Fannie and Freddie Bailout Here?

Question

Looks like this weekend may mark the next chapter in the Fannie and Freddie Story . . . :zzz:
 
Here's a peek from the New York Times:
U.S. Rescue Seen at Hand for 2 Mortgage Giants

Bob Hines · Answer

I was expecting the socialization to happen latter in the month-I'm surprised it happened this early.  I guess all the cheerleading in the press last tues/wed about the successful & oversubscribed bond issuances didn't work.  Raising $5 billion in 1-3 month notes must be easier than rolling over the entire $230+ billion of long term notes that Fannie & Freddie have maturing this month (I come from a stock/credit market background).

A word of caution to all- there is an abnormally large amount of bank/financial company long term bonds that mature this month and next (sept & oct).  Many of these banks last raised capital (preferred stock) in the 8%-10% range and those securities are now priced in the 12%-14%+ range.  The big question hanging over this is what will the interest rate be this time?  Will everybody be able to raise capital or will some/many be cut off?  How long can a business last if it needs long term financing from a hard money lender?

As bad as the stock market has done this year, it has done fabulously compared the credit market.  (the credit market is many magnitudes larger that the equity market so it is usually considered the 'smart' money compared to the stock market).  National City bonds are pricing in about a 25% chance that they go under in the next 12 months!  It's going to get scary out there and the next 2 months are going to tell us a lot.

Ken Hicks · Answer

Maybe there needs to be a 3rd player or even more.

What the government needs to do is wipe out the boards and executives bank accounts first.

Again the good men and women get a nice mud sandwich.

Jon Holdman · Answer

Well, it will hurt anyone who owns shares in these two rogues, which probably includes just about anyone who owns a mutual fund.  But, at least the execs and boards, and, yes, shareholders, don't escape with a bonanza while taxpayers are left holding the bag.

Now, if some of those execs could just see the inside of a jail cell...