Hedgie Tepper on pace to make $2.5 billion this year (WSJ) The moral hazard trade has a new face. Tepper bet big that government would rescue bank shareholders and creditors. He was right. Can we blame him? He didn't make the rules; he just played the game better than the rest once they were made.
from Rolfe Winkler:
Fed repeats "exceptionally low" for "an extended period" (Fed statement) The Fed maintains that it isn't raising rates for the foreseeable future, but repeated that it plans to end MBS asset purchases by April next year. Too bad we can't get a surprise rate hike in order to chase risk back out of credit markets...
The Federal Housing Administration – the U.S. agency that actually enjoys full faith and credit of the government – is in quite a pickle. Reuters reporting that its capital reserves stand at a scant 0.53 percent, below the 2 percent regulatory minimum and without spitting distance of the “help me” threshold.
I know that the government already leaked the plan, but seeing it actually launched I can’t help but feel a little despair that the Obama Administration continues to use Fannie and Freddie to implement new housing policy. I wrote a column when the idea was first floated to help state and local housing agencies access financing.
It’s hard to keep all the U.S. housing agencies straight. Fannie Mae and Freddie Mac are still basket cases relying on government support, while the Federal Housing Administration and its partner, Ginnie Mae, are setting off alarm bells with their more aggressive efforts to support overstretched homeowners.
When the medication is flowing, it’s hard to see straight.
Amid the giddiness in the markets and the cheers for the end of the recession, what often gets ignored is the fact that government stimulus is still fueling the reflation of financial markets.
A year after the government’s seizure of Fannie Mae, Freddie Mac and AIG , not to mention the bankruptcy of Lehman Brothers that sent the global financial system into a tailspin, very little has changed to prevent debt from being sliced and diced, again and again.