169,401 New Listings - March 2010 - Last update March 15, 2010 6:15 AM ESTBillionaire Opines That Fannie Mae And Freddie Mac Is Not The Last Of Bad News
George Soros is a billionaire investor. He opines that the Fannie Mae and Freddie Mac is not the last of the bad news in the reigning foreclosure crisis. A larger credit slump will have grave impact on the already sluggish American economy.
The Treasury raised the credit lines of both Fannie and Freddie beyond the present levels of $2.25 billion for each. The department also agreed to buy shares to boost up their finances. Federal Reserve also permitted the duo to borrow at rates it charges from banks as regards direct loans.
The aggressive stand taken by the government highlights the gravity of the foreclosure related problems mauling the market that has all the ingredients ready to spin the country into recession.
Soros categorically stated, “This incident is not the last one” over a phone interview. He added that the global financial crisis is something unprecedented in his lifetime. He explained that Freddie and Fannie are facing a solvency crisis and not a crisis of liquidity. There is no trouble as regards their ability to borrow. Moreover “Freddie is there to provide the liquidity” he added. Soros did not hesitate to blame the foreclosure crisis for their losses in equity.
In trading, the shares of Fannie and Freddie increased by 30% when the opening bell rang on Monday. But they could not hold on to it. At the close of the session Fannie shares went down by 5.07% to halt at $9.73 while Freddie lost 8.26% to halt at $7.11. The stock exchanges of US also showed losses. It is clear that reo properties are having the last say.
Analyzing the position of the dollar in the middle of this foreclosure turmoil, Soros said that the “dollar is vulnerable” because there are clear indications that the country is slipping into recession stemming from huge “accumulation of debt.” Various ratio readings all point to the fact that “the credit worthiness of the country’s assurances are deteriorating.” The growth of USA economy is being progressively gnawed into by the foreclosure related credit crisis. The financial markets alone cannot be blamed. It is impossible to think that this sort of a foreclosure crisis can continue without infecting the general economy. Soros has no doubts that Ben Bernanke, the chairperson of the Federal Reserve “is in a bind”. He has few tools left at hand to tackle further foreclosure attacks.
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