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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (36482)	7/21/2005 1:56:50 PM
From: ild	Read Replies (1) \| Respond to of 110194

We have FOMC Minutes today at 2:00 ET

To: mishedlo who wrote (36482)	7/21/2005 1:58:34 PM
From: ild	Respond to of 110194

WASHINGTON (Dow Jones)--Large investment portfolios held by mortgage companies Fannie Mae (FNM) and Freddie Mac (FRE) drive up their profits, but don't do much to lower U.S. mortgage rates, U.S. Federal Reserve Board Chairman Alan Greenspan said Thursday. Greenspan, testifying before the Senate Banking Committee, said the Government Sponsored Enterprises, or GSE, function of purchasing mortgages, securitizing them and selling them into the U.S. financial markets "has been an extraordinarily valuable addition to housing finance." However, the practice of holding the mortgages in investment portfolios hasn't had much impact on the availability of housing finance, he added. "That is not adding liquidity to the housing market, nor in our judgment, is it assisting the market generally," Greenspan said. "And in addition, because it is a highly leverage operation and because it requires sophisticated hedging of interest rate risk, it is imparting a significant risk to the American financial system." Asked if GSE investment portfolios should be treated differently from those of large U.S. commercial banks, Greenspan said they should because U.S. commercial banks hold more capital relative the size of the portfolios. "A critical aspect of the problem is the fact (GSEs) have relatively small amounts of capital relative to the assets they hold," Greenspan said. The GSEs must hedge aggressively against future interest rate risk because their capital is so much smaller than the investment portfolio, he said. "They are unable to self-insure," he said. Greenspan noted that GSE debt enjoys low interest-rate spreads over U.S. Treasury bonds because the market perceives them as having a U.S. government guarantee. Greenspan said both the opponents to GSE portfolio limits and the supporters in the mortgage industry overestimate potential shifts in market share in the securitized mortgage markets resulting from a restriction. For example, Greenspan said the decision of whether a GSE's accumulated mortgages end up in a portfolio or are securitized is made after they are purchased from small banks. Home builders and community banks worried that portfolio limits would drive up interest rates are mistaken, Greenspan said. Over the longer run, those groups are more at risk because a systemic problem would harm the housing market, he said. "We are creating a potentially very serious systemic risk and to have arguments about whose market share and whose profits will change in some way is missing the larger point," Greenspan said. Testifying before the House Financial Services Committee on Wednesday, Greenspan said he opposes their version of legislation establishing a new GSE regulator because it doesn't include investment portfolio limits. Later in his Senate testimony, Greenspan said he doesn't have a number in mind for the appropriate size of the GSE investment portfolios. He said GSE's have a "significant" need to hold liquid assets for investment. However, those assets should be in the form of cash or Treasury bonds. "They don't want to hold Treasury bills because selling debentures to hold Treasury bills won't create profits," Greenspan said. "In fact, it reduces them."

To: mishedlo who wrote (36482)	7/21/2005 2:05:11 PM
From: ild	Respond to of 110194

DJ At FOMC, 'Views Differ' On How Much More Rate Must Rise DJ FOMC: Unwise To Raise Rate Just To Tackle Home Prices DJ FOMC:Econ Events Will Determine How Much Rate Will Rise DJ All FOMC Members Saw Continued Inflation Risk - Minutes DJ FOMC: Murky Outlook For Long-Term Rates, House Prices DJ FOMC: Econ Recovery To Persist Despite Oil-Price "Drag"

To: mishedlo who wrote (36482)	7/21/2005 2:26:12 PM
From: All Mtn Ski	Read Replies (1) \| Respond to of 110194

Some areas are dieing because of exhaustion right now I think. I've been tracking this site for a while. Average prices for SD condos topped out at close to $1 mil, and have recently been in the mid $800k range before dropping below that. It has already begun... sandiegodowntown.info A-M-S