2008-10-14 — bloomberg.com
Yields on Fannie Mae and Freddie Mac corporate debt rose to records relative to Treasuries as the government said it would guarantee borrowing by banks, providing bond buyers with competing U.S.-backed investments.
...
As part of U.S. plans announced today to halt a credit freeze, the Federal Deposit Insurance Corp. will fully guarantee newly issued, senior unsecured debt from some banks. The bank notes initially will probably carry yields greater than those on Fannie and Freddie's $1.7 trillion of debt, reducing demand for so-called agency bonds, said Jim Vogel, an analyst at FTN Financial Group.
This shows that they can't make more capital simply by guaranteeing everything.... a shrinking pool of capital must still go around to the same or increasing number of outlets.
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