Michael Size 🇪🇺

European nations should develop a joint tactical nuclear deterrent to counter Russia’s expanding arsenal, Airbus board chair René Obermann said today, breaking one of Europe’s biggest defense taboos. politico.eu/article/airbus…

The Fannie & Freddie Boondoggle: The Biggest Wealth Transfer From Taxpayers to Hedge Funds in U.S. History @BillAckman is pushing a plan to restructure Fannie Mae and Freddie Mac and “release” them from conservatorship. He claims it will modernize the housing finance system and create a huge win for taxpayers. That is simply not true. It is a carefully engineered boondoggle that would hand Ackman and other hedge fund investors a massive windfall while leaving taxpayers with zero upside and exposing the U.S. housing market to even greater danger than before the 2008 financial crisis. The government cannot IPO Fannie or Freddie. To do that it would have to publicly disclose whether their debt is guaranteed or not. If it admits the debt is not guaranteed, mortgage rates would rise and home prices would fall, something Trump will not allow. If it explicitly guarantees the debt, Congress must approve it, and that will never happen. Ackman’s plan avoids this entire political problem by keeping the GSEs in conservatorship so the government never has to admit the truth. Nothing real is reformed. The guarantee remains. The public is kept in the dark. And private investors are given a path to cash out. The plan is not privatization. It is fake privatization. Before 2008 the guarantee behind Fannie and Freddie was implicit. After the bailout it became explicit in practice. Ackman wants the GSEs to remain government backed while distributing dividends to private shareholders. That is the most extreme form of moral hazard: private profits paired with fully socialized losses. Underwriting standards will weaken. Risk will rise. The mortgage bubble will grow even larger. And because the guarantee is now unmistakably real, the next collapse will be even more devastating. The truth is the best long-term solution for both the housing market and the broader economy is to shut the GSEs down entirely and get the government out of mortgage finance. That would bring real market discipline back into housing and end this cycle of moral hazard once and for all. But that solution is politically untenable because it would create short-term pain. Home prices would fall, affordability would improve, and the correction would trigger losses for lenders and homeowners who depend on inflated valuations. Given that political reality, the status quo is far superior to what Ackman is proposing. It is the lesser of the two evils. His plan does not reform the system. It simply inflates a bigger bubble, increases the risks, and hands hedge funds a windfall at taxpayer expense. But it gets even worse. Ackman wants to slash the capital requirement for the GSEs from the current 4.5% of their guarantee book to just 2.5%. This is one of the most dangerous parts of the entire proposal. The 4.5% standard is already low compared to what a normal financial institution would need to survive a downturn. Cutting it nearly in half virtually guarantees that even a mild decline in home prices will wipe out the GSEs’ capital cushion. Lower capital means higher return on equity, which drives the share price higher and enriches Ackman and other investors. But it leaves the housing market far more fragile than before the 2008 crash. It forces the GSEs to take on more risk to generate enough earnings to justify their valuations. And because the guarantee is explicit, there is no market discipline left. The GSEs take the risks and taxpayers take the losses. Right now taxpayers benefit from every dollar of profit the GSEs earn because all profits are retained and invested in Treasuries. Ackman’s plan changes that. The first phase does not alter anything because dividends to common shareholders cannot be paid until the GSEs rebuild capital. During this phase taxpayers still indirectly benefit from retained earnings just as they do today. The second phase is where taxpayers start losing money. Ackman owns junior preferred stock and its entire value depends on dividends resuming. Once the Senior Preferred is forgiven, the junior preferred dividends begin flowing again. That money is currently retained and invested in Treasuries, but under Ackman’s plan it goes straight to private investors. This is the first real wealth transfer from taxpayers to hedge funds. The third phase is the most dangerous. Once the GSEs are deemed fully capitalized, common dividends will resume. Treasury will technically own nearly 80% of the common stock after exercising its warrants, but it will not receive dividends on that stake. If it did, it would reignite the political firestorm that surrounded the Net Worth Sweep and hand Trump’s critics an easy attack. Treasury will therefore likely hold its 80% only on paper. That means private shareholders, who own only 20% of the company, will effectively receive 100% of the real cash profits. The government’s stake becomes economically meaningless. It produces no dividends, no cash, and no realized benefit of any kind. It exists solely for political optics so Trump can claim he created a multibillion dollar paper gain that cannot and will not ever be realized. In effect the GSEs return to the same economic structure that existed before conservatorship, except now it is worse. Private investors once again receive all the profits. Taxpayers once again bear all the losses. But the moral hazard is far greater because the guarantee is explicit and undeniable rather than implicit and theoretical. The GSEs will be encouraged to take even more risk because their earnings must support dividend payments rather than building real capital. That accelerates the expansion of the housing bubble and ensures that when the downturn arrives, the capital cushion will be thin, the losses will be enormous, and the government will be forced to step in again. When that happens the government’s 80% stake will collapse to zero along with the private shares. All of the paper profits Trump once bragged about will be wiped out. The dividends paid to private shareholders will be gone. The junior preferreds that were revived will be worthless again. And taxpayers will absorb 100% of the losses. The only people who will have walked away with real money are the hedge funds who got in cheap and cashed out during the brief window when the stock price was artificially inflated by the cancellation of the Senior Preferred. Ackman claims this plan is the first step toward true privatization. That is nonsense. If the GSEs are not ready to be privatized now after sixteen years of conservatorship they never will be. Ackman knows this. He will be long gone by the time investors discover that the guarantee will never be removed and that real privatization is politically impossible. His goal is simple: get the Senior Preferred wiped out, get dividends restarted on the shares he owns, push the common stock price higher, and sell his shares before the next crisis hits. The burden of the collapse will fall entirely on taxpayers. This is not reform. It is not modernization. It is not a win for taxpayers. It is a massive wealth transfer disguised as policy. It ensures private investors receive one hundred percent of the profits while taxpayers remain exposed to 100% of the losses. The next bailout will be larger than the last because the moral hazard will be greater, the bubble will be bigger, and the government guarantee will be absolute. This plan creates the most dangerous and irresponsible structure imaginable. It benefits hedge funds and politicians, and it leaves American taxpayers holding the bag. I’ll be hosting an X Space on Monday, February 24th at 9:00 AM ET, to explain how this plan works, why it puts taxpayers at extreme risk, and how hedge funds stand to gain billions at the public’s expense. I will answer questions, and expose the full truth behind this so-called recap and release. Anyone concerned about the housing market and the future of American finance should be there.

💬 Which two countries have achieved the greatest economic success in the world? First, China, and second, Poland. You all travel, you all have friends and family abroad - you all see how perceptions of Poland have changed, and changed for the better. | Deputy PM, FM @sikorskiradek during a meeting at @RODM_8

@John_A_Ridge Never ask a man his salary Never ask a woman her age Never ask a Tech Bro to demonstrate his military "innovation" against a resisting opponent.