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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: MSI who wrote (9544)	3/11/2003 3:54:17 PM
From: Ramsey Su	Read Replies (1) \| Respond to of 306849

MSI it will be very different. LTCM is a Fed orchestrated bail out by bringing in Greenspan's wallstreet buddies. Feds basically rigged the market so that they are assured their money back. Such was all the greenspan BS about moral hazard. A secondary market liquidity problem would have to come with Federal backing. That alone should stabilize the fear of the unknown and in theory would be enough. However, that decision process is much slower. It is unlikely that congress can act as fast as the private sector did in the case of LTCM. Once again, I think people are confusing the issues. This is not about the fundamentals of freddie and fannie as companies. The issue is what if freddie and fannie is "out of the market" for 30 days, 60 days or more? Right now, with the implied government backing, the MBS are perceived to be low risk. If that perception is changed, rates will go up. I am not suggesting doomsday but rather pointing out that the market may not be prepared.