Housing Doom Housing Bubble Blog

“… Some hedge funds and investment funds may collapse, but optimists put a positive spin on this. They say that hedge funds and derivatives are the new shock absorbers of the world economy, absorbing shocks while letting the world economy carry on over major bumps. Replacing damaged shock absorbers is much cheaper than replacing entire vehicles.”
             Swaminathan S Anklesaria Aiyar, India

“It would be easy to Armageddon-ize this— and you can read plenty of blogs doing just that— but it’s really just an unnecessary replay of earlier surges of Nitwit Lending. We’re going to have to tough it out. And we will.”
             Scott Burns, Texas

Swami, by this time next month there’s gonna be a whole new spin on the word vehicle. [1] Oh well, at least we’ve gotten past containment …

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Just what is the implicit guarantee on agency debt? Doom North’s trusty 1963 Compact Desk Edition of Webster’s New World Dictionary has

1. suggested though not plainly expressed; implied.
2. necessarily involved though not apparent; inherent.
3. without reservation; absolute.

Right.

The DND MILSPEC 7th Concise Oxford helpfully adds virtually contained (in), which sounds more like Bernanke’s fervent prayer than enlightenment. The CO also points at the link with the verb implicate, which is what Mr. Market seems to be about with Congress relative to the guarantee.

A Doom reader informs us that there is presently keen blogosphere interest in this March 15th Congressional testimony,[1] where the Treasury Dept strongly denies that the US stands behind agency debt. Indeed all the GSE paper carries this explicit denial in writing, and the Fed’s Bill Poole is further carrying out a multi-year agitation to quench the market’s expectation that too-big-to-fail doctrine applies to Fannie and Freddie. Still, Mr. Market speaks in a loud and unambiguous voice that implicit means absolute — the proof is in the narrow agency debt spreads over treasuries and the unshakable AAA bond ratings they get from every rater.

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