The Trillion-Dollar Mortgage Time Bomb

[Purveyor]

Source: CNNMoney

Risks are rising that Fannie Mae and Freddie Mac may need a government bailout that could cost far more than previous rescues.

April 21, 2008: 5:46 AM EDT

NEW YORK (CNNMoney.com) -- Among the nightmares lurking around the corner for the already battered housing and credit markets would be a meltdown at mortgage financing giants Fannie Mae and Freddie Mac.

Although few are predicting an imminent need for a bailout just yet, credit rating agency Standard & Poor's recently placed an estimated price tag on this worst case scenario -- $420 billion to $1.1 trillion of taxpayer's money.

This dwarfs how much it cost to help banks during the savings and loan crisis of the late 1980's and early 1990's. That cost taxpayers about $250 billion in today's dollars.

S&P added that saving Fannie (FNM) and Freddie (FRE, Fortune 500) might cost so much that the federal government's AAA credit rating, the top possible rating, might even be at risk. If that was lost, then all federal government borrowing would become more expensive.




Read more: http://money.cnn.com/2008/04/21/news/economy/fannie_freddie/index.htm?section=money_mostpopular

[mckara]

1. When Will the Shoe Drop?

It's crazy that all these problems exist and the market bounced back 5% in April.
:shrug:

[OKthatsIT]

6. It did. Its being propped up. To squeeze every last dime...

Americans need to SEE...they need to LOOK.

It's right under your nose.

The European Banks created this fiasco. It was designed long ago. They wanted the collapse. It serves to destroy the USA. Remember the NWO? It isn't Bush's NWO. Bush only gave them an excuse to take control...which Bush is fully aware of AND deserves a pat on the back for doing their bidding.

Even after they wreck our economic base, they will squeeze US further by taking control, claiming they are 'coming to the rescue' but the truth is, they are holding a police state over our heads demanding that we pay back all the debt that THEY MADE with their own policies.

It's all mafia. All of it.

[formercia]

8. Controlled demolition of the financial system.

The boys let us build up equity, then they crash the market and collect the spoils.

The American consumer as a cash crop.

[BeHereNow]

11. "The American consumer as a cash crop..." Brilliant way of putting it.

That's quite good formecia.

I wish there were more discussions on DU about the
role of the Trilateral Commission and the CFR in all of this.

BHN:thumbsup:

[formercia]

15. My father warned me.

He was an insider, OSS man. He served with with the Ivy League Mafia during the War. I can remember hearing the stories about the IG Farben/ US industrial connection as far back as the 50's. I was just a boy then and it didn't mean much to me at the time but it didn't take me long to make the connections.

[BeHereNow]

16. I don't know if I ever told you before....

but I always read and appreciate your posts on DU.
You are one of the increasingly few, who "get it."

BHN

[formercia]

17. Thank You

It's good to howl at the Moon and hear someone howl back. :)

[ckramer]

21. Equity? what equity ?

you are owned by the bank from the get go

[MadHound]

9. Whoa buddy, and I thought I was conspiratorial

The European banks didn't create this mess, no, that would be good ol' US banks and financial institutions. It has nothing to do with the NWO, at least not as you're thinking, but more to do with Alan Greenspan putting off the worst of the tech bust recession to the future by lowering interest rates and allowing the big money to flow into real-estate eight years ago.

Besides, Europe is a petty US creditor. China holds most of our public debt with various ME countries hold the majority of our consumer credit, which includes credit cards and home equity loans.

Stop looking through the conspiracy lenses all the time, and try looking at the facts. If you look at the facts and they lead you to a conspiracy, fine. But if they lead you in some other direction, then you've got to be intellectually honest and follow it. Otherwise you simply come off as a crackpot and a crank.

[Tangerine LaBamba]

10. Really?

The "Mafia"? Surely you jest.

Haven't you noticed that China owns us?

[formercia]

22. The term 'Mafia'

has become generic in recent years. It meant 'My family' (Ma Familia) originally but can apply to any groups engaged in organized criminal activity.

'My family' could easily apply to Bush Gang.

Cosa Nostra (Our Cause) is another related term.

[keep_it_real]

2. Could this lead to a depression?

[slackmaster]

3. A trillion dollars isn't really worth a trillion dollars any more

It's only a million million.

[asthmaticeog]

5. Yeah, but a trillion here, a trillion there, pretty soon you're talking about real money.

(h/t Everett Dirksen)

[sam sarrha]

4. add another 3 trillion from the war..

[darue]

7. so let them fail, SO WHAT if they do? n/t

[unblock]

12. note "WORST CASE". this is NOT at all a "LIKELY CASE"

the gsa's will take a loss on the bad debt they have. but they've raised fees and tightened lending criteria to make up for it. they're not going under and are not likely to need a bailout unless foreclosures get a LOT worse AND this continues for quite some time.

mostly this is irresponsible, hyperbolic journalism at its finest.

[Purveyor]

13. "mostly this is irresponsible, hyperbolic journalism at its finest"...

Of course this is the same response we have heard for the past 3-4 years when predictions of the current situation was outlined...

Just keep spinning. Most 'have your number'...

[unblock]

14. my post had actual content in it

and buried in the article you cite were the fact that this was just a "worst-case" scenario analysis and that it's not likely.

but i guess actually reading the article is mere "spin", and that any wild scenario is worth getting all hot and bothered over.

after all, whenever an asset bubble bursts and prices return to normal, the planet splits in two, dormant volcanos spring back to life, and dinosaurs walk the earth again.

try countering THAT without dismissing it as irresponsible and hyperbolic.

guess i've got YOUR number :evilgrin:

[Massachusetts]

18. Look on the bright side

This makes it easier for the changes OUR country needs. The silent masses can't be silent anymore.

[natrat]

19. whatever...maybe a %10 chance of implosion,,,but can not be dismissed out of hand

or the concept of some form of organized crime being behind the devestation because god knows there are serious crooks pulling the strings right here and right now

[NashVegas]

20. How Much Of This is a Result Of Raising Their Ceiling Caps to $400k and Bailing Out Bundlers?

And forcing them to absorb Wall St's midway barkers' mistakes?

WASHINGTON - A federal regulator made it easier yesterday for mortgage giants Fannie Mae and Freddie Mac to absorb problem loans that are dragging down many U.S. homeowners, the latest of several measures designed to stabilize falling home prices.

The Office of Federal Housing Enterprise Oversight announced that it would lower the amount of capital that Fannie and Freddie must keep in reserve from 30 percent to 20 percent.

With less in reserve, the two government-sponsored enterprises will have an estimated $200 billion more available immediately to purchase troubled home loans.

Despite promises otherwise, mortgage lenders and loan servicers have moved slowly to modify or refinance loans to homeowners who are behind on their payments. One in 20 home loans nationwide is past due, according to the Mortgage Bankers Association.

Yesterday's move by the regulatory agency of Fannie Mae and Freddie Mac seeks to provide a backstop to lenders. If the stressed loans are modified, Fannie and Freddie are better able to purchase and bundle them with other home loans to offer to investors as mortgage bonds.

http://www.baltimoresun.com/business/bal-bz.fannie20mar20,0,5454409.story