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NEW -> Contingent Buyer Assistance Program
So, awgee, are you saying that between 40 and 400 trillion of perceived value will vanish?

This stuff is not my forte'.

Isn't 400 trillion something akin to the total worth of everything in the US?

Holy tulips.

At least most industrial workers who are thrown out of work will be Chinese etc. Nothing wrong with Chinese, but if it's them vs. us I pick us.
 
liz - Heck, I dunno. I am not trying to cop out, but I do not have a clue. I can identify the problem, but I can not foretell the consequence. I have not been around long enough and don't have enough smarts. But, it don't look good.

Any ideas?
 
Freddie Mac and Fannie Mae are suppose to be the saviors of the housing market right? If so, we are in deep deep deep trouble.

biz.yahoo.com/ap/071120/earns_freddie_mac.html

WASHINGTON (AP) -- Freddie Mac set aside $1.2 billion in the third quarter to account for bad home loans and posted a $2 billion loss Tuesday, prompting the nation's second-largest guarantor of home mortgages to seek additional sources of capital.]

(Freddie is quasi-government right? If they need additional capital, what the heck is company like Countrywide going to do?)

Freddie stock is only down like 24% this morning.

Fannie stock is down about 17%.
 
Freddie is quasi-government right?

IIRC, and that's a big IF, they issue bonds to raise funds. Check wikipedia for more. That's where I found some good (reliable?) info.
 
Irvinerenter, I did not know you were in the Bay Area this week. I am going up for Thanksgiving!

www.sfgate.com/cgi-bin/article.cgi

"A real estate symposium on Monday - featuring panels titled "catastrophic risk," "subprime crisis" and "economy on the edge," among others - predicted more gloom in the Bay Area housing market over the next year or so.

Hosted by the UC Berkeley Fisher Center for Real Estate and Urban Economics, the annual event draws several hundred developers, real estate agents, brokers, investors and policymakers who hope to gain a clearer sense of the direction of the market."

"Economist Ken Rosen, a notorious bear on housing who has called for a correction for several years, said home prices in the urban core of the Bay Area could drop 5 to 10 percent - but outlying areas could see tumbles of more than 20 percent.

In other regions, such as economically depressed Detroit, or Las Vegas - the land of speculative building - the damage could be far worse next year and beyond."
 
Goldman paints bleak picture for housing, financials

http://www.reuters.com/article/ousiv/idUSN1953742020071120?pageNumber=1

NEW YORK (Reuters) - Goldman Sachs issued a gloomy report on the U.S. financial services sector, saying housing prices are likely to fall a lot further, write-downs will mount and some mortgage insurers and guarantors will be forced to raise capital just to survive.

...

Goldman lists financial guarantors MBIA Inc (MBI.N: Quote, Profile, Research), Ambac Financial Group Inc, Security Capital Assurance Ltd (SCA.N: Quote, Profile, Research) and Assured Guaranty Ltd (AGO.N: Quote, Profile, Research) as the desperate. It lists Citigroup Inc, Washington Mutual Inc (WM.N: Quote, Profile, Research), First Horizon National Corp (FHN.N: Quote, Profile, Research) and National City Corp (NCC.N: Quote, Profile, Research) in the "needy" column.
 
Freddie Mac scrambles for cash

Finance company's shares plunge on news that it has turned to Wall Street and may cut dividends as losses cut deep into capital.

http://money.cnn.com/2007/11/20/news/companies/freddiemac/index.htm?postversion=2007112011

But what got the most attention on Wall Street was Freddie's announcement that its capital surplus had fallen by $1.2 billion to only $600 million above a mandatory target set under a consent decree with regulators. Freddie also said it has hired Wall Street firms Goldman Sachs (Charts, Fortune 500) and Lehman Brothers (Charts, Fortune 500) to help it "consider very near term capital-raising alternatives."

Among the alternatives it is looking at to increase its available cash would be to slash its dividend by 50 percent. It also could be forced to limit the growth or reduce the size of its retained portfolio, slow purchases by its credit guarantee portfolio or issue additional preferred or common stock.

Company officials also said they had discussions with federal regulators about possibly relaxing the capital standards agreed to by Freddie Mac due to past accounting problems.

-----------------

And from the comments link on http://calculatedrisk.blogspot.com/2007/11/freddie-mac-visits-confessional.html

I listened to the conference call - Freddie's auditors require them to call the street and get quotes on their loans and securities for pricing purposes. Under this approach, Freddie took horrific credit losses in the third quarter. Freddie is close to Lehman and Goldman which is why they have been retained to raise capital. So, the question was asked if the street (persumably Lehman and Goldman) are using the same marks to value their own positions. Remember that Lehman and Goldman gave Freddie the disasterous levels but their portfolios show no such losses. The question got a nervous laugh followed by a "we are not going there" response.

LaSalle Street | 11.20.07 - 11:50 am | #
 
Good analysis again by Diana Olick regarding the Freddie Mac issue.

www.cnbc.com/id/21899524

"It’s not like we haven’t heard bad numbers from tons of lenders out there, but the difference here is that Freddie Mac, a GSE, doesn’t play that much in the field where all the bad sportsmanship took place.

Freddie is not a big subprime lender. As of September at least, of Freddie’s $713.1 billion portfolio, $105 billion of securities were backed by subprime mortgages. That’s a lot, but it’s nowhere close to the bulk of the portfolio. So the losses can’t all be subprime.

The trouble is, as a Fannie exec said on the call, you have to factor in home price depreciation and the corresponding historical default rate. Comparing to the housing downturn in the early nineties, if home prices fall 10%, then the default rate rises 4-5%. "

Request to all you financial/lending people. . . please translate the following for me as to the impact..

"An interesting moment on the Freddie conference call: An analyst asked if Freddie had talked to its regulator, OFHEO, about changing its mandatory minimum capital surplus of 30%, given that it's bleeding cash. Answer: "We respect and abide by our regulators wishes, we have had discussions with them on the 30% and I would expect we would have those discussions as time goes forward," said CEO Dick Syron. So the analyst says, "Is that yes or no?" Syron answers, “You can interpret that response…”

Cutting to the chase, the answer is NO. "
 
Actually, my question was more about what it would mean if Freddie could not get approval from the regulators. Will they have to fold if itfall under the 30 percent minimum surplus? It is a violation of its corporate charter or will it just result in a tongue lashing by its regulators.
 
It's like a money snake eating it's own tail.... will there be any of the snake left?

Public School Funds Hit by SIV Debts Hidden in Investment Pools

http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=aYE0AghQ5IUA
 
lm - The one company I will never sell short is GS. Even if GS ends up showing losses from all this, my guess is that GS will end up consolidating more power. Think of all the folks who are presently in postions of power, both public and private, who came from GS. I would short Berkshire before I would short GS.
 
From that Bloomberg article above:

``The widening of swap spreads is a function of tight lending and a de-leveraging in the financial system and the high cost of money,'' said William O'Donnell, head of U.S. government bond strategy at UBS Securities LLC in Stamford, Connecticut. ``The last two times we saw these meteor-like spikes in swap spreads in the U.S., they were followed by a recession. Liquidity is absolutely horrible.''
 
WINEX - Sorry, I am unable to find the thread in which you posted the link to Mr Wen's comments regarding

China's support for a strong dollar.

What do you make of Mr. Wen's comments? And Mr. Paulson's iteration of the USA's interest in a strong dollar?
 
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