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To: LLCF who wrote (149068)	2/5/2002 8:07:37 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 436258

i'm not surprised. just as i suspected, once the downturn got underway, people would start looking a bit underneath the shiny exterior and ask things like: "well what IS there actually, in terms of exposure? oh, it's not even on the balance sheet...i seeeee...how much of it isn't on the balance sheet? HOW MUCH??? SELL!!!" we're at that point now in the big bonks like JPM. and that's just credit exposure, no-one's even talking yet about derivatives and the associated counterparty risk. FNM shareholders must consider several things here...a)Buffett sold, saying he doesn't like icebergs he can only see the tip of. b)in a push comes to shove situation in which RE values collapse and delinquencies soar, bond holders would very likely be bailed out by Uncle Sam (there's really no other choice, since agency paper has evolved into a big seller to overseas investors and is even accepted by the Fed in repo ops in the best John Law tradition...-g-)..BUT shareholders would almost certainly become bag-holders, as the govt. would balk at bailing them out too. it wouldn't be good PR, and it would cost too much to boot. normally i'd regard mortgage debt as comparatively safe, since debtors are likely to default on everything else first before they default on their mortgage loans. but this isn't 'normally'...it's the tail end of a huge credit bubble. it has been more extreme in Japan way back when, but that country still serves as a stern warning regarding RE credit bubbles. btw., they seem to have printed a special dictionary for Franklin Raines that doesn't contain the word "bubble".:)