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Fannie, Freddie, and Our Socialist Government

Yesterdays bailout puts us one step closer to socialism...

This bailout was not really required because Fannie & Freddie both had the required capital reserves. They lost around 17 billion... but WaMu lost 19 billion. Losing money is not a prerequisite for taking control over a company; if it were the government would've seized many more companies by now.

in the short term this will be good for mortgage interest rates and ultimately the housing market. In the long term this is going to wreak havoc on our financial system and economy as a whole. The FED is going to start printing money to cover losses and to make cash infusions, the value of our dollar once again is going to plummet, and investors are going to turn to oil again as a hedge against inflation. The cost of gasonline will soar and we will be in the same type of mess that we are in now except that it will be deeper and take longer to recover from.

Posted by Christopher Ohlsen on 09/08/2008 11:09 AM

Comments (6)

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6 Comments on Fannie, Freddie, and Our Socialist Government

SEP

2008

In a restless market where Armageddon preachers are more then the cool headed analysts the government needs to take action to shut them up. That is exactly what the government did with this intervention, standing behind an agency that is critical to all the balances of the housing market in an act to restore peace and calm to our marketplace

I guess I missed something in the Constitution. I didn't know that it was the job of the govenment to restore peace and calm to the marketplace. I thought that America was the land of the free market and business failures cleansed the market of malinvestment and bad decisions.

Christopher, I agree that short term this might be good but it's just going to prolong the agony later.

Yep, Yep!!! Now, if only they would give our citizens "health insurance" for every man, woman & child. Wouldn't life be less stressful?? I've seen the difference with and without health insurance in "The States". I definitely prefer "National Health Insurance" whether I'm working for one company or another and not have to worry if they will cover me or my family.

;>)

This isn't socialism (unless you mean corporate socialism) and things would have been a lot worse if they hadn't stepped in. All the GSE's assetts were tied up in loans to real estate that has continued to lose value. This means that their values and their reserves continued to ratchet down. Our whole economy (and by extension the gklobal economy) is tied to the availability of credit, especially home credit.If they were allowed to fail, we would have a panic and a world wide great depression on our hands.

James - Peace and calm for what... A couple of hours? the fact is Fannie & Freddie had enough reserves and were in pretty good shape until the Government stepped in. This is not free trade... and now the US Government has a stranglehold, or monopoly if you will on the mortgage industry. All that is left now are government loans... thats it. Ultimately they have shifted responsibility from investors who make calculated risks based on their models and placed it on tax payers while stripping the actual investors of any gains they may have made (or losses for that matter). This is not a good thing for America, this is a band aid and once the zeal wears off peoples heads are going to spin... especially when they finally give us some kind of a figure with regard to how much this is going to cost you and I.... The tax payers. We will most likely see more business just not the kind of business we are after. Rates will undoubtably go down which will spurr refinance business... but refi business does nothing for the housing market.

Tim - You are right on the money... just like when a few unscrupulous mortgage brokers lied to and cheated people they were cleansed right out of the marketplace. Bad practices beget bad practices and such is the structure of our "free market system" and yesterday our "free market" took the mightiest of blows that it has ever endured to the exten that it will not endure this. The government now owns everything... As of today there is no more "free market"... Thank you for the insight.

Anne - I like Obama's health care plan as well. The thing is that people's health is a different matter entirely. Health care never should've been privatized. We as Americans should take care of our own and ensure the well being of our citizens. The trade of money however is privatized rightfully so because people willing to take on the risk of investment are rewarded when they make good bets and penalized when they make bad bets. People do not decide their health and it is not right for investors to gamble with it.

Peter - There is some truth to what you say, but these 2 GSE's had a long way to go before they failed. They were no more at risk of failure than WaMu or Meryll Lynch. The government lied initially saying that they were not going to nationalize Fannie & Freddie but that they were simply going to allow the two GSE's to borrow money directly from the treasury in order to avert catastrophe... Money that would ultimately have to be paid back. Now, instead the Government has just taken them over and nationalized them... and now we are all on the hook for the bad decisions that these two firms made.

SEP

2008

Christopher you are right and we are going to be heading down the long road before the recovery takes place.

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