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| User Info | Fannie and Freddie - Short to Zero? in forum [Ticker] | |||
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Genesis Posts: 71412 Incept: 2007-06-26 
KD^2 
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http://market-ticker.denninger.net/2008/....
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-04-30 08:59:57
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Mtgspy Posts: 6121 Incept: 2007-10-27 
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if u ask FNM they will show u they insurance policy for all those Fast and Easy with MTG and RDN. Covered.
---------- It sounds antiquated, merchantilistic - until you figured out that I was hoarding for war.
2008-04-30 09:41:39
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Newbtrader Posts: 3256 Incept: 2007-08-24 
Bubbleville, VA Online
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Question about fannie/freddie.. Is it true that fannie/freddie only bought loans where buyers put 20% down or else mortgage insurance was required? I was having a discussion with someone and they said this was in fact the case, but I couldn't in fact find any data supporting or refuting this. If they are "insured," is insurance similar to the "insurance" offered by bond insurers and credit default swaps, etc? Or was more regulation involved and thus *should* be safer for fannie/freddie? ---------- "So try and figure this **** out. Catholic men and jewish women, no hats. Catholic women and jewish men, hats. Somebody's got the whole thing totally ****ing backwards." -George Carlin
2008-04-30 10:30:32
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Mtgspy Posts: 6121 Incept: 2007-10-27
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Yes. If 80+ LTV was originated, a PMI is required. Additionally, if it is "low doc", back in the days FNM further buys "pool coverage", this is after 10,000 loans came in they buy insurance for the "bulk". Does MTG and RDN reminds me of ABK and MBI? Yeah sure. What they do differently is that their capital ratio is 100%. $1 of risk they put $1 of capital in the book per their regulation. Now the problem you might say is "who determines that the risk is $1" and the answer you may not like. 
---------- It sounds antiquated, merchantilistic - until you figured out that I was hoarding for war.
2008-04-30 10:40:13
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Genesis Posts: 71412 Incept: 2007-06-26
KD^2
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Yeah it is allegedly covered...... Betcha they can't pay..... ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-04-30 10:42:07
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Nomullet Posts: 3422 Incept: 2007-11-11
Duke City
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Why would congress do anything? Banks spent 500 million getting glass-steagall repealed. The banks and Congress are one and the same.
---------- if you crap more than once a day you are eating too much
2008-04-30 11:03:06
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Newbtrader Posts: 3256 Incept: 2007-08-24
Bubbleville, VA Online
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Hmm ok, so Fannie/Freddie do have a big layer of protection (assuming the insurers can pay). This seems to shift the real focus to the insurers then. Are there any good articles out there that look at their books in more detail? The obvious concern is that if that "risk" is very subjective, like you said mtgspy. Question I guess then is how did they determine the risk? ---------- "So try and figure this **** out. Catholic men and jewish women, no hats. Catholic women and jewish men, hats. Somebody's got the whole thing totally ****ing backwards." -George Carlin
2008-04-30 11:03:44
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Mtgspy Posts: 6121 Incept: 2007-10-27
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How to determine risk? Model, of course. S&P helped them develop the prototype. Do you like S&P model?
---------- It sounds antiquated, merchantilistic - until you figured out that I was hoarding for war.
2008-04-30 11:05:09
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Stcm Posts: 1356 Incept: 2008-02-05
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IMO, going to zero won't happen. Congress won't let them fail - they'll work out some deal to let them borrow more - or take the losses somehow off books. How often does a GSE go "officially" bankrupt? ---------- Short-Term Capital Mismanagement - "When genius was never there to begin with!"
2008-04-30 11:27:50
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Mtgspy Posts: 6121 Incept: 2007-10-27
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secret can now be told: http://mtgspy.blogspot.com/2008/04/mortg.... Sorry link was bad, check out the Q&A. ---------- It sounds antiquated, merchantilistic - until you figured out that I was hoarding for war. Last modified:
2008-04-30 11:42:39 by mtgspy
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Genesis Posts: 71412 Incept: 2007-06-26
KD^2
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They used to be nationaliEd and will be again. They wont go away but the common is very likely a zero. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-04-30 11:31:28
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Mtgspy Posts: 6121 Incept: 2007-10-27
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I disagree. BSC brought about an important lesson to the govt. They should just give money to equity holder of BSC of $5-6B and that looks a lot better than $30 B pledge for the debt. In reality the $30B wont cost them a thing but $5 does up front. Problem was BSC wasn't important enough in public interest to do so and there is NO mechanism for which a quid-pro-quo can be established with BSC. With FRE and FNM all they got to do is hire a talking head and say the benefit to the public if govt gives $100B to equity is a) a lot less "headline" #s relative to backing $4T debt ala BSC, and b) quid-pro-quo this will reduce mortgage rate such and such that over 100 years the US public will come out "ahead". Booyah. ---------- It sounds antiquated, merchantilistic - until you figured out that I was hoarding for war.
2008-04-30 11:37:02
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Watermelon Posts: 674 Incept: 2007-12-23
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Mtgspy, The link is bad....
2008-04-30 11:41:41
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Mtgspy Posts: 6121 Incept: 2007-10-27
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fixed. sorry about that. check the Q&A.
---------- It sounds antiquated, merchantilistic - until you figured out that I was hoarding for war. Last modified:
2008-04-30 11:43:24 by mtgspy
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Genesis Posts: 71412 Incept: 2007-06-26
KD^2
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Won't happen. Direct nationalization ends the bs and is cheaper all in. That's how this ends; they won't bail out the equity because that doesn't do a thing for the credit book. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-04-30 11:44:52
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Mtgspy Posts: 6121 Incept: 2007-10-27
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"Direct nationalization ends the bs and is cheaper all in" What matter is the headline and the technicality that you have to create $4T treasury to replace 4T of GSE debt although, you are right, that there are also about 4T of assets worth behind it. $100B is the right amount should they go and blackmail the congress and I think they are working on it, and will be successful. That's about as bad as credit scenario I can think being realized from their collective books. Believing is seeing. ---------- It sounds antiquated, merchantilistic - until you figured out that I was hoarding for war.
2008-04-30 11:49:00
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Genesis Posts: 71412 Incept: 2007-06-26
KD^2
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No they don't have to replace with ts. Just designate the bonds as specials like the ssi ones. Done. Now you get real oversight but they svae 100 bill and common is zeroed. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-04-30 11:52:16
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Cosanostra Posts: 1758 Incept: 2008-02-24
Witness Protection
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Question Gen, Is there not a possibility that FRE and FNM can raise multi-billion dollars in the public market to shore up their balance sheets ala C and LEH? ---------- Angelo Mozilo: “Don’t worry, housing prices always go up. We sell the more risky loans off to investors anyways, so we don’t really care".
2008-04-30 11:53:46
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Genesis Posts: 71412 Incept: 2007-06-26
KD^2
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Sure if people will buy. Will thy when pmi blows? Remember putbacks. Pmi will repudiate the policies in an attempt to remain solvent. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-04-30 11:55:49
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Mtgspy Posts: 6121 Incept: 2007-10-27
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dunno man I was behind the idea of backing the debt and zero the common 4 months ago and that was demonstrated in BSC. Since a couple of weeks ago, I changed my thesis to 100% direct handout (nigga-style) to the equity holder. That's how weak the gov't position right now from discussions I have been hearing. ---------- It sounds antiquated, merchantilistic - until you figured out that I was hoarding for war.
2008-04-30 11:56:16
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Oxfordrick Posts: 2685 Incept: 2007-07-09
san diego
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GSEs will probably be nationalized by end of 09. Shorting to zero or close to it by direct short is a nice idea but it'll be a rough ride and you'll probably be bucked off by your broker at just the wrong time. For the passive, how about an FNM JAN 2010 20/10 put debit (=Bear) spread for a potential 200% return? Or for the more active perhaps a series of front month naked calls is the best means of attack. Good trading everybody!
2008-04-30 12:05:26
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Ruffcut Posts: 2193 Incept: 2007-07-07 Mushagain Online
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"These institutions need to be shut down or nationalized" I think it's already starting to be FEDERALIZED. Someone in power seems to manipulating,to avoid any bankruptness. ****bags, one by one, are being sticked saved consistently and increasingly. It is simply the way the tape reads. ---------- Support locally, and **** off globally!
2008-04-30 12:40:26
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Genesis Posts: 71412 Incept: 2007-06-26
KD^2
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Mtg, I don't see it. You bail the equity what do you do about the PMI companies? They're not going to eat the liar loans. They were sold them as NOT being liar loans. Look at what's starting with AMBAC and then tell me how that doesn't play out with Fannie and Freddie. It sure as hell will and that's the end of the game for them once that starts. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2008-04-30 13:10:06
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Mtgspy Posts: 6121 Incept: 2007-10-27
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Honestly I dont know what they will think about the MI companies. If they failed and there is no reason liability is not satisfied either by them or the front-end guarantor (GSE) then there should be no issue. My additional $100B is 30% nationwide House price drop over 30 months by the way so that in addition to being severe I would also collect that many bugs on the net. Wont get there because right now we are still talking whether $30B on FNM is going to be breached given the pipeline over the next 12 months.
---------- It sounds antiquated, merchantilistic - until you figured out that I was hoarding for war.
2008-04-30 13:43:32
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Genesis Posts: 71412 Incept: 2007-06-26
KD^2
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I see no way the PMI companies can absorb this. They won't even try. They're going to pull an AMBAC and shove all the failed paper back at Fannie and Freddie eventually, probably even on claims they've already paid. The fraudulent origination problem is a ticking nuclear device and the timer has 00:01 left on it. This is totally underappreciated in terms of the damage it is going to do throughout the system, top to bottom. Everyone is sitting out right now thinking they "got away with it." They're wrong, and when the rank-breaking starts on this it will unleash a flood that will be impossible to stop. That day is now here. We are now down to debating "how fast" it all disassembles, not whether it will. Take 25% of the production in ALT-A over 06-07 and that's the "best guess" at the total loss to be recognized here. Absolutely NONE of this is in any of these firms' prices. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me Last modified:
2008-04-30 13:47:27 by genesis
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