Help me understand - Fannie/Freddie . . . M, B, & T's . . . 1776

The government creates these 2 entities "for the public good." I am curious, if this is true then why did these entities have to spend hundreds of millions of dollars to help certain politicians get elected. Oh never mind it's just millions with an M, way bigger questions to address below . . .

Their current combined capitalization is around $6 Billion (notice the B)

Congress estimates their combined losses will be in the $25 Billion range (anyone willing to bet on that?) My best guess, take that number put at least 1, probably 2 zeros behind it and you will be closer – read as $250 Billion - $2.5 Trillion (notice the T)

They have over $55 Billion in preferred shares and subordinated debt, who would ever lend or invest in them at this point? Warren Buffet (of whom I have always been a HUGE fan) says they are toast, game over, they are done.

Combined they back over $5.2 Trillion (there’s that T again) in mortgage securities.

I just read where there are $62 Trillion in credit default swaps written against their debt. But no one knows who owns it, no one knows the terms, and no one knows how it’s insured (ha-ha – insurance on investments or in financial markets – what are you stoned?)

So in summary:
$6 Billion in combined capitalization
No one with an ounce of sense to inject any more money
Losses to be realized of somewhere between $25B (if you believe your politicians) and $2.5 Trillion if you believe we have just started to see the tip of this iceberg.
$55 Billion in preferred shares and subordinated debt held extensively by banks who would fail if this was wiped out thereby further increasing the already unbearable burdens on the FDIC
$62 Trillion in CDS written against their combined debt.

Does anyone else’s head hurt?

How did we get here?
How many other situations public, private or in between exist like this?
After people stop paying on their homes, how quickly do student loans, credit cards, boats, cars, etc stop being important enough to continue making payments on?
Who is next?
For how long will the public be willing to allow others to provide unlimited band aids at our expense?
What would happen if we could waive a magic wand and simply say “what’s done is done, your government will not spend another dime on this matter, nor will we support or reimburse anyone who has been impacted by it. If you are over 18 years of age, tough figure it out. We have already saddled our future generations with enough burdens.”

Yeah of course there would be riots and anarchy and millions of people left hurting. But it would be over, the pain would be realized and we could lick our wounds and begin the healing process. We would learn how to think, how to work and how to be responsible for ourselves. We would probably demand an educational system that taught us more about understanding our finances and our financial decisions. We would take better care of ourselves if we knew that we had to pay the bills ourselves when our poor choices led to health care expenses. We would pay more attention to a lot of things. Would that really be so awful – a nation full of people who struggled, and worked hard, thought harder and fought for a new and better way? Oh wait, wasn’t there once a nation something like that, I don’t know maybe back around 1776?

How do the dominoes fall?

I enjoy reading information from John Mauldin and his outside the box newsletter. The other day he forwarded a piece by Bennet Sedacca entitled “Dead Men Walking.” This started to spell out not only who they expect to see fall in the near future, but how and why the dominoes that fall actually do so. Forget the fact that they expect the following companies/banks/financial institutions to go away (see list below) but more importantly take a look at this article (Google him/the article I don’t even want to know how to do that whole link thing!)


Some of the dominoes to fall:
Bear Stearns fallen and can’t get up
Fannie/Freddie fallen, not ready to share the ugly truth yet
Lehman Brothers
National City
Washington Mutual
Zions Bancorp
KeyCorp
Fifth Third Bank
Regions Financial
GM/GMAC
Ford/Ford Motor Credit
CitiGroup

There will undoubtedly be more, I personally have shared with clients that I expect no fewer than 200 institutions to fail, fold, collapse whatever term you want to use over the next 12-18 months. These imminent failures will certainly require our national government (you remember the people who are already so ridiculously overspending that we are only years away from not even being able to make our interest payments on our foreign debt) to step in to the tune of, my best guess, over $1trillion just on the FDIC side. Disgusting, truly, pathetic and disgusting. Yet how many Americans today are doing the same exact thing? Are you spending more than you are earning? Are your savings growing each month? Are you paying down your debts? Are you a fiscally responsible American or do you just play one in front of an audience to look good whenever you can?

Noted economists clueless - Well Duh!

Below is one of hundreds of things I have read recently on what the "experts" have to say. As you read this remember that since 2004 I have been sharing with some of my best clients that the pieces were in place and that we would move into a global depression of such significance that history would show it to make "The Great Depression" look like a drop in the bucket relative to that which we are now in. Make no mistakes; this is not about the US housing market! It is about the incredible greed and arrogance of some, coupled with the absolute ignorance and apathy of many. This is not a US issue alone. Yes we here in the states are starting to feel it first; the rest of the western hemisphere will soon follow as will Europe, then eventually Asia. When all is said and done, about 20-25 years from now, a major housecleaning will have taken place in the world's financial markets and economies. What an amazing time to be alive! Throughout history the times of the greatest and most rapid changes, when the masses needed the most help to simply survive, those who have been the most prepared, informed and concerned have had the greatest opportunities to make huge differences and to truly help large numbers of people. When you are committed to helping others, and there exist tons of people to help . . . what happens to you personally?


Says famed Harvard economist Martin Feldstein of the ongoing rapid decline of home prices: "It's simply not clear – at least to me – what will stop this self-reinforcing process." Not a word was said about who created these problems. I imagine all the well-heeled economists now meeting with the Fed governors in Jackson Hole this week are doing an economic version of "Who's On First?" The government and its economists conspired to build a false prosperity through huge increases to mortgage lending over the last decade. Just look at the outrageous growth of the balance sheets of Fannie and Freddie. Now the facade has worn thin. And the debts must be repaid. What should happen? Pity the uneducated or delusional people who trusted their mortgage broker. Hang the political leaders and the bankers who encouraged reckless borrowing. What will happen? The government and its economists will do everything they can to postpone the inevitable, which will make the problems worse.
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The government and its economists are looking for truckloads of Band-Aids now, when the patient would truly be best served by a full, complete, and rapid amputation. Will that happen? No, there are no votes in taking that action, the powers that be will let infection and disease set in and until the stench is so strong that we simply can't take it any longer we will try to hang on, thereby exacerbating the problem significantly.

What would happen if none of our tax dollars went into this or into any other situation where the government was trying to bail out people from the consequences of their own stupidity? Buy a house you can't afford - tough figure it out. Make a loan to someone who couldn't pay - tough figure it out. Build your home or city below sea level, or on a known fault line - tough figure it out. Invest in things you don't understand - tough figure it out. Choose to neglect your physical well being - tough figure it out. Have 5 kids you can't afford to feed - tough figure it out (or we'll take the kids and give them to someone who can afford to feed them since you are obviously an idiot and we are tired of idiots raising children to perpetuate the idiot lifestyle.) I could go on forever, but not now.

I.O. USA - the movie

I) If you didn't see it yet, find a way to do so now - or continue to be ignorant and uninformed
II) Best point (paraphrased) - What "we the people" through our elected officials, are doing is identical to your parents running up hundreds of thousands of dollars in credit card debt and then your being obligated to pay it for them.
III) Only put people in office who will NOT promise more programs and lower taxes. Those who promise lower taxes and more programs are morally bankrupt thieves who are willing to lie for their personal short term gains at other's long term expense.
IV) Focus everyday on how to best maximize your human potential. Need assistance with this? check out: www.iLearningGlobal.biz/theresultsgroup
V) Immediately become more responsible financially. Follow a plan to eliminate your debt and to start saving. Want to maximize the plan read the info at: :http://www.discovermoneymerge.com/help
and take action now
VI) a very small number of people, committing to build the disciplines necessary to facilitate change can spark a revolution, are you one of those people or are you simply too pathetic?
VII) welcome to smashedfeet.com where we won't just step on your toes . . . we will smash your feet - we promise!