Monday, August 11, 2008

Paulson Forgot to Add....

Treasury Secretary Henry I'm Sorry I Ever Left Goldman Paulson opined on Sunday's Meet the Press as to how there are no plans to inject capital into Freddie and Fannie, even though both posted worse than expected results on 8/6 and 8/8, respectively.

What he really meant to say was, There are no plans to inject capital into Giant Mortgage Losers Fannie and Freddie--This Week.

We think this will happen around September 15th--you know, a few days after the numbers for the final month of the Sad Summer Sell of 2008 roll in, plus there's more evidence of 2007 mortgages collapsing quickly.

Paulson's intelligence shines, though, whenever he speaks; we'll give him that. We have got some serious issues that we’re dealing with in our economy,” he said. “I believe it’s going to take us well beyond the end of the year to work through all the housing problems.”

Ya think, Hank?

He also mentioned that he'd be leaving office along with W and the $482 Billion Dollar Deficit W leaves for his successor.

That deficit doesn't take into account costs for Iraq and Afghanistan or the potential $50B for another economic stimulus package. It doesn't account for vacuuming out $$$ from the national treasury that will result from further declines in the housing market and the need to invoke the Bailout.

Good plan, Hank.

5 comments:

matt s. said...

Guess its time for another distraction.

How about opening another front in the oil war?

Montpellier said...

Heh - the oil and gasoline inventory numbers this week will be very interesting. I think oil futures got a bit ahead of themselves and the GS talk of $200/bbl oil was simply "talking their book."

The numbers at Fannie and Freddie will continue to get worse, though with the fed's explicit guarantee, investors may not flee. If they don't flee, there's a good chance the fed will not have to backstop them by buying preferred stock. I think it's really just anyone's guess at this point.

However, the bottom line is that it's going to be harder than ever for the Congress and the executive to force FNM and FRE to lower borrowing guidelines. That means fewer dollars chasing more inventory. And the beat goes on....

genesis said...

montpellier makes a good point about investors staying put...we'll see. what's also going to roll along in September is another bad report of high unemployment figs from august, as well as poor back-to-school shopping numbers, which are expected to be low...and more reports of credit card open lines being shortened b/c the firms are afraid of risk.

and don't forget the potential cost when the US somehow gets involved in the whole russia/georgia thing. or perhaps that will be added to next year's deficit.

Jason said...

Congress can force guidelines on the GSEs all they want, but the market will determine what stays or goes. Mortgage insurers will stop insuring loans, or worse, investors will stop buying (and/or start selling) mortgage backed securities. And when that happens, hello 9%+ mortgage rates. We think the housing bubble is bad now...

Paulson, like Big Ben, is in an impossible situation and he has to walk the ultimate fine line. Too much or too little information and investors around the world panic.

George H said...

F houses. Time to buy gold.