Freddie Mac CFO Found Dead

David Kellermann, acting chief financial officer of Freddie Mac, was found dead in his Virginia home Wednesday morning in what police say was a suicide. Condolences to his family and friends over what is surely an inconsolable sorrow.

As the times change and challenges arise, the solutions which seem like an easy way out are not really so. Whatever Mr. Kellerman believed or knew about the darkness in his industry past and present, and the dark road ahead, suicide is a mortal sin and those of us who are believers pray for his soul.

It seems like a good time as well, to remind people that there are groups who help whistleblowers, and if indeed, as some suspect, Mr. Kellerman chose suicide over an ugly whistleblowing scenario, the tragedy is compounded if such a thing be possible. If you are a whistleblower suffering from the stress of what you are carrying, or are close to one who is suffering, check out the Government Accountability Project, or GAP, the nation's leading resource for government, corporate and international whistleblowers.

Again, our condolences to the family and friends of David Kellerman.
~~~~

Denner's Take on Fannie & Freddie

I have followed Robert Denner's comments on and off for a couple of years. He is readable and well-informed, with a fresh viewpoint you won't find in your local paper. His slant is contrarian/bearish and he is very knowledgeable about Peak Oil ~ rare indeed. His writing is like cod liver oil ~ goes down nasty but is very good for you.

Be sure and click over and read his whole post.

From Daily Economic Update

QUOTE This doesn’t necessarily mean that the government will have to dole out 4 trillion dollars but it does mean that they will now backstop the rest of this collapse ON YOUR DIME and the first payment due is going to be about 200 billion dollars. How does our “free market” friends on Wall Street and all the other markets in the world react TO THIS SOCIALIST INTERVENTION IN THE MARKETS?? Why you guessed it, they are up on average about 3 to 5% this morning and the US markets which open in 45 minutes are up a stagering 260 points in premarket trading which will probably equate to a 300 to 500 point gain on the day.
You see watching charts can be a good thing for you .. The markets crossed over a very important mark on Thursday and that signalled to me that something had to give. As usual I BET ON THEM DOING THE RIGHT THING FOR ONCE and as usual I was proven wrong. Instead of just letting reality finally rule on the markets and to let the blood flow, they once again deferred the pain and they bailed out the Chinese and Japanese and all the other 60 some odd National Banks. NOW DO YOU SEE why the dollar went up and why I called it manipulation. This was a tit for tat move that has been in the works for weeks now evidently.
YOU MUST UNDERSTAND NOW THAT YOUR MONEY IS NOTHING TO THEM!!!!!!! The money sitting in the markets right now is nothing more than pure unadulterated GAMBLING and cannot be considered any thing close to an investment. Investments are good things that help to pave the way to the future. They are conservative uses of money and are meant to build a future that is bright and optimistic. If you have money in the markets(and that includes your 401k money) you must understand that it is nothing but a gamble at this point. If they, with the wave of a pen, can do what they have done this weekend, what do you think they can do to your “investments”. UNQUOTE
***************

Fannie Mae and Freddie Mac Bailout

“Take a load off Fanny, take a load for free;
Take a load off Fanny, and - and - and.....You put the load right on me.”
– The Band, “The Weight,” 1968

Here once again is the usual solution of the fiat money bubble - as soon as one bursts, we blow another, bigger one to cover it up and keep the party going a little longer. We print print print!! those ol' greenback dollars and we toss 'em out of helicopters hovering over the latest smelly pile of financial caca in hopes that the fresh ink will cover up the smell of dyspeptic bullpucky.


Who owns securities in Freddie and Fannie which the US Treasury/US taxpayer is backing up---China! Can we connect the dots and make a picture here?


The whole mortgage mess reminds me of Matthew Arnold's verse

And we are here as on a darkling plain
Swept with confused alarms of struggle and flight
Where ignorant armies clash by night

The truth is, nobody knows exactly what is going on. We all have opinions, but it is like the mating rituals of sharks, where the real boffing, kicking and fighting takes place below the water, out of sight of those on land.


From The Oil Drum: Europe

QUOTE The bailout of Freddie and Fannie has just been announced by Hank Paulson, with supporting words from Bernanke. What's interesting in what's proposed, as usual, is what's unsaid. This would seem to be an incredibly ambitious gambit: a nationalisation, an attempted bailout of ALL the banks, and an open-ended commitment of taxpayer money to save the financial world..... As expected, as the government takes over, the normal shareholders are wiped out, something that will allow the Bush administration to claim that they are being tough and not bailing out investors, but we'll see that this claim is fundamentally false.
This whole side of the package will allow the government to claim that the bailout has a minimal cost: $1 billion only for now, a highly disingenuous claim (the warrants will most likely need to be exercised - but only next year, and there is the rest...)
The plan, outlined jointly by the Treasury Department and Federal Housing Finance Agency, also includes a plan for the Treasury to purchase mortgage-backed securities from the firms in the open market, and a lending facility through the Treasury from its general fund held at the Federal Reserve Bank of New York.
This is huge. This is the federal government taking over the "toxic waste" in a way that will have an impact not just on Freddie and Fannie, but on the whole market. UNQUOTE

*************

You Know The Drill ~ Kunstler Gets EBW

Frequenters of this blog may know by now that Jim Kunstler gets a Eff Bomb Warning every time I link to him. But he's such a brilliant Cassandra, and so very often right, that hopefully my good Catholic and other conservative readers will forgive him, an dme for a couple of eff bombs.

It might be useful to try and think of them in the Irish sense, like boldface type or exclamation points, rather than cussing. Go here, scroll down and it's on the left side - July 14, 2008 Cluster**** Nation

Here's a snippet to whet your whistle:

QUOTE With the death of the IndyMac Bank last week, and the GSEs Fannie Mae and Freddie Mac laying side-by-side in the EMT van on IV drips, headed for the Federal Reserve's ever more crowded intensive care unit, there was a sense of the American Dream having passed through the event horizon that denotes the opening of a black hole. What would happen if the US Government acted to bail out these feckless enterprises (and what if they don't)? Either way, it's not a pretty picture. If Mr. Bernanke does start shoveling loans into the GSE black hole, he'll further undermine the soundness of his own outfit and do nothing, really, to repair Fannie and Freddie's structural problem of having securitized too many loans that will never be paid back. If instead Fannie and Freddie are flat-out taken over entirely by the US government (and remember the Federal Reserve is not the government), then the national debt will roughly double overnight -- which will pound the US dollar down a rat-hole. UNQUOTE

Fannie, Freddie, The Banks and The Government

In trying to better understand the Fannie Mae - Freddie Mac mortgage debacle through reading news today I came across this impassioned tome calling for us to, like the doughty French, take to the streets to avoid being bankrupted by our own apathy and our weaselly government. This is a longish read but I encourage you to bite the bullet and read it. The knowledge may help you and yours. These giants of American business and finance aren't going down without dragging a lot of us with them. The current administration has argued for years, as part of its grandiose vision of an “ownership society”, that more Americans have been able to join the ranks of home ownership. They failed to note that it was being accomplished through artificially low interest rates, gimmick - sleazy mortgages, and non-existent lending restraint. So much for George W. Bush’s “ownership society”. Fasten your seat belts.

Here's a sample:

QUOTE Even worse, Fannie and Freddie, who guarantee their own bond issues, started buying their own paper. That is, they are writing insurance on a hurricane when they are both the writer of the insurance and the loss payee. This looks brilliant in that the "expense" of providing that insurance effectively disappears, thereby making the entirety of the spread they get from their source-of-funds to their paper issue theirs to keep, but that's the wrong way to look at it.
In fact that paper is uninsured, because the money comes from one hand goes to the other, attached to the same body.
Where were the regulators? Congress? Intentionally asleep. Remember that back in 2003 and 2004 both firms were found to have improperly accounted for their results. This should have led to an immediate clampdown and forced deleveraging to no more than 10:1 on an audited basis.
It did not, and in fact neither firm timely filed accounting statements until last year, more than three years after the "errors" were discovered.
But for Congress, The Fed and OFHEO looking the other way on purpose most of the Housing Bubble could not have happened, as the money necessary to fuel it simply would not have been available.
Now we are faced with the reality - Fannie and Freddie, under fair value accounting rules, are insolvent (if you listen to Bill Poole.) What does that mean? It means that if Fannie and Freddie were to sell their assets and net it out today, you'd wind up with a negative number. That is, its assets are less than its liabilities.
The question now comes down to "what do we do about this?"
There are several choices, all of which will have bad side effects. It is critical, however, that we understand those side effects and choose the path forward that represents the least risk to the broader economy and to the government, not just the most expedient or the one that the people who would lose will scream most loudly about. UNQUOTE

"NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANICAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES. "

~~~~~~~~~~~~~~~~~~~~~~~~~~~~