madasiwannabe

Fannie, Freddie Bailout To Wipe Out Equity Holders?

Once again Mr. Shedlock, your articles speak volumes about your short position on these stocks. There's still a couple bucks left in the common, so keep pushing and I'm sure you'll make a ton at the nation's expense.

I've said it before and will say it again, nothing good will come out of wiping out the GSE's. There is enormous downward pressure coming from special interest groups like PIMCO that stand to make large sums of money at the demise of the GSE's and we the taxpayers will be picking up the tab.

Yesterday was a good indication of things to come and I'm not talking about the stock. The auction spread to attract buyers will continue to grow, not only for the GSE's but also banks and the Fed, which will drive interest rates higher and higher to make up the spread. That is what's called inflation!!!!

This in turn eats into buying power and will drive housing prices lower and accelerate the mortgage meltdown. Nationalizing a toxic portfolio will have serious consequences to the Fed's portfolio and cause increased spreads for US backed instruments, which will further erode liquidity. The loss of liquidity will in turn eat into the banks ability to recapitalize and cause the ultimate collapse of the entire U.S. Financial system. Those buying securities (like PIMCO) will get rich beyond imagination at the expense of the American people. I told you weeks ago this is what would happen and now, as the most casual observer can see, it has started.

I ask again, how could the GSE's get out of control with government oversite and regulations that keep them capped? Look at the facts. Their numbers were systematically dropped and their mortgage risk metrics were decreased shortly after Mr. Greenspan challenged the banks to make money available to every American. I'm sure if Fannie and Freddie were private companies, they would tell the world government regulators forced them to increase their portfolio's and take on more risk.

I say hammer down.... I've sold my stock and now I'm going short to help speed up the collapse. I'm also running my HELOC into the stops before it gets frozen so that I get to live it up before the big crash. I say let's wipe out our future over some sort of twisted, media inspired principle so we can get interest rates back to the 20% level of the 1980's as quickly as possible.