My Take is that 15B Sunday night could obviate the need for FNM/FRE to follow through with a planned capital raising this week. The function would be to prevent market discovery of the real rate these two entities would be charged, by the free market, for more capital. As usual, the goal is to prevent mark-to-market pricing that the rest of the market can see. Lime, if you will, poured on the dead bodies.
That said, despite my multi-year concerns about all of this, I actually don't think the current situation with FNM and FRE is quite as dire--actually, dire is the wrong word, probably "imminent" is the right word-- as many fear. Though, I do think we will go deeper into crisis over the next 12 months, and that there will be a staircase deterioration, in FNM and FRE. So my view is merely that they don't blow up this week, or even this month. And probably not this year. Yes, the situation is dire.
If by some enormous miracle housing bottoms by Q2 2009, I think FNM and FRE could actually survive till then with patches and infusions. However, as I don't think most housing markets recover until at least 2010, I think the big kahuna moment in FNM and FRE will actually come next year. (conveniently in time to lay the egg on a new Congress and President)
Gregor |
