Posted by Karl Denninger
March 5 (Bloomberg) — Fannie Mae and Freddie Mac bondholders shouldn’t assume the government will make them whole on their investments as Congress retools the companies, House Financial Services Committee Chairman Barney Frank said.
Heh, who’s the biggest individual bondholder?
Mr. Bernanke, the bond market is on line #1!
A “whole range” of options is being considered for investors in the two government-seized companies, “from paying nothing to a haircut to whatever,” said Frank, whose committee oversees Fannie Mae and Freddie Mac.
Nothing? You mean zero, zilch, bupkis?
That would be rich. After Bernanke stepped in and bought some $200 billion of their debt, to have it “marked to zero” would be the ultimate slap in The Fed’s face for buying that which I have argued is impermissible under the law.
What an elegant solution to a difficult problem – “oops – tear ’em up jackass – you should have known better than to buy something that you weren’t allowed to and was patently worthless!”
The irony of that outcome would be delicious. Yes, I know I’m dreaming here – or am I?
“Please don’t think this is federally guaranteed, I don’t think it is, I don’t think it should be, I don’t feel any obligation to bail you out,” Frank said. Congress will “certainly not” extend any new protections to bond and mortgage-security investors beyond what exists, Frank said.
Oh. You mean that the face of those prospectuses mean what they say? You mean this is real?
Uh, the market is kinda ignoring that right now, isn’t it?
Yes, I think it is.
How about this for a clear statement?
“We’re not remaking Fannie and Freddie,” Frank said. “We’re going to start from scratch and do housing finance.”
Go ahead folks, keep buying. This is spelled “opportunity”, thank you very much. Now please excuse me while I go put a few chips on “red.”
PS: Why are these stocks still listed again?