>>masses for the masses, how nice. :)
Posted on 07/10/2008 9:33:59 AM PDT by BGHater
Fears about Fannie Mae and Freddie Mac retreated somewhat Tuesday after their federal regulator, OFHEO Director James Lockhart, said new accounting rule changes should make "no difference in the risks of the two firms."
On Monday, Freddie and Fannie shares plummeted after a Lehman Brothers analyst said a new FASB rule could require the two firms to write-down as much as $75 billion.
Rather than the accounting rules, what's really got investors spooked is a growing realization the government will have to nationalize Fannie and Freddie, says Kevin Depew, executive editor of Minyanville.com.
The two mortgage lenders are simply too big to fail and too critical to the housing market, Depew says. Given Fannie and Freddie own or guarantee 50% of all housing debt, according to the WSJ, continued stress on their balance sheets means higher borrowing costs for the firms, and ultimately higher mortgage rates for individuals. It also means another round of write-downs for the battered financial sector generally, which owns a lot of Fannie and Freddie-backed paper.
But nationalizing the firms, each created by an act of Congress, would mean a wipeout for equity holders, who have already seen their holdings decimated in the past year.
(Excerpt) Read more at finance.yahoo.com ...
At this point I’d rather loan money to the local crack head than hedge fund.
I’d add to both of your suggestions: abolish public education, with the result that property taxes would be significantly lower, which would probably be the equivalent of the mortgage deduction.
dittos
Grapes of Wrath by John Steinbeck
Welfare for the well connected. Aargh!
Where are the Republicans that understand Milton Friedman?
“Too big to fail... Too big to bail” is how I’ve heard it put.
An even greater benefit: it would destroy a powerful obedience-conditioning tool for the governuts.
Please explain.
“Back then folks like my working class grandparents typically didnt have anything invested in the stock market.”
Quite so. Whereas bank savings accounts were widespread. The thousands of banks that collapsed were largely rural banks, which devastated small town America. Joseph Schumpeter wrote that the Depression was much more severe in the US than in Europe, and this was due to a peculiarity in American banking law that prevented interstate branch banking.
In Europe large money-center banks could have branches in rural towns. If there was a run on a bank, the rural bank could get help from its larger parent. In America a run on a small town bank would collapse it. Which led to a greater panic on the part of the public. The panic fed on itself. FDR’s speech “we have nothing to fear but fear itself” was in fact about this very issue, and not the war.
Sometimes it’s the people who keep pointing to places and screaming “fire” that are actually causing the panic. And when they seem to be invested in a way that panic improves their earnings, you might wonder whether they are trying self-fulfilling prophesy in order to make a buck.
It’s worked well for them so far.
Then, their Creator demanded that they provide home loans (including multifamily rental housing) to people who had no possibility or likelihood to pay.
This is a giant social engineering project meeting its inevitable end.
Too bad.
Back in the day when their clients were responsible lenders, it was a good thing.
When they were forced under political pressure to become something else, I predicted their downfall.
I saw this coming as early as 1985.
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