Skip to comments.Uncle Sam Can Bail Out Fannie, But Who'll Bail Out Uncle Sam?
Posted on 07/18/2008 5:37:41 PM PDT by Kaslin
The taxpayers' predicament when it comes to Fannie Mae and Freddie Mac, the precariously capitalized "government sponsored" mortgage investors and insurers that own or guarantee $5.4 trillion worth of mortgages, or half the nation's total, is grave enough.
Graver still is that the rest of the world of supposedly high finance is becoming more like Fannie and Freddie, with potentially disastrous consequences for the American economy and taxpayer.
Everyone has long thought that Fannie and Freddie are too big to fail. The feds would never let them fall into bankruptcy because they're crucial to the nation's mortgage markets and broader financial markets. The two have used their government coddling to wrap themselves in a web of guarantees, insurance contracts and derivatives that makes Bear Stearns' business look as straightforward as a lemonade stand.
The mortgage disaster such a bankruptcy would create would mean near-certain depression. The Bush administration's move last week to ask Congress to let the federal government step in and buy shares of the two companies as well as lend up to $300 billion to them, along with the Fed's decision to let them borrow directly from the central bank, bears out this stark reality.
How did we get into this situation? It's useful to follow the reasoning behind the New Dealers who created Fannie's predecessor, the Federal Home Loan Mortgage Association, to see how the best of government intentions can be perverted by voracious market appetites and vice versa when government and business grow too cozy in pursuit of a reasonable-seeming goal ending cyclicality in the mortgage markets.
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Looking forward to them raiding private retirement accounts.
"We must. There is no other choice."
They already did, or is your private retirement account doing better than the 15% rate of real inflation?
Amazing how they did it, and didn't get any on themselves...
I'm retired, so I don't have to drive much, and have no desire to drive a lot. The more they raise gas prices, the less I drive. The more they raise food prices, the more bargains I look for. That's how the market corrects.
I'm not happy about this idiocy that's going on, because it's nothing but short-sighted stupidity by politicians, but I must say it hasn't affected me that much. And there are plenty of others besides me, in the same boat.
We’ll know they are serious when they find the courage to give Franklin Raines the Jeffrey Skilling treatment. ;)
“We must. There is no other choice.”
While I agree with you I just don’t see it happening.
I honestly don’t believe that the majority of Americans have the guts or care to have it happen.
Also, I just don’t see how it would be possible to keep this plan secret.
If they raid our retirement accounts they will also raid our bank accounts.
I keep a bit of cash around the house. Not much, just enough in case I have a family emergency during the night and need money for gas or for the oh so rare ice storm (haven’t had one here in about 10 years) so I can walk to the local grocery store.
But I’m beginning to wonder if even the cash I have on hand will become worthless. I foresee us being forced to replace our dollars with whatever the currency will be for the North American Union here within a few years.