The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: MulhollandDrive who wrote (133468)	7/13/2008 1:30:09 AM
From: XoFruitCake	Read Replies (2) of 306849

"imagine being levered up 60 to 1 on declining assets....there is simply just no 'fixing' this" heh heh, both FNM/FRE are insolvent at this time. However, don't foret their duopoly power of guarantee mortgage with a fee in the future and they can raise fee drastically to make up for their loss now.. it will take quite a few years but they will be able to recoup the loss and more.. The key is that they need more capital now (I saw some estimate that they may loss 40-50B out of all the mortgage mess).. I think one of the proposal floating around now is to have Treasury buying a special class of stock and highly dilutive to the current shareholder.. Will see how it pan out.. But my bet is that one way or the other, their capital requirement is going to get solved and we are turning the corner on this mortgage mess from a bank perspective. Once the FNM/FRE capital requirement is settle, all the other bank can earn their way out of the write down in the next few years. Home price will continue to drop and economy will continue to suck but bank will start to make money again even after write off. Good time will start rolling until Fed start fighting inflation with a new rate cycle. business.timesonline.co.uk US TREASURY secretary Hank Paulson is working on plans to inject up to $15 billion (£7.5 billion) of capital into Fannie Mae and Freddie Mac to stem the crisis at America’s biggest mortgage firms ... Under the terms of the proposed move, the US government would receive a new class of shares in exchange for the capital, which would be hugely dilutive to shareholders.

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