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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Wyätt Gwyön who wrote (1572)	3/9/2004 12:55:41 PM
From: mishedlo	Read Replies (1) of 116555

Snow on FNM WASHINGTON, March 9 (Reuters) - U.S. Treasury Secretary John Snow on Tuesday took direct aim at mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE), repeating previous warnings to investors that government-sponsored enterprises are not financially backed by the U.S. government. "We don't believe in a 'too big to fail' doctrine, but the reality is that the market treats the paper as if the government is backing it. We strongly resist that notion," he said in prepared remarks before a bankers group here. "You know there is that perception. And it's not a healthy perception and we need to disabuse people of that perception. Investments in Fannie and Freddie are uninsured investments," he said. Because the companies were originally chartered by Congress and have access to multibillion-dollar emergency lines of credit, some investors treat their securities as almost equivalent to riskless U.S. Treasury debt. Legislation pending in Congress would overhaul how the companies, as well as the Federal Home Loan Bank system, are regulated. Snow repeated the administration's stand that a "strong, credible and well-resourced" regulator is needed, with the power to set minimum and risk-based capital levels. "GSE reform is pending before the Congress right now ... it's a critical time, legislatively, for details," Snow said. ======================================================= Just how big a warning is this? Mish money.iwon.com

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