U.S. Weighs Takeover of Two Mortgage Giants

It just keeps getting worse. I guess we haven't reached the bottom yet. How can anyone recommend buying property in the NYC area in this market at this time. And please spare the right property with the right price saga. The truth is that the right price is unknown, which makes that theory severely flawed. There will be a day when it's worth buying, however today is not that day.

I would just like to add this just an opinion. And please not that I didn't post this article, mainly because Steve beat me to it.

"the right price is unknown"

The right prices is 12x annual rent. AKA 50% below today's asking prices.

Did I fail to post that C has sold its German retail bank, GE has sold its Japanese consumer finance division, Wachovia is teetering, WaMu is living up to its stupid name?

No, guys, what we have experienced over the past 5 years in terms of housing prices is a never-to-be-see-again scenario. Reregulation is upon us (next week). Underwriting standards will revert to normal. Risk aversion is the name of the game. Prices will fall in line with incomes.

Yup LICC: with recent price cuts, there's now a $300,000 per-floor premium on units at Chelsea Stratus. That's just the beginning. Imagine the joy of pod living at Jade.

Ask petrfitz- according to him, now is the best time EVER in Manhattan's history to make money in real estate.

Fannie and Freddie going under has been talked about in many blogs since 2005...

I still have this publication printed from 6 years ago:

http://www.larouchepub.com/other/2002/2924fannie_mae.html

This was the first time I started to really question the Housing Expansion, not from a price appreciation point of view, but from a funding perspective. This was also around the time I started listening to Peter Schiff and his investment strategies of Gold/Commodities and foreign currencies.

Could this actually be the capitulation? If so, the situation is a lot worse than the typical American thinks. Read the article to understand why.

Wow. This is going to radically change things. We're going to go from two companies issuing bonds with an implicit government guarantee with companies issuing bonds with an explicit government guarantee.

"The step might also carry little impact since markets already accept that the government backs the companies, the officials told the newspaper."

Damn, armageddon is one step away.

You know, it doesn't take much cleverness to forecast a bust - even a broken clock is right twice a day. This continuous posting of articles (some of them quite good) with follow-up negative spin is really not very helpful or informative for 95% of the readers on this board. But that's just my opinion.

Excellent article. I especially like this line: "There is a physical constraint on their ability to pay, and thus, ultimately, a constraint on the housing bubble itself."

Really?! A constraint?! Who would have ever thunk it?

Like maybe 28%/40x?

"You know, it doesn't take much cleverness to forecast a bust - even a broken clock is right twice a day. This continuous posting of articles (some of them quite good) with follow-up negative spin is really not very helpful or informative for 95% of the readers on this board."

Yes, ap307, the problem lies with the spin.

MMAfia looks like Gold will cut through 1000 and then some.

"You know, it doesn't take much cleverness to forecast a bust - even a broken clock is right twice a day. "

This is EXACTLY the mentality that lead to where we are today. Read the article. Back in 2002, this was clearly understood, yet no one took much notice 6 years ago about Fannie and Freddie's problems.

nahh.. it's not a big deal. every broken clock is right once in a while. don't worry about it... it's not the end of the world.

well, it's been right... VERY right many times now as the dominos lined up are falling exactly as how it was postulated it would.

now look- they are about to go under.

Keep that kind of mentality up, and watch where we will head as a nation.

"MMAfia looks like Gold will cut through 1000 and then some."

stevejhx, i've tried my best to tell people on this board years ago, but was met with FEVERISH antagonism to which I defended myself as best as i could.

i don't even bother anymore, although i think i've at least convinced spunky and i hope he makes some good money out of it.

technically these guys are insolvent. We Americans continue to be lied to by the leaders of our companies, OFHEO, HUD, and BLS for inflation data. You have to read between the lines. We are seeing the effects of the credit crisis firsthand now, in real life, not in talk anymore. No way these guys can raise capital with their stocks at these levels. A nationalization of FRE & FNM will wipe out shareholders, and who know s how the financials will react to this. A explicit govt guarantee of the some $4-5 Trillion of debt may occur as well, and CR thinks this is the most effective solution as it would lower the borrowing costs for FRE & FNM. When FRE issued an offering at some 79 bps over ffr, you knew something was wrong.

urbandigs, EXACTLY.

I don't think the typical American realizes the magnitude of this..

we are talking about an almost $6 TRILLION dollar bill here folks!!!

That's TRILLION!!! not billion!! (not that the dollar is worth hack anymore, but nevertheless...)

But petrfitz alone has a trillion dollars worth of property, right?

Thanks MMafia

i hate to admit this, but after 12 months of blogging about the severity of this credit crisis, I am completely sick and tired of discussing it. And we are prob only in 5th inning or so.

A Lyndon LaRouche blog as source is a little dubious, no.

urbandigs, I know what you mean. Wall Street is only starting to think about setting the budget for 2009, the bonus pools haven't been announced and only a few layoffs have actually occurred. Tons and tons of crazy 5-year no interest, no principal mortgage products issued in 2005 waiting to reset in 2010.

"A Lyndon LaRouche blog as source is a little dubious, no."

Perhaps, but what can we say when it was right 6 years ago?

http://www.iht.com/articles/2008/07/11/business/11fannie.php

The look on Hank's and Ben's faces tell it all.

We're not talking millions.

We're not even talking of billions.

We're talking TRILLIONS.

TRILLIONS and TRILLIONS.

That's how much these GSE's are supposed to back. With such a HUGE amount, even 1% delinquency can cause havoc.

Just the scale is stupendous. Almost doesn't register. Goo goo. Ga ga.

The FED is running out of weapons.

MMAfia, that photo is telling indeed - props to the photographer for capturing that one. urbandigs, just curious what makes you say we're in the 5th inning here? I (think I) remember you saying a while ago we were in the 7th. I know it's just an analogy, but just wanted to get a sense of your thinking here - apologies, as I know you're tired of this mess. Either way, quite clear we're approaching some further drastic changes on the lending front.

Stop whining. These problems are merely psychological and are all in your head.

--Phil Graham

Um. Its Phil *Gramm*.

MMAfia although I find the links to your articles interesting the Lyndon LaRouche part is a bit concerning. The man has views very similar to Adolf Hitler and I believe he =was indited on some type of mail fraud.

spunky, to be honest, I do not know too much of LaRouche, nor do I care about his political views.

I was interested in the economics of the analysis of Freddie and Fannie. The author of that article, Richard Freeman, apparently works for/has ties to LaRouche.

however, thanks for pointing LaRouche out to me... I googled him and he appears to definitely have a controversial past, none of which I care bout nor endorse.