Freddie (FRE) & Fannie (FNM) 01 (May 08 - Feb 12)

[kennynah]

surely, not all can be saved...even if the US govt wishes to without ramifications to the dollar value. some, probably the smaller banks, will eventually fail...i think last week, there a bank run on a small establishment.

the dollar amount stated below differs from earlier post...but the story is the same...help will be granted to fannie and freddie by US Treasury, if needed..

*****
From The Sunday Times (pls dont ask me which sunday times this is)
July 13, 2008
US Treasury rescue for Fannie Mae and Freddie Mac

US TREASURY secretary Hank Paulson is working on plans to inject up to $15 billion (£7.5 billion) of capital into Fannie Mae and Freddie Mac to stem the crisis at America’s biggest mortgage firms.

The two companies lost almost half their market value last week as rumours of a government bail-out swept the stock markets, hammering share prices around the world.

((truncated))

[millionairemind]

First time I have seen our gahmen criticised the US gahmen...

Welcomes but warnings for Fannie, Freddie rescue plan
Mon Jul 14, 2008 9:11am EDT
By Jeremy Gaunt

LONDON (Reuters) - A government plan to rescue mortgage agencies Fannie Mae and Freddie Mac was welcomed by one of the world's biggest holders of dollar assets on Monday but fears remained about the state of the global financial system.

Japan said it hoped that a plan unveiled on Sunday by the Treasury and the Federal Reserve would support the troubled government-sponsored mortgage financiers, but a senior minister said that world markets were on the brink of crisis.

The central bank of Singapore, another major dollar-asset holder, issued a similar warning about risks to financial markets and institutions.

The Treasury and Fed called late on Sunday for measures to lend money and buy equity if necessary in Freddie Mac and Fannie Mae, which are government-sponsored enterprises (GSE) owned by shareholders.

Fannie and Freddie own or guarantee $5 trillion of debt, close to half the value of all U.S. mortgages. Foreign central banks, mostly in Asia, hold $979 billion of the bonds and mortgage-backed bonds sold by the agencies.

"We hope the move will have a positive impact on the world economy," Japanese Vice Finance Minister Kazu Sugimoto told a news conference in Tokyo.

The hope was peppered with caution, however. Japan's financial services minister, was quoted as telling a meeting of economic ministers that the world's financial markets were "on the verge of a crisis".

The Monetary Authority of Singapore, meanwhile, was blunt.
"Significant challenges and downside risks in the international financial markets remain and financial institutions and investors should stay vigilant," the central bank said.

FREE-FALL

The rescue plan was timed to soothe market nerves. Freddie and Fannie shares plummeted more than 40 percent last week on fears they were under capitalized.

Freddie also is to sell $3 billion of three- and six-month bills on Monday in a test of market appetite for agency securities.

"(Their) continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore, we must take steps to address the current situation as we move to a stronger regulatory structure," U.S. Treasury Secretary Henry Paulson said in a statement.

Beyond the short term, however, a collapse of one of the agencies could unleash massive turmoil in the world's battered financial markets and inflict a deep recession on the United States that could chill growth everywhere.

Allowing a failure is considered inconceivable by many investors because of the massive role played by the GSEs in the financial system.

"It's not just that they are too big to fail, it's that they are too important to fail," said Ramon Maronilla, portfolio manager at State Street Global Advisors, the $2 trillion money management unit of State Street Corp.

Many financial markets did react positively to the plan. European shares where sharply higher, with the FTSEurofirst 300 up more than 1.5 percent and Wall Street looking set for similar gains at its open.
The dollar was also up across the board, gaining more than half a percent against a basket of six major currencies.

"While this is positive, if they hadn't done it things would be a lot worse," said Sharada Selvanathan, a currency strategist at BNP Paribas in Hong Kong.

"At the end of the day, the holders of agency debt are significantly in overseas hands and foreign central banks. They had to do this because confidence could weaken further, and that would be very, very bad for the dollar," she said.

Many investors were also keen to hang onto or buy Fannie and Freddie debt.

Russia's central bank, which holds about $100 billion worth, said on Saturday it saw no problem holding the paper.

Bill Gross, who manages the $130 billion Pimco Total Return Fund, also said he expected regulatory changes for Fannie and Freddie that could make their bonds "look more like Treasuries in terms of yield and credit quality, as will the mortgages that bear their name".

Both Freddie and Fannie said they were adequately capitalized but welcomed government support.

The Treasury said it would temporarily raise its line of credit to the two mortgage financiers, as well as purchase equity in them, a step never taken before, if needed.

The Fed said Fannie and Freddie could have access to its emergency cash. It held out a similar lifeline to investment banks after organizing a takeover of ailing investment bank Bear Stearns in March as it moved to calm markets roiled by the worst housing slump since the Great Depression 80 years ago.

[LenaHuat]

Juz read on CNA forum that Jim Rogers was fuming mad abt the US govt bailout on Bloomberg TV. I watched him blowing his top too on BBC juz a few minutes ago. Maybe he short Freddie and Fannie But seriously, the US juz took on some 5 trillion into their balance sheet. There is nothing much left in the kitty for another rainy day, more so if it rains soon thereafter.

Cannot recall where but I read one piece of news : this financial guy expects 300 small US banks to collapse.

[LenaHuat]

Traced the remarks to Gerard Cassidy as reported on CNBC:
http://www.cnbc.com/id/25666215

[kennynah]

i think there is no other way except to print money.... eur/usd is back to 1.59 region... if they increase tax, they will kill any chance of economic growth....

but i think they are really in a tough spot....if they dont calm the financial sector, by bailing out Fan/Fred, tonight could have seen a total meltdown...at least this morning, it had ~140 points of cushion...which is now about all GONE...

[OE2008]

Fannie and Freddie and a few which are too big to fail would be saved. The rest have to fend for themselves. The financials continue to be taken down, LEH, WB, MER and even JPM and C are not spared.

TA-wise, we are in buying zone. Damned, the market is just not listening Sheet,they have to bring in Abby on CNBC to air a bullish target of 1400 for S&P by year-end . Kiss of death

[kennynah]

TA-wise, we are in buying zone.

i agree...selective counters..and pretty short term play....it's a question of level of traders' aggressiveness....some would prefer to see a much clearer uptick...some, prefer not to wait...very individual at this stage....no right, no wrong, for sure...

[millionairemind]

Even with such a BIG rescue plan, the stock still fell... after the initial short covering is done.. be careful out there...the mkt is darn bloody weak... might just break in the middle..

Fannie, Freddie shares fall after early gains
Attention shifts to congressional approval of rescue plan
By Robert Schroeder, MarketWatch

Last update: 4:21 p.m. EDT July 14, 2008Comments: 6

SAN FRANCISCO (MarketWatch) -- Shares of beleaguered mortgage-finance giants Fannie Mae and Freddie Mac posted losses Monday after making strong gains early in the day as attention turned to congressional approval of a U.S. plan to help the companies.

Fannie Mae shares surged by 29% at the open of Monday trading, while Freddie Mac's shares gained 20%. But Fannie's shares lost 5% to close at $9.73, and Freddie's fell 8.3% to finish at $7.11.

Congressional Democrats said Monday they will act quickly to approve the plan to extend credit to the two companies, which back about half of all outstanding U.S. mortgages and have faced fears about their capital over the last week.
House Financial Services Committee Chairman Barney Frank, D-Mass., said the plan, announced Sunday, is "reasonable" and said in an interview on CNBC he doesn't believe the companies need to borrow from the Federal Reserve to stay afloat. Frank said the goal is to get a housing bill containing the new rescue plan to the White House for signature by the end of next week.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., said the Senate could complete its version of the bill this week. The bill agreed on by the House and Senate would be sent to the president for signature. Among other things, the bill now being negotiated by members of Congress would create a stronger regulator for Fannie and Freddie and the 12 Federal Home Loan Banks.
On Sunday, the Fed said it was prepared to lend to both Fannie and Freddie. Treasury Secretary Henry Paulson is requesting congressional approval of a plan to widen the Fed's line of credit to the two companies. See full story.

Shares of both companies fell about 45% last week as investors worried that they will need to raise large amounts of capital to deal with growing losses stemming from mortgage defaults.

Meanwhile, experts said on Monday that if the U.S. government has to buy stakes in Fannie and Freddie, current equity holders may be wiped out. See full story.
Dodd said Monday that Paulson, Federal Reserve Chairman Ben Bernanke and Securities and Exchange Commission Chairman Christopher Cox will appear before the committee and give members more information about the rescue plan on Tuesday.
House Majority Leader Steny Hoyer, D-Md., also said he'll work to ensure "timely consideration" of the plan announced Sunday.
"As the House and Senate finalize housing legislation aimed at protecting communities and helping millions of Americans keep their homes, I look forward to working with the Administration and the Financial Services Committee to ensure that the Treasury Department has all the tools it needs to assist Fannie Mae and Freddie Mac if necessary," Hoyer said in a statement Monday.
Dodd told reporters on a conference call Monday that Sen. Richard Shelby, R-Ala., the banking committee's top Republican, is also supportive of the administration's plan. A spokesperson for Shelby said the senator is in discussions about the plan.
Put together, Fannie and Freddie own or guarantee about $5.2 trillion of U.S. home mortgages, which is almost half of mortgages outstanding.

[LenaHuat]

Fannie and Freddie and a few which are too big to fail would be saved. The rest have to fend for themselves. The financials continue to be taken down, LEH, WB, MER and even JPM and C are not spared.

TA-wise, we are in buying zone. Damned, the market is just not listening Sheet,they have to bring in Abby on CNBC to air a bullish target of 1400 for S&P by year-end . Kiss of death

Apparently, Jim Rogers is shorting the investment banks via a ETF. Abby Joseph Cohen seemed so much sidelined during the show. Carl did not even thank her for appearing on the bigwig discussion.

[millionairemind]

Jim Rogers attacks Fannie Mae and Freddie Mac bail-out
By James Quinn, Wall Street Correspondent
Last Updated: 12:04am BST 15/07/2008

Renowned currency trader Jim Rogers has blasted the US government's planned bail-out of Fannie Mae and Freddie Mac as an "unmitigated disaster".

His former trading partner, hedge fund guru George Soros, warned that the banks would not be the last victims in the "most serious financial crisis of our lifetime".
News of the bail-out sent the shares of the two banks up as much as 20pc in early trading, but the gains were quickly eroded as investors feared the possibility of another collapse in the regional banking sector.

The Dow Jones Industrial Average was down 97 points at one stage and, by lunchtime on Wall Street, Fannie Mae was down 55 cents at $9.70, while Freddie Mac was off 84 cents at $6.91.

The price falls came despite strong demand for a $3bn debt sale by Freddie Mac, the first test of the company's borrowing ability since last week's dramatic share price falls.

Reaction to the Treasury and the Federal Reserve's bail-out plan was mixed but Mr Rogers was the most vocal. He argued that Fannie and Freddie, America's largest mortgage finance companies which own or guarantee some $5 trillion of mortgage debt, are "basically insolvent".

He said: "I don't know where these guys get the audacity to take out money, taxpayer money, and buy stock in Fannie Mae." He added that the US government should instead have allowed Fannie and Freddie to go bankrupt.

Mr Soros said the dollar remained vulnerable as a result of the government's actions to increase its own already sizeable debt pile.

Investors pointed to regional bank National City as the next possible victim as its shares fell 27pc in early trading, despite assurances from the Ohio-based bank.

It followed the Federal Deposit Insurance Corporation's seizure of California's IndyMac Bank on Friday, the second largest failure of a US bank. IndyMac reopened yesterday under FDIC control, with borrowers queuing to withdraw cash at many of its 33 branches .