[Fannie and Freddie are on the verge of bankruptcy and taken over by the US government.]
This news stole the headlines of the closing ceremony of the Olympic Games because this news represented the direction of the US economy.
The US economy has a decisive impact on the global economy. From the end of last year to the beginning of this year, too many companies went bankrupt in the US.
But with the help of the US government, many countries in Europe, Asia, and so on, came up with money to help, and it seemed that the crisis had been suppressed.
As long as they managed it patiently, it would recover in two years.
But once a giant like the two Fannie and Freddie have a problem, it would not be easy to solve. Five trillion US dollars of bonds could not be converted completely, but the debts of the two Fannie and Freddie must be solved.
More than 600 billion US dollars of debt, the interest every year, no, every day was not a small amount. If the debts could not be solved, the two Fannie and Freddie would not be able to recover.
That was why it was a mistake for the US to hand over the two Fannie and Freddie's problems to the Bank of America. The Bank of America could not come up with so much money. Even if it was in batches, it would need to come up with 400 to 500 billion US dollars in three to four years.
It was not a problem for a company to have a certain proportion of debt. Many companies had a debt ratio of more than 50%, and they were still doing well. But when the debt was several times the market value of the company, it was a big problem.
But with the current ability of the Bank of America, it would be difficult to come up with 400 to 50 billion US dollars, let alone 400 to 500 billion US dollars. That was why the Bank of America no longer wanted to swallow the two Fannie and Freddie's high-quality assets.
Let the two Fannie and Freddie run their own course? That would not work.
The US government had to step in and take over this mess.
Bush was very depressed. He thought he could drag it until next year and let the successor worry about it. It could even be said that the successor was not capable enough, which led to the bankruptcy of the two Fannie and Freddie. If it was him, he would not have gone bankrupt.
But the US financial institutions also had no money and could not fill this hole. If they wanted to fill the hole, there was another way, which was to issue shares to raise funds or get other investments.
But at this time, the US stock market was slowly falling. How much money could they raise by issuing shares? It would also dilute the shareholders' equity. Of course, the shareholders were not willing to do this. Moreover, the purpose of issuing shares was to make more money, and this was to clean up other people's mess.
There were consortiums willing to invest for them, but they also had to pay shares. How could those shareholders let their power fall?
There were also US companies that had the ability to save the Two Fannie and Freddie Group, such as Rockefeller and Walton Group. Even if they suffered losses during this period, they would not be hurt, and they still had the ability to raise funds.
But why should they pay for this mistake? The bankruptcy of Fannie and Freddie Group would not affect them much, and they could even use this opportunity to make a sum of money.
The bankruptcy of the two did not have much of the impact on them. They did not rely on investments to make money. Taking advantage of the falling prices, they could take advantage of it.
Also, if the economic situation worsens, there will definitely be a lot of unemployment in the United States, and the wages of the employees will be lowered, which is also beneficial to them.
The two Fannie and Freddie groups became unloved enterprises. More than a year ago, they were still glorious. No one expected the world to change so fast, and now they were on the verge of bankruptcy.
According to Feng Yu's analysis, the two Fannie and Freddie Mac should have applied for bankruptcy protection long ago. Because when they applied for bankruptcy protection, some debts could not be repaid, and some interest would not continue to increase. They had enough time to restructure their assets.
Many companies would be interested in restructuring during the bankruptcy protection period to get rid of the risk of bankruptcy.
The two Fannie and Freddie Mac issued so many bonds, which was enough to prove that they still had a lot of quality assets.
Unfortunately, many shareholders chose to hide the real situation of the company and borrowed a lot of debt to tide over the crisis. In the end, they did not tide over the crisis and fell into a deeper hole.
Now, no one wanted the two Fannie and Freddie Mac. Insolvent, whoever took over the company would suffer losses.
The default rate of US housing loans was still rising, and the two Fannie and Freddie Mac's hole would become deeper.
The US government could not get rid of them and could only take over themselves. The two Fannie and Freddie Mac could not go bankrupt. Otherwise, the US economy would be finished, and the financial market would definitely collapse. There were too many financial companies related to the two Fannie and Freddie Mac, and it would cause a chain reaction.
But the government taking over was also very controversial. Because many people said that the US taxpayers' money should not be used to fill the hole in the business. The shareholders should be asked to take out more money to bail out the company.
There were so many foreign investors holding the two Fannie and Freddie Mac's shares, and many of them were national investment institutions. Ask them to take out the money. They still hold so many bonds of the two Fannie and Freddie Mac. Do they want to see the bonds become waste paper?
Although debt is higher than equity, if the company goes bankrupt, what can you get back from the bonds?
Aren't the European Union and Japan very rich? Ask them to take out the money.
What worried these people the most was that once the two Fannie and Freddie Mac went bankrupt, will the government that took over at this time have to bear the debt repayment?
Other countries that invested in the bonds and shares of the two Fannie and Freddie Mac were relieved when they heard this news. The US government finally took over the two Fannie and Freddie Mac. This time, it should not be so dangerous, right?
The S&P credit rating of the two Fannie and Freddie Mac had fallen from the best AAA credit rating to the current CCC + credit rating. That is to say, S&P believes that the two Fannie and Freddie Mac are likely to default. Without good commercial, financial, or economic conditions, the default rate would be very high.
It was also because of these reasons that it was difficult to pull up the two Fannie and Freddie Mac's shares.
S&P said that the credit ratings of these two companies were so low that they did not have enough repayment ability. What was the point of investing in them?
But after the US government took over, it was different. The US government had a AAA credit rating and had a strong repayment ability. It was basically impossible for them to default.
Many people even said that the bonds issued by the two Fannie and Freddie Mac might be equivalent to the US Treasury bonds again, and the yield would be higher than the Treasury bonds.
At this time, the value of the two Fannie and Freddie Mac's bonds began to rise, and the two Fannie and Freddie Mac's shares also began to rise. It seemed that the two Fannie and Freddie Mac were going to be revived.
But was this the case? Feng Yu wanted to expose this illusion!
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