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FNM and FRE Statistics You Should Know

Submitted by njvoter on Tue, 10/14/2008 - 22:50
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FNM and FRE had outstanding liabilities of 5.4 Trillion (yes with a T) dollars, at the time they were seized.   This is the eqivalent of the total outstanding public debt of our entire country.   OK, so one cannot underestimate how big the GSE's were. 

The immediate unadvertised action necessary of the treasury was an infusion of $100 billion.   Which is the tip of the iceburg.    It is easily going to be well over the 700 billion figure to shore them up ongoing.   The democrats and MSM are deflecting that....

Much has been said about the use of leverage on Wall Street....yes it's true Goldman and Lehman were levered up somewhere between 32 and 40 to 1.   Bad judgement, they deserved their fates.   No one ever mentions that the GSE's were levered 2x that amount!!! Between 60 to 80 to 1 depending on which entity and which assets you include in the calculation.   FAR MORE LEVERAGE THAN THE INVESTMENT BANKS!   And they got away with it.  

The management of FRE and FNM have no obligation to repay the huge salaries and bonuses they received over the past few years, unlike the bailout package requirement for the banks.  
 
FRE and FNM have two businesses.
  1. They purchase mortgages and resell them as mortgage bonds.
  2. They borrow from the Federal Reserve and buy back their own bonds.

These two businesses place FRE and FNM in a conflict of interest position.

FRE and FNM have their debt backed by the Federal Government. This means they can borrow at the Fed Funds Rate or Treasury Rate, plus a negligible premium. This makes it very lucrative for FRE and FNM to buy back their own bonds. The Fed Funds Rate is currently 2% and mortgages yield approximately 6%. This means that FRE and FNM can make 4% times their leverage ratio. A few years ago, FRE and FNM successfully lobbied for permission to use more aggressive ratios.  Raising their leverage to the rates discussed at the top.

 
Talk about greed on wall-street???  (not denying that, but hey people in glass houses shouldn't throw stones...)
 
FNM execs had targets to double earnings in 5 years....they did it, in a very dangerous manner.  
 
By the way Morningstar had a very good piece on their website on CDO's and CDX (swaps) today.   Go read it,  very plain english, and then you'll understand why that market is necessary and why some of what is said about the vehicles is inflammatory.   Certainly there are problems which need correcting...but these vehicles facilitate alot of good for market participants as well.  

 

 

How Palin should next frame the Acorn situation...

Submitted by njvoter on Tue, 10/14/2008 - 22:28
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I suggest to Sarah Palin to reach back to other history to illustrate the "trend" in unethical election tactics for Obama, beyond but including Acorn....something like...

 

“Unfortunately, our opponent is no stranger to questionable election tactics.   Yes, as a community organizer he led voter registration drives, however, when his own future lied in the balance he determined the voice of the people was less important than his political ambition.   In the first election he “won” in Illinois in 1996, on January 2nd operatives for Barack Obama filed into a barren hearing room of the Chicago Board of Election Commissioners, and began the task of challenging the signatures on nominating petitions for DEMOCRATIC RIVALS.   Although the incumbent African American woman candidate, Alice Palmer, had twice the number of signatures needed they were successful in having her removed from the ballot, along with two other hopefuls.   If a woman signed her maiden name instead of her married name, if someone wrote in script where the petition instructed “print”, these people were denied their voice.   They challenged the qualifications of the petition collectors, nullifying entire sheets of names.   This activity handed Obama a victory in a district which had not voted Republican in recent history.  
We witness first hand in Texas and other states the intimidation and unfair tactics practiced in the democratic primary caucuses, the victim there Hillary Clinton and the countless voters intimidated, locked out of buildings and presented with mis-information.   I encourage you to go to this website:  
www.wewillnotbesilenced2008.com to see a amateur filmmaker’s documentary of the shameful events of the democratic primary caucuses, perpetrated by ACORN and other Obama supporters.  
Now again, we have reports coming in from all over the country, with 11 states now in active investigations of voter fraud, much of it sponsored by the radical organization ACORN.   Mr. Obama worked for ACORN as a legal representative for 3 years, he trained their staffers, and has contracted them to handle his voter registration campaigns in several states.  
We must be prepared to combat these tactics, we must be prepared to demand fairness in this and in all elections.   We must be vigilant and insist to be counted; and insist the rules be followed so that our voices are not diluted by fraudulent voter registrations.   We must send a clear message, that what is acceptable in Chicago-style politics we will not allow to spread to the rest of this great nation.”  
 
Many people are not aware of the Alice Palmer incident.    Tie this to the two women, Alice & Hillary, spoken by Sarah Palin this will be a powerful reminder to women voters, especially Hillary supporters.

 

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