The stunning manner in which Basel III will force banks to make "investments" in government and elite favored organizations is like nothing ever seen before. Indeed, incredibly, ranked as top tier investments that banks will be forced into buying will be sovereign debt that is on the edge of collapse and the edgy paper of Fannie Mae and Freddie Mac!
CNBC's John Carney has the stunning news:
A little noticed change in the proposed rules...could throw a monkey wrench into plans to reform Fannie and Freddie, the two mortgage giants that have spent the last two years on government life-support. So far, U.S. taxpayers have been forced to pony up around $150 billion for Fannie and Freddie, and the Congressional Budget Office says that the total cost could amount to three times that much...
Policy makers who hoped to eventually remove the costly government subsidies and guarantees for Fannie and Freddie will run into a stumbling block, however, if the Basel III rules are implemented. That’s because Basel III includes a liquidity requirement for banks that will encourage them to buy the debt of the Fannie and Freddie as well as the mortgage-backed securities they back...
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