't see Lehman bragging any more about their 25 times leverage.
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