Minyanville - NEWS & VIEWS-The Credit Crisis Revisited, Part 2: "More Thoughts on Fannie and Freddie
First, let me correct an error: It wasn't JPMorgan (JPM) that Treasury Secretary Hank Paulson asked to come up with a plan to fix Fannie (FNM) and Freddie (FRE). It was Morgan Stanley (MS). Sorry.
Warren Buffett has stated that Freddie and Fannie are toast, as have many establishment analysts. Buffett told CNBC that the firms had no net worth and would need tens of billions in capital to shore up their balance sheets. Since their combined capitalization is less than $6 billion, it is unlikely that there is any way they could get even a sovereign wealth fund to come to their aid in the form of stock...."
Norton's comments: Much of their stock is held by foreign central banks and sovereign funds that will not look kindling if their values go to zero. This will force a taxpayer takeover to avoid a seismic financial collapse. Watch for the signs. No clear solution now.
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