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Archive for September 7th, 2008

More GSE

Posted in Finance, Housing Crisis, Meltdown on September 7, 2008 | Leave a Comment »

Another point of view on the GSE bailout from a guy who writes often on economic issues (energy banker Jerome Guillet):
http://www.dailykos.com/storyonly/2008/9/7/112435/2773/960/589911

Incidentally, have been thinking a bit about the peak oil question – I suppose it’s the confluence of finally reading The Prize and looking back on a bunch of Krugman articles:
http://krugman.blogs.nytimes.com/2008/07/19/oil-outlook/
http://www.dailykos.com/story/2008/9/3/17171/23247/34/567446
http://www.theoildrum.com/files/Peak_Oil_June_08B.pdf

I’ll throw in a personal finance question – I have never had a good idea for investing in energy, perhaps because of my general aversion to buying stock in companies over about $10-$15bn in enterprise value and strong aversion to buying wildcatting operations.  What is a good place to invest if you think oil will rise?  Just try to buy West Texas Intermediate options?  Is there a particularly attractive business sector that does not rely on the health of the American economy (bit nervous about refiners/pipelines if demand drops but global crude prices rise)?

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Ouch

Posted in Finance, Housing Crisis on September 7, 2008 | Leave a Comment »

So the slow-moving train wreck of Fannie/Freddie hit something…
http://treasury.gov/news/index1.html

I like this more than the BSC intervention, which was a disgrace, but I still am not quite sure why we would nationalize a debt portfolio equal in size to our own sovereign debt.  A statement that they were on their own would have done far more to prove that private actions have private consequences.

Recognizing that this was probably unrealistic, though, I still don’t see why the Treasury would intervene in the mortgage-backed securities market to buy MBS paper from Fannie/Freddie.  Isn’t a major component of the problem that people don’t want Fannie/Freddie paper?  Why should we – the taxpayers – want it any more than all the other potential buyers who are staying away?  More to the point, one of the key action items here is shrinking Fannie/Freddie; we don’t want them to pose this threat to our financial system in the future.  So why not begin running them off today?

There is a curious belief in the US – across party lines – that homeownership is a virtue in and of itself.  You know, the whole story about how people don’t wash rental cars (a common argument that misses the fact people often wash leased cars – maintenance seems to have a lot more to do with length of use than capital structure).  It is why we offer the mortgage interest deduction and pour billions into the GSEs.  No one ever seems to wonder why, say Australia and Germany (no mortgage interest deduction and dramatically lower owner occupancy rate, respectively) do not have greater social unrest or a more dilapidated housing stock.

Shooting management was a cute touch, though…

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