It will not further provides François FillonThis is the case particularly of the AuchanThis is the case of Lyxor who collected 2Security issues should still win in acuity6 Million it should go to 5 million casesIn two sessions he lost more than 10 dollarsHe crossed the Atlantic for an MBA at Harvardthe Agriculture Ministers met this weekendMitsubishi will be more that ever the team to beatOr the India had come to rely on these capitalThis is a historic public rescue for a country as liberal and Darwinian as the United States, in particular under Republican administration. The two companies "too big to fail" who in their turn succumbed to the "sub-prime" crisis For President Bush, the two agencies semi-public funding U.S. sub-prime, Fannie Mae and Freddie Mac, "represented an unacceptable risk" for the financial system and the US economy. The Secretary of the Treasury, Henry Paulson, yesterday announced the plan to rescue of the two organizations listed which ensure or guarantee near 5.300 billion in mortgages, or 40 of U.S. mortgages outstanding. "It is time to take action." "We have have three core objectives: provide stability to financial markets, to continue to make funding for accessible housing credit and protect the taxpayer", he said.
Fannie Mae and Freddie Mac will be placed under guardianship ("conservatorship") of the new regulator of mortgage refinancing (FHFA), which means that they can continue to function normally. The Treasury is prepared to invest up to 100 billion of senior preferred shares in each of the companies. It will initially invest $ 1 billion to buy on the market of the preferential shares with a coupon 10 for each of the two firms. He has warrants that can give term 79.9 of the capital in each case. "These are necessary measures to strengthen the US housing market and promote the stability of our financial markets," commented on Ben Bernanke, Federal Reserve Chairman.
Fannie Mae and Freddie Mac are indeed an essential part of the US economy: they redeem their loans to banks and resell them securitized, bringing by that liquidity for new financing. In its new plan, the Treasury is also gives the opportunity to acquire products securitized related to real estate (MBS or mortgage backed securities), "which will provide capital assistance to the markets of real estate credit in these times of uncertainty", said Ben Bernanke. Henry Paulson, Fannie Mae and Freddie Mac will modestly increase their portfolio of MBS until the end of 2009, but will be starting in 2010, the reduce annually by 10 to stabilize "at a level lower and less risky. The State will return to his account the commitments of the two companies. They have sold billions of products securitized credit-based real estate funds, central banks, financial institutions.
Gradual intervention
The nervousness of the last few days has convinced the administration that it was time to intervene. Morgan Stanley, mandated by the Treasury Board to analyze the situation, has not considered them sufficiently capitalized to reflect only in a difficult environment. Above all, it considered that the accounting methods employed by Freddie Mac did not reflect objectively capital needs. According to the plan, the State will not massive injection of capital, but will intervene as and extent that the situation required. It will particularly ensure that the 1,600 billion in bonds issued to finance their operations are creditworthy. "They are looking to do two things, the first is the Trusteeship and the second is to refinance them." "I think that it is a large combination," said Barney Frank.
This summer, a law was passed authorizing the Treasury to enter the capital of these companies if necessary. "On the basis of what we have learned about these institutions in the course of the last four weeks, including what we have learned about their capital requirements and given the current market conditions, I have concluded that it would not in the best interest of the taxpayer to make a simple capital investment in these companies in their current form"argues Henry Paulson. Mid-July, the Treasury had increased their line of credit and the Fed them had financing facilities, as it already did for investment banks. The idea was then to reassure the markets and to avoid intervention by public authorities. But the continuous degradation of real estate and financial markets forced the Treasury to intervene more quickly. Policies have been warned of the operation: the candidates for the Presidency of the US as elected representatives of the Congress.
After the rescue of the fifth Wall Street, Bear Stearns Investment Bank in February, and its sale for a price discounted at JP Morgan Chase, Henry Paulson found a second opportunity to intervene directly and apply its doctrine: preserve the stability of the financial system but leave the shareholders responsible for the risks.
