Zeev's Turnips Patch-No Politics (ZEEV)

[Joe Stocks]

Zeev, What is "essentially backed by the US taxpayer mean"? Here is an article and an excerpt that confuses me.

http://biz.yahoo.com/djus/020701/200207011401000557_1.html
"The perception in financial markets that Fannie Mae and Freddie Mac are implicitly guaranteed by the government limits the benefits of the firms' "voluntary initiatives" to increase transparency and market discipline, according to Congressional auditors."

I guess I'm asking is the perception true or not?

This from another article:
"The exact level of government involvement in GSEs is a matter of some debate. While set up by the government, they are shareholder owned and no guarantee of their credit is explicit. But it's customarily assumed by the market that the government wouldn't allow GSEs to fail, which lowers their cost of borrowing."http://www.thestreet.com/_yahoo/markets/rebeccabyrne/10018964.html

Let's say the government does step in. If we get to that point we have many other problems to deal with as if we do we will have a fundamental problem with real estate valuations and other default issues. Since FNM is now privately owned, I'm not so sure how the public will accept a bailout of the shareholders. I see a long and painful resolution if we get to that point.

Joe