As a result of yesterday’s “Sunday Save III,” I decided to publish my notes from episode 29. The last event did not make investors more confident in the long run. In fact, in the last two months, the stock market dropped considerably and FNMA and FMAC stock (and thus the investors) lost over 80 percent of their value. Today, their values dropped to the penny stock status. The stocks traded at about $30 in January, today less than $1.
Here are those notes: Remarks on the News….Another Sunday Save? 7/14/08
- Government support for an institution doesn’t necessarily build investor confidence…
- May further an investor pull out, on concerns of why the government is so concerned.
- Seems to have a political spin-“saving the future of homeownership”
Purpose of FNMA and FMAC
- Purchase home loans originated by banks and mortgage co, then package and sell as securities
- Provide continued liquidity in housing loans
Remember they borrow short term to give money for long term loans. Thus Federal Reserve agreed Sunday to loan these institutions billions of dollars at same rate as Wall Street Firms and banks.
Meanwhile, the SEC is trying to crack down on rumors regarding stocks, claiming that hedge funds or buy-out competitors rumors cause stocks to drop.
Define Hedge funds (FNMA and FMAC have acted like a hedge fund), and remember they win under all market conditions.
Maybe there should be greater emphasis on FHA (Federal Housing Administration) since loans are insured (Ins. Bought by borrowers)
Book of the week: “Escape” by Robert Tanenbaum created a scenario where a giant international hedge fund run by terrorists almost brought down the whole U.S. stock market.
T
