Global Correction

[dotcom]

SET closed 722 after touching 717 or thereabouts. Keep buyin all the way down. LOL.

Edited July 10, 2008 by dotcom

[LaoPo]

Mr. Bush has a problem...a VERY big problem, just a few months before he steps down; as I write both shares (Fannie Mae - Freddie Mac) are down, down, down again with -16 to -22% on top of the losses the past few days

White House mulls Fannie and Freddie failure

by Katie Benner

The Bush administration has held talks about what to do if mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) fail, The Wall Street Journal reports, citing people familiar with the matter.

Even though the discussions have been ongoing for months and are described as part of the Treasury Department’s normal contingency planning, the newspaper says talks have become more serious as the stocks of both companies continue to fall. On Wednesday, Freddie shares fell 24% and Fannie shares dropped 13%, after plummeting Monday as well. For both companies, Wednesday’s declines marked their lowest closing prices in more than 15 years, says the Journal. Fannie shares have lost 76% over their value over the past year, and Freddie shares have lost 83%.

Former St. Louis Federal Reserve president William Poole tells Bloomberg that the firms are already insolvent and may need a bailout. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair-value accounting rules, Poole said.

“Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,” Poole told Bloomberg.

These government-chartered, publicly-held companies are vital to the functioning of the housing market because they buy, package and guarantee a disproportionately large amount of the country’s mortgage debt. The Journal says the two companies own or guarantee about $5 trillion of mortgages, or nearly half of all U.S. home-mortgage debt outstanding. Serious problems at either firm could threaten the country’s chances for a housing recovery and economic comeback.

The Journal report was quick to point out that officials don’t expect either company to fail and that no rescue is imminent, but that Treasury officials are talking about what the government could do if Fannie and Freddie become so stressed that they can no longer borrow enough money to fund their operations.

Even if Fannie and Freddie stay afloat, common shareholders have lots of reason to worry. They could suffer even larger losses as housing prices continue to fall and mortgage defaults rise; and they will likely have to raise significant capital to make up for these losses. Bond investors are demanding higher interest rates for Fannie and Freddie bonds, evidence that the markets think they are becoming riskier investments.

If investors lost confidence in either company, the government would have to step in, Peter Wallison, a former Treasury Department general counsel, told the Journal. “The losses would extend through so much of our economy, and so much of the world economy. There is simply no way that the United States government can let it happen,” Wallison was quoted as saying.

Fannie and Freddie would not speak with the Journal about the government discussions.

If the firms ran into real trouble, they would most likely raise capital from private investors, even though that would dilute the interests of current shareholders, Josh Rosner, an analyst at Graham Fisher, said.

---FORTUNE/CNNMoney

The Fannie and Freddie doomsday scenario

It's time to wonder what would happen if Fannie Mae and Freddie Mac failed.

http://money.cnn.com/2008/07/09/news/compa...rtune/index.htm

LaoPo

[Naam]

Sub Prime crisis over ?

I don't know how much further these 2 American Mortgage Giants could fall any further but nothing is impossible.

FRE: Freddie Mac lost -83 % of their market value/past 12 months; Coming from $ 60, now $ 10.39

FNM: Fannie Mae lost -76% of their market value/past 12 months; Coming from $ 65, now $ 15,40

LaoPo

Pretty shocking all right. Aren't those two quasi-government companies?

Yes

a fairy tale... because they are NOT!

[Naam]

Is Freddie Mac a government agency?

No. Freddie Mac was chartered by Congress as a private company serving a public mission; however, Freddie Mac is not an agency of the Federal or any state government nor does Freddie Mac receive federal funds. In fact, Freddie Mac is one of the nation's largest federal taxpayers. Freddie Mac is owned by its shareholders and, like other corporations, is accountable to its shareholders and a board of directors. Freddie Mac's enabling legislation calls for our Board to have 18 directors, five of whom are to be appointed by the President of the United States. Anyone can own Freddie Mac stock, which is traded under the stock ticker symbol "FRE" on the New York Stock Exchange; in your local newspaper, you'll see our stock price referenced as "FredMac."

http://www.freddiemac.com/corporate/compan...file/faqs/#BM5_

[cloudhopper]

Thanks for all the clarification. Well quasi or not, it sure looks like they will both soon be de-facto owned by the US taxpayer...

[Naam]

share prices:

[pkrv]

Is Freddie Mac a government agency?

No. Freddie Mac was chartered by Congress as a private company serving a public mission; however, Freddie Mac is not an agency of the Federal or any state government nor does Freddie Mac receive federal funds. In fact, Freddie Mac is one of the nation's largest federal taxpayers. Freddie Mac is owned by its shareholders and, like other corporations, is accountable to its shareholders and a board of directors. Freddie Mac's enabling legislation calls for our Board to have 18 directors, five of whom are to be appointed by the President of the United States. Anyone can own Freddie Mac stock, which is traded under the stock ticker symbol "FRE" on the New York Stock Exchange; in your local newspaper, you'll see our stock price referenced as "FredMac."

http://www.freddiemac.com/corporate/compan...file/faqs/#BM5_

I am sorry naam but I could not help but note you appeared to say Freddie Mac is a taxation milking machine with five directors appointed by the US president.

Edited July 11, 2008 by pkrv

[dotcom]

Thanks for all the clarification. Well quasi or not, it sure looks like they will both soon be de-facto owned by the US taxpayer...

No they're not. Any more than Bear Sterns is owned by the taxpayers.

However one thing is clear. Current shareholders are going to be diluted.

[Naam]

Is Freddie Mac a government agency?

No. Freddie Mac was chartered by Congress as a private company serving a public mission; however, Freddie Mac is not an agency of the Federal or any state government nor does Freddie Mac receive federal funds. In fact, Freddie Mac is one of the nation's largest federal taxpayers. Freddie Mac is owned by its shareholders and, like other corporations, is accountable to its shareholders and a board of directors. Freddie Mac's enabling legislation calls for our Board to have 18 directors, five of whom are to be appointed by the President of the United States. Anyone can own Freddie Mac stock, which is traded under the stock ticker symbol "FRE" on the New York Stock Exchange; in your local newspaper, you'll see our stock price referenced as "FredMac."

http://www.freddiemac.com/corporate/compan...file/faqs/#BM5_

I am sorry naam but I could not help but note you appeared to say Freddie Mac is a taxation milking machine with five directors appointed by the US president.

i did not say anything but copied from Freddie Mac website.

[pkrv]

Is Freddie Mac a government agency?

No. Freddie Mac was chartered by Congress as a private company serving a public mission; however, Freddie Mac is not an agency of the Federal or any state government nor does Freddie Mac receive federal funds. In fact, Freddie Mac is one of the nation's largest federal taxpayers. Freddie Mac is owned by its shareholders and, like other corporations, is accountable to its shareholders and a board of directors. Freddie Mac's enabling legislation calls for our Board to have 18 directors, five of whom are to be appointed by the President of the United States. Anyone can own Freddie Mac stock, which is traded under the stock ticker symbol "FRE" on the New York Stock Exchange; in your local newspaper, you'll see our stock price referenced as "FredMac."

http://www.freddiemac.com/corporate/compan...file/faqs/#BM5_

I am sorry naam but I could not help but note you appeared to say Freddie Mac is a taxation milking machine with five directors appointed by the US president.

i did not say anything but copied from Freddie Mac website.

True - I guess it is in how you choose to interpret the information that counts. I could be wrong, but don't think so.

[dotcom]

Fannie & freddie - cut in 1/2 today. Bong holders will be fine.

[dotcom]

Wild ride in the US markets last night.

The hand of God came in & saved them.

[flying]

Former St. Louis Federal Reserve president William Poole tells Bloomberg that the firms are already insolvent and may need a bailout. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair-value accounting rules, Poole said.

"Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer," Poole told Bloomberg.

LaoPo

Sounds bad..............Then I see things like this

http://armscontrolcenter.org/policy/securi...al_war_funding/

Suddenly the 5.2 billion looks small.

Makes me wonder how we can afford any of it.

[cloudhopper]

Fannie & freddie - cut in 1/2 today. Bong holders will be fine.

...so will people who use vaporizers or just twist them up the old fashioned way.

[midas]

Former St. Louis Federal Reserve president William Poole tells Bloomberg that the firms are already insolvent and may need a bailout. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair-value accounting rules, Poole said.

"Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer," Poole told Bloomberg.

LaoPo

Sounds bad..............Then I see things like this

http://armscontrolcenter.org/policy/securi...al_war_funding/

Suddenly the 5.2 billion looks small.

Makes me wonder how we can afford any of it.

But USA cannot afford any of it ! And that is why all these

people who think the dollar will recover are smoking something !

[cloudhopper]

Another one bites the dust...

http://www.bloomberg.com/apps/news?pid=206...L8&refer=us

[Naam]

no risk no reward. although i missed the lows when buying and missed the highs when selling i am quite happy having made 28.5% within a couple of hours. thank you Freddie and thank you Fannie

[midas]

no risk no reward. although i missed the lows when buying and missed the highs when selling i am quite happy having made 28.5% within a couple of hours. thank you Freddie and thank you Fannie

Naam with all due respect to you as to whether or not you made 28.5% or 200% seems superfluous

when faced with a headline this morning " One of the largest US mortgage lenders has collapsed amid a growing credit crisis"

the bigger question should be how long before a total breakdown in confidence in the financial

stability of the USA ?

[Naam]

when faced with a headline this morning " One of the largest US mortgage lenders has collapsed amid a growing credit crisis"

the bigger question should be how long before a total breakdown in confidence in the financial stability of the USA ?

your concerns are justified Midas. however i think that neither Freddie nor Fannie is in real danger. that was my rationale behind the decision to touch (YUCK) shares after many years to make a quick buck. the U.S. can afford to pump another trillion into wars in Iraq, Afghanistan or perhaps Iran. what the country canNOT afford is the collapse of it's economic backbone and that is housing which is financed mainly by mortgages.

where's the problem for the FED to provide liquidity of 50, 100 or even more billions to prop up the capital of Freddie and Fannie as it was the case with JPM/Bear Sterns? let the printing press run! all what we investors have to do is to hedge whatever dollar denominated assets we hold. that's free of charge and even profitable based on prevailing interest rate differentials (exception JP¥).

[midas]

when faced with a headline this morning " One of the largest US mortgage lenders has collapsed amid a growing credit crisis"

the bigger question should be how long before a total breakdown in confidence in the financial stability of the USA ?

your concerns are justified Midas. however i think that neither Freddie nor Fannie is in real danger. that was my rationale behind the decision to touch (YUCK) shares after many years to make a quick buck. the U.S. can afford to pump another trillion into wars in Iraq, Afghanistan or perhaps Iran. what the country canNOT afford is the collapse of it's economic backbone and that is housing which is financed mainly by mortgages.

where's the problem for the FED to provide liquidity of 50, 100 or even more billions to prop up the capital of Freddie and Fannie as it was the case with JPM/Bear Sterns? let the printing press run! all what we investors have to do is to hedge whatever dollar denominated assets we hold. that's free of charge and even profitable based on prevailing interest rate differentials (exception JP¥).

" where's the problem for the FED to provide liquidity of 50, 100 or even more billions to prop up the capital of Freddie and Fannie " - may be not so much

a problem for us now but for the next generation and the generation after that we are leaving behind a very sorry state of affairs.

[dotcom]

Fannie & freddie - cut in 1/2 today. Bong holders will be fine.

BOND

Frightfully sorry old chap.

[highdiver]

when faced with a headline this morning " One of the largest US mortgage lenders has collapsed amid a growing credit crisis"

the bigger question should be how long before a total breakdown in confidence in the financial stability of the USA ?

your concerns are justified Midas. however i think that neither Freddie nor Fannie is in real danger. that was my rationale behind the decision to touch (YUCK) shares after many years to make a quick buck. the U.S. can afford to pump another trillion into wars in Iraq, Afghanistan or perhaps Iran. what the country canNOT afford is the collapse of it's economic backbone and that is housing which is financed mainly by mortgages.

where's the problem for the FED to provide liquidity of 50, 100 or even more billions to prop up the capital of Freddie and Fannie as it was the case with JPM/Bear Sterns? let the printing press run! all what we investors have to do is to hedge whatever dollar denominated assets we hold. that's free of charge and even profitable based on prevailing interest rate differentials (exception JP¥).

totally agree with you.

I believe the US is a very very strong economy. it is supporting so many other countries as well as you said, pumping endless amounts of money to maintain military presence around the world.

the banks that roll over will be taken over by the feds that will in future have a tighter control on how they are managed.

[midas]

when faced with a headline this morning " One of the largest US mortgage lenders has collapsed amid a growing credit crisis"

the bigger question should be how long before a total breakdown in confidence in the financial stability of the USA ?

your concerns are justified Midas. however i think that neither Freddie nor Fannie is in real danger. that was my rationale behind the decision to touch (YUCK) shares after many years to make a quick buck. the U.S. can afford to pump another trillion into wars in Iraq, Afghanistan or perhaps Iran. what the country canNOT afford is the collapse of it's economic backbone and that is housing which is financed mainly by mortgages.

where's the problem for the FED to provide liquidity of 50, 100 or even more billions to prop up the capital of Freddie and Fannie as it was the case with JPM/Bear Sterns? let the printing press run! all what we investors have to do is to hedge whatever dollar denominated assets we hold. that's free of charge and even profitable based on prevailing interest rate differentials (exception JP¥).

totally agree with you.

I believe the US is a very very strong economy. it is supporting so many other countries as well as you said, pumping endless amounts of money to maintain military presence around the world.

the banks that roll over will be taken over by the feds that will in future have a tighter control on how they are managed.

how can USA be perceived today as a " very very strong economy " ? The " pumping endless amounts of money to maintain military presence around the world ' isn't even its own money with countries like China providing the finance USA doesn't even seem to have a bright future ahead because what can it offer the world today ?

[lannarebirth]

when faced with a headline this morning " One of the largest US mortgage lenders has collapsed amid a growing credit crisis"

the bigger question should be how long before a total breakdown in confidence in the financial stability of the USA ?

your concerns are justified Midas. however i think that neither Freddie nor Fannie is in real danger. that was my rationale behind the decision to touch (YUCK) shares after many years to make a quick buck. the U.S. can afford to pump another trillion into wars in Iraq, Afghanistan or perhaps Iran. what the country canNOT afford is the collapse of it's economic backbone and that is housing which is financed mainly by mortgages.

where's the problem for the FED to provide liquidity of 50, 100 or even more billions to prop up the capital of Freddie and Fannie as it was the case with JPM/Bear Sterns? let the printing press run! all what we investors have to do is to hedge whatever dollar denominated assets we hold. that's free of charge and even profitable based on prevailing interest rate differentials (exception JP¥).

totally agree with you.

I believe the US is a very very strong economy. it is supporting so many other countries as well as you said, pumping endless amounts of money to maintain military presence around the world.

the banks that roll over will be taken over by the feds that will in future have a tighter control on how they are managed.

I hope you're right highdiver. I look forward to the day when the American public are once again called citizens, rather than consumers.

[lannarebirth]

From the July 10, 2008, South Florida Sun-Sentinel, syndicated from The New York Times

We Are A Country In Crisis

by Thomas L. Friedman

Just a few months ago, the consensus was that Barack Obama would need to choose

a hard-core national security type as his vice presidential running mate to compensate

for his lack of foreign policy experience and that John McCain would need a running

mate who was young and sprightly to compensate for his age.

Come August, though, I predict both men will be looking for a financial wizard as their

running mates to help them steer America out of what colud become a serious

economic tailspin.

I do not believe nation-building in Iraq is going to be the the issue come November --

whether things get better there or worse. If they get better, we'll ignore Iraq more; if

they get worse, the next president will be under pressure to get out quicker. I think

nation-building in America is going to be the issue.

It's the state of America now that is the most gripping source of anxiety for Americans,

not al-Qaida or Iraq. Anyone who thinks they are going to win this election playing the

Iraq or the terrorism card -- one way or another -- is seriously deluded. Things have

changed.

Up to now, the economic crisis we've been in has been largely a credit crisis in the

capital markets, while consumer spending has kept reasonably steady, as have

manufacturing and exports. But with Banks still reluctant to lend even to healthy

businesses, fuel and food prices soaring and home prices declining, this is starting

to affect consumers. Unemployment is already creeping up and manufacturing

creeping down.

The straws in the wind are hard to ignore. If you visit any car dealership in America

today you will see row after row of unsold SUV's. And if you own a gas guzzler already,

good luck. Just be glad you don't drive a bus. Motgomery, County, MD, where I live,

just announced that more children are going to have to walk to school next year to

save money on bus fuel.

On top of it all, our bank crisis is not over. Two weeks ago, Goldman Sachs anylysts

said that U.S. banks may need another $65 billion to cover more write-downs of bad

mortgage-related instruments and potential new losses if consumer loans start to buckle.

Since President Bush came to office, our national savings have gone from 6 percent of

gross domestic product to 1 percent, and consumer debt has climbed from $8 trillion

to $14 trillion.

We are a country in debt and in decline -- not terminal, not irreversible, but in decline.

Our political system seems incapable of producing long-range answers to big problems

or big opportunities. We are the ones who need a better-functioning democracy -- more

than the Iraqis and Afghans. We are the ones in need of nation-building. It is our political

system that is not working.

I continue to be appalled at the gap between what is clearly going to be the next great

global industry -- renewable energy and clean power -- and the inability of Congress and

the administration to put in place the bold policies we need to ensure that America leads

that industry. Ironically, America DOES lead this industry but early adopters of most of it's technologies are other countries.

"America and its political leaders, after two decades of failing to come together have lost

faith in their ability to do so," Wall Street Journal columnist Gerald Selb, noted. "A political

system that expects failure doesn't try very hard to produce anything else."

We used to try harder and do better. After the 1973 oil crisis, we came together and made

dramatic improvements in energy efficiency. After Social Security became imperiled in

the early 1980's, we came together and fixed it for that moment. "But today," added

Robert Hormats, vice chairman of Goldman Sachs International, "the political system

seems incapable of producing a critical mass to support any kind of serious long-term

reform."

If the old saying -- that "as General Motors goes, so goes America" -- is true, then folks,

we're in a lot of trouble, General Motors' stock-market value now stands at just $6.47 billion,

compared with Toyota's $162.6 billion. On top of it, GM shares saink to a 34-year low

last week.

That's us. We're at a 34-year low. And digging out of this hole is what the next election

has to be about and is going to be about -- even if it is interrupted by a terrorist attack

or an outbreak of war or peace in Iraq. We need nation-building at home. Vote for

the candidate who you think will do that best. Nothing else matters.

[thaigene2]

The above post by the New York Times' columnist about "The way GM goes, so goes America.." is just so true.

I couldn't believe my eyes the other day when I turned on TV in New York City to hear the local CBS channel 'business news bunny' telling me that Chrysler was giving its employees a 'mandatory two-week vacation'. In other words, it was shutting down its manufacturing lines for 2 weeks - to save money. They'll be selling off the fixtures from the executive washrooms next.

Two more little news nuggets:

1. I checked the Dow Jones graph for the year-to-year as it tells me more about the direction of a market than tracking just one month or three months. The result was 14,000 a year ago to around 11,000 at Friday's close - around a 20% drop. Now that may not be much given the climb it's had over 15 years or so. But am I the only one to think that even another 20-30% drop over the NEXT year wouldn't be a catastrophe for America and eventually the rest of the world? Continuing at this present rate, it would have lost 40% in two years..Could we live the lives we lived 15 years ago if the DJIA returned to the 2-3,000 levels? In other words, would things jusrt go back to the way they were? I doubt that.

2. The U.S. unemployment rate has now risen to 5.5%. Does 10% in another year from now sound that unlikely? And what would that mean if interest rates go higher, there are fewer jobs available, and you're overextended on your mortgage? Americans have, on average, negative-savings (in other words none, but with credit card debts, etc). How long could the average newly-unemployed working-class American with a mortgage last before losing his house? Two months? Three months?

The above debates in this thread are interesting, but to me it's not a question about being a pesimist or an optimist. It's a question of basic numeracy..You either get this or you don't I guess.

[midas]

The above post by the New York Times' columnist about "The way GM goes, so goes America.." is just so true.

I couldn't believe my eyes the other day when I turned on TV in New York City to hear the local CBS channel 'business news bunny' telling me that Chrysler was giving its employees a 'mandatory two-week vacation'. In other words, it was shutting down its manufacturing lines for 2 weeks - to save money. They'll be selling off the fixtures from the executive washrooms next.

Two more little news nuggets:

1. I checked the Dow Jones graph for the year-to-year as it tells me more about the direction of a market than tracking just one month or three months. The result was 14,000 a year ago to around 11,000 at Friday's close - around a 20% drop. Now that may not be much given the climb it's had over 15 years or so. But am I the only one to think that even another 20-30% drop over the NEXT year wouldn't be a catastrophe for America and eventually the rest of the world? Continuing at this present rate, it would have lost 40% in two years..Could we live the lives we lived 15 years ago if the DJIA returned to the 2-3,000 levels? In other words, would things jusrt go back to the way they were? I doubt that.

2. The U.S. unemployment rate has now risen to 5.5%. Does 10% in another year from now sound that unlikely? And what would that mean if interest rates go higher, there are fewer jobs available, and you're overextended on your mortgage? Americans have, on average, negative-savings (in other words none, but with credit card debts, etc). How long could the average newly-unemployed working-class American with a mortgage last before losing his house? Two months? Three months?

The above debates in this thread are interesting, but to me it's not a question about being a pesimist or an optimist. It's a question of basic numeracy..You either get this or you don't I guess.

Exactly thaigene but apart from basic numeracy its also " trends ". look how the Chinese kids who

respect authority and their parents are furiously learning English and computer skills while the American

education system sinks further into decline. everything about America seems to be in decline.

[lordofdelusion]

Tough times indeed for the US economy. It is still the largest economy in the world and will be for some time to come. I believe a recent article stated that China would overtake the US by 2025 or 2030 and they have a lot more people.

Trying to find positives, I look at both the presidential candidates and see that they are talking balancing the budget. I think not only politicians but the general public are starting to realize that is a good idea. We'll see. That will strengthen the dollar and hopefully reverse the skyrocketing price of commodities. The fed may be forced to raise rates sometime in the next few months to prop the dollar or coordinate with the European banks to allow the dollar to gain some relative strength. That seems unlikely now but as things spiral down in Europe, might just happen. Germany and Spain are not happy about the last rate increase.

Another positive I see is that the US has already cut it's driving and gasoline use. Everybody with an opinion is lining up to help form a new energy policy that will reduce the need for imported oil. In the long run a good thing. We should have started that when the gas lines formed in the 1970's. Just takes a push sometime. House prices may once again become affordable and financial institutions will be monitored more closely. I couldn't believe my ears when people on CNBC were saying enough of this hands off business stuff, we need some regulation.

Just trying to find some positives as the last few months have been very depressing. My first downturn since retiring. Made me think of chunking it all and heading back to work. EEEESSSHHH

[Naam]

when faced with a headline this morning " One of the largest US mortgage lenders has collapsed amid a growing credit crisis"

the bigger question should be how long before a total breakdown in confidence in the financial stability of the USA ?

your concerns are justified Midas. however i think that neither Freddie nor Fannie is in real danger. that was my rationale behind the decision to touch (YUCK) shares after many years to make a quick buck. the U.S. can afford to pump another trillion into wars in Iraq, Afghanistan or perhaps Iran. what the country canNOT afford is the collapse of it's economic backbone and that is housing which is financed mainly by mortgages.

where's the problem for the FED to provide liquidity of 50, 100 or even more billions to prop up the capital of Freddie and Fannie as it was the case with JPM/Bear Sterns? let the printing press run! all what we investors have to do is to hedge whatever dollar denominated assets we hold. that's free of charge and even profitable based on prevailing interest rate differentials (exception JP¥).

" where's the problem for the FED to provide liquidity of 50, 100 or even more billions to prop up the capital of Freddie and Fannie " - may be not so much

a problem for us now but for the next generation and the generation after that we are leaving behind a very sorry state of affairs.

that might be a problem for an American with children and perhaps grandchildren. no problem at all for a German who lives in Thailand without any generation to leave behind (unfortunately).

[Naam]

when faced with a headline this morning " One of the largest US mortgage lenders has collapsed amid a growing credit crisis"

the bigger question should be how long before a total breakdown in confidence in the financial stability of the USA ?

your concerns are justified Midas. however i think that neither Freddie nor Fannie is in real danger. that was my rationale behind the decision to touch (YUCK) shares after many years to make a quick buck. the U.S. can afford to pump another trillion into wars in Iraq, Afghanistan or perhaps Iran. what the country canNOT afford is the collapse of it's economic backbone and that is housing which is financed mainly by mortgages.

where's the problem for the FED to provide liquidity of 50, 100 or even more billions to prop up the capital of Freddie and Fannie as it was the case with JPM/Bear Sterns? let the printing press run! all what we investors have to do is to hedge whatever dollar denominated assets we hold. that's free of charge and even profitable based on prevailing interest rate differentials (exception JP¥).

totally agree with you.

I believe the US is a very very strong economy. it is supporting so many other countries as well as you said, pumping endless amounts of money to maintain military presence around the world.

the banks that roll over will be taken over by the feds that will in future have a tighter control on how they are managed.

how can USA be perceived today as a " very very strong economy " ? The " pumping endless amounts of money to maintain military presence around the world ' isn't even its own money with countries like China providing the finance USA doesn't even seem to have a bright future ahead because what can it offer the world today ?

the U.S. is a strong economy. unfortunately only as strong as the purchase power of its domestic consumers which seems to be dwindling more and more. it is also correct to say that countries with large trade surpluses, e.g. China are providing [partly] financing by buying U.S. debt (as they have no other choice!). all the raving and ranting that these countries might switch their reserves out of USD into other currencies is nothing but..... raving and ranting because it is not feasible.

the real strong point of the U.S. is that all its external debt is denominated in USD at interest rates which do not even cover the real inflation rate. and if worse comes to worst Bernanke (or whoever is in charge) will equip the printing presses with turbochargers the dollar will keep falling, inflation will increase exponentially and the real sufferers will be the average U.S. citizens.