We're doomed.

http://www.msnbc.msn.com/id/26567533


MSNBC.com
Reports: Fannie Mae, Freddie Mac bailout set
Top execs would be dismissed and common stock diluted under federal plan
MSNBC
updated 8:08 p.m. MT, Fri., Sept. 5, 2008

The federal government has prepared a plan to take control of troubled mortgage giants Fannie Mae and Freddie Mac, several newspapers reported Friday night.

The Washington Post reported on its Web site that government officials had told the two companies that their top executives would be dismissed and government funds used to prop them up. The New York Times said the company boards also would be replaced.

The Times described the plan as effectively a government bailout that could cost taxpayers tens of billions of dollars and would be among the largest rescues in U.S. history.

The Times and the Wall Street Journal said an announcement of a takeover could come this weekend.

Quoting unidentified sources, the Post said that the companies would be placed under a conservatorship and that the value of the companies' common stock would be diluted but not wiped out, while other securities, including preferred shares, would be protected by the government.

The Post and the Journal reported that any infusion of capital would be done quarter by quarter. The Post said that was being done in an attempt to minimize the initial cost of the rescue.

Fannie Mae and Freddie Mac have seen their stock prices plummet as fears mounted they would soon need government support and that any bailout would leave stockholders in the lurch.

Washington-based Fannie Mae and McLean, Va.-based Freddie Mac hold or guarantee half the U.S. mortgage debt and are considered crucial to the mortgage market's continued operation. But the government-sponsored companies lost a combined $3.1 billion between April and June. Half of their credit losses came from so-called Alt-A loans, which were made to borrowers with solid credit but little proof of their incomes, or small or no down payments.

The Bush administration this summer unveiled a plan to provide unlimited government loans to the two companies and to purchase stock in them if needed for a period covering the next 18 months.

The two companies have been hammered by the collapse of home prices in the United States and the credit crisis that has gripped financial institutions.

The Mortgage Bankers Association reported Friday that a record 9 percent of American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June.

The source of trouble in the mortgage market has shifted from subprime loans made to borrowers with poor credit to homeowners who had solid credit but took out exotic loans with ballooning monthly payments.

More than one out of 10 borrowers with a prime adjustable-rate loan is now delinquent or in foreclosure. That portion, 11.3 percent, was up from 9.7 percent in the first quarter and is expected to continue to rise as more homeowners see their monthly payments spike.

 

we knew this was coming

 

Well yeah, as soon as their stock started tanking...

Here we are bailing out people who bought a house they couldn't afford in the first place because they could barely qualify for the lowest adjusted rate payment. The industry is at fault for allowing it to happen, by allowing loan originators that weren't actual lenders that had no intention of holding any of the loans to earn commissions.

 

Time to short!

 

Please gub'ment, save us from ourselves.

 

5 mins into trading down 80%

:eek5:

 

they are expected to settle around 35 cents each :eek4:

 

I am an idiot, all this seems like greek to me. I dont know who Fannie and Freddie Mac are, Were they related to Bernie(R.I.P) or something :dunno:

 

facepalm.jpg

 

Mortgage giants, they hold a great deal of the loans for many people.