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GSE Bailout, the Quick Run Down
I was one of the lucky few to sit through the 11AM announcement on the 'Big Bailout' of mortgage lenders Freddie Mac and Fannie Mae. Treasury Sec. Henry Paulson gave a run down of the plan to force these two giant-ass financial institution into federal conservatorship and be privately run no more. This move represents the third or fourth wave in the housing crisis and there is more to come. As average Americans trying to enjoy the beginning of the NFL season we are left pondering the impact of this news
Here is a quick run down of the nine point plan that Paulson outlined during today's annoucement. I wrote them down myself as I listened so I'm not linking to any sources just yet. In no particular order of importance:
1. The companies will be open for business tomorrow albeit under a different structure.
2. Both GSE's can continue to issue MBS.
3. The FHFA, a newly created regulatory entity will assume oversight of both GSE's
4. The CEO's of both companies are out
5. New guys start tomorrow, they are from the financial sector.
6. Stock dividends are gone, duh.
7. A lobbying moratorium is in place, no more privte jets.
8. The Treasury will inject capital by purchasing new preferred stock and opening a line of credit.
I am missing one point in the plan from my notes but the details can be read here, here or here.
So what does this mean to the presidential election? It depends on your philosophy on private versus public enterprisewhen it comes to the housing market I guess. Maybe the real question on this dilemma can be summed up in one phrase, "it's the liquidity stupid". More on that later.
Here is a quick run down of the nine point plan that Paulson outlined during today's annoucement. I wrote them down myself as I listened so I'm not linking to any sources just yet. In no particular order of importance:
1. The companies will be open for business tomorrow albeit under a different structure.
2. Both GSE's can continue to issue MBS.
3. The FHFA, a newly created regulatory entity will assume oversight of both GSE's
4. The CEO's of both companies are out
5. New guys start tomorrow, they are from the financial sector.
6. Stock dividends are gone, duh.
7. A lobbying moratorium is in place, no more privte jets.
8. The Treasury will inject capital by purchasing new preferred stock and opening a line of credit.
I am missing one point in the plan from my notes but the details can be read here, here or here.
So what does this mean to the presidential election? It depends on your philosophy on private versus public enterprisewhen it comes to the housing market I guess. Maybe the real question on this dilemma can be summed up in one phrase, "it's the liquidity stupid". More on that later.
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