From "It's your turn Congress" :
The Federal Reserve/Treasury are very interested in using Fannie/Freddie for several reasons. The modus operandi being to transfer liabilities from the bank's balance sheet to that of the taxpayer. The second will be "quasi-mortgage interest rate tool"
Excerpt from Zero Hedge "Goldman Boosts Q4 GDP Estimate From 4% to 5.8%; Economic Status Quo Expected To Continue" in which Goldman prophesied:
Q: What can the GSEs do to keep rates down? The most obvious approach would be for the agencies to add to the $1.5 trillion in mortgages and mortgage-backed securities that they collectively hold in their portfolios. As shown in Exhibit 1 above, the GSEs have not been large buyers of MBS over the last year, accumulating roughly $100 billion. This is largely because when the Treasury put the GSEs under conservatorship, it required them to reduce their portfolios by roughly $150 billion below year-end 2009 levels by the end of 2010.My thoughts? GD-SOB-JFC-WTF-OMFG
In December, the Treasury amended this agreement, effectively raising the portfolio cap to $110 billion above current levels, or $260 billion above where it otherwise would have been (Exhibit 4). This is a relatively small amount, equivalent to roughly one month?s worth of Fed/Treasury purchases in 2009. It is also worth noting that the last time the portfolio limit was increased, it had little effect. In May of 2009, the Treasury increased the cap on the GSE portfolios by a combined $100 billion, but this resulted in little GSE net buying. In fact, the agencies? retained portfolios began to shrink soon after.
That said, the agencies will still have some flexibility to influence rates. The cap on portfolio size applies only at year end. During the year, the GSEs are limited only by the cap on outstanding debt, which is set at 120% of their portfolio cap, or roughly $2 trillion in 2010. However, this expansion would necessarily be temporary, since the agreement requires that the retained portfolio be reduced to $1.6 trillion by calendar year end.
See Also:
Revolution Resolution
WE THE PEOPLE (Have Had Enough)
Good Times, Goldman Sachs & Kneale
Also, for those who think the TARP was repaid with interest and the Treasury returned a profit... Might I refer you to the Maiden I though Maiden MMX funds? Dare I refer you to the Fed's balance sheet? Also, please consider the recent hundreds of billions to the GSEs. With a 1 in 5 delinquency rate on 5T in guarantees could it be valuing these assets at 50 cents on the dollar (and paying 100 cents for them)
