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To: aknahow who wrote (13117)	6/26/2003 10:10:28 PM
From: maceng2	Respond to of 39344

Hi GW and everybody, Thanks for the illuminating discussion on the subject of Freddie and Fanny Mae. I can see now Elizabeth is being most accurate when she described these agencies as "recyclers" of money. But what if these very influential businesses were to tighten or relax the credit rating required to take out mortgages? Would this have effect on property prices? The banks, awash with fractional money generate the mortgages, and Fannie Mae just buys them from the banks. I see the "money generator" right there, the credit requirement is the throttle, and it has been floored for a while now imho, in the UK most certainly.

To: aknahow who wrote (13117)	6/27/2003 4:59:14 PM
From: Elizabeth Andrews	Read Replies (1) \| Respond to of 39344

That's what I thought but I'm no expert in this (or anything else-well maybe mashed potatoes). I'll guess I'll go to Edgar and find out how Fannie is financed, that may help me a bit.

To: aknahow who wrote (13117)	6/29/2003 1:51:15 PM
From: russwinter	Read Replies (1) \| Respond to of 39344

<There is no creation of money.> Not technically, but in sort of a defacto sense, as these credit backed assets show up as collateral to create even more "assets", and so on. IMO this is very hot leveraged defacto "money/asset" creation, with the potential (indeed likelihood) for evaporation (through default, quality downgrades, higher interest rates). Austrie's post 12974 is critical to this question, Message 19057149 as it implicates the potential for a term and process not mentioned much nowadays, disintermediation. The trade de jour is to borrow short term, and loan long term, and pocket the spread. Disintermediation of course occurs when short term borrowing costs rise, and the fixed long term assets (15-30 year mortgages for instance) can't be raised to offset it. Apparently the market mentality is that the Fed "has abolished" negative yield curves? Well, we will see (snicker, snicker). The 12974 post is important to contemplate as it gives clues as to who the bagholders will be in a massive disintermediation. And yes, despite all the Wall Street spin about swaps, derivatives, etc, there WILL be bagholders. Kevin Phillips has a terrific new book out that describes what he calls "neo-merchantilism" which gives these special privileges (asset or defacto money creation) to large financial institutions, who in turn abuse them. There is quite a history of this already, so nothing new, except for the extent of it today. amazon.com