Will Moody's upgrade Fannie and Freddie

After all if Moody's wants us to borrow and cover these two corporations, then they must have increased in value. What is the book seller saying:

The loan portfolios of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac (both have senior debt we rate AAA/Negative) continued to perform weakly in the first quarter of 2011 because of ongoing residential mortgage losses, primarily for loans made during 2005-2008. The GSEs' operating performance is likely to worsen before it improves, Standard & Poor's Ratings Services believes. In fact, we expect Fannie and Freddie to keep requiring funds to pay the rising dividend they owe to the U.S. Treasury under its Senior Preferred Stock Purchase Agreement the government used to bail out the two. Despite a modest, gradual decline in total mortgage delinquencies, the GSEs continue to recognize losses from the seriously delinquent (three or more months in arrears; SDQ) segments of their portfolios and from ongoing foreclosures. Moreover, weak GDP growth in April and May plus stubbornly high unemployment could create another round of challenges for the U.S. housing and mortgage market.

In November 2010, we estimated the total taxpayer cost to keep the GSEs solvent at about $280 billion, including $207 billion of credit losses embedded in the combined portfolios of Fannie and Freddie, as of June 30, 2010 (see "U.S. Government Cost To Resolve And Relaunch Fannie Mae And Freddie Mac Could Approach $700 Billion," published Nov. 4, 2010). Our projection for the ultimate cost to resolve Fannie Mae and Freddie Mac hasn't changed. But we've updated our loss assumptions to reflect the housing market's performance since then plus GSE-specific data through March 31, 2011. Based on recent data, we now believe there to be $190 billion of lifetime losses remaining in Fannie and Freddie's combined single-family portfolios. When we add the $22.3 billion in combined credit losses Fannie and Freddie have taken since our last estimate on June 30, 2010 data, to our updated estimate, our total credit loss expectation tracks very closely with ourS&P

This seems like a dispute. S&P dumps all over F and F; but Mark Zandi thinks they are a great investment for the middle class.

Confused? Well what is really going on is that Moodys wants the Senate to take another chunk of ass from the middle class. Its all about bailing out the Senate. The Senate channel requires a minimum amount of imprecision, extra gain, to cover its production costs. That gain is gone and the Senate is Kerplunk.