http://www.dailyreckoning.com.au/the-two-pillars-of-the-us-mortgage-market-fannie-mae-and-freddie-mac-wobbled-again-yesterday/2008/07/10/ An independent perspective on the Australian and global investment markets Sun, 08 Nov 2009 09:45:07 -0600 http://wordpress.org/?v=2.8 hourly 1 http://www.dailyreckoning.com.au/the-two-pillars-of-the-us-mortgage-market-fannie-mae-and-freddie-mac-wobbled-again-yesterday/2008/07/10/comment-page-1/#comment-50090 Gov Bailout of Fannie and Freddie Would Destroy the Dollar Mon, 03 Nov 2008 15:12:35 +0000 http://www.dailyreckoning.com.au/?p=2962#comment-50090 [...] Dan Denning says both companies are sitting on a black hole. He is concerned that neither own enough capital to cover the potential losses they face. This risk is showing up in higher bond yields and credit default swaps (insurance against debt default): Fannie and Freddie have trillions of dollars in assets. But remember, a bank’s assets are someone else’s liability-a loan is a promise to pay. The trouble for Fannie and Freddie is that combined, they own or have guaranteed over US$5.3 trillion in debt and securitised mortgages. Their capital, on the other hand, is slender by comparison, with Fannie having US$38.8 billion in capital and Freddie US$16.3 billion. [...] [...] Dan Denning says both companies are sitting on a black hole. He is concerned that neither own enough capital to cover the potential losses they face. This risk is showing up in higher bond yields and credit default swaps (insurance against debt default): Fannie and Freddie have trillions of dollars in assets. But remember, a bank’s assets are someone else’s liability-a loan is a promise to pay. The trouble for Fannie and Freddie is that combined, they own or have guaranteed over US$5.3 trillion in debt and securitised mortgages. Their capital, on the other hand, is slender by comparison, with Fannie having US$38.8 billion in capital and Freddie US$16.3 billion. [...]

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