Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
WAYS TO SECURE YOUR FINANCIAL FUTURE - 20th Aug 19
Holiday Nightmares - Your Caravan is Missing! - 20th Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Fannie and Freddie Credit Implosions Are Too Big to Bail Out

Stock-Markets / Credit Crisis 2008 Jul 11, 2008 - 02:13 AM GMT

By: Mike_Shedlock

Stock-Markets Best Financial Markets Analysis ArticleIt's been a wild ride for Fannie and Freddie recently. Yesterday, James Lockhart, director of the Office of Federal Housing Enterprise, said the GSEs are "well capitalized".

William Poole, former Fed governor disagrees. Poole Says "Fannie, Freddie Insolvent" .


The market agrees with Poole as share prices have continued to plunge and Fannie Mae Pays Record Yield Spreads on Sale of Two-Year Notes vs. two-year treasuries.

Fannie Mae Waterfall





Freddie Mac Waterfall



Institutions Must Be Allowed To Fail

Today Paulson Says Financial Institutions Must Be Allowed To Fail .

I would like clarification from Paulson as to what " fail " means. What it should mean is Fannie and Freddie go bankrupt, the government gets out of the GSE sponsorship business, and home prices fall to their natural level.

What I suspect Paulson means is We're All Homeowners Now, Nationalization of Fannie, Freddie Unavoidable . In this scenario, the share price of Fannie and Freddie will drop to zero yet taxpayers will foot the bill to keep Fannie and Freddie in business.

Wachovia and Washington Mutual at Risk

Yesterday Wachovia Named New CEO and Warned Of Big Loss . Larry Smith, interim CEO said " the company plans to remain independent, despite rumors of a possible takeover ". My thought is no one in their right mind would want to acquire Wachovia and besides, no one is big enough to take them under as JPMorgan did Bear Stearns.

Both Wachovia (WB) and Washington Mutual (WM) are loaded to the gills with Alt-A, liar loan garbage. Wachovia is barely a teenager at $13.13 while Washington Mutual is hanging on for dear life around $5.25 a share.

WMALT 2007-0C1

Chris Puplava has new charts available of the Washington Mutual Alt-A pool WMALT 2007-0C1.That pool has been the "poster child" for what is happening with Alt-A. Although it is just one pool, it is arguably indicative of the rotten nature of liar loans in general.

Pool Stats



REOs are Soaring



Tranche List



The tranche breakdown shows total deal size. Total size is 519.159M, "A" Tranches are 476.069M total, "M" Tranches are 30.112M total, "B" tranches 7.788M total and "C" tranche is 5.19M total

Cesspool Math

As of today, tranches A1 through A5 are all still rated AAA . Those 5 tranches constitute $476.069M out of an original pool size of 519.159M. In other words, 91.7% of this entire mess is still rated AAA even though REOs are now up to a whopping 10.48% and 60 day delinquencies are 32.69%. Moody's and the S&P should be embarrassed by this.

Too Big To Bail

The credit bubble has popped. Fannie Mae (FNM), Freddie Mac (FRE), Washington Mutual (WM), Wachovia (WB), and Lehman (LEH) are all at serious risk. Many smaller payers are at huge risk as well.

Meanwhile, the Fed continues to orchestrate "takeunders" like the shotgun marriages between JPMorgan (JPM) and Bear Stearns (BSC), and Bank of America (BAC) and Countrywide (CFC). The Fed's idea seems to be for the strong to take over the weak. The reality is the strong become weak through these efforts.

Paulson's statement " Institutions Must Be Allowed To Fail " is in reality an implicit admission the Fed is powerless to stop a credit implosion whether the Fed wants to do something about it or not. We have finally reached the point at which the mess is too big to bail. All that remains at this point is the final numbers on how much taxpayers have to cough up when Congress foolishly tries to make water run uphill.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules