Fannie Mae and Freddie Mac put in "government conservatorship"

[ryanpatgray]

@JonBostwick

@katja328

Somebody riddle me this: Why do US stocks surge after this “bailout”. Do people really not understand the consequences of this?

People trying to unload their dollars?

I am unloading what I can. Every chance I get I go to my local coin shop and buy silver or gold.

[ryanpatgray]

@Spideynw

@ryanpatgray

In the Untied States our quasi-socialist economy has just become even more socialist

Next is the healthcare system.

It should not be long until the car companies are nationalized. They are going to the government asking for a $50 billion bailout. We cannot let car companies go out of business, Americans need cars.

We will next have to nationalize the airlines. We cannot do without flying in our country.

Next will be farms. The government will have to make sure food is available for all. And they just got a $300 billion bailout.

So on and so forth. The entire economy will have to be nationalized, because like my mom says, government officials are like our parents, and care for us. Even though she recognizes that they are in bed with big business, she cannot give up the control that government has. Like most people, I think she has a defective brain.

We must nationalize that toothbursh industry! Americans need clean teeth!

[ama_gi]

I’m not an expert, but it seems to me that bailouts for irresponsible companies only encourages more investment in irresponsible companies. There’s more to come.

[Bostwick]

@ryanpatgray

@JonBostwick

@katja328

Somebody riddle me this: Why do US stocks surge after this “bailout”. Do people really not understand the consequences of this?

People trying to unload their dollars?

I am unloading what I can. Every chance I get I go to my local coin shop and buy silver or gold.

Commodities have crashed across the board. Looks like I was wrong.

[Byzantine]

@ama gi

I’m not an expert, but it seems to me that bailouts for irresponsible companies only encourages more investment in irresponsible companies. There’s more to come.

Sallie Mae, probably.

Bill Anderson raised a good point on LRC: these exotic financial instruments are all just bets on loans to us schleps. They’ve just been lumped together and risk swapped around to make them seem like more than they are. Are there no publicly traded companies out there with entrepeneurial promise? Why are all these investment dollars tied up in bird cage liner? Ridiculous.

I’d hypothesize that there may be too many “investment dollars.” There just would not be this much money flowing towards investment banks without US tax laws. Americans are shovelling billions of dollars to 30-something MBA’s and telling them to do something with it. So they do.

[DougM]

@katja328

Somebody riddle me this: Why do US stocks surge after this “bailout”. Do people really not understand the consequences of this?

The bailout represents a huge transfer of wealth from all owners of U.S. dollars into the financial stocks.

The businesses of Fannie and Freddie are to insure mortgages. These mortgages are repackaged into asset-backed securities and sold to financial companies. The market value of these securities is based on the present value of the scheduled future payments. For any given level of future payments, the present value is determined by the interest rate. A key component of the interest rate is the risk that debtors will default on their scheduled payments. With Fannie and Freddie in financial difficulty, the insurance of these securities was questionable. Now, it is backed by the full faith and credit of the U.S. government. Consequently, there is a drop in the market interest rate and a spike in the market value of mortgage securities. Since the financial companies own these securities, they will benefit from this.

Of course, the perceived unlimited resources of the U.S. government come directly and exclusively from those who own U.S. dollars. So everyone who owns U.S. dollars is now directly subsidizing owners of financial stocks.

[rroopstr]

@DougM

Of course, the perceived unlimited resources of the U.S. government come directly and exclusively from those who own U.S. dollars. So everyone who owns U.S. dollars is now directly subsidizing owners of financial stocks.

Most foreign reserves from most foreign countries, OPEC & a number of individuals own U.S. dollars. The amount of subsidy can still be huge. This deleveragin could be an opportunity for a healthier financial system, but perhaps it will just not be enough.