The following is my response to the Government's take-over of FRE and FNM:
1. NEVER and I mean NEVER let Jim Lockhart speak. Ever.
2. Paulson made a very important point: The GSEs are NOT sustainable in their current form, and if we don't address the issue now, it will only come back to haunt us.
3. That being said, what is the Government doing buying WARRANTS of public companies? WARRANTS!?
4. The Government has permanently damaged these stocks. 80% ownership will have to be reduced at some point in the future, and knowing our government, the decision to sell the Government's stake will come to Congress and we will likely see heavy selling. Nice.
What are your thoughts?
Subscribe to:
Post Comments (Atom)
Posts
2 comments:
Something had to be done and everyone knew the private sector was going to have nothing to do with it at prices that the Fed and Treasury want. I think this plan looks good on paper but the U.S. is going to assume to much debt in the deal which will drive up borrowing costs for everyone here.
I do believe however that you can't just let Freddie and Fannie fail because over half of the nation's mortgages would go down with it and mortgage rates would rise far above the levels they are now. If the government handles this efficiently then hopefully private sector help will come when the price works for both sides.
The common shareholders are pretty much screwed, but that the risk they inherit by owning common and hopefully some of the preferred doesn't fall out either because many banks have it in their investments. Hank Paulson said, "We examined all options available, and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection." Let's hope he is right.
The whole GSE structure was really stupid... seems like it was only a matter of time before taxpayers would pay for its stupidity.
Post a Comment