Saw this news posted on FRE board!!! This is great news!!!
sccottrade news out 8-Oct-08 06:12 pm News Charts Options Fundamentals Insiders Earnings Financials SEC Filings Paulson Signals GSE Portfolios Will Grow Substantially 9 minutes ago - Dow Jones News
Related Companies Symbol Last %Chg FNM 1.09 -9.17% FRE 1.17 -9.30%
As of 4:00 PM ET 10/8/08 By Jessica Holzer Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Treasury Secretary Henry Paulson signaled Wednesday that Fannie Mae (FNM) and Freddie Mac (FRE) might grow their holdings of mortgage-backed-securities by a combined $150 billion, a clear shift since the government seized control of the mortgage giants last month. Paulson said then that the firms would "modestly increase" their portfolios through the end of 2009, before gradually reducing their size beginning in 2010. But in prepared remarks on Wednesday, Paulson referred to efforts already under way by the government-sponsored enterprises' regulator, the Federal Housing Finance Agency, to boost the firms' MBS purchases. He said the firms had plenty of leeway to grow their portfolios, which together top $1.5 trillion, in order to pump liquidity into the mortgage market. "There is headroom of over $150 billion between the current GSE portfolios and their regulatory limit. FHFA will supervise the growth in these portfolios, under its expanded authorities to monitor GSE risk-management," Paulson said in a televised speech aimed at shoring up confidence in the financial markets. The more than $150 billion in "headroom" refers to the $850 billion caps the Treasury placed on each firms' MBS portfolio as a condition of its agreement to invest $200 billion into the firms to keep them solvent. At the end of August, each company's portfolio was roughly $760 billion in size, meaning that it could grow by about $90 billion before bumping up against the cap. About three weeks ago, FHFA Director James B. Lockhart announced that he had directed the GSEs to begin immediately purchasing MBS. In a statement, he said the goal was "to contribute greater stability and liquidity in the mortgage market." Expanding the GSEs' portfolios is one in what is expected to be a series of moves by the government to extend the firms' role in propping up the housing market. Along these lines, Fannie last week announced it would cancel a fee that would have raised costs on borrowers. This week, it announced it would buy fixed-rate mortgages from the Federal Home Loan Bank of Chicago, a move aimed at generating fresh capital for new mortgages. "We are committed to the mission stated by the Secretary and the Director on Sept. 7 of helping to bring stability to the market," Freddie spokeswoman Sharon McHale said. -Jessica Holzer, Dow Jones Newswires; 202-862-9228; email@example.com
FNM will buy good (80 cent on dollar) type MBS -they will not - by charter - buy crap
The 700 billion is for the crap and crappier
FNM and FRE are buying good stuff - and semi good stuff - clearly to put CASH into hands of banks - and take back ""paper""
This is a classic money supply role of FEDS and Treasury - buy back paper with CASH - add liquidity
FNM is not IMO - adding risk - if anything IMO it is adding a less risky on average new pile of paper to its existing pile
Whatever else is true - or false - about the future - I feel comfortable that what you read means:
Treasury does not want to wait for the full apparatus of the $700 billion to be there (in say 3-4 weeks) Treasury wants to act now - with focus on liquidity - liquidity - and liquidity - get banks lending to each other and to good companies and solvent home buyers Treasury is thus finding ANOTHER way to put money in hands of banks - and taking back paper at fair but not exaggerated price (paper that is good to excellent quality - but priced below par) If this on top of buying commercial paper does not work - Paulson will indeed use part of the 700 billion to buy up 10% - 20% of many banks - cash for warrants ......
Goal is put cash - money - in hands and vaults of banks - any way he can
Bad bad bad paper will be handled by the rescue or bail out in November/December