parvus wrote:To be fair, there's two issues. Bernanke says Fannie and Freddie are solvent; Rogers disagrees.
Rogers is certainly is prone to exaggeration - I wish he'd avoid this because my credibility meter dips big when pointed at folks who resort to stretching the known facts to bolster their point. Talking his book and highly motivated to do so at present. That doesn't automatically make him wrong on his market bet though.
Has anyone noted a useful review of the risk profile of FNM and FRE mortgage holdings? Rogers' hyperbolic opinion that all 4 or 5 trillion is at risk can't be correct.
It seems to me the issue isn't so much whether FRE and FNM are solvent - doesn't matter so much in the long run, as the credit portfolio, whatever is beyond junk status anyway, will be bought by others - but how much of that portfolio is crap and therefore likely to further impact housing prices.
Side note, article in the Globe and Mail on Saturday
The house that IndyMac built is worth a read. The on-line photos aren't nearly as impressive as the dowdy picture presented in the print version, but the entire article is currently online:
LOS ANGELES, TORONTO and NEW YORK — Patricia Ramirez's home, which sits on a ragged dead-end street at the edge of East Los Angeles in the shadow of an elevated freeway, cost $445,000 (U.S.) when she and her husband bought it in February, 2007.
Mrs. Ramirez, an office manager at a tortilla maker, and Mr. Ramirez, a truck driver, together make $48,000 a year. When a relative of theirs bought a house a few years ago, his real estate agent told the Ramirezes they could afford a house too. They had dreamed of owning a home for years, and jumped at the chance, scraping together a $5,000 down payment, or 1 per cent.
They moved into the one-storey, three-bedroom beige house in a working-class neighbourhood that was bid up in value during the boom, because while it's on the edges of the rougher parts of town, it's not too far from downtown or the ocean. A pleasant green cemetery is half a block away and the nearby main streets are colourful, lined by eclectic shops and strolling families, most of whom are Hispanic.
Today, the Ramirez home, with its rusted basketball hoop in the driveway and yellowed lawn, is worth just $360,000 – a drop of 20 per cent in less than a year and a half.
Yet their monthly mortgage payments have moved rapidly in the opposite direction, escalating to $4,500 from the $2,500 payment they originally made – a sum they believed was fixed for five years.