Dirkyp

The Paragraph That Changed the World: Will Treasuries Crash?

Complete fearmongering. You can't just add on the liabilities of Fannie and Freddie to the government's debt, because those liabilties are coming onto the government balance sheet with offsetting assets. And new MBSs will be much more secure than the old stuff - lending standards are high now so new mortgages will be done on already deflated home prices and credit quality will be high. All this does is allow banks to start offering lots of mortgage financing to those who qualify, and the bank's cost of capital will be much lower now, so the US Treasury gets high quality loans, the banks get cheap capital, borrowers get a lot of debt available at more attractive rates which will help the housing market stop declining and ultimately start to turn around.