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

To: Les H who wrote (112190)	3/22/2008 9:46:10 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 306849

>>Fed's rescue halted a derivatives Chernobyl<< ...and created a moral hazard and inflationary Hiroshima! (Damn, superlatives are FUN!)

To: Les H who wrote (112190)	3/22/2008 9:55:14 PM
From: Les H	Respond to of 306849

Fannie And Freddie Unbound The OFHEO reduced the 30% surplus capital requirement to 20%, effective immediately. This frees up about $3 billion in capital at each company, which will provide $200 billion of immediate liquidity to the mortgage market, and allow the GSEs to purchase or guarantee about $2 trillion in mortgages this year. In exchange for loosening the reins, Fannie and Freddie have agreed to raise significant capital (although exactly how much was omitted from the press release), to maintain overall capital levels in excess of requirements while the mortgage market recovers, and to acknowledge the need for GSE reform legislation. Clearly, the administration remains worried about the systemic risk posed by newly enlarged GSEs, but has subordinated this concern in the short term in order to restore liquidity and support mortgage security prices. In combination with recent monetary stimulus, lower mortgage rates and easier credit conditions may even help slow the rate of decline in house prices and limit foreclosures, at least among prime borrowers. However, it will do little to bail out subprime borrowers or lenders. In addition, strong headwinds will persist as the U.S. economy faces recession. bcaresearch.com Fed's Aggressive Policy The Fed did not meet expectations of a 100 basis point rate cut, but policy is being eased at an aggressive pace. If the latest moves fail to work, then the next step probably is outright purchases of non-Treasury securities. bcaresearch.com