Between Christmas and New Years – at a time when most people aren’t paying attention to the news – the Obama administration announced that it would offer unlimited financial resources to Fannie Mae and Freddie Mac. This money will be used to continue to bail out Fannie’s and Freddie’s current bad loans and enables them to continue to make lending decisions without regard to the safety of their capital.
Furthermore, this unlimited funding enables the federal government to continue to expand its position as the world’s largest mortgage lender. (Try to find that in the Constitution!)
George Bush began the bailouts in his last year in office, and it was an astoundingly bad idea then. Since then Barack Obama’s administration has made Bush’s stimulus look like a drop in the bucket. Obama truly has thrown good money after bad.
Additionally, the Obama administration appears poised to double down on their push for mortgage modifications, with a heavy emphasis on principal reduction. This will, no doubt, apply to Fannie and Freddie loans also. Hmmm… unlimited funding for the government lenders plus pressure to forgive portions of the debt being loaned out equals another welfare program in disguise. This program stands in direct contrast to the rules of economics that have stood for thousands of years and will never change.
This is the height of short-term thinking. Here’s how it plays out:
- You pay high tax rates (which will be even higher after Obama’s health care plan becomes law)
- Your money is given to Fannie & Freddie who lend it out without direct compensation to you
- The Obama administration compensates Fannie & Freddie (and other lenders) to modify mortgages and reduce principal balances, thereby gifting YOUR money to those defaulted borrowers
Of course, the Obama apologists will suggest that it’s the government’s responsible to provide housing to the less fortunate. But the truth of the matter is that artificially supporting a market always results in damage to that market in the long term, meaning more foreclosures and lower property values.
What do you think? Is it a good idea for government to artificially prop up the housing market, or will doing so just make the ultimate crash of the real estate market even harder and worse?
Please give us your vote in the poll below – and leave your comments in the comments are below the poll. This is an important issue for real estate investors because if Obama is wrong – and he certainly is – this action will have the effect of prolonging the real estate crash and driving the United States further into debt with no tangible benefit for the country as a whole. So please, vote in the poll and leave your comments.
Thanks for reading http://realestate.BryanEllis.com
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I’m very concerned about the economic policy direction by this administration. I like the idea of helping the less fortunate but when will the spending cause the entire country to have problems? Soon I think.
It is not the responsibility of the federal government to bail out business. It’s unconstitutional. But when did this administration ever care about the consititution?
I think the unlimited funding to bail out Fannie’s and Freddie’s bad loans is a bad idea but it will certainly be interesting to watch it play out.
I VOTED NO… FOR THIS REASON. HAVE YOU LOOKED AT YOUR CREDIT CARD INTEREST RATES LATELY? IF NOT… YOU BETTER! THEY ARE DOUBLING AT ALARMING RATES…..AND YOUR CREDIT RATING DOESNT MATTER. OUTSTANDING OR AVERAGE! THIS IS THE THANKS WE GET FOR ‘BAILING OUT THE BANKS’ AND THEY WILL DO THE SAME WITH MORTGAGE INTEREST RATES IN THE NOT TO DISTANT FUTURE. (REMEMBER THE SAVINGS AND LOAN BAIL OUT IN THE 80′S RTC (RESOLUTION TRUST COMPANY) JIMMY CARTER HE WAS THE WORST PRES. IN OUR COUNTRIES HISTORY….UNTIL GEORGE JR CAME ALONG. I REALLY CAN’T UNDERSTAND HOW WE/OBAMA CAN ALLOW THIS TO HAPPEN.WE SHOULD HAVE LET THEM CROOKS SINK OR SWIM LIKE EVERY OTHER BUSINESS IN THIS COUNTRY!
It was nice living here but now I am not too sure what to look forward to. All I can see is the “Projects” in a scale never imagined all across the country!
There will be areas that take longer to succumb to this complete idiocy but it will blight every place in the country sooner or later. Does this sound glum, well it is! At one time I thought the housing recovery would play itself out in about 10 years or so, with this it may not ever happen. For those that think I am wrong or just being an alarmist, let us hope I am. I am not though and anyone wanting to wade through pages of history, economics and the thought process of people let me know. I can give you facts, figures and reasons to be very worried and alarmed.
If any can repulse my arguements with written, verifiable facts then post those. If all you have is a bunch of whining about this President not having a chance to do things, then go fly on an airplane from Europe, but watch other people’s shorts. This is all his problem now, time to quit crying about how everything is some one else’s fault by this bunch of whiners!
This last midnight monetary deal is without a doubt the most harmful one ever developed by anyone in the history of the United States. The others we could possibly recover from but this one will take almost all property from private ownership and make most property the governments over time. Between this and “emminent domain” it will not be long and property taxes will be a thing of the past, they will own all of it. Then we will all pay the rent, hidden or openly the government wants to charge so they can say the tax load is going down, just the rent will be over the top.
If this does not get reversed all real estate investing will become a thing of the past. After all investors are villians, just ask Obama and his minions. All investors are greedy, all people wanting to make things better for themselves by getting a great education and working hard to get ahead are greedy. The only people who are not greedy are the people he is hooked up with, they are the good ones and we should all be like that, except there is not much room on his list. So being part of an endangered species is something we as Evil Investors need to become comfortable with. I would say we will be a rare breed in 20 years, maybe sooner and extinct in 30 years, probably sooner.
So before any libs flame this do some research, post some real number, not some crap about some previous administration made things so much better with high taxes, just is not true when you dig out the numbers. Kiss our investing asses good bye! We are so screwed with this new policy!
any other company no matter what it is has to live or die by the decision they make in business so everyone should have to. I don’t want to send my hard earned money to postpone something that will happen anyway. Let them work for their own money.
Everyone should be responsible for their own mistake!
Well sometimes it takes a look at the bigger picture not just what is in front of your own financial pocketbook or the political agenda of some greedy fat cats trying to enhance their own power position. They lie and created this mess in the first place. Taking Hundred million $ bonus of investors money just before filing BK. IF the financial intuitions had been allowed to fail the depression of the 30′s would have looked like a weekend vacation, and it would have been world wide. Pension funds, and some municipality’s tax revenues would have been wiped out. Example a teacher I know just retired after 41 years of teaching and her pension would be gone, 65 retired with NO income. Teachers are not allowed to collect Social Sec in CA and a lot of other states. Some cities in Europe had invested in US security’s that would have gone south with their collapse. You should all be happy because this has created such an opportunity for investors. If they will just look beyond their greedy pocket books need for instant gratification at the big picture we will all be rich and EVERYONE will win. A homeless broke unemployed person doesn’t do much to help us create wealth. They only put a burden on Taxpayers for welfare that is lost forever. So do you pay now and get it back later, or pay later and never get it back. If they are broke how can we sell them anything?
Africa has the most in natural resources in the world yet they are the poorest. Japan has nothing yet they are one of the richest and have a low crime rate. The difference is WORKING TOGETHER FOR THE GREATER GOOD. The team will always do better and make more. Haiti and The Dominican Republic. They are on the Same Island. Do you want to be right or happy?
I heard the announcement regarding Freddie and Fannie and I thought my ears were deceiving me. Obama and his so called “friends” are taking this country over with big government. I was very suspicious of him when he was running for President but everyone thought we needed “change” well, what are the Obama supporters thinking now. I hope people wake up and smell the coffee as this country is “changing” and not for the good. At the risk also of becoming called a alarmist, I’m afraid that this time next year we will not recognize this country as it previously existed. Change that we can believe in? HELL NO.
a truly free enterprise system has not existed in this country for at least 60 years. Big business has manipulated prices, supply, dema nd and basic macro-economics with its influence and lobbying. Real estate, and credit was given inflated values which have hurt the families that did not yet deserve these goodies.Now the regulators must make policy decisions to prevent the collapse of necessary industries such as banking and auto. A reduced mortgage balance is one possible way to control a depreciating market and prevent financially sound families from losing all their net worth. Fed policy of very low interest rates has helped global stock markets. The future is always an unknown and common sense not merely quick profits will help the common good.
I am sick and tired of all of this government intervention. It just abuses the free enterprise system that this country has thrived on for so many for so many years. If Freddie and Fannie mess up, let them get it together on the own, the same way that we as taxpayers have to when we make wrong decisions. The homeowners who are in bad mortgages and those who find themselves unemployed and can’t make their payments aren’t receiving any help, the real estate investors and anyone trying to help them, are running into roadblocks from the same people that created this mess in the first place. The Government needs to wake up open their eye and see what is really going on, but some how I think they know. America may be the Home of the Brave, but I question whether or not it is still the Land of the Free and if it is, for how long.
Dogwash and Harlinda,
Get a real history book or just follow the writing of regulations over the last 60 years reguarding loans, and Fed policy. Teddy Roosevelt started us down this government take over path and we have had plenty of others working to complete his work.
The only thing Bully about Teddy, Woodrow Wilson, FDR, Carter, Clinton and Obama and plenty of others, these are just the most notable and obvious in the crew, is their overwhelming desire to take from the free and give to the government!
If you want to really learn some sobering facts, not the pablum spewed by progressives, take a couple of courses in constitutional law. You will have trouble finding accurate courses in todays colleges but a few do exist, compare them with 50-60 years ago if you are interested in the differences. Read about who is really profiting from the legislation passed over the last 40 years concerning loans and how they have to be made. If you really read the information you will be ashamed what has been done to the banking industry in this country. It has virtually no control about who they lend to. Hell just learn what Reg “E” is before you spout off again, do that and tell me the government is not controlling every dollar in our economy!
As for lobbying by business, what do you think the Obama Care bill is? The current administration is so far up their you know whats, all they can hear is a muffled noise inside their office with our money paying for every trip, meal, house, clothes, get the idea?
The government has never created a single dollar of wealth, single job, or anything approaching a sensible, common sense plan of any kind. Governments are not capable of doing this by their very nature. Everything run by committee, and paid for by someone else is doomed to failure from the start. Show me one government run program run with pride and run with something not approaching a criminal mentality! Which of the hundreds of government programs can you point to and say that is how I want everything to be? Show me one program not so filled with overriding greed and corruption the people in charge should not be thrown in prison. If they were running a private enterprise this way they certainly would be arrested. Not one of the current government programs could pass Sarbane’s Oxley, not one.
The stock market is not recoverying well here in this country, compare it to those abroad and you will see we are seriously lagging behind. The majority of companies showing recovery are those that are multi-national of have moved most of what they do offshore. Why do you think the SEIU is so busy trying to be in bed with Obama? If they cannot get a strangle hold on the right to freely work in this country, coupled with the government taking over their health care responsibilty, they will be bankrupt in less than a decade! They will cease to exist and all the huge money they steal from the people under them will be gone! How is that for common sense!
The idea there is any common sense in the current or most administrations is an absolute luancy!!! Government has no idea what common sense is nor does it want to! If this is run with any common sense, then why is it all backdoor deals? Why does billions of dollars of Pork have to be used as bribes to get special deals done that no one gets to read before it is voted on? What is common or sensible about any of that?
Anyone that thinks this administration has created anything for investors, one of the groups Obama has pointedly spoken against more than once and his czars show nothing but hatred for, is just not doing anything other than writing lines of words to help support the biggest theft of freedom and money for the common people in the history of mankind.
Show some common sense if you are really a person and show the actual numbers of how this is good for anyone but an incredibly small number of political hacks and a very limited number of special interest friends of Obama! Show some real numbers before you throw words around you have no idea of their meaning. Be factual instead or rhetorical. I can and will post huge columns of numbers to support what I say if the space would allow it. I am not afraid of cold hard facts, show some to prove this is going to be good for the common people in any way, shape or form!
This is just another in a long list of government screw ups.
Obama: How do you like him now!
Socialism Sucks…and most of us can agree on that. As far as real estate investing goes. PEOPLE… Time to straighten out your mind set if you have’t already! There has never been a greater time to make money in real estate than right now! Personally, I never made more moey in my entire life. Sure, I lost hundreds of thousands of dollars after the Crash.. Big Deal. Time to re-focus, and ADDAPT to the new market. If your not making money, it’s because… well you answer that.
Use your Intelectual Capital and get busy people because this gold rush will not last forever. I’m trying to be encouraging here, Yea…the President is blowing it,… but I’m not going to let that discourage me as far as my business goes, and you guys shouldn’t either.
Your fellow invest at work!
Don
There is only one explanation that makes sense of the actions of the Obama administration. When you put aside the “social gospel” smoke screen what you see is a concerted effort to make the majority of people dependent upon the government. Taking actions to worsen and prolong the current crisis is a way to drive more and more people into dependence on the government.
I wish I could lay all this at the feet of Barak Obama, but this trend began with Teddy Roosevelt and Woodrow Wilson, when communism was first rising in power and its little brother fascism was wildly popular. It really got in full swing in the days of FDR.
As in the days and ways of FDR, so to Mr. Obama. The government intervention contradicts economic realities and makes the crisis worse. The wealth redistribution pushes more and more people to become addicted to the government dole that is fed by wealth redistributing schemes such as this most recent move.
Those who try to stand on their own are taxed and despised as evil because they believe that we should all stand or fall on our own merits, rather than robbing from others to support our own failures or lack of initiative.
Bailouts always lead to the same end. The poor stay poor and continue to develop a hand-out entitlement mindset. The rich are robbed to give hand outs so they can’t give as much to the charities they feel merit their contributions. The middle class keeps trying to get ahead thru actually working, and thru small businesses which get taxed and slapped at every turn. When will we learn?
It’s amazing to me how most have not figured out the obvious yet!
The country and principles our forefathers build this country on are long gone. This is no longer our country anymore! It is nothing more than one big CORPORATION!………..Do you think you have a voice? Well think again. If you did the 700 Billion Dollar Bailout to the banks would have never taken place. The working class is on the road to doom. The irresponsible behavior of government officials and their obvious connection with Wall Street has got us so deep in crap that their will be no recovery just continued chaos and loss. mark my words the worst is yet to come because those people who are running your life have no intentions on fixing things. Why, because THEY DON’T KNOW HOW!!!……So it simply business as usual on wall street and government! …… End of story.
BO are Pres. is trashing the Constitution along with the financials.
The Gov. has no business in business (refer to the Constitution)
Terrible idea and will cost the tax payers huge sums. Irresponsible behavior by the government again.
I think it’s a disgrace what the Obama administration is trying to do! It will destroy this market for EVERYONE from owners to investors like myself! Obama needs to stick his nose someplace else… We as investors & Realtors are the only one’s that can actually save this market! He should let US do it with the knowledge we have… & stick to what he knows….