The news is everywhere that the government will not allow FNMA and FHLMC to fail. Instead the Federal Reserve will offer funds at the same rate that the big banks pay and the loans will all be guaranteed by congress. Maybe.
Obvious problem with this solution is that, contrary to popular opinion, the government does not have any money, earns no income to speak of, and seems unable to manage critical issues such as concealing concubines, balancing the budget, and uniting in the defense of the country. Odd group of failures, one thinks.
Politicians strive prmarily to remain in office. Events such as the collapse of FNMA and/or FHLMC could interfere with getting re-elected. We know approximately 3% of the population controls over 90% of the wealth in the country. Seems as if the politicians would play to the 97%, not the 3%, but that would not be a very successful bet.
Together these two agencies contain a bit over 5 trillion dollars in debt. How big is a trillion? It is 1000 billion. How big is a billion?
A billion seconds ago it was 1959.
A billion minutes ago Jesus was alive.
A billion hours ago our ancestors were Living in the Stone Age.
A billion days ago no one walked on the earth on two feet.
A billion dollars ago was only 8 hours and 20 minutes ago aaAt the rate our government is spending it.
That's roughly 3 billion per day, or a touch over a trillion dollars per year.
Just who is the lender of last resort in the USA? Take a look in the mirror friend. It is you and the rest of the taxpaying public.
What do you think? Should these agencies be allowed to fail? Are they still needed in our economy? Or do they just add another layer of cost to each mortgage transaction that could be dealt with another way for a lower cost?
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