It Has Begun

By
Real Estate Broker/Owner with Bluffs Real Estate and Investment Properties

Freddie Mac announced higher-than-expected losses for the second quarter on Wednesday. The losses, to the tune of $821 million, cause significant downward pressure on its shares.

For better or for worse, this news comes on the heals of the newly forged "Housing and Economic Recovery Act of 2008" which contains rescue provisions for the troubled Freddie Mac and Fannie Mae institutions.

Many fear this is the beginning of a long and expensive tax expense as the Treasury Department has been authorized to loan an unlimited amount of capitol to Freddie and Fannie, as well as buy their shares if the need should arise.  

Freddie Mac and Fannie Mae provide critical liquidity for the banking industry and are generally seen as stabilizing elements in US lending.

Comments (3)

Dale Terry
Yadkinville, NC

Did you see where the Treasury dept. has hired Morgan Stanley to assess the risks that Fannie and Freddie have?  Talk about letting the fox guard the henhouse.  These people are indiots.

Aug 06, 2008 01:44 AM
Stephen Graham
Inactive - Atlanta, GA

Is our "so called" free market economy really an illusion? For better or worse, a free market lives or dies on its own.

Aug 06, 2008 01:52 AM
Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

I have to agree with Stephen - We don't really have a free market any more.  So many manipulations and bailouts!  Thanks for the post, because I hadn't seen this news yet.

Aug 06, 2008 02:25 AM