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Thread: (late) weekend commentary - reality displaces wishful thinking re Freddie and Fannie

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    Default (late) weekend commentary - reality displaces wishful thinking re Freddie and Fannie

    (snip)"Freddie Mac and Fannie Mae slumped to the lowest levels in almost two decades, losing more than 22 percent, after Barron's said shareholders of the biggest U.S. home-loan financiers would be wiped out in a Treasury rescue. Lennar Corp. and Ryland Group Inc. led a 5.5 percent drop by builders. Hershey Co. retreated the most since 2002 after the chocolate maker said price increases will curb growth.

    The Standard & Poor's 500 Index lost 19.60 points, or 1.5 percent, to 1,278.60 as 23 of 24 industry groups declined. The Dow Jones Industrial Average retreated 180.51, or 1.6 percent, to 11,479.39 as all 30 companies fell. The Nasdaq Composite Index slumped 35.54, or 1.5 percent, to 2,416.98. Seven stocks dropped for every two that advanced on the New York Stock Exchange.

    ``Every day, there's the possibility there could be some type of disaster in the financials,'' said Eric Green, the Cherry Hill, New Jersey-based director of research at Penn Capital Management, which manages $4.5 billion. Fannie Mae and Freddie Mac are the ``major lenders for the housing market in the United States, so bad news there usually affects the homebuilders and all of the financials.''

    About 986 million shares traded on the NYSE, the fewest for a full trading session since Dec. 27 and 29 percent less than the three-month average.

    $500 Billion in Losses

    The S&P 500 has dropped 13 percent this year as the biggest U.S. housing slump since the Great Depression slowed consumer spending and spurred turmoil in mortgage markets that saddled banks with more than $500 billion of losses. The benchmark index for U.S. equities has rallied 5.2 percent from an almost three- year low on July 15.

    Banks and brokerages in the S&P 500 staged their biggest one-day rally on July 16 after the government announced plans to shore up Fannie Mae and Freddie Mac's financing. The S&P 500 Financials Index gained 19 percent since the measures were disclosed through last week.

    Stocks advanced on Aug. 15, sending the S&P 500 to a third weekly gain. MBIA Inc. and Ambac Financial Group Inc. climbed after the largest bond insurers had their credit ratings affirmed and a report showed unexpected growth in New York manufacturing.

    Lowest in Two Decades

    Fannie Mae today lost $1.76, or 22 percent, to $6.15, the lowest price since May 1989, and Freddie Mac dropped $1.46, or 25 percent, to $4.39, a price last seen in January 1991. Homebuilders in S&P indexes slumped as much as 6 percent. Lennar fell 86 cents, or 7.3 percent, to $10.96. Ryland retreated $1.67, or 7.7 percent, to $19.94. Financial shares in the S&P 500 slumped 3.6 percent, the most among 10 industries. "(snip)

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    As a taxpayer, all I can say is that it serves the 'fat cat' FNM and FRE investors right to be forced to eat some losses as opposed to expecting middle class taxpayers to cover their asses via a fed bailout paid for with increased income taxes. After all, they have been enjoying comparatively high rates of return in addition to tax favored status for years. Naturally, the fat lady hasn't sung yet on this topic ...

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    Default Re: (late) weekend commentary - reality displaces wishful thinking re Freddie and Fan


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    Default Re: (late) weekend commentary - reality displaces wishful thinking re Freddie and Fan

    ^^^ for a fact, the total dollar amount of outstanding Alt-A mortgages that are due to reset in the next few months far exceeds the number of 'subprime' mortgages that reset last year. Fannie and Freddie are already holding a big brown stinky bag full of Alt-A mortgages that continue to 'ferment' ... which has caused enough concern that Fannie has already issued a policy that no new Alt-A mortgage paper will be purchased after January 1st 2009.

    Of course, this means that any bank originating a new Alt-A mortgage will have to supply the capital and assume the loss risk themselves ... which translates into extremely few new Alt-A loans being written, as well as any new Alt-A loans carrying a whopper of an interest rate in order to cover the increased loss risk. Unfortunately for all self-employed persons including the vast majority of dancers, as Alt-A borrowers the future availability and affordability of mortgage loans is likely to be extremely poor.

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