John McLeod

Fannie and Freddie: The Gifts that Keep on Giving

The OMB could put an end to this idiocy in 10 minutes by simply stating the obvious, that the GSEs' senior debt is now explicitly guaranteed by the Treasury. The effect would be to double the nominal value of America's national debt and apply a reality shock to everyone's econometric model, not to mention Congress' silly legal limit. This Wyle E. Coyote situation is becoming ridiculous.

Fannie's Tax Credit Sale to Goldman: No Deal

Fannie (under a nightmare "conservatorship" until it inevitably blinks out sometime down the road) is in effect back to its pre-1968 persona as a government department. It can no more legally sell its tax credits than we could have sold our DND-earned Air Miles on eBay. This is all about laundering public funds in such a way that Agency Debt can stay junior to treasuries. They're defending the ambiguity of the "effective guarantee." A side effect would have been Goldman and Buffett siphoning off something like a billion dollars risk free for their intermediation services. Thus the thief-in-the-night timing. It nearly worked this time, and next time it will.

The New Bull Market Fallacy

"... so they could sell equity into the rally before the next huge wave down." -- that's the punchline of this joke, no?

Technical quibble: "She states: // Flash orders are also called ..." I think you forgot to "blockquote" that para.

Yikes! My head hurts. We've been following the NY Fed's numbers on foreign central bank holdings of Treasury and Agency debt (a key support for all those US stimulus programs):

a) since start '09 the agencies number has not been credible

b) (related to a) since start '09 Fed has bought for its own account over 1/2 $trillion of agencies -- never previously owned any -- and every last MBS has maturity beyond 10 years. This in an era when long treasuries investors have taken a 25% haircut.

c) foreign central banks' reported buys of treasuries have gyrated repeatedly from near-record amounts one week to virtually nothing the next

d) the definition of "indirect buyer" changed in June, so reported record participation by cenbanks in ongoing treasuries auctions has become suspect

... bottom line, the debt markets are looking as weird as the equity markets. But at least they will get some relief when this idiotic bear rally collapses ;-)

Not Buying This Rally

I think it was for over a year I was posting sidebar links with "this isn't going to end well" comments to UK stories promoting getting onto the "property ladder" via speculation in Bulgarian condos. However, that carnage was trivial in comparison to what's going down when this historic C-leak rally turns.

Oh well, the tastiest coffee beans are harvested from the slopes of the volcano in the hours before it explodes. Party on, guys!

Central Banks, Commercial Banks, and Lies: America Has Been Bamboozled

Shai Dorsai!

Full marks for throwing down the gauntlet of falsifiability. May your PDF be ruthlessly attacked by the best minds in the business today.

Regulator and Bank Negotiations Are a Good Thing

Hello again, Tom,

I'm one of the wild arses in the blogosphere you cite, but as I just remarked under another of your posts I'm not posting opinions these days, at least not on our own blog. That being said, I amused myself on the weekend predicting via e-mails that this morning is going to be another 3/5 1933. If so, should have been clear by now, so looks like I lost that round ;-)

Well, against your 20 years of relevant experience I'm a burnt out computer programmer and aspiring poet, so it's doubtful anything I could have said would have moved anything. Today will obviously start out with a moderate profit-taking event, but surely the Plunge Protection Team can keep this down-tick from stampeding the horses into thinking we're heading back to S&P 666!

That WSJ story set off everyone from Roubini to Time Magazine, with Rachel Beck and the NYT caught in the undertow. That, if I may be so bold, should provide a pretty fair "stress test" for the sucker rally. I think it was Market-Ticker that reported frantic selling by insiders the last couple of weeks. If the rally breaks through last weekend's naysaying, they and I will have egg on our faces.

Got popcorn?

Will the PPIP Bankrupt the FDIC?

Back in August I wrote a post titled "The CDARS of Lebanon: Did Gramm-Leach-Bliley Doom FDIC?"
housingdoom.com/2008/0.../

Essentially, there are 3rd parties who are allowing (relatively) wealthy investors to work around the $250k (whatever it is now) limit on FDIC deposit insurance. This PPIP thing seems to be putting still more pressure on Sheila. I'm beginning to wonder if FDIC, like the big GSEs that were quasi-private and are now quasi-nationalized, are working a bit like Enron's QSPE off-balance-sheet vehicles -- convenient hiding places for risk that should be on Congress's balance sheet (and the national debt).

The Auction-Rate Security Mess: Read the Writing on the Wall

This is the first time I've seen an assertion about Dark Pools affecting ARS, or for that matter any market. I expect that we will see more and more stories about how the perfection of Romulan cloaking technology for institutional investors has wreaked subtle havoc with just about everything.

But congratulations on being first.