Bastions Of Privilege
July 10th, 2008 by 
reality
From Bloomberg:
Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules, he said. The fair value of Fannie Mae’s assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, Poole said.“Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,” Poole, 71, who left the Fed in March, said in the interview yesterday.
Well at least Mr Potato Head has left the bastion, with the gold. No doubt the taxpayer is going to be bailing out these over-leveraged lenders.
Posted in Fixed Income, Rogues and Rascals | 
July 10th, 2008 at 9:53 am
There is a deeper point about the contortions (well beyond simple distortions) in the US that prop up housing prices. Fannie Mae and Freddie Mac are symptomatic of broadly held delusions that policies of price supports for housing are a good thing. Since no one wishes to tackle these delusions, a govt. bailout is all too likely.