Monday, December 28, 2009

Fannie Mae And Freddie Mac Developments Of December 24

For those who may have missed it, there was a notable development on December 24 concerning Fannie Mae and Freddie Mac. Here is The Wall Street Journal link and the Treasury Dept link:

Basically the government announced plans to cover an unlimited amount of losses at both companies.

It is yet another testament to the extent of intervention in the real estate markets.

I think this "blank check" approach carries many risks. A while back I wrote an article ("Business Planning Principles Applied to the Stimulus / Intervention Efforts") about how interventions could be effectively managed. The article is not intended to condone or support the concept of interventions. However, there should be a regimented approach to their administration. These interventions carry a tremendous amount of risk, aside from the substantial amounts of money being expended.

SPX at 1126.48 as this post is written

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