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To: neverdem
Still, Washington has shown little interest in winding down Fannie and Freddie. The ostensible reason is that there would be no mortgage market without them; private lenders are still unwilling to make home loans that they want to hold as investments, so Fannie and Freddie still have to buy or guarantee them.

We are now in a centrally-planned economy. Because the Fed keeps interest rates a near zero, the Gov't still wants every deadbeat out there to own a home, and the banks and Fed are still sitting on tons of bad loans and property already - the NY Times in telling us the free-market doesn't want to touch mortgages.

4 posted on 03/24/2013 8:45:31 PM PDT by PGR88
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To: PGR88

Had the Fed and Treasury simply backstopped the liquidation of these troubled banks interest rates would have shot up through the roof. RE prices would have dropped like a stone. It would have been scary, but explainable and the average mortgage payor wouldn’t be affected in the least bit. Some capital markets would have slowed or stopped temporarily.

This would signal to investors and capital would have been reallocated as good deals came along. In short time interest rates would have dropped and stabilized at a market based level reflecting the risk/reward trade off. Things would be back to normal.

The trouble is we haven’t had a free market economy in the US for over half a century. There aren’t any advocates in government in favor of it. GW Bush being the last, great hope of the free market.


5 posted on 03/25/2013 4:23:05 AM PDT by 1010RD (First, Do No Harm)
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