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Sunday, July 13, 2008

Housing/Subprime/Credit Roundup — July 14, 2008

Items of Interest:

Watershed Moment: U.S. Government Tries to Bail Out Market

"The financial-based dike is springing a lot of holes and there are only so many fingers with which to plug them." - Todd Harrison, Minyanville.com
Fannie Mae headquarters in Washington, DCNY Times:
Treasury Acts to Save Mortgage Giants -- Alarmed by the sharply eroding confidence in the nation’s two largest mortgage finance companies, the Bush administration on Sunday asked Congress to approve a sweeping rescue package that would give officials the power to inject billions of federal dollars into the beleaguered companies through investments and loans.

In a separate announcement, the Federal Reserve said that it would make one of its short-term lending programs available to the two companies, Fannie Mae and Freddie Mac. The Fed said that it had made its decision “to promote the availability of home mortgage credit during a period of stress in financial markets.”

An official said the Fed’s lending program was approved at the request of the Treasury, but that it was temporary and would probably end once Congress approved Treasury’s plan. Some officials briefed on the plan said Congress could be asked to extend the total line of credit to the institutions to $300 billion...
Paul Kedrosky / Infectious Greed:
Love Notes From FannieMae to the Fed, etc. -- Just because it's really bugging me, I'll just say this once to get it off my chest: What a [F-word] travesty that in the world's most supposedly free capital market this toxic government-sponsored duopoly exists. I wish I felt like I would live enough to read history books where people laughed at the absurdity...

Kudlow"s Money Politic$:
Cleaning Up Fannie and Freddie - But their other business activity is to purchase mortgage loans for their own portfolios, essentially setting up a high-risk internal hedge fund. This is what caused stock market investors to slash Fannie and Freddie share prices nearly 50 percent last week, leading to much angst...
My question is whether under the new rules U.S. taxpayers are gonna be on the hook for these portfolios.

Stephen Labaton / New York Times:
Bush Offers Plan to Save Fannie, Freddie -- Alarmed about the sharply eroding confidence in the nation's two largest mortgage finance companies, the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions …

Wall Street Journal:
Treasury and Fed Pledge Aid For Ailing Mortgage Giants

NY Times:
Protected by Washington, Companies Ballooned -- Helped along by robust lobbying efforts, the imperiled companies resisted stronger oversight as they expanded...

NY Times:
Government as the Big Lender -- For millions of Americans, the government has morphed from lender of last resort into effectively the only lender...

Gretchen Morgenson / NY Times:
The Fannie and Freddie Fallout -- IT’S dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors...

Washington Post: Ripple Effects From Fannie And Freddie
IndyMac depositors line up for cash after seizure by FDICReuters:
Lines for Cash in California .... -- Hundreds of worried IndyMac Bancorp Inc customers descended on the company's branches on Monday to withdraw their money, after regulators seized what was once one of the largest mortgage lenders in the United States.

Regulators took over the Pasadena-based lender on Friday after a bank run in which customers -- panicked over IndyMac's survival prospects -- withdrew $1.3 billion over 11 business days, regulators said.

At a branch at IndyMac's headquarters, customers began arriving at 4 a.m., five hours before the doors opened. The Federal Deposit Insurance Corp now operates the thrift's 33 Southern California branches.

"I didn't think anything like this would happen," said retired teacher Charles Tengeri from Pasadena, who was first to emerge from the branch after withdrawing $171,000 -- about two-thirds of his life savings. "I withdrew as much as I could. I know it's going to take a little time."

The FDIC said the renamed IndyMac Federal Bank will cover insured deposits, mostly up to $100,000, and initially cover 50 percent of uninsured deposits...
WaMu Says It's `Well Capitalized' After Share Slump
The Big Picture:
FDIC's Failed Bank List - banks which have failed since Oct. 1, 2000
FDIC halts foreclosure on IndyMac mortgages
Paul Krugman / New York Times:
Fannie, Freddie and You — And now we've reached the next stage of our seemingly never-ending financial crisis. This time Fannie Mae and Freddie Mac are in the headlines, with dire warnings of imminent collapse. How worried should we be? — Well, I'm going to take a contrarian position …
Brad DeLong / Grasping Reality with Both Hands: Paul Krugman on Fannie and Freddie
Paulson Statement on Freddie Mac, Fannie Mae: Full Text — Following is the text of a statement issued today by Treasury Secretary Henry Paulson: — Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies...
more discussion:
Brian Wingfield /Forbes: Rescuing Fannie and Freddie
Clive Crook / Financial Times: Guarantees for America's Guarantors
Peter Wallison / Wall Street Journal: There Is No Reason to Panic
Sebastian Mallaby / Washington Post: Nationalize Fannie and Freddie
Editorial / New York Sun: Fannie, Barack, Freddie & John

The Big Picture: Fed to Lend to Fannie & Freddie
Ian Welsh / Firedoglake: Surprise! Fannie and Freddie Bailout!
Jay Newton-Small / Swampland: Bush Flip-Flops on Federal Lenders
Yves Smith / naked capitalism: Thin Gruel in Paulson Statement re Fannie, Freddie; Fed Opens Discount Window
Tdog / the talking dog: Bookends Theme
U.S. takes bold steps to shore up Fannie, Freddie -- A senior Treasury official said all the actions it proposed need congressional approval, but expressed confidence that could be secured this week.

A spokesman for Speaker of the House of Representatives Democrat Nancy Pelosi said she would work with the Republican administration of President George W. Bush on this matter.

Shares in the two mortgage giants, which own or guarantee just under half of the country's $12 trillion in outstanding mortgage debt, have been hammered by concerns that they might run out of capital amid mounting home-loan losses.

On Sunday the Securities and Exchange Commission stepped in to warn against rumor-mongering of any kind against any firm.

The SEC said it will conduct investigations to make sure that no false information was being spread, although it did not name any companies it felt might be victimized...
NY Times:
Making Sense of Problems at Fannie and Freddie -- An examination of how Fannie Mae works, the current problems and some proposed actions. How Does Fannie Mae Work?

Fannie Mae was originally formed by the federal government in 1938 in order to supply liquidity to the mortgage market. Since 1968, it has been a private corporation. Here is how it works...

How does Fannie Mae work?----

KC Johnson / Durham-in-Wonderland:
Steel to Wachovia -- The Wall Street Journal is reporting that Wachovia [bank] has hired Bob Steel as its new chief executive officer...

If Steel runs Wachovia like he oversaw the lacrosse case at Duke, I fear the institution’s “time of turmoil” might just be beginning.

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia