FNM

[Art G]

Well I've been waiting and waiting, but I believe FNM has got to get bailed out by the Government and with a 5% dividend, isn't it a decent buy now? Well, isn't it

 

[Art G]

Is it a buy around $10?

 

[clifp]

It is looking interesting at around 16 to me, since the government will bail it out, but I think stock holders will have to take a hit.

 

[Art G]

I'm not convinced that $16 is low enough. I also believe they'll get help. Who does the Gov't help first, FNM or GM?

 

[al_bundy]

latest word from the White House is we'll help the GSE's, but no mercy for the shareholders

 

[ziggy29]

I would expect bondholders to come out of this reasonably well. The stockholders, not so much.

 

[copyright1997reloaded]

I looked at the preferreds on Fannie and Freddie on quantumonline, and have decided to wait. Why? non-cummulative, no stated maturity date. This tells me that if the common craters the preferred could also. (Disclaimer: I am not the sharpest tool in the shed when it comes to these securities).

Anyone out there that can point me to real debt of these companies (some examples) and an indication of what they are trading at today?

Thanks

 

[brewer12345]

Anyone out there that can point me to real debt of these companies (some examples) and an indication of what they are trading at today?

Thanks

Most any broker could sell you fannie and freddie bonds and MBS. The actual senior unsecured notes issued bythese companies trade at a wider than normal spread to treasuries, but still nothing to write home about, IMO. Bloomberg indicated that senior notes are trading at something like 82BP over treasuries for 10 year bonds. Put another way, with the 10 year at 3.84%, GSE senior notes would yield about 4.66%, although commissions and dealer mark-up would reduce your yield.

 

[ziggy29]

Actually, Fannie and Freddie bond quotes seem to be trading higher. I think there's growing belief in the credit market that the feds will bail out bondholders before letting these agencies completely fail.

Stockholders, on the other hand...

 

[haha]

Most any broker could sell you fannie and freddie bonds and MBS. The actual senior unsecured notes issued bythese companies trade at a wider than normal spread to treasuries, but still nothing to write home about, IMO. Bloomberg indicated that senior notes are trading at something like 82BP over treasuries for 10 year bonds. Put another way, with the 10 year at 3.84%, GSE senior notes would yield about 4.66%, although commissions and dealer mark-up would reduce your yield.

Brewer, could you give us an idea where SLM senior debt is trading? How about credit default swaps?

Ha

 

[brewer12345]

Brewer, could you give us an idea where SLM senior debt is trading? How about credit default swaps?

Ha

Dunno, Ha, as I am remote today. Safe assumption that they are wider today, though.

 

[haha]

Thnx.

 

[copyright1997reloaded]

Most any broker could sell you fannie and freddie bonds and MBS. The actual senior unsecured notes issued bythese companies trade at a wider than normal spread to treasuries, but still nothing to write home about, IMO. Bloomberg indicated that senior notes are trading at something like 82BP over treasuries for 10 year bonds. Put another way, with the 10 year at 3.84%, GSE senior notes would yield about 4.66%, although commissions and dealer mark-up would reduce your yield.

Brewer, thanks. I figured as such, I just hate dealing with humans, especially brokers. (I do have brokerage accounts and relationships that I've had for many, many years, but am mostly a DIY kind of person when it comes to securities selection and purchase, i.e discount brokerage.) I especially get un-trusting when it comes to bonds as I don't have a good way of determining how much I am getting hit up for in terms of spread, etc.

82BP isn't much of a risk premium...no way I'd go for that. Thanks.

 

[brewer12345]

Well, there you go: Fed threw open the discount widow to Fannie & Freddie. No more liquidity problems.

 

[ziggy29]

Well, there you go: Fed threw open the discount widow to Fannie & Freddie. No more liquidity problems.

Which quickly brought the markets to back over flatline, which even more quickly led to a stampede of sellers taking advantage of whatever tiny rally they can get to reduce their losses by 1%...

Wow, what a horrible market this is. You know the dagger is still falling when every tiny rally is met with an overwhelming wave of selling.

 

[brewer12345]

Which quickly brought the markets to back over flatline, which even more quickly led to a stampede of sellers taking advantage of whatever tiny rally they can get to reduce their losses by 1%...

Wow, what a horrible market this is. You know the dagger is still falling when every tiny rally is met with an overwhelming wave of selling.

That's OK. The big deal to me is that the Fed just removed a humongous systemic risk all in one stroke. The bond market was starting to charge the GSEs a larger and larger premium to lend them money, which could have turned into a landslide in a hurry. Fannie and Freddie ARE the mortgage market right now and their securities are on the balance sheet of just about everyone, so them getting into liquidity difficulties would have been disastrous for the world economy. Now that horrific outcome is off the table incontrovertibly, which is very important.

With the Vix spike today, maybe all the retards wiating for "capitulation" will finally be satisfied that things have cratered enough for now.

 

[al_bundy]

i imagine this money has to be paid back at some time, if fannie and freddie are suffering these losses how will they pay the fed back?

i've also been reading last few months that the Fed has been destroying it's own balance sheet lending all this money

 

[ziggy29]

i've also been reading last few months that the Fed has been destroying it's own balance sheet lending all this money

Well, all you have to "read" is the chart which tracks the U.S. dollar.

 

[Hamlet]

Didn't they just deny this?

Honestly, though, I can't imagine the government not backing their bonds. They've let people think that they would for so long, that I think letting FNM or FRE default would be about the same as the government defaulting on treasuries. End of the world kinda thing.

I wouldn't touch their stocks though. What is their debt/equity ratio? Isn't it about 60:1? No thanks, I'll stick to WFC and USB.

Well, there you go: Fed threw open the discount widow to Fannie & Freddie. No more liquidity problems.

 

[ladelfina]

Didn't they just deny this?

That's "today".. next week who knows?
Bloomberg.com: U.S.

If they are really doing 80% of today's mortgage biz.. allowing that to come to a halt seems beyond political contemplation (but the moral hazard and the effect on the dollar, treasuries, etc. is even more frightening).

ANALYSIS-Fannie, Freddie bailout would imperil budget, dollar - Reuters News
"it all happened so quickly" says the above article.

[August 2006] One cannot even exclude systemic risk consequences if the housing bust combined with a recession leads to a bust of the mortgage backed securities (MBS) market and triggers severe losses for the two huge GSEs, Fannie Mae and Freddie Mac. Then, the ugly scenario that Greenspan worried about may come true: the implicit moral hazard coming from the activities of GSEs - that are formally private but that act as if they were large too-big-to-fail public institutions given the market perception that the US Treasury would bail them out in case of a systemic housing and financial distress – becomes explicit. Then, the implicit liabilities from implicit GSEs bailout-expectations lead to a financial and fiscal crisis. If this systemic risk scenario were to occur, the $200 billion fiscal cost to the US tax-payer of bailing-out and cleaning-up the S&Ls may look like spare change compared to the trillions of dollars of implicit liabilities that a more severe home lending industry financial crisis and a GSEs crisis would lead to.

RGE - Nouriel Roubini's Global EconoMonitor
oy, what a headache I have now.

http://www.rgemonitor.com/redir.php?sid=1&tgid=&cid=272624
BNP Paribas:

With house prices set to keep falling for the foreseeable future, losses will
likely continue to stack up for the two agencies, which have already endured
a combined hit of more than $11billion in the nine months ended March 31st.
And after recent falls, their combined market capitalisation has dwindled to
less than $19bn as leverage has skyrocketed. As of the end of March this
year, Freddie Mac’s leverage has ballooned to an unprecedented 50 times!
The US mortgage market seems to have arrived at the ultimate conundrum.
The GSEs need to keep pumping money into mortgages to keep the
mortgage market functioning but doing so appears to be fatally undermining
their financial health. As we have argued for several months, nationalisation
– partial or in extremis wholesale - may be the only long-term solution to this
paradox but, given that the GSE’s liabilities are themselves already larger
than the extant federal debt, the latter out-turn is itself barely feasible.

--
Roubini today, quoted at great length here with arguments against a bailout:
naked capitalism: Roubini: Restructure Fannie, Freddie Debt, Skip "Mother of All Bailouts"

 

[brewer12345]

Didn't they just deny this?

Honestly, though, I can't imagine the government not backing their bonds. They've let people think that they would for so long, that I think letting FNM or FRE default would be about the same as the government defaulting on treasuries. End of the world kinda thing.

I wouldn't touch their stocks though. What is their debt/equity ratio? Isn't it about 60:1? No thanks, I'll stick to WFC and USB.

They did deny it after all. But its inconceivable that they would not stand behind fannie & freddie if needed. Thus far, at least, the damage seems to beconfined to the GSE's shareholders, since the bond market continues to play with Freddie and Fannie. If the debt market stops playing with them, we have a problem that discount window access would probably solve pretty much instantaneously.

After all, if the Fed will open the window to the brokers, Fannie & Freddie are a cinch for access if they need it.

 

[al_bundy]

Didn't they just deny this?

Honestly, though, I can't imagine the government not backing their bonds. They've let people think that they would for so long, that I think letting FNM or FRE default would be about the same as the government defaulting on treasuries. End of the world kinda thing.

I wouldn't touch their stocks though. What is their debt/equity ratio? Isn't it about 60:1? No thanks, I'll stick to WFC and USB.

when did a government official say they would rescue fannie or freddie in case of failure? it has always been implied as far as i know

 

[Art G]

This is an interesting discussion. Actually, the government has always stated that the loans were "backed" by the government. They never said anything about the company itself. Therefore, they can take over the loans thus making the company a government entity, keep the loans secure, but thusly, screw over the shareholders.

 

[FinanceDude]

This is an interesting discussion. Actually, the government has always stated that the loans were "backed" by the government. They never said anything about the company itself. Therefore, they can take over the loans thus making the company a government entity, keep the loans secure, but thusly, screw over the shareholders.

SO the govt line is: "Well, we always said "implied", which meant unless you screwed the pooch we wouldn't need to bail your sorry a*s out, but since you got greedy and stupid, we're taking you over, but your shareholders are SOL. Have fun explaining that at the annual shareholder meeting".............

 

[Texas Proud]

FD... well, in a word YES....

They are backing the debt that is backed by mortgages... not the shareholders of the company... so both Fannie and Freddie could indeed go bankrupt and all the negatives that attach to that... but the FNMA bond are 'good'...