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Tuesday, July 22, 2008

Housing/Subprime/Credit Roundup — July 22, 2008

Items of Interest:

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Bloomberg:
U.S. Lawmakers Reach Deal on Fannie, Freddie Bill -- U.S. lawmakers reached agreement on a rescue plan for Fannie Mae and Freddie Mac that the House may vote on tomorrow, Representative Barney Frank said.

Under a modified version of proposals made by the Bush administration, the Treasury Department would gain authority to inject capital into the two largest U.S. mortgage finance companies, through loans and equity investments.

The Treasury would be barred from providing aid that would cause a breach in the federal debt ceiling under the agreement, a constraint aimed at limiting any taxpayer losses. The plan would give Treasury Secretary Henry Paulson power to restrict the companies' ability to pay dividends and require regulatory approval of the salaries of top executives.

``The package we have got is fully acceptable to Treasury,'' along with lawmakers in the Senate, said Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee. ``Nobody is for everything that's in it or got everything in it he wanted, but we negotiated a lot with the Treasury and the Senate.'' ...
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CNNMoney:
Fannie, Freddie rescue could cost $25B -- Congressional Budget Office puts possible price tag on Bush administration plan to stabilize mortgage finance giants - says 50% chance money won't be needed.

The Congressional Budget Office on Tuesday estimated that a government plan to stabilize mortgage giants Fannie Mae and Freddie Mac could cost government coffers an average of $25 billion.

The CBO said it thinks there is probably a better than 50% chance that the Treasury would not need to step in. In addition, it said there is nearly a 5% chance that Freddie and Fannie's losses would cost the government $100 billion.

CBO's $25 billion cost estimate is an average based on "the path of housing prices in the next several months." They considered three scenarios: prices stabilize, grow modestly or decline steeply.

The CBO report came out one day before the House is expected to debate and vote on a rescue plan proposed by Treasury Secretary Henry Paulson last week. Paulson asked Congress to give the Treasury broad, but temporary powers intended to provide a liquidity and capital "backstop" for the two government-sponsored enterprises (GSEs)...
related:
Bloomberg:
Fannie, Freddie Rescue May Cost Taxpayers $25 Billion, CBO Says

The Big Picture:
Pimco's Gross: Fannie, Freddie Mortgages 'Excellent'

Jessica Johnson, SeekingAlpha:
Short Interest in Fannie/Freddie Rises
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Paulson: bailing out Fannie Mae and Freddie Mac is crucial to stabilizing marketsReuters:
Markets depend on housing recovery: Paulson -- Treasury Secretary Henry Paulson said on Tuesday financial markets will remain under stress until the U.S. housing market's slide ends and called the health of mortgage finance enterprises vital to the recovery of the U.S. economy.

In remarks at the New York Public Library, Paulson cautioned that working through market turmoil will take additional time.

"Our markets won't make progress in a straight line and we should expect additional bumps in the road," Paulson said. "Until the housing market stabilizes further, we should expect some continued stresses in our financial markets," he added.

Paulson said restoring confidence in government-sponsored finance giants Fannie Mae and Freddie Mac is crucial to stabilizing markets rattled by a year-old credit crunch and a sharp fall in home values...
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Money Issue: How safe are credit unions?CNNMoney:
Credit unions: Safe as a banks -- 1. How safe are credit unions?

Is it possible to find out about credit unions? How safe are they at this time? - Willie, Florida

Credit Unions are just as safe a bet as banks are. Instead of the FDIC guarantee, you have the NCUA to back up your accounts up to the same amounts.

The NCUA stands for the National Credit Union Association. According to them, there have been six credit union failures so far this year, but as long as you have $100,000 or less in an individual account or $250,000 or less on a retirement account, you're insured. Plus, credit unions may have marginally better interest rates and rates on CDs, savings accounts and money markets.

To find a credit union in your area, go to creditunion.coop.
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Todd Harrison / Minyanville:
Random Thoughts: Civil Liberties -- Will Wall Street and the First Amendment Collide?

The lawsuit against analyst Dick Bove brought a disturbing conundrum to bear.

It's endemic of the shifting social mood. Nobody asked questions when the screens were green. Once the wheels wobble on the wagon, everyone is quick to point a finger...

What we’re now seeing extends beyond accountability—it talks to civil liberties.

It speaks to the First Amendment.

If a market participant spreads false information and profits from it, he or she deserves to get the book thrown at him.

Painting the entire short side of the market as villains—and holding them accountable for horrible performance—not only damages the market machination, it challenges a fundamental premise that our country was founded on...
Bloomberg:
BankAtlantic Sues Analyst Richard Bove for Defamation
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