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He's fueling the fire today former Saint Louis fed bank president William -- telling Bloomberg that quote.
Congress ought to recognize these firms are -- -- all -- And it is allowing these firms to continue to exist as a bastion of privilege financed by the taxpayer bottom line are you going to be bailing out your neighbor.
-- Washington bureau chief Jim McKay says that -- a terrible idea but it's probably inevitable.
At Fannie and Freddie might have to leave the public markets -- joining us now from Washington Jim.
With some things are going from bad to worse for Fannie and Freddie they got to stop somewhere where is that.
Yeah you know it it looks like it.
If this bad news continues and they continue to get hammered in the -- it's going to be a self fulfilling prophecy.
And they will need a federal bailout which would make us like Mexico.
Because essentially we would be nationalized and a gigantic part of our financial system I hope it doesn't apple is going to bail them out Jim.
You and me and the other taxpayers.
I think the Fed could help here though.
You know our Chicago bureau chief John Laing wrote to brilliant piece is about signing day and one and 2004.
And want one last year.
He pointed out that the two point six billion dollars in losses at Fannie in 2007.
In large sport when I was due to a write down of derivative choose to hedge interest rates.
And that if interest rates rise the value of the -- -- derivatives will increase.
So the Fed could give them some breathing room here.
They -- they still maintain those derivatives on their books we don't know what their positions are do we.
Now I'm assuming that they they have to have them on their books you know part of the issue is if we talk about a bailout -- to talk more about this a bit later on is.
The government has said as as as late as 2003.
That Fannie and Freddie are not backed by the full faith and credit of the US government John Snow said that senate testimony.
Who could bail amount -- -- the government has said listen your public company I mean we give you certain tax advantages but you're not.
-- -- -- and and the idea here policy makers today saying well.
They are and they aren't our baby and you saw the editorial in the Wall Street Journal as indicated that some kind of a taxpayer bailout.
Is essential which I think I disagree.
I don't know what to do here and maybe we should be offering an X prize for the financial genius or configure -- way out of this mess.
You know Sallie Mae was privatized but it was in -- different environment where when it was easier to sell debt.
And a lot smaller to Jim Sally was yeah a lot slower than Fannie and Freddie.
You're right there was there was much smaller.
As a candidate and it isn't and Al jumping isn't that the problem and when you look at the size in the six trillion roughly.
In mortgage portfolios these companies hole right.
There's no Wall Street bankers know consortium of banks.
That could ever absorb that size debt she got two choices that government or not.
Or some other government -- one other sovereign wealth funds.
I don't think we want.
The Arabs on camera housing market however -- so that's really not politically feasible.
He and you know what struck me out of your town today is that I was -- -- -- Paulson and Bernanke have taken my gosh.
The sounds a lot like 03 when -- hearings if Fannie and Freddie were too big.
And they need to be regulated further and real these bad boys then now of course last year the government makes them bigger how quickly -- -- -- -- Well you know Fannie and Freddie have been -- cures of both parties fanning is a democratic senate cure.
Freddie Mac has been the -- Republicans have a cure and -- look at the people who have been running.
-- and that he had frank -- from the Clinton administration Jim Johnson who was democratic operative.
-- -- a lot of people in the Clinton administration became millionaires doing do nothing and jobs at Fannie Mac.
So here's what other problem with a government -- I mean.
Do we want the government running an institution that they've already run into the ground so it's a real conundrum.
-- -- -- -- -- again the story is a long way from being over -- take -- baron's -- we appreciate your insight thanks very -- Thank you.
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