Mortgage giants expected to shrink again starting in 2010.
By Daniel at 30 October, 2008, 11:44 am
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“”It really is business as usual. We are encouraging them now to be more creative,” Lockhart told a ballroom crowd at the Urban Land institute fall meeting here. “In this marketplace we really need Fannie and Freddie to provide liquidity and support.”
Although the government takeover of Fannie and Freddie, which included for each a $100 billion credit facility with the U.S. Treasury to back its debt, was expected to calm mortgage markets, volatility has been the rule.
“For the first couple of weeks or so what we thought would happen did happen — mortgage rates came down. Then other, bigger financial issues began to hit and overwhelmed them,” Lockhart said. “So many different actions have been taken all around the world … there is just a lot of confusion out there, confusion and fear. It will take time to work its way through.”
While both Fannie Mae and Freddie Mac are expected to grow their balance sheets in the coming year in an effort to keep mortgage money flowing in the U.S., the plan is to allow the mortgage giants to shrink again starting in 2010.”
Isn’t “business as usual” what led to their recent stunning collapse?
More creative? I know. Let’s get them to buy junk mortgages from outfits like Countrywide and then they could sell the mortgages to investment banks who could package them as investments for the entire world, all secured by FM’s implied government guarantee. I mean, what could go wrong?
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