WTF! So basically you ran one of the largest companies into the ground. Even after receiving tons of federal funds over the last few quarters. How are things going to improve as long as the same boneheads are making all the decisions. I thought most of the people there were on their way out.

“Fannie Raises $7 Billion in Largest Single Debt Sale”, by Jody Shenn, Bloomberg, September 10, 2008.

Asian investors bought 12 percent of the latest issue, while European investors purchased 8 percent, down from 39 percent and 17 percent in the July sale, according to company data. Central banks bought 27 percent, down from 57 percent.

Igor says, “Unreal.”

This whole scenario with buying and selling debt is crazy. Even school districts and municipalities bought CDO’s

For some reason, it keeps reminding me of musical chairs, and hot potato.

I had thought before reading Money and Markets that to some extent, this bailout seemed like rebranding GSE debt as Treasury debt and wondered if it would work. After reading this, I’m even more convinced it won’t.

That was pretty entertaining. Once again we see the footprints of the historic turnaround in foreign demand for agency debt.

“Why The Fannie-Freddie Bailout Will Fail”, by Martin Weiss, Money and Markets, September 8, 2008.

The immediate reason the government decided not to wait any longer to bail out Freddie and Fannie was very simple: All over the world, investors were beginning to reject their bonds, [my emphasis] refusing to lend them any more money. So the price of Fannie and Freddie bonds plunged, and the yields on those bonds went through the roof.

As a result, to borrow money, Fannie-Freddie had to pay higher and higher interest rates, far above the rates paid by the U.S. Treasury Department. And they had to pass those higher rates on to any homeowner taking out a new home loan, driving 30-year fixed-rate mortgages sharply higher as well.

Now, with the U.S. Treasury itself stepping in to directly guarantee Fannie-Freddie debts, Washington and Wall Street are hoping this rapidly deteriorating scenario will be reversed.
…

There’s just one not-so-small hitch in this rosy scenario: Fannie’s and Freddie’s mortgage obligations are just as big as the total amount of Treasury debt outstanding. [emphasis in original] So rather than the Treasury lifting up Fannie and Freddie, what about a scenario in which Fannie and Freddie drag down the U.S. Treasury?

Doom first encountered Money and Markets more than two years ago when Weiss’ colleague Mike Larson put out a frantic early warning about “early payment defaults.” Seven months later HSBC’s Tom Zimmerman made a presentation at the AEI nailing just this phenomenon as what triggered the subprime crisis.

Money and Markets tends towards over-the-top fear mongering, but they do have a track record

http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=2198

Here’s a letters-of-fire quote on who’s getting bailed out. There’s still daylight between treasuries and agencies. Which is to say that next week Congress will consider raising the National Debt ceiling by $5.4 trillion

“A US government bail-out of foreign investors”, by John Gapper, FT blog, September 8, 2008.

Meanwhile, foreign holders of agency debt including that issued by Fannie and Freddie have been given a cushion. The US government has not given full sovereign backing to senior and subordinated debt but it has provided comfort.

This is very significant for all the foreign investors, including foreign governments and wealth funds that have piled into agency debt over the past 15 years, regarding it as a substitute for US Treasuries.

They did not come up with this on their own. Fannie and Freddie travelled the world to persuade foreign investors that their debt was a good bet. It turns out that they were correct, at least about that.

If these people owe more on the mortgage than the home is worth, those houses or in no way, shape or form THEIR home.

Why does anybody want to protect the stupid segment of the public from their mistakes, at the expense of those more intelligent to get caught up in this mess?

Why? …because the real intention is not to save the public, despite what McCain says, but to save the fat cats and banks. Saving the public just so HAPPENS to be part and parcel of saving the rich in this case. You only need to look to other issues (eg. health care) to know that McCain et al doesn’t really care at all about the public.

“We’ve got to keep people in their homes,” Republican presidential candidate John McCain said in an interview with CBS’s “Face the Nation” program. “There’s got to be restructuring, there’s got to be reorganization, and there’s got to be some confidence that we’ve stopped this downward spiral.”

AS I HAVE SAID, OVER AND OVER, FOR A LONG LONG TIME, WE ARE MOVING TOWARD A BAN ON HOUSING EVICTIONS. WHERE ARE THE MORAL HAZARD CREEPOS NOW?