Silicon Investor (SI) -- The First Internet Community

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 : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (29115)	2/23/2003 2:39:58 AM
From: energyplay	Read Replies (1) \| Respond to of 74559

Thanks for the quick reply. The service fee is very small, essentially insignificant to this discussion. Fannie is not a source of funds like the 1975 bank, but mostly a pass thru . To get the money to buy the mortgages, Fannie borrowed money by selling bonds. Fannie used this money to buy the mortgage package. So Fannie has debt. Home owner has debt X - took out loan Fannie has debt X - sold bonds to buy loan Fannie's bonds are bought by somebody - the investor who supplies money to this whole chain. Could be Japanese, a hedge fund borrowing Yen at 1%, or a bank with deposits. The debt gets recycled - something that did not happen much in the 1930-1950s when these statistics originated. There is no addtitional money created (that only happens at he origination) but the nominal debt (and a corresponding asset) now exist multiple times. The way this statistic is measured, it can't handle double entry bookeeping - it just counts debt. There was a better explaination in Barron's about 2 weeks ago, along with a chart showing the rapid growth of this (nominal) debt.