"As for the enemies of freedom, those who are potential adversaries, they will be reminded that peace is the highest aspiration of the American people. We will negotiate for it, sacrifice for it; we will not surrender for it, now or ever." - Reagan, January 20, 1981

"In Vietnam, we tried and failed in a just cause. No More Vietnams can mean we will not try again. It should mean we will not fail again." - from No More Vietnams by Richard Nixon

Saturday, July 12, 2008

7/12/08 - Top Story - IndyMac Folds, Fannie Mae and Freddie Mac in trouble, and Oil in Alaska





http://www.abcnews.go.com/GMA/story?id=5362068&page=1

In IndyMac's Wake, Are Fannie Mae and Freddie Mac Safe?
After IndyMac Goes Bust, Concern Centers Around Mortgage Giants
By BETSY STARK, TRACEY MARX and EMILY YACUS
July 12, 2008 —


Fannie Mae and Freddie Mac are private companies with deep ties to the government.

Fannie Mae was created during the Depression as part of the New Deal as a way to revive a collapsed housing market by providing mortgage guarantees to low- and middle-income Americans.

Today they own or guarantee a mind-boggling $5 trillion in loans  far more than any other lender, which is why the fear that they could go under has been so nerve rattling.

"If they were to go out of business, most of middle America would not be able to get a mortgage," said Howard Shapiro, an analyst for global adviser Fox-Pitt, Kelton.

Even if you haven't heard of Fannie Mae and Freddie Mac, there's a good chance, if you're a homeowner, they own your loan. Here's how it works: After a bank gives you a mortgage, it often packages it with other mortgages and sells it, most often to Fannie Mae or Freddie Mac.

If Fannie and Freddie were to fail, analysts say mortgage rates would soar, mortgage lending would grind to a halt and borrowers of all kinds would pay higher rates  sinking the economy into an even deeper downturn.

That's why most analysts believe the government would never let it happen.

"Both Fannie Mae and Freddie Mac play such a vital role in the mortgage market," said Greg McBride, a senior financial analyst for Bankrate.com. "They are essentially too big to fail."

Government officials tried to shore up confidence in Fannie and Freddie. Sen. Chris Dodd, D-Conn., says there is no crisis and no bailout is necessary. "These institutions are in sound shape," he said. "The economics are fine in these institutions, and people need to know that."

But news late Friday saw another big mortgage lender, IndyMac, shut down by regulators. IndyMac's assets as of March 31 totaled $32.01 billion and its deposits totalled $19.06 billion. This news is likely to feed the psychology of fear that has been gripping the market.

Per a July 11 press statement from the Federal Deposit Insurance Corp., IndyMac "had about $1 billion of potentially uninsured deposits held by approximately 10,000 depositors." The FDIC has taken over the bank, which it described as the "fifth FDIC-insured failure of the year."

Fox-Pitt, Kelton analyst Shapiro said, "We've been in kind of a psychological mode in the markets for the past year, where the worst news is the news everybody believes."


Copyright © 2008 ABC News Internet Ventures



http://www.bloomberg.com/apps/news?pid=20601103&sid=aHzSn8poUPB4&refer=us

Bush Says Gas Prices Causing Rethinking on Drilling (Update1)

By Holly Rosenkrantz

July 12 (Bloomberg) -- President George W. Bush said some opponents of expanded domestic oil drilling and exploration are rethinking their positions amid the rise in gasoline prices.

``If this change of heart is real,'' Bush said in his weekly radio address, lawmakers can ``expand American oil and gas production and eventually relieve the pressure of rising prices.''

Bush is pressing Congress to open more domestic land to oil drilling in an effort to reduce energy prices. He has proposed drilling in the Outer Continental Shelf and developing energy sources in Alaska's Arctic National Wildlife Refuge as a response to record prices.

Many Democrats have resisted calls for new drilling on the grounds it may damage the environment, and they have called on Bush to release oil from the U.S. Strategic Petroleum Reserve to ease pressure on prices, a proposal Bush has rejected.

The stockpile, with more than 700 million gallons of oil, ``has never been more full than it is now,'' Representative Chris Van Hollen of Maryland said in today's Democratic radio address. Releasing some of it would give drivers ``quick and real relief'' from gasoline prices that have nearly tripled during Bush's presidency, he said.

The U.S. also needs a long-term energy policy to curb its dependence on foreign oil, boost the economy and reduce global warming, Van Hollen said.

The price of crude oil has doubled in the past year, with oil for August delivery settling at $145.08 a barrel yesterday on the New York Mercantile Exchange. The average price of a gallon of regular gasoline now tops $4 per gallon, according to AAA, compared with less than $3 in early February.

McCain's Stand

Bush, in his radio address, didn't name lawmakers who have changed their positions on the issue. Some Republicans, including presumptive presidential nominee Senator John McCain and Senator Mel Martinez of Florida, have expressed stronger support for domestic drilling than they have in the past.

House Democrats will push legislation next week that would ban the export of Alaska oil to overseas markets. The legislative package would also require oil companies to drill on leases they have before asking the federal government for more leases.

Bush blamed a lack of action on the issue on the Democratic Party.

``Past efforts to meet the demand for oil by expanding domestic resources have repeatedly been rejected by Democrats in Congress,'' he said.

No comments: