Uh oh. I'm getting a serious sinking butterfly-stomach feeling over Fannie and Freddie bailout

I've been posting moderately optimistic blurbs about the Freddie and Fannie takeover, but after reading some more detailed reporting, I am getting the serious willies.

I'm still moderately optimistic. But as I'm learning about the depraved depths of what Fannie and Freddie were doing, and what the Feds are commiting themselves to do, I'm getting hot flashes about how serious this is. I'll try to post something long and analytic later today, but here's a synopsis:

- The federal takeover really is a nationalization -- the stuff that European countries used to do in the post war period when their financial institutions tanked. This isn't a bail out; it's nationalization, and that's what a lot of serious economic bloggers are now calling it.

- Freddie and Fannie were engaged in very, very, seriously fucked up financial transactions. We're talking Enron level risk and stupidity -- but on a much more monumental scale.

- As privatized companies, Fannie and Freddie ceased focusing on their core business -- guaranteeing consumer home loans to make them more marketable in the secondary mortgage market, and keeping that market liquid -- and became a super mortgage company itself; in other words, instead of helping other companies create mortgage backed securities, it was creating them itself. Unlike other creators of mortgage backed securities, however -- the point of such transactions is to get the obligation to pay bondholders off one's own books -- Fannie and Freddie kept the obligations because they are the guarantors of the underlying mortgages. This is the same mistake Enron made.

- Fannie and Freddie were playing dangerous games with interest arbitrage, derivatives and other exotic financial instruments that no one understands or can value.

- In fact, the sum total of Fannie's and Freddie's transactions were so complex that no one understands them -- and I mean no one, not even their own management. One recent year's audit was so horrifically complicated that Fannie spent $1 billion on the audit. That's billion with a b. On the audit. That's how many hours of accountants' work (plus other expenses and charges) it took just to figure out what they own and what it's worth.

- The Feds are, in effect, taking over some of Fannie's and Freddie's business, by proxy. The Treasury is agreeing to selling T-bills to buy Fannie's and Freddie's mortgage backed securities to maintain liquidity. We now have a socialized, nationalized home mortgage banking system.

- The scariest part about the latter is that whatever happened to Fannie and Freddie (and Bear Stearns and others) can now happen to the Treasury. The Treasury Department is committing itself to engaging in the interest rate arbitrage games that Freddie and Fannie were doing and that got them into trouble.

- The Bush administration has ceded control of U.S. financial policy to Chinese, Japanese and European Central banks, and U.S. Treasury Department and Federal Reserve are basically taking orders from overseas financial powers. Doesn't that mean we're not an empire anymore but just a big friendly third world colony? It's not just Fannie and Freddie that are in "conservatorship"; we are. This is like what the IMF used to do to third world countries, but they're trying to make it look not as bad.

I don't fully understand all this means, and all the ramifications of the 'bail out', so this was very helpful! If not disturbing.

to realize just how serious this situation is.

Again, thank you for making me aware. I think. :scared:

how could this administration profit from this "bail-out." I don't understand much of the financial markets although I have been watching the stock exchange. - was this planned?

Somehow I've determined those in the administration are evil genius's. :freak:

it could benefit if the companies turn around. That's because the price of stock rises and falls depending on the health of the company.

See post 15 for background on the difference between "bailout" and "nationalization."

When you loan a troubled company money, the most you can get back is the money you lent plus interest. (Actually there are exceptions, like when you buy depressed bonds and they rebound; I think the Treasury ended up making money on the Mexican peso crisis bailout.) When you buy the stock there is no limit to how much that stock will someday be worth.

Because the federal government is going to buy the stock of the company, the government could profit from a turn around. But it won't be during the time left to this administration. It would be a profit to the federal government.

while bush-cheney and the repubs were pulling out the guns, -- china, japan et al were pulling out their checkbooks

bush-cheney-repubs sold us out

We here on DU were reading about these "instruments" years ago. We knew bad stuff was going on because a few brave Financial Bloggers alerted us.

Bushies did this to cover up what a crisis we were in after the Tech Implosion. Creating another "Bubble" was Greenspin's way of supplying "liquidity" while American jobs went overseas and Wall Streeters continued their games behind closed doors.

Only way America could survive shipping jobs overseas and losing manufacturing was to keep prices low here (import, import, import) while propping up Housing Speculation so that average folks could borrow and borrow to keep buying cheap going more and more into debt while the Chinese, Russians and others bought our treasuries.

But, then you know this "Rad" as one of the original DU Marketeers. Bad stuff...and yet so many knew and no one would listen...:-( It made fortunes for many while impoverishing the rest of us for decades.

in the ME from all that money spent in Iraq and Afghanistan. We have been royally had.

My eyes glazed over at "interest arbitrage" but I understand enough of the other text to see why you have the willies.

79.9% ownership in each...so what happens if the housing market continues to slide? How much in tax dollars will have to be pumped into the mortgage market just to keep the US Treasury afloat?

But this is quite misleading. Everything I write in this thread, I should point out, is subject to being revised because so much info is pouring in, so I can't vouch for it all.

Basically if you buy stock in a corporation, you have limited liability. No matter how much debt the corporation racks up, you can only lose your stock investment. No one can come after you for the corporation's debts.

So on one hand you might conclude the Treasury taking a modest equity (stock) position in Fannie and Freddie isn't that big a deal.

But the devil is in the details. Treasury agreed to buy however much stock is necessary to keep Fannie and Freddie from being insolvent, so although they are buying stock, they are also taking on a somewhat exotic form of liability.

Because of the peculiar way financial companies are valued, as the value of their assets (mortgages, mortgage backed securities) goes down compared to the value of their debts (having to pay guarantees of defaulted homeowners, plus the mortgage backed securities they've issued to others) the difference has to be made up with "equity" -- ie shares. That's what the Treasury has to buy under the agreement -- the difference.

As Fannie and Freddie deteriorate, Treasury could be forced to buy very large amounts to keep their balance sheets, well in balance.

I wish I had some understanding of it all - your IAWL analogy was very, very helpful, but I'm afraid I'm just a dolt so please forgive what is probably going to be a very stupid question.

This sounds less like a nationalisation of Fanny and Freddy and more like the Treasury is just going to prop them up - bail them out - by taking on their debt. Why are the European markets so happy about this? Shouldn't them be taking it in the shorts along with F & F's other stockholders?

First, why is this a nationalization, rather than a bail out (propping up). Nationalization is a policy that has been promoted in communist countries, but also more rationally and effectively in socialist/democratic countries like Sweden and France under Socialist governments and even during certain Labor governments in Britain.

"Nationalization" of a company means that the government owns the company -- sometimes entirely, sometimes a controlling share (ie 51% or more). To carry out a nationalization, the government buys the company's shares of common stock and/or preferred stock.

(If the government doesn't pay for the shares, seizes them, or uses eminent domain to get them at unfairly low prices, the "nationalization" is called "expropriation" and if the expropriated company was previously American owned, the leader of the expropriating government can anticipate inopportune visits from the CIA and should not fly on small planes.)

A "bail out" usually refers to the government lending the company money, often at reduced rates. When no investors or banks will lend and the government comes in and lends as lender of last resort, we usually call that a bailout. That's what happened to Chrystler for example and Bear Sterns. The lending sometimes takes the form of the government buying new bonds issued by the company, or it can be a direct bank-like loan.

In a nationalization, because the government buys the stock and can vote the stock, it is considered the owner and can hire and fire management, determine policy and so on. In a bailout, the government is only a lender. It can't hire and fire management and tell the company what to do.

In this case, the federal government is going to purchase Fannie's and Freddie's stock. There is also a bailout aspect, because the government will also be lending F and F money. But it will basically wipe out the existing shareholders and make sure they don't make any money if the companies make a recovery. The government also will end up the owner and controlling voter in the company -- with control of the board of directors, for example.

In a more typical bailout, because existing shareholders are left in place, if the bailed out company makes a recovery, those shareholders will profit; their investments will be saved by government/taxpayer generosity.

That's why in many parts of the world bailouts are more controversial than nationalizations -- because bailouts unfairly help shareholders. The reason the reverse is true here is because Americans are irrationally terrified of socialism. In nationalization, if the company recovers, then the government (and taxpayers) earn the profits, which is why they are more fair overall.

As for your second question, the markets are happy because we/they have averted a complete market meltdown and catastrophe, which we were very close to having. The shareholders of F and F are a very small subset of all shareholders. Also, it's important to distinguish between Fannie's and Freddie's shareholders (not important or organized or powerful, and not that many comparatively speaking) and Fannie's and Freddie's bond holders (European and Asian central banks, and many commercial banks -- very powerful, and very concentrated and organized power).

The former were thrown under the bus to save the latter.

No one (figuratively speaking) gives a shit about the shareholders of Freddie and Fannie at this point. Even they barely care because the market had already priced their shares as nearly worthless by the middle of the summer anyway.

So - if the government owns the company, then the problem is that the practices (those things no one -especially me - understands) that have gotten F&F in their current fix are too deeply entrenched/irrevocably intertwined to separate from the original core business?

In other words, there is no way at this point to off-load the bad risk stuff? Do they have to keep doing it or is it just that it would be impossible to separate those practices from the basics?

I think that the plan suggests that they will continue doing some of these things for a year. For example, although Paulson mandates that the size of the portfolio must eventually shrink, it is agreed that it will grow through 2009 -- it's like trying to turn around an ocean liner.

Also, Paulson admirably has decreed that stockholders will not profit from this and that management has to go.

Interestingly news reports came to the conclusion that Paulson had something of a come to Jesus (or Karl Marx) moment and decided it was impossible to reconcile the public mission of F and F (helping homeowners) and it being for profit! So I suppose events turned him into a socialist -- hence nationalization.

They will not offload bad stuff. Keep in mind that part of their problem is that they are also in the reverse position of the banks that held to much mortgage backed securities; their problem is also that they issued too much mortgage backed securities as well. The international aspect was central banks telling them, "you better stand behind this stuff."

were sold off at scandalously low prices. It seems that they were effectively "expropriations". Only to the detriment of the public purse, instead of its profit.

to prevent a worldwide depression similar to the Great Depression valid?

BushCo has done it to us again. We won't really have a true picture of the extent
of the damage their greed and corruption has done to us until after January 2009.

---

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I'm looking forward to your further comments on this.

This is where they've been wanting to go. While we're worrying whether Sarah or Palin had Trig or screwed Levi -- or anything else we've worried about these last eight years -- the Norquist plan is working.

The idea is to bankrupt government at all levels -- local, state, and federal. One way to do this is to lower or eliminate taxes. This will, as Norquist calls it, "starve the beast." There are other ways to do it more dramatically. The nationalization of Fannie and Freddie will help.

Ultimately, when there's no more money in the pot, they will declare that we can no longer afford social programs, public education, student aid, medicare, social security. They will turn their pockets inside out and show us. "We had no choice."

It's already happening on a lot of levels. I read a lot of local news sites on the web. Daily, you see stories of local programs being abandoned, teachers laid off, libraries closed, schools closed, aid to the poor and elderly being cut, etc. And the phrase "we had no choice" can be found in almost every story. That's the goal. It's not their fault. They had no choice.

BTW -- keep in mind that Grover Norquist was one of the gang that "vetted" Palin and inserted her into the process. You can be sure that he's confident she will continue his goal of destroying the US from the inside.

I do believe you are referring to the same Grover Norquist that said the Cons were going to make government so small that we could drown it in a bathtub.

Treasonous Bastards!!

And the story on the street is, "Thank goodness, those sensible government people rescued the industry!"

It's going to be an interesting unfolding.

But NO!

"Fannie and Freddie form the backbone of our mortgage system- we can't let them fail!" Screamed some DUers.

Come to find out in this mess that the treasury itself at times was involved with the ARMs and "make it work" mortgages.

So the people that made billions and bailed out will get away, and we will hold the bag...that makes about as much sense as anything else that has happened so far.

In the Watergate days, the investigative reporter's mantra was "follow the money".

Those were petty crimes by the standards of the organized crime syndicate the GOP has become.

The fascists never accept anything like this (nationalization of one of their favorite money-laundering fronts) without having the next scam in mind. I don't know enough about it to know what they are up to, but one thing is for certain. Before they made this move, Cheney and his friends have figured out how that can turn this into another $500 billion into the pockets of their friends. When the history is written on this operation, I bet we will learn that a) the taxpayers funded a huge bailout, b) a bailout wasn't necessary, and c) the fascists pulled this big one out of their hat because they were afraid that they may be out of power for a few years, so they have nothing to lose and everything to gain by going for the big one.

As I've written here and elsewhere, this is too important to be subject to Bush/Cheney neo con looting. In another thread, I wrote that the Bush/Cheney looting wing of the government is getting something like the Serpico treatment (sorry to analogize Bush/Cheney to an honest cop, but):

Ever seen the movie, "Serpico" about the crusading, anti-payoff NYC cop Frank Serpico? At one point, he is transferred from areas of petty corruption in the Bronx and Manhattan to Brooklyn narcotics. On his first day on the job a detective who knows Serpico's reputation and already hates him, pulls him into a car and says the Brooklyn narcotics cops are taking like $100,000 per month, and adds "That's serious money. And with that, you don't fuck around. You understand? Good. Now get the fuck out..."

That is what is happening to Bush/Cheney. They're telling them, "you may have looted your own treasury and tax base, you may have looted Iraq and New Orleans, but you owe us several trillion dollars. That's serious money and with that you don't fuck around..."

<end quote>

Although we ordinarily wouldn't expect ideological conservatives like the people running the Treasury to agree to a nationalization by their own free will, this is not being done of their own free will; the global financial system is forcing them to do the only things they can to save the system.

We will not learn that this "wasn't necessary." We were on the verge of financial armageddon.

Basically we had sold the Chinese over $1 trillion in dollar denominated securities, including several hundred billion in mortgage backed securities -- ten years of Chinese national savings were at risk. That's serious money.

If we had let Fannie and Freddie go down the drain, the dollar would have collapsed. The Chinese would have dumped not just the mortgage backed securities, but t-bills and dollars. The entire system, from Fannie and Freddie, to the Wall Street houses, to the undercapitalized Chinese banks holding our paper, all corporate securities whose pricing is tied to treasuries, to the central banks of China, Japan, France, England and Germany, to your personal checking account would have been destroyed. There would have been nothing left except financial rubble.

It was necessary. Just hope it was also sufficient.

What I'm saying is that we will learn, beyond the shadow of any doubt, that the fascists used the OPPORTUNITY created by this SHOCK to find ways to funneling huge amounts of money to themselves. Now, it may be, as was the case with the S&L, that they have ALREADY funneled hundreds of billions to themselves, which is what broke the back of these two companies. The point is that whether these shocks happen as acts of God, through their own incompetence, or through their criminal enterprise, the shocks invariably present additional opportunities for them to extract great sums from the American people. This extraction can take many forms:

- direct criminality, such as fraudulent loans made to friends
- huge consulting agreements
- huge management contracts to take over the failed enterprise
- sweetheart deals to sell them a still-valuable portfolio at pennies on teh dollar
- direct transfer of capital from the Federal Treasury
- and the most insidious of all, a subsidy from the FED by creating "credit", with the resulting inflation robbing every American of their savings.

Go read the report on the Iran Contra scandal, then the S&L ripoff, then read Shock Doctrine, and then tell me this isn't how they operate.

for Bush appointees. Paulson says he didn't want to dump this in the lap of the incoming administration.

I think as career financiers, they are more loyal to the financial system than they are to Bush.

On the other hand, a complete collapse would have sealed the election for the Democrats, but who wants to destroy the entire system for an electoral advantage, and Obama would have been doomed to failure if that's what he would inherit.

It all depends on how this holds together and what the next collapse in the financial system looks like.

There would have been nothing left except financial rubble.

I don't remember the details of the financial thriller (the word "thriller" is probably an exaggeration in this case) "Rollover", but I do remember the end of the movie involved the world's finances being left in a state of rubble.

I may have to rent that one again. In the movie, I think we owed our financial souls to the Saudis, and not the Chinese, but I may be mistaken.

I hope so too!

It's a much bigger, much scarier deal than most people realize.

:kick:

the plan has always been to get the taxpayer to pick up the tab. I'm very pissed over this. It's very Soviet.

I'll bet that there are 3 or 4 mortgages on a single home...HUD would do that. It's a complete racket.

someone told me the other day that the FDIC could be in trouble as a result of this situation and that there may end up being no insurance at all for bank deposits of any amount. Do you know if this is true?

Can FDIC insurance be sucked into this? If that could happen, the whole banking system would collapse. No one's money would be safe in the bank anymore. Alsame, if you get an answer on the question you posed, can you please post it. I'd like to know.

1. The true part is that a complete collapse of the mortgage market would cause banks to fail, because banks hold mortgage backed securities as one of the biggest portions of their assets. If these decline in value or become worthless, the bank doesn't have enough assets to balance against liabilities (the deposits they owe their customers).

The result is a bank failure. When a bank fails, the depositors are paid out of the FDIC. So it is true that if the Fannie and Freddie problem were allowed to spin out of control, there would have been vast demands on the FDIC.

2. The FDIC probably wouldn't "run out of money" because they are also backed by the U.S. federal government, which technically can't run out of money because they can "print money" as a last resort.

Under Bush the first, the FDIC and FSLIC basically ran out of money during the S&L crisis, so they were reorganized with big infusions of money through the temporary "Resolution Trust Corporation," which took over all that real estate and all those liabilities.

On the other hand at some point, they can't just print as much money as they want because of concerns about inflation, interest rates, and the value of dollar assets held by foreign countries.

Getting rid of Fannie and Freddie is part of a huge long-range neocon strategy to destroy everything created under President Franklin D. Roosevelt's New Deal.

This is also why they want to get rid of Social Security, created under the New Deal.

Anything that helps the average person is considered unnecessary by the neocons. They only government they want is whatever helps the filthy rich, the CEOs, and the mega-corporations.

- The scariest part about the latter is that whatever happened to Fannie and Freddie (and Bear Stearns and others) can now happen to the Treasury.

Fannie was created during the New Deal as a completely government owned entity. It was privatized in I believe the 60s.

By nationalizing it, we are actually going back to the New Deal model.

The reason Chinese and some European banks are in fine shape
is good governance. If you can't govern well, turn the
task to someone that can.

That goes for Fannie, Freddie and every financial institution
in the United States. That's the way it goes. There's nothing
inherently wrong with foreign involvement or control over the US
banking system.

Lower spreads between US treasury bonds and Mortgage bonds means cheaper interest for me in Sweden :)

Once again the American public is footing the bill.

Who knew?

bankrupt the country..

Remember Grover Norquist's statement?

Am about finished with "The Shock Doctrine," and it is a treatise on the greed and corporate capitalism that's been going on all over the world since The New Deal. The ground that she covered and the research she undertook is nothing less than amazing, and although the book is lengthy, it's very, very readable. I have a much better understanding of the cycles of shock that have occured through natural and man-made disasters over the past decades.

K&R

:thumbsup:

Kicked and recommended.

- The scariest part about the latter is that whatever happened to Fannie and Freddie (and Bear Stearns and others) can now happen to the Treasury. The Treasury Department is committing itself to engaging in the interest rate arbitrage games that Freddie and Fannie were doing and that got them into trouble.####

Well, of course the Treasury Dept is doing that.

The only player in the electoral process that seems to have any notion of all this is (DARE I EVEN BREATHE HIS NAME) Ron Paul.

I am not saying you should vote for him. I am not saying I like everything he stands for.

But when the other four contenders: McCain, Palin, Obama and Biden don't display any sort of in depth knowledge of how messed up our PONZI system of banking is, we are in huge trouble.

even if I knew it was happening because panic will never help in this situation. And believe me the truth is not setting me free - it is scaring the hell out of me.

On the other hand, if there is a fire in the basement that has spread upstairs to the nursery, MAYBE someone should call someone's attention to it!!

is that they have saddled the middle class, most particularly the under-40s, with a debt that we CANNOT pay off without a major across-the-board wage hike, while the rich continue to get bailouts and the IRS will not go after their Bahamas and Bermuda tax shelters.

This is French Revolution sh*t right here.

There won't be any social security for me, good schools for my kids, safe streets, habeus corpus, etc. Why stay? For a flag, a hotdog, and a song?

The Worsening Debt Crisis: Who Got Us into This Mess and What are the Real Political Options?


http://counterpunch.com/whitney09082008.html

By MIKE WHITNEY

Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JP Morgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world’s first sovereign debt fund for Scudder Stevens & Clark. Dr. Hudson was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002.

Mike Whitney: On Friday afternoon the government announced plans to place the two mortgage giants, Fannie Mae and Freddie Mac, under “conservatorship.” Shareholders will be virtually wiped out (their stock already had plunged by over 90 per cent) but the US Treasury will step in to protect the companies’ debt. To some extent it also will protect their preferred shares, which Morgan-Chase have marked down only by half.

This seems to be the most sweeping government intervention into the financial markets in American history. If these two companies are nationalized, it will add $5.3 trillion dollars to the nation's balance sheet. So my first question is, why is the Treasury bailing out bondholders and other investors in their mortgage IOUs? What is the public interest in all this?

Hudson: The Treasury emphasized that it was under a Sunday afternoon deadline to finalize the takeover details before the Asian markets opened for trading. This concern reflects the balance-of-payments and hence military dimension to the bailout. The central banks of China, Japan and Korea are major holders of these securities, precisely because of the large size of Fannie Mae and Freddie Mac – their $5.3 trillion in mortgage-backed debt that you mention, and the $11 trillion overall U.S. mortgage market.

When you look at the balance sheet of U.S. assets available for foreign central banks to buy with the $2.5 to $3.5 trillion of surplus dollars they hold, real estate is the only asset category large enough to absorb the balance-of-payments outflows that U.S. military spending, foreign trade and investment-capital flight are throwing off. When the U.S. military spends money abroad to fight the New Cold War, these dollars are recycled increasingly into U.S. mortgage-backed securities, because there is no other market large enough to absorb the sums involved. Remember, we do not permit foreigners – especially Asians – to buy high-tech, “national security” or key infrastructure. The government would prefer to see them buy harmless real estate trophies such as Rockefeller Center, or minority shares in banks with negative equity such as Citibank shares sold to the Saudis and Bahrainis.

But there is a limit on how nakedly the U.S. Government can exploit foreign central banks. It does need to keep dollar recycling going, in order to prevent a sharp dollar depreciation. The Treasury therefore has given informal assurances to foreign governments that they will guarantee at least the dollar value of the money their central banks are recycling. (These governments still will lose as the dollar plunges against hard currencies – just about every currency except the dollar these days.) A failure to provide investment guarantees to foreigners would thwart the continuation of U.S. overseas military spending! And once foreigners are bailed out, the Treasury has to bail out domestic American investors as well, simply for political reasons.

Fannie and Freddie have been loading up on risky mortgages for ages, under-stating the risks largely to increase their stock price so that their CEOs can pay themselves tens of millions of dollars in salary and stock options. Now they are essentially insolvent, as the principal itself is in question. There was widespread criticism of this year after year after year. Why was nothing done?

It's long but there are some great ideas and lots of TRUTH in it! Thx for posting this!! You might want to post it in the Economics Forum if it isn't there already.

WOW....I'm sending to others.

WASF....we are so fucked.

He wrote:

"...these dollars are recycled increasingly into U.S. mortgage-backed securities, because there is no other market large enough to absorb the sums involved. Remember, we do not permit foreigners – especially Asians – to buy high-tech, “national security” or key infrastructure. The government would prefer to see them buy harmless real estate trophies such as Rockefeller Center..."

<end quote>

I can't emphasize how on point and central this is.

But ultimately, the Chinese, Japanese and Koreans are going to have to be given access to purchase real assets other than real estate. That's the only solution.

At that point, the telephone company becomes Sprint-Nippon, the steel company becomes China Steel, etc. All the industrial capacity of the U.S. has to go on the market to balance the accumulated trade and budget imbalances -- what happened to Argentina under the IMF hammer in the 80s.

That's actually probably a good thing for economic, financial and security reasons. It actually means a massive reinvestment in American industry. Basically the American capitalist class has forfeited the authority to run things and the financial situation will require its replacement with new management.

And I am betting you are right, I am hopeful they bring Solar Technology from Japan. My husband is in Machine Tools and I would love for him to sell to companies like those in Japan.


Very cutting edge and damn if it does not make sense to go this way right now....

http://www.solarbuzz.com/FastFactsJapan.htm

Solar Energy
Japan is the second largest country market for solar photovoltaics. In 2007, the country installed a further 230 Megawatts of solar photovoltaic energy.

For comparison purposes, Japan has set a national target to install 300 Megawatts of wind capacity by 2010. In 1999, Japan added 43.4 Megawatts of wind capacity.

Around 26% of the world's solar cell production is manufactured in Japan.

Japan leads the world in thin film PV with the highest capacity of operational manufacturing plants. Present manufacturers are Kaneka, Matsushita Battery, Sanyo, Sharp and Showa Shell Sekiyu.

MITI (now METI) 1998 long term strategy energy consumption plan called for a 300% increase in renewable energy including solar and wind energy. The IEA estimated total renewable energy consumption in 1996 to be 1,210 trillion Btu.

Household solar system purchasers received 120,000 Yen/kW for systems up to 10kW. The main residential subsidy program ended in 2006.

that we can nationalize. Get what all those trillions in debt will be wiped off the books, because we will not have to the FR interest. Why, it's magic!

I own 100 shares of Freddie Mac that I paid $700 for. It's now valued at $80.

$1 billion on an audit does not even seem possible. That's 40 million man-hours at $25 an hour or 4 million man-hours at $250 an hour. That's 1,000 people working full time for two years.

I also wonder if there is some way to find out who is buying all of the Freddie Mac stock. Approximately 50% of it's entire mass of common stock change hands today - 350 million shares. Whoever was selling must have taken a tremendous beating, buying anywhere from $5 to $60 and selling for 80 cents.

securities in Fannie/Freddie Mac. (Got those names are an embarrassment) So what that tells me is that us taxpayers are handing over a bailout to China. Oh those backroom deals we never hear about, eh Cheney Energy Task Force> Would China still own the MBS's? and get the bail out? Will we ever know the truth? Crap We're Being Lied To on a monumental scale. My head, it hurts.

because if we didn't, they might stop buying treasury bonds, in which case we wouldn't be able to feed ourselves in a few weeks.

And I quote: " Paulson got the power to make purchases of the two companies' debt or equity in legislation enacted July 30 that was aimed at shoring up confidence in the businesses. He has said the Treasury doesn't expect to use that authority.

The two companies combined account for more than half of the $12 trillion U.S. mortgage market.


OH WELL So much for the "he has said that the Treasury doesn't expect to use that authority.

makes you realize why Congress is given a 9% approavl rating - doesn't it?

First Congress doesn't think that George W will rush to war when given the Authority to attack Iraq, and now some years later, those in Congress are trusting that same crowd of henchmen to ask for authority but meanwhile listen to them saying "We won't use the authority that we are given."

and other foreign (especially central and commercial bank) investors, but let's not forget China, and the foreign central and commercial banks financed the entire Iraq War plus a huge amount all the consumer consumption of the last 8 years or so.

This bailout is saying that the US won't stiff them on those trillions or so lent. It's not their fault they lent us money on what were supposed to be the safest of all safe investments.

there are a few considerations that should temper the dire descriptions in the OP. One, is that the Chinese and others cannot simply throw the US overboard without leading to a global catastrophe of biblical scale. The last thing the world wants to do is put a match to their own gargantuan holdings and investments in all things USA. That is to say right now.

It has been said that if you borrow a million from the bank, they own you, but if you borrow a few billion, you own them.

If you really want to scare yourself silly, think about the Chinese and Indians graduating hundreds of thousands of engineers, scientists etc. each year to our tens of thousands. A few generations of Americans had a good ride!

taking themselves down with us. But they've got us by the economic balls and they know it. With the judicious application of just the right amount of pressure, they can make us dance to whatever tune they play. I would not be at all surprised to see them move against Taiwan, maybe not in 5 years, but 10-15, and use their economic leverage to keep us from doing anything more than bluster impotently.

They OWN this fiasco.

:evilfrown:

:scared:

when the Democratic Congress privatized them to write off some public debt. These companies should have remained in government custody, instead of privatizing profits and nationalizing losses.

They could take the full risks that free market mortgage companies did, but didn't have to worry about the consequences because of government backing.

derivatives and how they are valued....and they are everywhere.

We are now like Soviet Union....you will live where we say you will live.

Fucking Bastards! :grr:

Thank you for articulating some of the problems we face. I don't know about these things. I do remember reading something a few years ago about the stock markets' potential collapse by the CEO of overstock.com. He talks about corruption within.

http://deseretnews.com/article/1,5143,695259654,00.html


and exchanges emails with a reporter, I think.


http://www.deepcapture.com/

The Bush years have been marked by declining family incomes which were not balanced by declining consumption but by expanded family debt. At the same time, in an act of breathtaking political cowardice, taxes were cut while federal expenditures were also increased. Entitlement expenses increased in a predictable way given an aging population. A war of choice and political opportunity was elevated to the status of a crusade and the money to finance it was added to the tab without a whimper of protest or a minute of serious debate. We borrowed the money to finance all this foolishness from those who seek to supplant us in our position in the world.

Overextended families and overextended lending institutions are now seeking sanctuary with an overextended federal government. The chickens are coming home to roost.

Please channel your anxiety into phone banking and volunteering to canvas and register voters. If you state is not in play then volunteer for Florida or Ohio, etc.

rant off and thanks

Vote for Obama, but do so with a full understanding.

It's scary when you stop to think about it, but Sallie Mae is heading down a very similar path. Ever since they severed ties with the government, they've been pulling a lot of the same practices. Most recently Bank of America gave them a bunch of funding earlier this year.

It's not the same degree of debt, but Sallie Mae is managing around 130 million debt and they keep pushing people to consolidate their loans through Sallie Mae so they, in effect, become the primary holder of the debt instead of backing the debts provided by FFEL providers. They're increasingly acting as both lender and collector, much like Fannie and Freddie was doing.

The only difference is Sallie Mae has only had 4 years of being 'private' so it's not at a point of collapse. However, they're treading almost the exact same path and if they don't learn anything from this Fannie/Freddy bullshit, Sallie May will end up the exact same way.

and that the next President will have to move further on Fannie and Freddie. If we are guaranteeing their debt, how can we turn it into a private company again?

Or is it such a mess that unraveling it and turning it back into a private company will be close to impossible?

so no, there is little chance of them becoming private any time soon.

Well said!

So, I'd guess it would work something like this: Nationalize, stabilize, re-fund with taxpayer money, then privatize again with cronies getting the original (low)subscription price on the IPO.

Only it won't look that simple.

I keep hearing and reading the US Government . . .

WHO signed the order? Whose idea was this? Who pulled the trigger for the 'bail out' aka 'take over'.

A month or so ago, he asked Congress for the power to bailout Fannie and Freddie, and Congress passed legislation. At the time, according to press reports, he thought the mere power to bail them out would calm markets. It didn't.

If he is to be believed, he said he felt like the dog who chased the bus's fender and caught it. He had this power and it was controlling him rather than vice versa.

Pressure built for him to use the bailout power when investors stopped buying certain Freddie and Fannie securities, which would have meant a collapse of the mortgage backed securities market.

So specificaly it was Paulson, authorized by Congress and Bush.

Appreciate it! ;-)

thoughts from my friend jsj
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

It's ALL about keeping people in the ether. There is NO way they can stop whats-a-comin', and you can say you heard it here first. I don't care how much the dollar advances on the Euro, the 800 lbs. gorillas in the room are DEBT & its twin, INFLATION.

Remember, it may take a year? It may take two, but the CREDIT/DEBT ratio in the U.S. CANNOT, WILLNOT be maintained.

Look toward another -20% drop in housing over the next 12-18 months, the jobs needed to support the price of housing in the U.S. just aren't here anymore.

... and IF the Chinese start dumping/stop buying our DEBT ... then it really is over. FINITO! There will be $3+ TRILLION in PAPER FLOODING BACK INTO OUR ECONOMY! Hell, a bag of potatos will cost $50?

~~~~~~~~~~~~~

Let's GET DRUNK! HEY! THE FED IS GOING TO BUY FREDDIE & FANNIE! OH HAPPY DAYS ARE HERE AGAIN!!! JUSTLIKE29PEARLSBEFORESWINE!!!

As you can see the DOW is getting drunk on the news of the Fannie & Freddie "rescue plan." This temporary stay of execution ... is momentary. THEY had ALL WEEKEND to calm and call their friends and explain THEIR SCHEME of just ONE MORE FLEECING! ... and now Joe Six-Pack can rest assured his "investments" are safe ... all the while THE FED inflates the PAPER-DOLLAR into the stratoshpere.

There is NO way THE FED can pump/print enough money into THEIR PRECIOUS SYSTEM now. THEY know THEIR SYSTEM is doomed, and along with it the DOW, but THEY are bent on squeezing the last drop of wealth from the common man before enslaving him with a SYSTEM based solely on credit.

No matter what happens now, the writing is on the wall. Whether it takes three months, or three years? Or ten(and it WILL NOT MAKE IT 10)the PAPER-DOLLAR is finished. Kaput, with a K!

Did you happen to see that Herbert M. Allison (TIAA-CREF)is taking over Fannie, and Richard Syron(Carlyle Group)will be at the helm of Freddie. ARE YOU F***ING KIDDING ME! Where is the outrage toward the foxes being allowed into the hen house now? To what? Clear out what's left?

I am surprised, the MAIN-STREAM-CORPORATE-MEDIA isn't going to have anyone left to pander to?

Bernanke is scared S***LESS. He really doesn't know what to do now, and Sir Alan Greenspan? Well, like the great slugger Barry Bonds. Sir Alan will have an even BIGGER asterisk next to his name.

It should be apparent that there are some investors who are 'too big' to fail, even if that means the US Govt has to step in and take the hit.

The exotic financial instruments in which billions of dollars were invested AND LOST are not only impossible to understand BUT were traded on a shadow financial market that now has lost the majority of its real value --and now the de facto 'margin call' is being met with a direct infusion of taxpayer money in the form of US Treasury guarantees.

Who are these Investors who must be protected at all costs? The majority are the very institutions which were designed to service the public and the markets --the banks, commercial and investments banks, AND also the hedge fund investors and finally the overseas foreign investment sources.

Basically the shadow financial market was driven by an exponentially expanding greed and willingness to do anything to protect that expectation.

This is a turning point because now it is clear who the US Govt will protect from failure and who will be allowed to sink and die.

It is masks off time at the financial masquerade party ....

It's one of the things that got them in trouble. Incredible.

Or did you find this in the articles that spoke about how they used legal methods to make their capital structure appear better than it actually was?

A brilliant analysis, Mr. Rice. Your posts are more than informational; they are educational. I am in agreement that this is not a bailout but some form of nationalization (but for whose government, though, ours or the Asian mega-investors?) Finally the US credit market has been forced to do something rational by our Chinese overlords! Is this the wave of the future as they acquire more and more of our assets?

It's not just the Chinese, but all the creditors. This is basically what the US and western Europe used to do through the IMF.

Or what the family of an alcoholic does during an "intervention."