John Hussman's weekly "sermons" are always enlightening, but this week's edition contains excerpts of FED chairman Bernanke's recent testimony before the House of Representatives as part of his mandated Humphrey-Hawkins testimony. http://www.hussmanfunds.com/wmc/wmc100726.htm Skip down the page to the headline "Well, then the Fed would lose money there".
The next part is an exchange by chairman Bernanke with Rep. Scott Garrett of New Jersey, a most rare bird: an intelligent congressman who understands totally what he is talking about. It's crucial that we understand what was said in this very revealing exchange, and how two Secretaries of Treasury and one Federal Reserve chairman have most likely put taxpayers on the line for paying 100% of the face value of all the FNMA and FNMC mortgages that the FED bought to bail out foreign and domestic banks who held them. This is roughly a trillion dollars and still rising. Many if not most of the mortgage securities the FED bought and "paid for" will never be paid back nor be marketable.
This is why the future looks grim for the government and the country. The point of decision will be in 2012 which is when the Congressional extension of coverage to Fannie Mae and Freddie Mac expires, leaving the FED bankrupt. Or if they extend it, the Treasury and taxpayers will be bankrupt. Read it and weep.
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