This statement is the scariest..."Wall Street was spooked by Freddie's announcement that its capital surplus had fallen by $1.2 billion, to only $600 million above a mandatory target set under a consent decree with regulators."
What we're all shocked by is the fact that Freddie does no sub-prime or Alt-A lending, so why the write-downs? Yes, their default rate is up .10%, but that's almost 3% below the standard thresh-hold.
Anyway, Countrywide having problems was an eye-opener. This Freddie news about insolvency is almost akin to the Fed saying, "Hey, we're bankrupt..." If Freddie goes down, the turn around to the housing market will take an extra 18-24 months above what it's already going to take IMO...
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