Fannie Mae and Freddie Mac plunge

Shares of mortgage financing giants Fannie Mae and Freddie Mac both plunged Monday as fears deepened about the credit crisis and housing meltdown.



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IndyMac just made news today, too.... this is where it gets really scary....


besides Freddie and Fannie having to raise 75bil to keep solvent, the Fed is going to have to guarantee their MBS.

folks, this is a real historical shit storm in the making.

R

So, what does this mean? dollar keeps losing value? more inflation? how does this affect me?
Why shouldn't I be buying Fannie and Freddie's shares if they fell that much? Isn't it kind of a "safe"bet as the government guarantees their existence?

I find this one more shocking (thanks for bringing it to our attention - had not seen this yet).

IndyMac to stop most mortgage loans, cut 3,800 jobs - Yahoo! News


NEW YORK (Reuters) - IndyMac Bancorp Inc (IMB.N), one of the largest U.S. mortgage lenders, said on Monday it will eliminate 3,800 jobs and stop making most home loans after regulators concluded it was no longer "well capitalized." ............


I find it really hard to believe that FASB would adapt a new standard, which would cause such distress in the American economy. I am no expert on the subject but I just can't see that happening. Perhaps I give to much credit to the other Accountants of the world.

What do you think the impact will be?

1. in layman's terms, $75bil is a shitload of money. Fre and Fan just had to raise $25bil recently and that wasn't an easy task.
2. yes and yes. faith in US stability and fiscal policies is depleting thus investors are seeking haven in other investments besides the US$... US asset devaluation will continue until this type of carnage stops because the gov't has no choice but to keep the money press running 24/7
3. your increasing taxes will compensate the mess that the capital markets brought unto themselves and in very short summary: inflation is all but assured thus interest rates to counter inflation will rise
4. unless there is a floor and if radical changes in accounting standards don't pan out as the article implies, then you will probably have made the buy of the century if housing market has in fact stabilized. I am in the camp that the housing market will continue to put stress on the mortgage backs
5. yes, it's a "safe bet" in the sense it won't bankrupt. but dude, even a Fed bailout won't stop it's share price from plummeting to $1



did you see afterhours quote? 50 cents. I don't even have a keyboard symbol for the cent sign...

the new accounting procedures are designed to prevent the very events unfolding in the markets this year but obviously have unfounded consequences.... agreed that the timing could have been a little better, but our government is really up against the wall.... there is a risk that Lehman might go under and the gov't will absolutely have no choice but to save it.... there's a lot of handwriting on the wall that says in big, bold red letters that the gov't has a lot more money to spend to stop the mess....

So more importantly, this kind of radical accounting change is designed to alleviate the US Gov't from having to bailout FRE and FAN... raising the 75bil using private placements/notes hopefully eliminates an actual tax payer sponsored bailout

ultimately, I am not sure if I hope for this or not, but right or wrong, it's a realistic scenario that investment bankers (not Fan or Ind.) like Goldman, Lehman, Merrill, Morgan, etc will be scrutinized and somehow realigned to fit under the Dept of Banking and Insurance jurisdiction.

I am for one in favor of this extreme change to prevent large financial collapses from occuring, but this counters my conservative view in the sense that the gov't should not be the safety net at the expense of the masses who pay taxes... and then I don't want the gov't to be wearing stripes and a whistle....

now, onto the gov't sponsored entities like FRE, FAN and IND- they should have had extremely conservative positions to begin with and should have never allowed their leverage to stretch as far as it has.... personally, this bothers me, the fact that a gov't sponsored organization is allowed to take risks using tax payer money is truly an atrocity.

going forward, they will be under a microscopic scrutiny but it's awfully late in the game to start changing the rules.... these reforms should have been made LONG before I first started the pessimistic investor thread a long time ago

but then again it's always being a quarterback sitting in my cushiony leather sofa at 5am feeding my 1 month old....

R