those who speak do not know.
The Tao Te Ching
Nobody knows anything
Adventures in the Screen Trade
We'll have more throughout the weekend. For now this is what some smart people are saying.
From the Wall Street Journal:
U.S. Near Deal on Fannie, FreddieFrom the New York Times:
Plan Could Amount to Government Takeover;
Management Shakeup Is Expected
The Treasury Department is putting the finishing touches to a plan designed to shore up Fannie Mae and Freddie Mac, according to people familiar with the matter, a move that would essentially result in a government takeover of the mortgage giants....MORE
U.S. Rescue Seen at Hand for 2 Mortgage Giants
Senior officials from the Bush administration and the Federal Reserve on Friday called in top executives of Fannie Mae and Freddie Mac, the mortgage finance giants, and told them that the government was preparing to place the two companies under federal control, officials and company executives briefed on the discussions said....MORE
Paulson Plans to Bring Fannie, Freddie Under Government Control
Treasury Secretary Henry Paulson is preparing to announce plans to bring Fannie Mae and Freddie Mac under government control, seeking to halt the crisis of confidence in the companies that make up almost half the U.S. mortgage market.From The Big Picture:
Paulson met with Fannie Mae Chief Executive Officer Daniel Mudd and Freddie Mac CEO Richard Syron yesterday to brief them on the decision to put the companies into a conservatorship, where they would be removed from their jobs, according to a person briefed on the discussions. A public announcement is expected this weekend, the person said....MORE
Here Comes the Half Trillion Dollar Fannie/Freddie Bailout!From Naked Capitalism:
A series of high-level meetings between Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and the chief executives of Fannie Mae (FNM) and Freddie Mac (FRE), along with the companies' new regulator, the Federal Housing Finance Agency took place today.
Rumors of the meetings had obviously leaked out earlier in the day, as the Financials and Homebuilders ramped up into the afternoon. Beazer Homes gained +8%, and Lennar popped 8.5%, despite the 4 million plus homes in inventory....MORE
NY Times: Fannie, Freddie Nationalization (aka Conservatorship) ImminentFrom Infectious Greed:
Guess the powers that be were unwilling to risk playing chicken with the markets and losing.
So much for the theory espoused by some that the government couldn't put the GSEs into custodianship absent a breaching of statutory minimums (technically, by being insolvent under the "fair asset" valuation method, Freddie is already on plenty thin ice). Nevertheless, this is quite a Friday night bombshell, particularly since the plan, as the Times appears to have garnered a few more details beyond the initial reports, is not minimalist (say an preferred equity purchase with no management changes). Conservatorship officially makes the GSEs wards of the state....
Why is FRE/FNM Being Underplayed?
Is the Freddie/Fannie bailout plan being underplayed? News late today that Treasury plans are likely to be announced imminently strikes many people, myself included, as one of the biggest financial events in modern memory, and yet it feels underplayed.
Why do I say that? Well, until recently, it was the second story on the front page of the WSJ this afternoon, and it hadn't even made the front page of the NY Times site last I looked. Marketplace on NPR, which I listen to most afternoons, shrugged it off in a 15-second drive-by comment as some late-breaking news that the market may have noticed....MORE
It's easy to get caught up in the minutiae -- should shareholders be wiped out, or merely massively diluted? What should happen to preferred shareholders? Can the government create a new class of senior subordinate debt, and if so, should it? But for me everything finally clicked into place just when I saw the headline above on Bloomberg.
Of course Frannie should be under government control; of course the CEOs should depart. The government is bearing all the risk; the CEOs have done nothing but destroy billions of dollars in value over the past year, and have proven themselves incapable of raising vital new equity capital....MORE