Paulson: let Fannie/Freddie buy Jumbos...

[sniglet]

Hmmm.... So allowing the GSEs (i.e. Fannie Mae and Freddie Mac) to buy Jumbo loans is the NEXT bail-out idea to come from the Treasury department. I wonder if this strategy will follow the same path as the Super SIV bail-out plan.

Just as the SIV bail-out became irrelevant as the value of the assets needed to be bailed out declined maybe there will be no need for a Jumbo bail-out? By the time congress gets around to upping the GSE conforming loan limits maybe California median prices will have fallen below $200,000 anyway.



Of course, even if the GSEs are allowed to buy Jumbo loans, where are they going to get the capital to do so? They are struggling right now just trying to keep their capital ratios in order with the declining value of their existing assets. Maybe the next bail-out proposal will involve a trillion dollar public re-capitalization of the GSEs?

[SunTzu]