[y66]

Isn't Fannie Mae essentially a federally chartered monopoly intermediary in the residential home mortgage market, i.e., the only game in town?

If they close their doors, how long will it take for other institutions to take up the slack? What effect will this have on the availability of capital in this market in the short term? On the supply and demand for new homes? On employment in the construction sector? On the value of homes and overall consumer demand in the U.S. and other countries? On the value of mortgage backed securities and the capital reserve requirements of highly leveraged and even sensible financial corporations who own these securities? On the general availability of capital in all markets, U.S. and foreign? On overall levels of employment, in the U.S. and elsewhere?

As posted above, nobody really knows what will happen.

Personally, I'm willing to see what happens if Fannie Mae runs out of capital. But if I were in Secretary Paulson's shoes, I don't think I would be serving the public interest by taking such a gamble. This is a time for pragmatism, not ideology.

I am delighted that we have a guy like Paulson at the helm at the moment. I am also delighted that we have a guy like Barney Frank on the Democrats' side of the aisle. These guys, and others like them, are solid citizens and they are doing a heck of a job improvising ways to get through this mess, imo.

re: OP's question: is more regulation needed? Kenneth Griffin has some useful suggestions on this front.

[P_Marlowe]

Hi,

#1 Given that an insolvence of the Fannie and Freddie would most
likely cause a big world wide financial crisis similar to the one
1930, the US goverment had to step in.

#2 Both companies were private, but were seen as public (companies
of the country) and worked that way, hence if one sends them to
insolvence the dept has to be paid by the owner, the goverment (=
tax payer)

#3 As it is, the insolvence of those two companies is heaviliy correlated
with huge depts accumulated by the peoble of the country, you had
a financed with depts, now some how the depts needs to be paid back.

=> What the goverment did was the only thing to do, maybe they should
change the status of those companies to public, which will be done in
next years.

With kind regards
Marlowe

[Al_U_Card]

Are you afraid yet? Well, you should be.

Debt financing. Ring a bell? Living on credit. What does it mean? Creation of money at interest. Indebtedness instead of value for money.

The IMF and the World Bank as well as the G-8 et al are all involved in the biggest banking fraud.....create value and provide money as its medium of exchange and then use that to exchange goods and services...right? WRONG!

Look at your monetary systems and how financial operations work. We are the cows. They collect the milk for a fee, skim off the cream and then charge us to get back the milk as well as adding water to the cream to create new milk..."investment instruments" .

Living debt-free may not be possible but perpetual indebtedness is a form of servitude that only the rich can avoid.....does that surprise you? You need only look at who is without debt to understand who is robbing you blind.

[jtfanclub]

Nice article....

http://www.city-jour.../eon0716ng.html

The scary part is investment banks borrowing directly from the U.S. Treasury. Wonder if they loaned any money to Lehman Brothers? Good luck on getting that back.

I understand why Countrywide was 'too big to fail'. I haven't figured out why Bear Stearns was.

[Al_U_Card]

Hmmmnnn, let's see, Bear Stearns you say? Bailed out buyout so as not to "hurt" the markets? How about this article?

several unexpectedly strong
earnings reports, including from JPMorgan Chase & Co.
Oil prices fell more than $5, dropping below $130 a barrel
for the first time in over a month. The steep decline in oil
reduced concerns about the threat of inflation on an already
fragile U.S. economy.
Shares of JP Morgan <JPM.N> jumped 13.5 percent after the
third-largest U.S. bank's profit fell less than expected on
resilient stock and bond underwriting revenue. Bank of America
Corp <BAC.N> rose nearly 17 percent and Citigroup <C.N> gained
over 9 percent.

Well, I guess it worked....but at what cost.....well their profit did not drop AS MUCH but they still made a bundle. Wonder how much of it was from the Fed's bail-out of their Stearns takeover?

[kenberg]

I generally agree with Y66 that we are fortunate in having some bright and serious guys doing their level best here. As the arguments get complex I can barely if at all keep up. But we have an election coming up and somehow I have to form an opinion. All I can say is that I am working on it.

I have to comment on Al's remark about the difficulty of living debt free. I suppose that most of us, for a while, had to have a mortgage. Beyond that it's simple. I follow in my father's footsteps here. If I don't have the cash (I may use plastic but the cash is on hand) I don't buy it. Note to young people being pushed to buy buy buy. My father's way has served me very well, I recommend it.

[Al_U_Card]

And that is the key to value for money....living "within" your means and not becoming indebted. The house (and for arguments sake car) loan is a "replacement or rental costs so it is legitimate, as you have (usually) as much resale value as you have debt left to pay so you are not "really" in debt.

Getting what you want is a sucker's bet. Concentrate on what you need and make sure that you prepare and acquire BEFORE the outlay so as not to be in a precarious financial position.

Like good physical health, you can only do your best and take care of yourself but in doing so, you make everyone else better off for it.