"Send someone to contact you and see if you can invite Feng Yu to come to the White Palace as a guest." Xiaobu Shi said.
"President, this is not good. Feng Yu is Chinese after all. If we do this, people will think that we want to further strengthen economic and trade exchanges with China."
Hearing this, Xiaobu remained silent. This matter was obviously not something he could decide alone, although he felt there was nothing wrong with it. It seems like this location is wonderful, but everything you say and do is subject to too many restrictions.
"Then you think of a way for me to meet Feng Yu. Do you know exactly what to do?"
Feng Yu didn't know that Xiao Bu Shi had already decided to meet and chat with him. He was still looking at the stock market.
For two consecutive days, the stock price of New Century Financial Corporation has fallen by 15%, and the decline will not stop. It is expected to continue to fall, as long as they cannot explain the media revelations clearly.
As for some small real estate finance companies, the declines have been even steeper, generally exceeding 18%. Two companies have even directly announced that they will apply for bankruptcy protection.
This filing for bankruptcy protection has only made matters worse, making investors even more distrustful of companies in the real estate industry.
"Boss, the stocks of these companies have indeed plummeted. Can we make a lot of money through short selling?"
Fengyu Consulting borrowed a lot of stocks of these real estate companies from some financial institutions, and then sold them in large quantities. With the help of news, the stock prices of these companies plummeted, which meant that Fengyu Consulting could make a lot of money.
Selling stocks will result in a loss on paper, but you can make more money by selling short.
"In fact, we don't make much money. The stocks of these companies are not our main investment direction at all."
Although the stock prices of these companies have fallen significantly, their market size is too small and the number of shares that can be lent is not large.
Moreover, Feng Yu only let Fengyu Consulting mainly operate New Century Financial Company, and only a little bit of others.
These are just experiments. Looking back, Fannie and Freddie Group will be the main direction of attack.
"Boss, why do you think that these companies may not all go bankrupt? Now it seems that these companies are definitely doomed?" Ralph asked humbly for advice.
"Because the U.S. government, or Xiao Bu Shi, must not let these companies go bankrupt. They will definitely find ways to save them."
"Guess what they will do?" Feng Yu asked with a smile.
Ralph thought for a while: "Find another company to take over?"
"Correct!" Feng Yu snapped his fingers, "For the current plan, they can only find other companies to take over. Taking over the business of these companies, they will also take over the debts of these companies!"
"But this is far from enough. These companies will cause a large number of people to lose their jobs, which is not a small problem. At the same time, what is even more serious is that there are too many bankrupt companies, which they cannot imagine!"
If only one or two companies go bankrupt, then it's really just a small matter. Anyway, the market value of those bankrupt companies now, even New Century Financial Corporation, is less than US$3 billion.
Given the size of Fannie and Freddie, a loss of US$3 billion a month may not be a big deal. Of course, it would be different if you were losing so much every month.
In Feng Yu's eyes, Fannie and Freddie Group are basically two takeovers, and they are also the ultimate scapegoats!
In the previous life, Fannie and Freddie filed for bankruptcy, which led to the real collapse of the U.S. stock market. Before, they could at least survive, and there were still some rescues.
The main reason for the bankruptcy of Fannie and Freddie Group was that they became the successors and ultimately took the blame for this misfortune.
In fact, the subprime mortgage crisis was mainly caused by these small real estate financial companies, and Fannie and Freddie Group were the ones taking the blame. But in the end, everyone generally believed that Fannie and Freddie Group was responsible for this incident.
Of course, the collapse of Fannie and Freddie Group is also the reason why this matter has become more serious.
Fannie and Freddie Group mainly packages these loans, issues bonds, and sells the bonds to investors. Under normal circumstances, the risk of this kind of bond is very low, because at the beginning, the person who can borrow the loan has a very trustworthy credit rating and repayment ability.
Therefore, the bonds issued by Fannie and Freddie Group are sought after by many investors, including China State-owned Assets in the previous life. To a certain extent, some people even interpret these as U.S. treasury bonds, completely forgetting that these are two private companies.
By doing this, they completed an asset securitization process.
At that time, Fannie and Freddie Group were very strict in reviewing the mortgage loans they purchased. They did not buy subprime loans at all.
But later on, more and more financial companies made subprime loans, and Fannie and Freddie also began to buy these higher-risk subprime loans at the request of Xiaobu Shizhengfu.
Then adjustable-rate mortgages became rampant, using low interest rates to lure people into borrowing money to buy houses. Many people with ordinary incomes also live in large and nice houses. But then the interest rates adjusted and the loans they had to repay were recalculated, and many families who could have repaid their loans were unable to do so.
These are all done by small companies. Fannie and Freddie really didn't do this at first, and they didn't need to do this. After their high-quality loans were turned into bonds, they would be enough to make money.
But now it’s no longer possible. Those small companies are going to be ruined. Xiaobu Shi is asking Fannie and Freddie Group for assistance.
How to provide assistance is not to take the mortgage loans of those small companies and then sell them in the form of bonds.
At this time, the bonds of Fannie and Freddie Group will begin to deteriorate. From low-risk, low-yield bonds to high-risk, high-yield bonds, the original intention of many people's investment is completely different.
Everyone is accustomed to the fact that the bonds of Fannie and Freddie Group are low-risk. This is an inherent impression. When these high-risk bonds are issued, many people will buy them without hesitation. Then it is equivalent to getting on the ship. It will be extremely difficult to get off the ship!
These small financial companies are burdened by people who have not repaid their loans, but they have to repay their loans to banks and other institutions, so they can only find ways to borrow money.
Yes, there are many properties mortgaged to them, but this is not easy to realize, and it has already depreciated. They can only borrow money to demolish the east wall to pay for the west wall.
The leverage of some financial companies has begun to become extremely high. Many products that normally only have a leverage of ten times can have a leverage of twenty times, or even twenty-five or thirty times in their company.
What does this mean? It means that they manipulated a large amount of funds with a little margin. How big is the risk? How fragile should the capital structure be
At this time, they still couldn't figure out what to do, so they could only hide some situations and even make some small financial tricks.
When Feng Yu found someone to expose this, their company had to go bankrupt. In order to prevent the situation from getting worse, Fannie and Freddie Group can only act as the takeover, thus becoming the scapegoat!
… (To be continued.)