Replies to post #689014 on Fannie Mae-No Politics (FNMA)

[Donotunderstand]

actually

having been a broker -

Fannie Mae - as an agency had in its first life an explicit guarantee

Treasury stood behind them

Later - in their second life a a GSE ---- there were two things - AAA ratings by every agency and there was this implicit guarantee. By definition it was not explicit and did not exist in any prospectus on their paper --- but it was out there

Problem was ---- the ratings were garbage as they were on a Trillion or so or so of PLMBS and on the senior unsecured Lehman debt. Wrong a joke a disaster - a fraud if you prefer

So when the Chinese and Russians got nervous - along with the entire world about US debt ----- not Treasury but everything else - bank - corporate and yes GSE implicitly guaranteed debt ---- it was deemed necessary for the GOV to do something

I do believe had nothing been done - another shoe after Lehman - and we would have had the GREATER depression

Now - could the GOV have simply said -- we now guarantee F and F debt - it would have worked IMO. Recall - the GOV said that it would guarantee aything with FDIC insurance with no limit and it worked. The GOV also guaranteed the $1 NAV on Money Market

So was there a need to take over the GSEs in the way it was done - I will leave to history and true mayves and analysts

Was there a NEED - IMO a necessity - for some HUGE GOV action - IMO - yes and yes

Again - why the GOV could not simply say its guaranteed I do not know

(Likely a hangover from prior days when right and left economists were super worried - beyond reason - about DEBT levels and huge money supply -so the GOV likely worried about being tested say to the tune of having to buy 500B or whatever of panic sold paper

Turns out --- that fear of M1 supply and huge deficits - was plain and simple wrong ! as the last 10 years has shown !!!

So IMO
1. Something WAS needed
2. Was Conservatorship the answer - likely no. And was there some plot by Paulson and Republican Mega Rich - ? Could be . Did the TBTF banks have too large an influence ? Likely
3. But the point I do strongly believe is that we just about had the GREATER depression and the actions of the BUSH administration (in contradiction of everything R in supporting debt markets) were right on the money . As was the stimulus by Obama - the only problem was that it should have been 2x or3x the size but everyone right and moderate were screaming it would bankrupt us ---- where in reality it stopped the calamity - and started us growing again -- albeit too slowly as Boehner and crew (and many D economists) over feared deficits

My view - you can find many who agree and many who disagree

And I do not dismiss two motives by Paulson --- one to save the debt market and the US Dollar and consumer and a second to wipe out F and F over time --- see all the bad paper F and F were then made to buy up?

And everyone here who is not yet so closed minded they are not human - this was ALL Republican - knee jerk reaction - their god was no deficits and they hated Fannie and everything FDR did

Yes - BO poured Big Coarse Salt - big time on the wound with the NWS --- but the carving and knifing of F and F ---- was BUSH And crew. History may tell us the motive of Bush and Paulson --- to save the country? to hurt F and F in the long term ? --- as - no article has ever explained to me why the TREASURY could not extend its protection over this paper without all the other stuff (which when the dust settled was - a guarnatee)