March 5, 2010
Analyst: Fannie and Freddie will force banks to eat $21 billion of soured loans this year (Keoun).Very interesting thread to follow. Remember, Fan and Fred guarantee loans meeting their underwriting standards that are originated by banks. Bad underwriting often means these loans are pushed back to the originating bank.
Why care? Because banks have literally trillions of off balance sheet exposure to Fan and Fred loans. Wells Fargo alone has over $1 trillion (see page 52 of its 10-k). Of course the vast majority aren’t going to be put back to them, but only a fraction need be to cause material losses. There are whispers of vulture funds in the market looking for loans they can push back to banks.
Meanwhile, the new accounting standard that forced banks to bring off B/S items back on balance sheet — FAS 166 and 167 — allows them to avoid all recognition of their Fan/Fred loan exposure.

Betting on the blind side (Lewis, Vanity Fair) Excerpts from Michael Lewis new book, of which I have a manuscript and am enjoying very much. Also looking forward to Roger Lowenstein’s new book.

Fannie was declared insolvent in 1981 (Scion Cap, ht Nick Gogerty) Nick forwards a link that, ironically, comes from the same guy profiled in the Vanity Fair article above.

PDF–An extended interview with Jim Rickards (Welling) The Welling@Weeden series is fantastic. Readers who liked Jim Rickards’ two columns in this space will like this a lot.

HBO picks up rights to Sorkin’s “Too Big to Fail” (Fleming, Deadline) Can’t wait. Hopefully they don’t take as charitable a view as Sorkin of all the characters involved in the drama.

For psychic, suit came as a surprise (de la Merced, NYT) This guy’s website is a hoot. I recall, during my interlude as musical theater actor here in NYC, a guy who was doing seminars like this trying to sell people on the idea that covered calls could make them rich. Total scam artist, but the people he targeted — actors — were vulnerable, uninformed and poor.

Busted (Hayes, CBS)

Graphic–Consumer Credit rises for first time in a year (Culp, Reuters) The statistical release from the Fed is here. This doesn’t include mortgage debt. Are consumers re-levering?

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