Regulators lift limits on Fannie, Freddie

[Dirt]

http://www.msnbc.msn.com/id/23371740/

This should be interesting. Some of what they do with securities would make the people that came up with the Enron scams head spin. Well, better that the duopoly assume some risk than the government itself.

[Shadarr]

The government will still be on the hook when the whole thing blows up.

[shift6]

http://www.msnbc.msn.com/id/23371740/

This should be interesting. Some of what they do with securities would make the people that came up with the Enron scams head spin. Well, better that the duopoly assume some risk than the government itself.
Like what?

[Ex-S Woo]

They're still GSEs though, so although they may not be explicitly guaranteed by the govt, they pretty much are implicitly...and in fact, that's how most of the financial world views them as.

[Dirt]

Like what?

My degree is in English Lit. All I can tell you is if you win the lottery, take the monthly payment and sell that as a government bond. You'll be able to keep more of your winnings.

[MyNameIsWill]

Like what?
Keep risky investments off the balance sheet?

[SlyFrog]

It's okay. Gotta prop that housing market back up. God forbid we taste some real pain now, when we could have it be incredibly catastrophic a few years from now.

[Aeon221]

I can't find where I read it, but I'm pretty sure Freddie and Fannie had liquid reserve requirements that were something like double or triple what other comparable institutions had.

[shift6]

My degree is in English Lit. All I can tell you is if you win the lottery, take the monthly payment and sell that as a government bond. You'll be able to keep more of your winnings.
My friend, once again I have no idea WTF you're talking about.

Keep risky investments off the balance sheet?
It's Fannie Mae and Freddie Mac, not your local stockbroker. And Aeon's right: they are required to keep a higher liquid position than regular federal regulations for other lenders. And they are essentially (although not by law) backed by the Fed. They're about the second safest way to invest in mortgages (probably only Ginnie Mae is safer).

Thus my original question: what do F. Mae and F. Mac do that is so risky?

[MyNameIsWill]

Didn't realize that the original post was specifically about them.

To answer your question, look at their latest quarterly reports. I think the enormous losses should give you a hint that something they're doing is insanely risky. Like betting their stock will keep going up and up, watching it go down, and having to pay billions because of it.

I do agree that your mortgages are safe, but hey, even Countrywide's are, right?

[stusser]

The government will still be on the hook when the whole thing blows up.
Umm, no. Where does the government get its money? Who do you think funds these bailouts? That's right, you and I do. Taxes. Your taxes and my taxes will be spent to prop up the value of rampantly overpriced housing across the USA so people who can't afford their mortgages get to keep their houses.

[Shadarr]

Of course it's all taxpayers in the end (well, taxes and inflation). My comment was a direct reply to this: "Well, better that the duopoly assume some risk than the government itself."