Tuesday, September 16, 2008


First, Fannie Mae and Freddie Mac:
"In an unprecedented rescue effort, the Treasury Department and the Federal Housing Finance Agency seized control of the two mortgage giants Sunday, replacing the firm's chief executives and pledging to provide up to $200 billion in order to stem losses and keep the companies afloat."

Second, AGI:
"In a bid to save financial markets and economy from further turmoil, the U.S. government agreed Tuesday to provide an $85 billion emergency loan to rescue the huge insurer AIG."

God I wish I liked taxes, and believed the Fed was even constitutional.

Image and another foretelling blog of this fiasco

From an editorial February 2008
"The recession will cause a sharp increase in defaults in all other forms of unsecured consumer debt such as credit cards, auto loans, student loans, etc. As the Fed Loan Officers Survey suggests, the credit crunch is spreading from mortgages to consumer credit, and from large banks to smaller banks, it is becoming clear that the losses are much higher than the $10-$15 billion rescue package that regulators are trying to put together. The Monolines are actually borderline insolvent if not out and out bankrupt and none of them deserves a AAA rating regardless of how much recapitalization is provided. Any business that requires an AAA rating just to stay in business is a business that does not warrant an AAA rating. However, any downgrade of the Monolines will lead to another $150 to $250 billion of write-downs since it will also lead to huge losses on their portfolio of Muni Bonds. Just their downgrade will spillover into large losses and potential runs on the Money Market Funds that have relied on those AAA ratings. The Money Market Funds that are backed by banks or that bought liquidity protection from banks against the risk of a fall in the NAV may avoid a run, but such a rescue will exacerbate the capital and liquidity problems of their underwriters. Any Monolines' downgrade would lead to another sharp drop in US equity markets already shaken by the risk of a severe recession and large losses in the financial system but worst of all, to a general loss in overall CONFIDENCE."



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