You’ve seen the reports that Freddie Mac’s CFO was found dead at home this morning, an apparent suicide. One unstable newbie CFO doesn’t bother me too much, and the event isn’t causing much of a ripple in the bond markets this morning.
The interesting thing about Fannie Mae and Freddie Mac is that, quite below the radar, they’ve morphed into practically full-faith-and-credit debt issuers. The term sheet under which they were nationalized last September provided that they should divest about one-tenth of their portfolios each quarter, with proceeds to benefit the Treasury, putting them on a glide path to full dissolution in three years or so. Instead their role has only gotten bigger and more systemic.
It’s no exaggeration to say that most new issuance of mortgages in the US (including refis) goes through Fannie and Freddie. But these mortgages are ultimately being funded by people who think they’re buying Treasury paper with a slight yield kicker, not by people who actually want exposure to US mortgages. If the market were to find its own level without this implicit federal support, it would be shockingly lower than it is now.
This is bad for at least two reasons: first, it misallocates economic resources, by definition. We simply have no way to know what desirable and healthy things the economy would be doing with the resources being forcibly directed into keeping housing overpriced.
And second, how do we ever remove the Federal support? No Administration will ever be willing to find out just how low housing values can really go. US housing has been permanently socialized.
To my readers here at RedState: I apologize for my low blogging output in recent weeks. As many of you know, I’m a CEO, and sometimes business gets very busy. I’m happy to say that conditions have been getting noticeably better, at least in the markets I participate in. Once things settle down a bit, I’ll be blogging more again, here and elsewhere.
Yeah. You should be apologizing, Francis.
Rod_Patrick Wednesday, April 22nd at 10:57AM EDT (link)Not.
But I’ve been really wanting to hear your opinion on the declaration of IBD and Ayn Rand Institute at the PJTV that the Banking Crisis is “almost” over.
As for the diary, I truly agree with you. In my humble opinion, the supposedly “forward looking” financial market of today IS HIGHLY DISTORTED and can no longer be fully trusted.
On the matter of the Freddie Mac CFO’s apparent suicide, I’m thinking of more skeletons in the closet.
You're a CEO!?
gotteeth Wednesday, April 22nd at 11:55AM EDT (link)Can I get a ride in your private jet?
I’ll bring the beer!
Seriously, good to have you posting again. I always look for your input here on Redstate.
Cheers!
FLY NAVY!
No private jet
Francis Cianfrocca Wednesday, April 22nd at 12:43PM EDT (link)With apologies to streetwise, my idea of true success isn’t flying private. It’s not flying at all.
When you get important enough, other people fly in to see you, not the other way around.
Thanks Francis
MrMosis Wednesday, April 22nd at 12:29PM EDT (link)Your contributions are greatly appreciated. I keep an eye out in the three or so places I know to watch for your content. Always happy to spot something new. Long contributes Blackhedd.
“I AM WHO I AM”; and He said, “Thus you shall say to the sons of Israel, ‘I AM has sent me to you.’”
Ipsum esse subsistens
I'm thankful for even the scraps
techsan Wednesday, April 22nd at 1:06PM EDT (link)As more of an average guy who is just getting involved in politics, I try to arm myself with both facts and sound philosophy as I talk with those around me. Your entries are written well for me, an economic neophyte, to understand. They are quite appreciated on my part. Thank you.
In the end, all we have on our side of the debate are facts and history.
Thanks for posting. I also read your articles at The New Ledger
Old_Crow Wednesday, April 22nd at 1:26PM EDT (link)“Enlightened statesmen will not always be at the helm.” — James Madison
“So this is how liberty dies.. with thunderous applause” — Star Wars III
Michele Obama ???
clintonformccain Wednesday, April 22nd at 4:56PM EDT (link)I hear that Michele Obama had the dude killed.
Write anything like this again and you're gone.
Martin Knight Thursday, April 23rd at 5:04AM EDT (link)In fact, I’m not sure you’re going to survive this slip-up …
To me, “consensus” seems to be the process of abandoning all beliefs, principles, values and policies. So it is something in which no one believes and to which no one objects … There are still people in my party who believe in “consensus” politics. I regard them as Quislings, as traitors … I mean it.
- Margaret Thatcher
NOTE: “consensus” = “Bipartisanship™”/”Centrism™”
if Conspiracy inference (or Satire) was intended!?!?
JLenardDetroit Thursday, April 23rd at 6:03AM EDT (link)2 words, Vince Foster, mention would have sufficed….
Not sure the persons intent, but apology is definitely in order!
(RS:Help) (JLD) (Hollyweird) (Brain-deads) (SPIN-cycle) (Obamaocare) (Party of kNOw) (Conservatism) (TEApeats) (respectful) (Reco) (Quotes) (removeRINOs.com) (Merry RSmas)
+ 0bama Lies & your Bank acct will Die! (4/15 Truthers)
+ Heil “O” Hell No Obamao is NOT MY PRESIDENT! “No U won’t”
+ I want “O” to FAIL (here, here, & whole Diary (Ofail) here, is why)
“The first Liberal was Satan” - a Rush caller (other Quotes)
Isn't this how we got into trouble in the first place?
bk Thursday, April 23rd at 5:37AM EDT (link)It sounds like another case where we have packages of mortgages getting rolled over and people buying them at a price that doesn’t match the risk. Isn’t that how the toxic asset mess started?
Don't cry for me
getrealistic Thursday, April 23rd at 9:48PM EDT (link)Not that I wish anyone evil, truly.
But before you invest too much emotion in this tragic situation, read between the lines.
The “newbie” CFO was actually a 26-year employee of this agency.
Hardly mentioned in the coverage was that before becoming the acting CFO, he was, among other things, the Comptroller.
Yes, the guy who is supposed to keep track of the money and make sure that the accounting is straight. Probably why the SEC wanted to have a little talk with him, now permanently postponed. Makes you wonder why his fired CEO decided to promote him to be in charge of all financial dealings on the CEO’s own way out the door, or for that matter why the CEO was the only one booted out. Seems like the entire crew of financial geniuses should have been ALL kicked out the door when the place melted down.