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Charles A. Smith
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Charlie Smith – Principal and Chief Investment Officer of Fort Pitt Capital Group. Charlie is a graduate of Penn State University and lives in Marshall Township, PA.
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  • It's A Wonderful Life (Part Deux)
    What a wonderfully perfect symmetry:
    Mark Zandi of Moody's says as many as 5 million U.S. households are squatting (i.e., living in homes on which they’ve not made a mortgage payment in months). The average mortgage value is $250K. The Fed, on the other hand, is the proud owner of $1.25 trillion in mortgage bonds. Five million times $250K is $1.25 trillion.  Mr. Squatter, say hello to your landlord: Mr. Bernanke.

    And Ben thinks he can sell this stuff? From CNBC:

    CNBC reports that at least 6 members of the FOMC favor near-term asset sales of mortgages, other assets. Nothing is imminent, however. Sources says that some would like to sell assets right now, while others would like to sell when the economy has clearly turned. These sales would take place when the time is right and the Fed is likely to sell them on a regular basis, not dump them. Once source says there is a lot more support for this than people think.
    Here are a few more numbers to consider:

    The Fed's latest balance sheet shows total equity of just under $54 billion. If they do start to sell this garbage, how do they paper over even a 5% loss, given that a writedown of this size on a $1.25 trillion portfolio wipes out their entire equity line? Oh, I know: They'll simply sell them back to Fannie and Freddie at a price which conveniently avoids any loss! Remember the Christmas eve announcement that the two big mortgage sieves would no longer have their losses capped at $400 billion? Welcome to the financial equivalent of Yucca Mountain; that's where this stuff is going to end up.

    Disclosure: no positions
    Apr 23 10:14 AM | Link | Comment!
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