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Advisor

Fannie and Freddie......OK...here's an idea...but how to do it?

It would take some sort of a defacto "Jubilee", I'd think. Credit would surge into a sink hole, for at least the immediate term.

 

But, yeah, ain't much of the X billions that will ever be paid off, so............

 

 

http://online.wsj.com/article/SB10001424052748704895204575320922399530274.html

2 Replies
Veteran Advisor

Re: Sure 'Nuf.... She's Gonna Blow!!!!!

Re: Fannie and Freddie......OK...here's an idea...but how to do it?

Within that piece there is a fascinating interweaving of fact and fiction.

 

It treats as fact the belief that Franny's problems were primarily about loan undrewriting standards, the CRA etc. Not so, but anyway.

 

The problems have much more to do with the difficulty in hedging both duration and yield- when interest rates were driven steadily lower through the first half of the 00s, refinancings were huge. The result was that nether were able to produce coherent financial statements by 2006 with a hopeless mess of derivatives tangling up their innards. And of course in the zero sum derivatives game the counterparties (winners) to those losing hedges were, yep, you guessed it.

 

But nevertheless they are huge problems and never should have been in the first place.

 

 I can't really think of any way out.

 

Best, h