[EyeGuy]

“If they go belly up, police and teacher retirements are gone, college trusts are gone, more big financial institutions would be crushed...”

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I have ALREADY lost ~90% of the value of my FNMA holdings due to the racist, and fiscally berserk machinations of the Democrat Party and one felonious Franklin Raines.

I’m not sure what investment difference it would make to those institituions and pensions if the value goes to zero. We are almost there now.

[chuckles]

If Fanny goes to zero, then there is more involved than just your investments. America itself would pretty much collapse having to bail out $trillions more in home loans. I haven't looked up the exact number, but it's more money than is in all the Earth. $65 trillion comes to mind, but that could be wrong. The point is, with the $19 trillion we already have staring us in the face by 2015, I don't think the Chinese or Japanese would loan us anymore money.

Game over.

BTW, AIG is a similar situation. Most of the muni bonds and other bonds in the US are insured with AIG and if AIG goes belly up, you can't have these bonds floating around with no insurance. Sorta like when you cancel the insurance on your house with a bank loan still pending. They call the loan.

I was just commenting on Fannie and Freddy, but if you look at the debt clock.org, we already are on the hook for more money than is available on the Earth. It just hasn't come due yet. Our obligations are somewhere in the $100 trillion neighborhood. If Fanny and Freddie goes, we would have to refinance most of the real estate loans in the US. Heaven forbid if more people quit paying for their homes. You have to ask yourself what are the odds of people continuing to pay for a $300k home that appraises for $225k? I wouldn't.