If you've watched the performance of Fannie Mae and Freddie Mac in the last five years or so, you've seen a shooting star. They really look too good to be true, and now that interest rates are going up, it turns out that they are. The going story is that they are inadequately hedged against upward movement in rates. NY Times claims to have an insider who says so. Benson points out just how much money the F&F Gang control, and it's pretty damn alarming.
I saw an article in the NY Times discussing things, and I meant to write about that, but I was waiting for some confirmation, since I don't think much of the Times. Now that I see that somewhere else, the Times article has gone archive on me.[1]
In any case, a guy named Richard Benson has an essay (and pictures!) explaining exactly how Fannie and Freddie are fucked. It's brought to you by Prudent Bear, a place I like on general principle.
Here's a gem from that:
Fannie and Freddie have no doubt not even considered a world where their customers will be facing higher heating prices, insurance, property taxes, interest rates, and virtually no home equity to start, along with a home bought at the top of the real estate bubble.
I would like to point out that the F&F Gang don't, as it turns out, have a guarantee of the full faith and credit of the U.S. Treasury. People *like* to think they do, but this is not actually the case. The real story then is whether the U.S. taxpayers will be forced to bail these idiots out or not. Gosh, I hope not.
[1] This story is from 7-August, no where near 30 days ago. If that's the way the Times does it now, this will not help their reputation. Of course, I'm sure they think blogs are a scourge on the earth, so what do they care?
Posted by nicole at August 19, 2003 08:22 PM