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    http://news.bbc.co.uk/2/hi/business/7602992.stm

    <div>
    <h1>
    US takes over key mortgage firms
    </h1>
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    <!- S IIMA ->

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    <div>Fannie Mae and Freddie Mac are central to the US housing market</div>
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    US President George Bush says mortgage
    giants Freddie Mac and Fannie Mae have been taken over because they
    posed "an unacceptable risk" to the economy.



    The two companies account for nearly half of the outstanding
    mortgages in the US, and have lost billions of dollars during the US
    housing crash.


    The most recent figures show about 9% of US homeowners were behind on their payments or faced repossession.


    The federal takeover is one of the largest bail-outs in US history.
    <!- E SF ->

    It was announced on Sunday by Treasury Secretary Henry Paulson.


    "Putting these companies on sound financial footing, and
    reforming their business practices, is critical to the health of our
    financial system," President Bush said.


    "The actions taken today are temporary, and will support housing finance in the near term."


    'Comprehensive action'


    As part of the changes, the management of the two companies will
    be replaced while the firms will be given access to extra funding to
    support their business going forward.


    Treasury Secretary Henry Paulson said the government was
    intervening in the wider interests of the financial system and of
    taxpayers since the financial position of the two firms was fast
    deteriorating.







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    <div>

    A failure of either of them would create great turmoil in financial markets here and around the globe
    <br clear="all"> </div>






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    <div>
    <div>Henry Paulson on Freddie Mac and Fannie Mae</div>


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    He added that the two firms' debt levels posed a "systemic risk" to
    financial stability and that, without action, the situation would get
    worse.


    "We examined all options available and determined this
    comprehensive and complementary set of actions best met the objectives
    of market stability, mortgage availability and taxpayer protection," he
    said.


    "Fannie Mae and Freddie Mac are so large and interwoven in our
    financial system that a failure of either of them would create great
    turmoil in financial markets here and around the globe."<div><!- capti&#111;n ->

    US treasury statement on the future of Freddie Mac and Fannie Mae<!- END - capti&#111;n ->
    </div>

    <!- end

    Comment


      should add some support to the mkts tomorrow....fun day at work ahead...
      Seas suas agus troid!

      Comment


        should add some support to the mkts tomorrow....fun day at work ahead...
        Seas suas agus troid!

        Comment


          Will it mean a weakening of the dollar ?

          Comment




            Interesting question Point.Fundamentally yes-the dollar should decline as the administration will fund this by borrowing-thus expanding the deficit.


            However and it's a big however, they are doing something and thus removing uncertainty.The market hates uncertainty and my bet would be the dollar will do better 1.20 is probably my equilibrum rate.


            Eamo
            I believe that all government is evil, and that trying to improve it is largely a waste of time.
            HL Mencken

            Comment


              I'd imagine LL is indeed busy today[img]smileys/lol.gif[/img]

              http://www.irishtimes.com/newspaper/...008/0908/break ing1.htm
              <h1>
              </font></h1><h1>Markets soar on back of Fannie and Freddie bailout</font></h1><div ="article-extensi&#111;n"><div ="c&#111;ntent">
              </div></div>DAVID LABANYI</span>

              Stock
              markets across Europe and Asia soared todayafter Washington bailed
              outmortgage firms Fannie Mae and Freddie Mac to salvage the US housing
              market, spurring investors to buy back risky assets and sell safe
              havens such as government bonds.

              Shares on Dublin’s Iseq were up almost 7 per cent at 4,580 a rise of 298 points, shortly after opening.

              Banks
              were the biggest gainers with Anglo Irish Bank adding 14.6 per cent to
              €6; AIB up 13 per cent to €8.91 and Bank of Ireland gaining 11.7 per
              cent to €5.90. Irish Life and Permanent stock added 11.4 per cent to
              €7.20.

              Building related stocks received a boost from the news
              with CRH rising to €18.75, a gain of 9 per cent, while Grafton added
              8.5 per cent to €3.80.

              European shares were also higher this morning with the FTSEurofirst 300 up 3.6 per cent at 1,165.7 at 8.20am.

              France's CAC-40, Germany's DAX and the FTSE notched up gains of between between 3.1 and 4.2 per cent.

              Earlier Japan's Nikkei share average rose 3.3 per cent, bouncing from a 5-month low on Friday.

              Please support Milford Hospice. Click here to donate.

              Comment


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                <!- Message ->
                <div style="overflow: auto; width: 100%;">
                A few points and stats re the US Fed takeover of these 2 mortgage banks.
                This is possibly a
                good thing for the world as it means the US Fed will pay the 'credit
                crunch' debts, and banks can feel more secure.
                It
                wasn't done for the benefit of the world. It was forced because if
                these 2 banks collapsed the US economy would be annihilated. Maybe for
                ever. The Fed only just barely has the capacity to take this debt on.
                Of
                course the US Fed means the US taxpayer. Largely ordinary workers, who
                have suffered most from the economic turmoil have to make up the losses
                pocketed by the mega wealthy thanks to Greenspan's economic policies.
                The US has a present deficit of approx 9 Trillion dollars. FMae and FMac add another 3 Trillion to that.
                This makes a nice round total of approx 8.5 Trillion Euros</span>.
                So much for Republican economic dogma.

                A lot of this debt is held by Asian and Chinese financial institutions. That is not insignificant.

                With 8.5 Trillion Euros, you could build a new Thomond Park for every man woman and child in Limerick (city and county)
                And still have 1 billion Euros change left over.

                </div><!- Signature ->

                Comment


                  From KBCAM.....

                  <title>FW: Note on Fannie Mae/Freddie Mac Bailout</title>Fannie Mae and
                  Freddie Mac Bailout</font></span>
                  Over the weekend, the US
                  government and regulatory authorities announced the implementation of a rescue
                  plan for Fannie Mae and Freddie Mac (the G</font></span>overnment</font></span> S</font></span>ponsored</font></span> E</font></span>nterprise</font></span>s</font></span>
                  or</font></span> “</font></span>GSE</font></span>’</font></span>s</font></span>”), the
                  legislation to provide for this having been passed some months
                  ago.</font></span>

                  Why the
                  bailout?</font>
                  </span>
                  The US mortgage market is
                  very different to what we are familiar with in Ireland. Here, generally, banks
                  issue mortgages to borrowers and hold them on their balance sheet. In the US,
                  banks issue mortgages to borrowers and then sell those loans on to, in the main,
                  the two GSEs, providing certain conditions are met. In other cases, the lender
                  sells on the mortgage to someone other than the GSEs, but only with a guarantee
                  issued by the GSE, for a fee.</font></span>
                  The GSEs were, until
                  recently, seen as very safe banks and so they were able to borrow money quite
                  cheaply in the financial markets, and use that money to finance the purchase of
                  the mortgages from ordinary banks. </font></span>
                  In recent months, however,
                  as the US housing market collapsed, the markets became increasingly worried
                  about how safe the GSEs really were, as it was thought that they would face
                  significant losses as borrowers would not be able to repay their mortgages. The
                  interest rate at which the GSEs could borrow rose sharply, which in turn meant
                  that new home buyers had to pay higher mortgage interest rates as well, the last
                  thing the housing market needed when it was already so weak.</font></span>
                  As well, government
                  regulators insist that the GSEs hold a given amount of capital. But increasing
                  losses on their loans meant that the capital they held was getting dangerously
                  close to that minimum level. And over the weekend several newspapers reported
                  that a special government investigation showed that the GSEs had used dubious
                  accounting rules to keep their capital artificially high – the real capital
                  position was even worse than it seemed.</font></span>
                  So the US government was
                  faced with two extremely large banks going bust – which is bad enough – but on
                  top of that this would inevitably mean that homebuyers would have to pay
                  significantly higher mortgage interest rates. This was not politically
                  acceptable and this alone meant that a bailout was inevitable. (A further
                  complication is the fact that other banks held large amounts of shares, and
                  particularly preference shares, in the GSEs). </font></span>
                  The new arrangements should
                  reduce – perhaps substantially – the cost of borrowing for the GSEs, and

                  Comment




                    Originally posted by ianpresley


                    <!- Message ->
                    <DIV style="OVERFLOW: auto; WIDTH: 100%">A few points and stats re the US Fed takeover of these 2 mortgage banks.
                    This is possibly a good thing for the world as it means the US Fed will pay the 'credit crunch' debts, and banks can feel more secure.
                    It wasn't done for the benefit of the world. It was forced because if these 2 banks collapsed the US economy would be annihilated. Maybe for ever. The Fed only just barely has the capacity to take this debt on.
                    Of course the US Fed means the US taxpayer. Largely ordinary workers, who have suffered most from the economic turmoil have to make up the losses pocketed by the mega wealthy thanks to Greenspan's economic policies.
                    The US has a present deficit of approx 9 Trillion dollars. FMae and FMac add another 3 Trillion to that.
                    This makes a nice round total of approx 8.5 Trillion Euros.
                    So much for Republican economic dogma.

                    A lot of this debt is held by Asian and Chinese financial institutions. That is not insignificant.

                    With 8.5 Trillion Euros, you could build a new Thomond Park for every man woman and child in Limerick (city and county)
                    And still have 1 billion Euros change left over.
                    </DIV>


                    <!- Signature ->

                    Your post is very inaccurate and quite misleading. The GSE's (how we in the mkt refer to Freddie and Fannie) do not add 3trillion USDto US national debt. That is the figure of US mortgages they own or have under wrote. A large % of these have no trouble and there will be no losses on. I could continue by pointiong out the fact that the GSE's always had the implicit guarantee of the US taxpayer, so its not like they have taken anything new on.....


                    Seas suas agus troid!

                    Comment


                      "Implicit guarantees" are about as real as leprechauns, hens teeth, or rocking horse poo[img]smileys/lol.gif[/img]



                      Comment




                        Originally posted by Dermot G
                        "Implicit guarantees" are about as real as leprechauns, hens teeth, or rocking horse poo[img]smileys/lol.gif[/img]


                        Not when it comes to Government backed financial institutions.....
                        Seas suas agus troid!

                        Comment


                          If they were "Government backed" why would they need to be bailed out?

                          Comment




                            Originally posted by Dermot G
                            If they were "Government backed" why would they need to be bailed out?

                            They havnt been really...just a media term for the crystalisation of their previous guarantee...the US Governments word should have been enough,and in any other time prob would have been....mortgages and home loans in the US are managed very differently to how we do it in Europe.Its system,while once noble, needed modernisation as recent advance in the financail industry allowed too many abuses...this will now take place.


                            The FED should take a bow in how its handling this mess...unlike our own ECB who have their heads in the clouds...
                            Seas suas agus troid!

                            Comment




                              well LLCOOL,
                              firstly F Mac and F Mae have underwritten properties approaching 6 Trillion dollars.
                              Not 3 Trillion as you state.
                              And half their mortgages are considered threatened.

                              And as DG says, the backing might have been implicit but believe you me they would have avoided 'nationalising' these institutions if they could have avoided it.
                              So, that 3 trillion of problem properties only have viability if the economy recovers.

                              With 12 Trillion of debt loabilities total now USA inc doesn't have much cushion against surprise global adverse events.

                              If the 2 companies had crashed the whole 6 Trillion would be down the Suanee as the US economy would be back at Octber 1929.

                              But leave aside hair splitting about how you apportion or count the numbers. The real problem remains the same.

                              Growth over the past 20 years has been based on credit, low interest rates, and artificial demand supported by credit.
                              The rationale was to generate unfettered profits for the wealthy. This is classical Republican dogma.
                              They believe that the richer the wealthy become the better the economy. Provided you keep wages pretty low so the plebs have to work hard to get by and in the process keep production high.
                              These profits coupled with low interest rates drew capital into shares as opposed to bonds and similar investment products.
                              So in effect the steep rises in share prices were founded on credit. This is the essential cause of bubbles.
                              You lend out money, this has a side effect of forcing prices up, the bubble bursts, a credit crunch comes and the collateral on these debts doesn't match the debts.
                              There is also convincing evidence that the commodity price rises were market manipulation by the mega wealthy and by hedge funds etc.

                              As part of this blind economic dogma steered by Greenspan over the past 20 years (he was appointed Fed chairman in 1987) the US now stands with debts of 10 Trillion dollars.
                              The wealthy are fine, some have lost a few million, a blow to the ego yes but not affecting the fine quality of life they expect.....
                              If McCain wins the election we can expect more of the same dogma.
                              The burden of this 10 Trillion in reality falls on the heads of ordinary blue collar workers mainly.
                              It's hard to find words to describe the inhuman nature of the blind self seeking of Greenspan and his cronies.
                              And he doesn't try to disguise it. Years ago when he was a young man he became a friend of Ayn Rand who proposed a philosophy called Objectivism (very popular in the 1950s east coast US)
                              She became his patron and mentor. The essense of Objectivism is that selfishness is the perfect ideal for society. If everybody acts first in their own best interest then society does best. Although they don't believe in society as most would define it.
                              It's a sort of Robin Hood in reverse.
                              I jest not. They prided themselves on this.
                              Rob the poor to pay the rich.
                              This is the true face of Republicanism.

                              Comment




                                What is the word on UBS these days?

                                Comment

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