Fannie Mae and Freddie Mac

Actually, more correctly: Phony Mae and Fraudie Mac.

bloomberg.com/apps/news?pid=20601087&sid=aYidZnvS7ykg&refer=home

What happened to the free market conservatives always talk about? Or government regulation that liberals talk about?

Why not let the housing market correct? Perhaps the poor could actually afford a house, if prices dropped enough. At least those of us who saved our money instead of “shooting up” with the drug called “credit” would be better off.

And what do those of us who saved instead of borrowed get? Our savings will loose buying power due to the ultimate drop in the dollar’s value due to this bailout.

This bailout is to save the ill gotten gains of the financial bankers, who buy Ferraris when they get their bonus check every year. And it is to save the foolishness of the middle class that used their houses as piggy banks.

A sign that things are being straightened out will be when the tax deduction for interest on home buying is repealed. That would stop the use of homes as a piggy bank. But you will never, never see that level of reality.

Remember the dollar is not backed by gold, it is backed by nuclear weapons. But the day will come when they will be useless as the U.S. economy falls behind.

One of the most telling statistics that I recently heard was that the level of exports from China had dropped a significant amount due to the slowing of the U.S. economy, BUT the production had only dropped by half that amount. In other words the Chinese economy itself is supporting China’s production more and more. And India will become a significant market for China. The U.S. will become less and less relevant in the world economy and will fall as so many civilizations have before.

  • kathie :bowdown:

True!

We’re heading toward becoming a 2nd world nation. With a trillion dollar deficit already in place, the Vice President was in Georgia, promising them $1 billion to rebuild their infrastructure, while ours is falling apart.

Jim

Yes indeed. And why have the FDIC? If a bank doesn’t have enough capital to cover itself, why should the government back it up?

OTOH, maybe this is a compromise to prevent further turmoil and could not just be used for the banks and mortgage industry but for health care as well. It’s not just protecting individuals. It is trying to prevent a final collapse of capitalism, which maybe wasn’t meant to work.

When a business entity is big enough, it may be deemed to be too big to fail, especially if failure could affect the overall financial system. The government bailed out Chrysler, it bailed out Bear Stearns, and now it’s going to bail out Fannie and Freddie. It will bail out bondholders, but it’s still unclear whether it will bail out stockholders. (Overseas FNMA and FHLMC bondholders including foreign governments are breathing a big sigh of relief over this.)

Even this big bailout, however, is not likely to cost taxpayers as much as the S&L crisis did in the 80’s, when there were so many S&L failures that they put the FSLIC out of business, and caused the government to create another entity, the Resolution Trust Corporation, to take over the assets–mainly mortgages and real estate–of failed Savings & Loan Associatons.

I would also note that Congress in passing the community reinvestment act, in essence mandated mortgage lenders to make loans which they would not otherwise make, for the particular social purpuse of encouraging homeownership. So the congress must bear part of the blame for the failure of those loans.

And why have the FDIC? If a bank doesn’t have enough capital to cover itself, why should the government back it up?

As for the FDIC, most depositors are glad to have the protection of insurance up to $100K of their deposits, since most of us would not be able to determine individually which banks are sound and which are not. Banks are not required to keep on hand sufficient capital to cover all deposits. If they had to do that, they would have no money to lend.

With a trillion dollar deficit already in place, the Vice President was in Georgia, promising them $1 billion to rebuild their infrastructure, while ours is falling apart.

Well spoken Jim, and how about the surplus in Iraq? The lack of attention to our own people is appalling.

John

This has been years in coming. What idiot thought it would be a good idea to extend 100% loans in the form of ARMs? Answer: Someone who knew that he’d make his buck fast and be gone when the brown stuff hit the fan.

This has been going on for many years. I even participated myself as a consumer in 1999. When we bought our first house, we got a primary mortgage for 80% since any large amount required the acquisition of PMI (private mortgage insurance for the benefit of the LENDER, not borrower). We simultaneously got a 10% second mortgage at a slightly higher rate, but still less than a single 90% with PMI would have been.

We did the right thing and paid off the 10% in 2 years because we knew we could. Many others got in the door that way, but have no reasonable way out.

This is off topic. Stay on topic or do not post.

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