I agree with you on your post (16).

P.S. I have rolled up my quarters, dimes, and nickels and am contemplating a Lehman bid.

For Scott’s next project, may I suggest “How To Manage A Loan Portfolio” for the suits at Feddie?

“Jay Butler gets rewarded…not just money” – I’m agonizing to know what that means.

That is a serious question that people I respect at church have asked, and that I’ve asked myself.

For what it’s worth, almost everyone else in my immediate and extended family are delightfully optimistic. They have accomplished some amazing things with that positive attitude. On the very day Paulson announced the GSE bailout, a recent project by my kid brother was profiled in the New York Times.

Jay Butler gets well rewarded for what he does, and it’s not just money.

Why do you have to be so negative all the time? Isn’t it about time we had another dose of Jay Butler – where has he been all summer, anyway, when we needed him?

Nothing personal, but I don’t believe I have any responsibility for the illusory run-up in housing prices. (I sold a condo in 2005 and began renting on a hunch that prices did not fit incomes, either nationally or here in Phoenix.) Nor do I feel like my taxes should be increased to pay higher (more) interest on national debt which was assumed in order to keep two socialistic agencies functional, in order that home prices can still remain artificially high.

About that underlying belief that RE will never decline in value. Over the last couple of years, twist and I have seen over and over again that professional forecasters are apparently twisting their models to spit out rosy scenarios when the obvious continuation of a clear trend points to disaster. For example, most forecasters today are predicting a strong rebound in house prices about the end of 2008, simply because if they don’t, the damage will be unthinkable.

I think the most egregious example we found was when Fannie’s chief economist put up graphs on Nov 8, 2006 predicting that house prices would slide until mid-2007, and then unaccountably rebound. In retrospect, it’s irresistible to conclude that in many cases like this the models and analysis were tweaked until the result was at least modestly palatable to the researchers’ bosses.

Yes, the economy is definitely suffering. However, the blame cannot just lie in the people running it. We all have to take responsibility. After all, didn’t we all take part in it somehow?

Looking at Syron’s and Mudd’s comp packages, I’m a little hard-pressed to believe the congressmen and senators, or White House tools, had guns to F&F’s heads to get them to buy or originate mortgages. I think the better explanation is the agencies, like everyone else, believed the underlying RE could never decline in value, ergo, balance sheet expansion was a “safe” means to higher salaries, bonuses, etc.

Everyone wants to find the sinister ulterior motive that led to the dumb borrower getting screwed, but once again, I think Occam’s Razor applies: GREED. My two Ameros. But I agree with everything else you said in #8.

The “difference” is what brought down the entire market. It’s the difference between what lenders have on their balance sheets and the real market value that can be supported by the current average wage level.

The cost of materials is driven by a global market, the cost of labor is driven by a local market. The U.S. has a massive glut of labor due to job losses for the past eight consecutive months while at the same time importing job seekers in the way of some 100K legal immigrants per month. Yep, that ought to work.

So prices went up, working class wages went down… What happened to the difference?

Fannie and Freddie management did exactly what government told them to do with the funds that our government made possible, “pass out money at any cost.” We now know what that cost was.

The plan was for the purposely induced inflation to also force up wages making it possible for ARMS and Resets to be paid…but it didn’t. Wages actually declined in real purchasing power and as they say, it busted up the game.

Thanks for the note.

I was never in favor of the bailout (simply because I believe houses need to find their market on their own, and I don’t believe a person should be eligible for a below-market-rate mortgage on the backs of the taxpayers), but the entity that broke F&F shareholders was management, not the government.

I fear that the Fannie and Freddie collapse demonstrates the severity of our failing economy.

I like yourself believe that this is most under reported and downplayed event in modern times. Our government just nationalized the mortgage market, breaking the stock holders while protecting the foreign bondholders.

I see no possibility for economic recovery in the U.S. under the current or pending new leadership on either side of the aisle.

“WaMu, National City Lose Suitors on Accounting Rule”, by Jonathan Keehner and Linda Shen, Bloomberg, September 10, 2008.

At least three potential acquirers ended talks this year to buy either Seattle-based WaMu or Cleveland’s National City Corp., according to two bankers involved in the talks. A sticking point, they say: a rule change that will force acquirers to compute a target’s assets at market prices instead of deriving values from measures including the purchase price.

WM down another 24 percent around 11AM this morning, by the way, and LEH back in negative territory. Another rough day on the Street?

Anti-spam word…COLLUDE…very appropriate

The quote was left out ? —> previous

Negative income? Yes; But negative revenues?

Did this happen in the 30′s?

Only in the current post modern securitization age. When you can report negative revenues in the multi billions, the Gov will come in to inject liquidity.

“Don’t Like Bailouts? Consider the Alternatives”, by Steven Pearlstein, Washington Post, September 10, 2008.

From the left, meanwhile, come populist complaints that government has committed enormous amounts of taxpayer money to bail out corporate fat cats and rich investors while ignoring the plight of millions of Americans facing personal bankruptcy and foreclosure.

While there is validity to these concerns, they are also based on a number of false assumptions, chief among them that vast sums are expended on these rescues.

History shows that rather than costing taxpayers, the rescues have often wound up making money.

Number of false assumptions? Count me in, Steve