HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
Wall Street Journal 3/6-7/10. The US Treasury reiterated its commitment to protecting holders of debt in mortgage-finance giants Fannie Mae and Freddie Mac after comments from an influential lawmaker suggested that the companies bonds might not be fully backed.
The Treasury was forced to take the unusual step after Rep. Barney Frank (D., Mass.) said (early Friday) that holders of debt shouldn’t assume they would be treated the same as investors in US government bonds…The Treasury hasn’t ever explicitly guaranteed the companies’ $1.6T in debt and $5T in mortgage-backed securities.
I watched the subsequent interview of Rep. Frank by Maria Bartiromo on CNBC that Friday afternoon. It was so confusing that at one point Bartiromo just threw up her hands.
Interest rates on the debt did not really change following Frank’s comments.
RMD comment: If the government does not fully back these notes, it would have societal implications.
Prior to 1933, anyone could exchange their paper money at the Treasury for specie, coined gold and silver. Until the 60s, $1 bills were Silver Certificates, backed by the Treasuries hoard of silver dollars.
Now look at the paper money in your pocket. They are Federal Reserve Notes, not US Treasury notes; they are really just pieces of paper not backed by anything.
In This Time is Different: Eight Centuries of Financial Folly (Princeton Univ. Press), Reinhart and Rogoff show convincingly it is not different: Governments have been reneging on their debt for centuries. In an interview on CNBC on Monday, Rogoff said there will be defaults in the Eurozone within 3-5 years.
I suggest: Keep some US-minted gold and silver coins in your personal possession.
RMD
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