Fannie Mae and Freddie Mac

joe-90

joe-90

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No they are not film stars of the forties, they are the USA's biggest mortgage lenders responsible for half the mortgages in the USA - and they are about to do a Northern Rock type collapse. If they go under then that will start a complete collapse of the banking system worldwide. Will their government bail them out? With a trillion dollars at stake who knows? Most worrying is that they are not caught up in the sub-prime fiasco, these are ordinary mortgages.

Back home it looks likes Bradford and Bingley could soon collapse to be followed by Allience and Leicester.

Will the government prop them up as they did with Nth Rock? How can they? How can they not?
 
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Get yourself an "A" board, mate.... can you back up your fears that more UK banks are to go to the wall?
 
Those yank lenders should have been forced into closure based solely on having such poxy names :eek:
 
As far as I can work out those are nicknames. I heard the proper names on the radio the other day, they have Acronyms beginning with "F" for "Federal"

edited:
Federal National Mortgage Association (FNMA)
Federal Home Loan Mortgage Corporation ("FHLMC")
http://en.wikipedia.org/wiki/Fannie_Mae
http://en.wikipedia.org/wiki/Freddie_Mac

From what I hear when a Yank Bank goes bust, the gov takes it over very fast. It closes on Friday and it reopens on Monday morning under new ownership. the depositors don't lose their money but the sharholders and managers do.

So no need for a Northern Rock-style run on the bank by people trying to take their money out, or a long-drawn out decline.

I believe they had a lot more small (local) bank collapses in the past than we did as they did not have the same sort of large National banks, so had more need of quick solution.

Northern Rock was not exaclty propped up - after a short period of tide-over loans it was nationalised (though the Gov avoids using the word) and the gov claims the value was as a gone-bust company. the speculators who picked up heaps of shares for next to nothing are of course trying to argue that they should be paid a value as if it was a successful bank that had not gone bust.
 
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You do have an uncanny habit of selecting a single statistic and building an entire argument on it :rolleyes:

Share price trend alone tells you absolutely nothing about the profitability or robustness of an organisation and there are many legitimate reasons for falling share price such as capitalisation, asset management, sector investment etc etc.

It may make them a target for a hostile takeover though :LOL:

MW
 
joe-90 said:
Most worrying is that they are not caught up in the sub-prime fiasco, these are ordinary mortgages.
Click to expand...
Both companies were involved in sub-prime mortgages. Freddie Mac had to write of $12 billion of sub-prime loans.
 
Actually freddie and fannie are underwriters of other companies that are exposed to the sub-prime collapse...

But you can Add another one to the stats..

And how can the US government 'bail them out' when they are $9.5trillion in debt?

They will of course just print more money, but that just puts off the inevitable...

And the Arabs or the Chinese can cause a crash in the US/West which could outdo the '29 one with a simple little sentence...

"please can we have our money back!"
 
This whole thing is just like an avalanche. First of all a few cracks appear and then there's a bit of minor movement. Then something big slips and the whole lot comes crashing down. We are just waiting for the something big to happen. If Freddie or Fannie go belly up - then the whole show will collapse, and take the British banks with them.
 
Fannie and Freddy are guarantors if the borrower defaults. they relatively recently changed their policy to only provide guarantees if the borrower could afford to pay at the full (not discounted) interest rate :rolleyes:

If they go bust, then the banks who lent more money than the house was worth, to customers who lacked the means or the will to repay, will be in trouble.

Just like you would be if you made a habit of letting customers run up big accounts when they weren't creditworthy.

It is foolish to allow companies to run a risky book on the assumption that all the profits belong to them, and all the losses belong to the taxpayer.

It is no more than is to be expected, and perfectly fair. the loan companies and their investors will go bust (tough) but the retail depositors will have their saving protected. For a while, the survivors will be more sensible.

That was always the idea :rolleyes:

With the help of Keynsian economics and the experience of the Wirtschaftswunder we know how to rebuild after a terrible crash. We've been through much worse destruction than this.
 
JohnD said:
If they go bust, then the banks who lent more money than the house was worth, to customers who lacked the means or the will to repay, will be in trouble.
Click to expand...
Which is just about all of them, given the slide downwards of the price of the house - the asset that allowed the banks to loan out (pyramid wise) £1m based on a £100k 'surety'
 
It's tough, isn't it?

If you build a house of cards, you have to expect it to fall, and take the hit.

I see the US central bank, the Federal Reserve, has cut interest rates to 2.25%. and made huge loans to the financial institutions that have a chance of surviving. Retail mortgage customers are still being charged 6% plus :eek: That should keep the companies staggering along until the storm blows itself out and we see who's still standing.
 
It's not scaremongering at all - it's what's happening to the economy.

Get your head out of the sand an get ready to live in poverty.

2002 - Oil $20 per barrel.

2008 - Oil $150 per barrel

...and still rising.

Oil is the base material for everything in our civilisation. It will soon reach the point where the raw material that we depend on is so expensive that we cannot afford to use it.

This will lead to a depression that will never end in your lifetime. (or your children's lifetime).

Sorry, but that's the way it is.
 
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