In HW’s initial coverage of the Fannie/Freddie bailout, we wrote that the move essentially made the Treasury into the world’s largest hedge fund:
The Treasury said it will appoint two independent asset managers as financial agents of the U.S. government to manage the a government portfolio of MBS with the goal of “promoting stabiliity and protecting taxpayers.” Which means that the U.S. government could become akin to the single largest hedge fund on the planet. Amazing to think, for anyone that has been in the mortgage market.
Interestingly, on Wednesday, none other than bearish economist Nouriel Roubini pulled out the same analogy, per the Seattle Post-Intelligencer:
Economist Nouriel Roubini — who has been spot on with his predictions so far — called the Fannie Mae/Freddie Mac takeover “the greatest nationalization in the history of humanity.” The action increased the government’s public assets by almost $6 trillion and has increased its public debt and liabilities by another $6 trillion. The capital costs could top $200 billion. He says the government essentially has created the world’s largest hedge fund with a “debt to equity ratio of 30 ($6,000 billion of debt against $200 billion of equity).”
Perhaps Roubini is reading HW? (Either that, or the hedge fund analogy is just too obvious.) Interesting, nonetheless.
