So here we are just 88 days before the Mayan Apocalypse, and 99 before the original end date for Geithner’s support of the housing GSEs. Well, in the time since I was following this closely there appears to be an earlier “revamp” [later: I asked around for clarification and a couple of knowledgeable sources confirmed that the $200+200B package was indeed in the original Sept ’08 bailout package, my bad] that placed a big slush fund in the way of Fannie’s and Freddie’s losses. This goes a long way to explain the curious lack of market panic last week:
WSJ/Fox (8/17 ’12): “Treasury Amends Fannie, Freddie Bailout Terms”
At the end of this year, the existing agreements return the companies to a limited amount of support, which adds up to $200 billion [for each, actually] less any funds that had been injected through 2009. The Treasury will be able to inject up to $125 billion into Fannie and $150 billion into Freddie.
I’ll leave it to “Math is hard” Barbie to explain how 125 + 150 = 200 (I’m recalling $200B for each F originally so maybe $275B is indeed the present number), but if I’m reading that right we aren’t going to fall into the sink hole as long as US housing prices stay comfortably inflated. And the $200/$275B limit (no matter how squishy) must be serving as the necessary fig leaf so that OMB doesn’t stray into Prince Harry territory maintaining that the gov’t isn’t on the hook for agencies.
Anyway, the Fed’s own MBS swelled by a modest $5.155 billion last week and foreign central banks’ appetite for US obligations continued to be insatiable. Which either means they continue to have bags of money they want to store in a safe place, or the Fed has found another evil regime from which to seize some juicy official assets.
This week’s Reuters report1 is, as usual, based on the weekly update from the NY Fed’s H.4.1 table site. 2 The Reuters weather reporters are back now, and have started their habit of creative rounding. Last time that came to a bad end, but so far they have avoided the pitfalls this time.
The treasuries number grew by $7.422 billion, about half of last week’s big rise.
Agencies surged $5.355 billion, carrying that number back to June levels.
*Agen-FM: The dotted line is the foreign central banks’ Agency Debt holdings reduced by the level of the Fed’s own MBS holdings. Since the FRBNY itself is a lightly audited peculiar amalgam of foreign & domestic, central and private bank I think it might be useful to consider the hypothesis that for a while starting in January 2009 the Fed’s MBS holdings were being quietly deemed to be “foreign.” That is, for the first half of ’09 the dotted line seems more sensible than the red one.
The net of US obligations growth was $12.776 billion, which came reasonably close to matching last week’s result.
Twist’s ratio graphs swung to a slight gain.
The Setser numbers both advanced, the treasuries one quite smartly.
Notes and References
: “Foreign central banks’ US debt holdings rise – Fed”, Reuters, August 23, 2012.