Just 16 months ago, 40 percent of the TFP members who voted in this poll;
http://www.tfproject.org/tfp/poll.ph...ts&pollid=1620 ,
agreed that
Quote:
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No, The US Economy Seems Too Strong to Become the #1 Issue in 2008
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Since then, the economy in the US and in the rest of the world, seems to have set itself up for a deflationary depression. Current and ongoing conditions are not about liquidity, they are about credit quality. Those who need to borrow are deemed too high of a risk to lend to, and those who are not risky to lend to, are not interested in borrowing. The result is a decline in demand, and prices of all goods and services, not just house prices, will soon begin to decline. Gasoline prices, too!! Good news, except for the certainty that many will lose their jobs and all of the equity in their once most valuable asset, their home.
I think denial about what has been happening and what is going to happen, is still the reason that the downward trend is only beginning. People have not even begun to pull back on spending and taken steps to protect themselves, just in case they lose their jobs.
I'm hoping that, as you see more and more of your fellow forum members post on this thread, that you will plan defensively. The problem with that, though, as recognition of the threat grows, the pullback in spending by people who have jobs will act to intensify the down trend. Since this is going to be a worldwide depression, it probably doesn't matter as much, what we individuals do in the US.
Quote:
http://www.time.com/time/business/ar...-inline-bottom
Friday, Jul. 11, 2008
Behind the Fannie and Freddie Fears
By Justin Fox
All debt issued by mortgage giants Fannie Mae and Freddie Mac comes with a prominent disclaimer: "Not guaranteed by the United States." But the business model of both companies, not to mention the continued functioning of the U.S. mortgage market, depends on nobody quite believing that disclaimer. Wrap your head around that contradiction, and you're well on your way to understanding the Fannie-Freddie drama currently gripping U.S. markets.
Shares in Freddie Mac are down 60% in the past three days; Fannie Mae is down about 45%. That's as of midday Friday; when markets opened for the day, the drop had been much worse, and the broader markets plunged likewise, with the Dow hitting a two-year low. The initial spark for the decline, at the beginning of the week, was a report from a Lehman Brothers analystsuggesting that new accounting rules might force the companies to go begging for $75 billion in capital. But what really sent the stocks into free-fall was the news — first reported in the Wall Street Journal — that Bush Administration officials have made contingency plans for responding to a scenario in which Fannie and Freddie could no longer pay their debts. Then, William Poole, until recently the president of the Federal Reserve Bank of St. Louis, pointed out in an interview with Bloomberg that Freddie Mac was already technically insolvent — it owes more than its assets are worth — and that Fannie Mae was headed in that direction.
The reason that the stock prices in both companies has plummeted, is that if the government had to step in to keep Fannie and Freddie functioning, shares in the companies would probably become worthless. On Friday morning, Treasury Secretary Hank Paulson issued a cryptic statement that seemed to say there wasn't any such bailout in the offing, and the stocks recovered slightly. Then word got out that Federal Reserve chairman Ben Bernanke had said the Fed would extend credit to Fannie and Freddie, and the stocks recovered more. But what happens next is anybody�s guess.
Here's why it matters: Fannie and Freddie buy the bulk of the home loans made in this country. Most are repackaged as mortgage-backed securities, which they then sell to investors with the guarantee that they'll make up any shortfall. Others they keep in their portfolio, which they finance by selling bonds to investors. If the two companies were unable to keep buying home loans, the current housing crisis would get much, much worse. But if the federal government had to backstop them, the cost could run as high as $1.1 trillion. ....
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Stock price charts of Fannie and Freddie and recently prominent US mortgage lenders:
Quote:
http://us.rd.yahoo.com/finance/finho...2/indymac.html
Government shuts down mortgage lender IndyMac- AP
IndyMac Bank's assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures....
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