(an email exchange)
>Ãƒâ€šÃ‚Â Ãƒâ€šÃ‚Â On Mon, Apr 21, 2008 at 9:55 AM, Russell wrote:
>Ãƒâ€šÃ‚Â Ãƒâ€šÃ‚Â Fannie and Freddie now back 82% of all mortgages in the U.S.,
>Ãƒâ€šÃ‚Â Ãƒâ€šÃ‚Â up from only 46% in the second quarter of 2007. If they need
>Ãƒâ€šÃ‚Â Ãƒâ€šÃ‚Â a bailout ÃƒÂ¢Ã¢â€šÂ¬Ã¢â‚¬Å“ could be a trillion dollars ÃƒÂ¢Ã¢â€šÂ¬Ã¢â‚¬Å“
Funds are already advanced to the homeowners which supports demand.
A ‘bailout’ would only be an accounting entry between the government’s account and the agency’s account – no effect on aggregate demand.
>Ãƒâ€šÃ‚Â Ãƒâ€šÃ‚Â the USA may lose its AAA credit rating.
Like Japan did. Just another sign of incompetance by the ratings agency if it happens.
What would that mean for the equity in Fannie and Freddie?
sorry, not my strong point! though i do think the congress will try to maintain their earnings ability, but don’t know how successfully.