The Residential Real Estate Crash Index Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: MulhollandDrive who wrote (17766)	2/24/2004 10:42:49 AM
From: Elroy Jetson	Read Replies (1) of 306849

I think this is the crux of what Greenspan is after: Deep and liquid markets for mortgages are made using mortgage-backed securities that are held by non-GSE private investors. Fannie's and Freddie's purchases of their own or each other's securities with their debt do not appear needed to supply mortgage market liquidity or to enhance capital markets in the United States. Fannie and Freddie packaging loans into CMO's is not the problem. The problem is when these GSE's support the market for their CMO's by buying large quantities to support the price. If the price continued to decline, say if interest rates rose, then these GSE's would failure with huge losses and look to the government to cover the losses. If they do not maintain inventories of the CMO's they create, the losses would be borne by the non-GSE buyers, e.g. life insurance companies, mutual funds and pension funds. Our long term rates would not be as low as they are now if Japan were not purchasing hundreds of billions of dollars worth of U.S. debt securities. If they were to cease their purchases, our long term interest rates would rise very quickly.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next