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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: russwinter who wrote (18840)12/17/2004 11:30:49 AM
From: RodgerRafter  Read Replies (3) of 116555
 
Hey Russ,

I don't think the Fed or the Republicans want to save FNM. It's a "Democratic" institution both in terms of its goals and who's campaigns they typically fund. They want to take it down and shift all the profit of selling mortgage backed securities to Wall Street. Taking down the GSEs won't be hard when the economy tanks and defaults rise. It will be more of a matter of just not supporting them.

I think the Fed has been trying to cushion Wall Street from the effects of inevitably rising interest rates by injecting in time to boost the bond market each month shortly before witching days. That way hedgers pay premiums for their hedges during interest rate spikes, then the underwriters make their profits when their derivatives lose value.

The basic theory is that the Fed works to suit the interest of big Wall Street bankers, both during booms and busts.

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