And what we see in times of crisis, the US State comes to the aid of private companies in difficulty ................ I'm fed up.
Do what I say but especially not what I do:
WASHINGTON (AFP) - 08/09/08 15: 30USA: supervision of mortgage refinancing organizations Freddie and Fannie
The United States Treasury announced on Sunday that the mortgage refinancing agencies Freddie Mac and Fannie Mae will be placed under government supervision, while they restructure their finances, which have been damaged by the credit and real estate crisis.
The plan provides that the federal government will be able to inject up to $ 100 billion into each of these companies to help them accomplish their mission..
Although it is likely that these envelopes will not be fully consumed, the rescue of Fannie Mae and Freddie Mac thus promises to be one of the most costly government bailouts of private companies ever conducted in the history of global finance.
The importance of the sum is intended to show "the strong commitment" of the State to the creditors and investors in securities of two institutions, defended Treasury Secretary Henry Paulson, whose party is a priori hostile to the rescue of private companies by the state.
At a press conference, Paulson said the decision was made after "a very thorough analysis of the current financial situation" of the two companies.
At the beginning of the summer, the federal state had already provided support to the two companies. Essentially verbal support, which Mr. Paulson compared to a bazooka, which is shown but not used. However, according to the press, a thorough examination of the accounts of Freddie Mac, and to a lesser extent, Fannie Mae, revealed accounting irregularities and a more precarious financial situation than previously estimated.
Mr. Paulson considered that the two companies, of private status but exercising public service missions, now presented a risk to the soundness of the financial system, which it was up to the federal state to correct, because of the "ambiguities" of their operation that he has long tolerated.
Within the limit of $ 100 billion set for each of them, the Treasury will provide new capital to the two institutions, as and when, according to their needs. This formula "is the most effective way to avoid a systemic risk and contains provisions to protect the taxpayer" in the event of bankruptcy of the two companies.
The Treasury will thus have priority in the event of liquidation. He will also immediately receive $ 1 billion in preferred securities of the two companies, offering a high yield of 10% per year, and "warrants" which will allow him to claim up to 79,9% of their share capital.
As already announced in July, the two companies will be able to refinance themselves with the central bank, like the commercial banks.
The respective departments of the two companies have been ousted and their management will now be ensured by officers appointed by the regulator.
By playing on their ability to refinance cheaply, Fannie Mae and Freddie Mac buy from the banks the home loans they have granted to individuals and then resell them to institutional investors. Banks thus free up liquidity which enables them to make new loans, thereby contributing to the dynamism of the real estate market.
Fannie Mae and Freddie Mac own or guarantee more than $ 5.000 billion in mortgage-backed securities, more than 40% of the outstanding mortgage loan in the United States.
Their bankruptcy would therefore have presented an "unacceptable risk" for the country's economy, explained President George W. Bush, assuring that the placing under supervision of the two institutions was not to be prolonged.
The Director General of the International Fund Dominique Strauss-Kahn welcomed a decision that should calm the financial markets.
Mr. Paulson's plan provides for a huge slimming program for the two companies, which will have to reduce the size of their balance sheets by 10% per year from December 31, 2009. Their loans and their bond portfolio, which should not not exceed 850 billion dollars on this date, will therefore have to fall by 10% per year, to return to 250 billion dollars.
During the reform of the two companies, the Treasury will buy part of the mortgage-backed securities that they issue to raise new funds. The Treasury expects an easing on the mortgage credit market, and in turn, a revival of the real estate market.
The importance of this buyback program, which will end at the end of December 2009, will be dictated "by developments in the capital and real estate markets".
Despite the trusteeship of Fannie Mae and Freddie Mac, which practically doubles the debt of the United States, the rating agencies Standard & Poor's and Fitch Ratings have maintained the "AAA" rating (the best possible) granted to the world's leading economic power..
And here are the corrupt rating agencies that rate AAA the USA when they are the most indebted in the World.
Source: Orange internet info.
but it's better like that.
