Most of you probably saw this coming, but that does not make it any less unpleasant. Rumors are swirling that on top of the $145 billion the two mortgage giants have already received, the entities will need another roughly $1 trillion to meet the demands of a “reasonable worst-case scenario for the companies” should the market continue to resolve slowly rather than with leaps and bounds[1].
Analysts and politicians seem to agree that simply cutting Fannie and Freddie off would produce a dangerous environment not only for the national housing market and economy, but for the state of global finances as well. Some compare it to the U.S. going off the gold standard in the 1930s. Furthermore, since foreign governments hold $908 billion in corporate debt sold by Fannie and Freddie, cutting the GSEs loose could have a staggering effect on the United States’ international relations and ability to navigate the international economy and market as well.
For now, politicians will continue to struggle with this issue as the newly-reconciled financial reform bill hits the floors of the House and Senate. At this time, the U.S. Treasury plans to keep both Fannie and Freddie afloat, while many representatives want to phase them out (which looks unlikely at this point). How do you think we should handle this problem? Should we “suck it up” and pay the trillion dollars in order to bail out Fannie and Freddie?
Thank you for reading! Your comments and questions are welcomed below.
[1] http://www.businessweek.com/news/2010-06-14/fannie-freddie-fix-at-160-billion-with-1-trillion-worst-case.html
I think it is necessary to this economy to let weak businesses struggle and survive on their own or fail as a result of their policies. If Fannie and Freddie can’t survive on their own income, then they need to close their doors. (In so doing they might provide and answer to some of the housing needs in this country.)
As private individuals we have to live within the limits of our income. We must expect the same condut from our government and its dealings with the economy and other nations. In my opinion, if we don’t get our spending in check, our currency and economy will collapse within 5-10 years.
On of the ways we might get some relief in our government is to replace almost every Senator and Representative in the Congress, whether Democrat or Republican and replace them with people who really care about the values of this country and will work for the country, not themselves.
Another way for relief is to have the people of each state pay the salaries of their elected representatives to Congress. This would remove the ability of the Senate and House to vote themselves a payraise and make them responsible to the people in another way besides the vote. Too many of the members of Congress spend most of their time trying to get re-elected instead of representing the people of their state and country.
I think they should be forced into bankruptcy as my company was when the market crashed. Nobody bailed me out nor did I ask them to. That is just part of of being in business and the the risk that comes with. Sometimes you get the Bear…sometimes the Bear gets you. Unfortunately in todays corrupt world the latter seems to be the norm. Good luck everybody…pray every chance you get. We will need all the help we can get.
I dont think we have a choice in ANYTHING anymore!
There is a statement that is proving quite true:
This administration doesn’t care what you do, as long as it is MANDATORY!
Nothing should surprise us anymore, and I am betting that at the end of this year, we will not know our country anymore.
God help these United States of America!
I say let them cut there losses and shut down. But the Federal Reserve and it’s owners(not the taxpayers by the way) have too much at stake to just let Fanny and Freddy go. The Federal Reserve knows that it will get it’s money back for it’s investors by forcing the government to tax the people to repay for the bailout.
But at the same time if we get under water with our investments and real estate there will be no bailout and credit is ruined. We would have to cut our losses and move on. So should they.
As you know the writting was on the wall. Our government has never done it right the first time. My view is, we only but $10 million at a time at this problem. Should we put in more it will be spent, and not the best way. The sooner we get our financial house in order as a country the better we can be the leader of the free world. This should be a race to balance the budget, and run the United States as a profitable business. By running the country with less debt, the citizens may do the same in their personal lives. Think about it our citizens have never been in this much debt in history. Our country has never been in this much debt.
Perception prior to election is key. And emotion is a far greater force than logic. With November fast approaching a rescue is imminent regardless of what is prudent.
Rather than bail out Fannie and Freddie, fire sale those notes to investors. Investors improve neighborhoods by rehabbing homes and renting them or lease optioning to future buyers. Enough bail outs to incompetency!
Maybe we should revert to the ways of the Old West and simply squat and claim land and defend it with a shotgun and a Grizzly Bear!
Homes should be a sanctuary, not an investment. Look at the mess Greedy Corp. America and Wall Street have gotten us into, yet they are still humming along, while we, the working class, are once again bearing the brundt of their actions. I say Corp. America and Wall Street Be Damned!! We no longer need you fools!! Wish we wouldall be smart enough to make the previous statement a reality……
We do not as a nation have the trillion dollars and Fannie and Freddie as so mismanaged getting rid of them is the only way to eventually save the housing market.
Of course we should shut it down as it is Unconstitutional . 1o th Amendment does not give them this Power . Add it to other failures , Amtrack ,Post Office , etc. Amtrack in 40 + yrs. . . . never made a PROFIT .
Franklin Raines , the Black CEO of Fannie Mae left after making $106 million in 6 years. He should be in Jail .
Fannie/Freddie have 90 % of Market
somewhere north of 5 TRILLION in Morrtgage business .
Here is a solution. 50 + yrs. ago they could have put all Social
Insecurity in a Lockbox and used it to issue fixed Mortgages at 5 %.
Add in Mortgae Ins. for more safety .
S/S would be SOLVENT + America benefits.
Of course they will never do it , because then they can never get their Ctriminal hands on the Money , + do their dastardly DEEDS as all
Politician’s are W H O R E S .
I do aplogize to all working girls .
Not being an economics guru I defer judgment to those with more education on this subject. The answer to these and other bail out questions will be debated by left/right adnaseum. Those who claim to have a crystal ball to foresee the long term results of any decision are the ones who I question. I can only hope for a better decision making process for any of these types of decisions that removes politics and demagoguery which is sure to happen here as well. I’m more confident in my ability to adapt as an investor than I am in our nations ability to objectively approach any decision.
Quit bailing out institutions that don’t conform to helping the problems of this country. Fannie & Freddie can kiss my azz
It isn’t going to work in the long run anyway. Fannie and Freddie are both doomed. It is only a matter of time. One day, the Government will no longer be able to get anyone (other than the Fed and maybe some other members of the international banking cartel) to buy US debt. The Fed along with other cartel members will try to monetize the debt, but it will be too late. Hyperinflation will result and eventually a crash of our fiat monetary system as well as Government. This is NOT sustainable. Let Fannie and Freddie die.
(Read the book entitled; “The Creature from Jekyll Island.”)
The near future of the U.S. was already known before Mr. Barak Hussein Obama’s election. The people was in delirium from the promisses and the “CHANGE” to come, here is the change. But the Democrats, having no other candidat ready to beat the Republicans, elected him by force of money and public innocense. In this country, what I see is as most important thing for some parties is to beat the opponent, they don’t care about the success of the country and the well being of the American Public. And most Democrats vote as their party’s will by kind of obedience. The result is: they lose, we lose and the whole country loses.
Simon Shekerjian
I say cut them loose! Why should we continue to bail them out when they continue to make bad decisions. Will they bail us out when we do? I think not.
Very interesting topic and excellent content. I’ll watch for more information.I’ll keep pluging in, thanks.