Nobel Economist Stiglitz Outraged That Fannie (FNM), Freddie (FRE) Paying Dividend With Our Bailout Money: "WHAT BOTHERS ME FROM THE POINT OF VIEW OF PUBLIC POLICY IS THAT FREDDIE MAC AND FANNIE MAE CAME TO THE AMERICAN TAXPAYERS, ASKED FOR THE RIGHT TO WRITE A BLANK CHECK. CONGRESS GAVE THEM THAT RIGHT. WHILE WE ARE, AS TAXPAYERS, IN A POSITION TO PUT MORE MONEY INTO FREDDIE MAC AND FANNIE MAE.THEY'RE TAKING OUT MONEY. TO ME THIS DOESN'T MAKE ANY SENSE. IF THERE IS A THREAT OR A LACK OF LIQUIDITY IN THE FIRM, WHY ARE THEY STILL PAYING DIVIDENDS AT ALL? ANY DIVIDEND."
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So, the taxpayers commit to financial support for Fannie Mae and Freddie Mac because they are having liquidity problems, i.e., not enough $$$ given the loans they have outstanding. So waht do they do? Right away they both pay dividends to their stockholders, sending $$$ out. As Stiglitz says, did they have liquidity problems or not? If yes, they need to keep that money in house and not send dividend checks to stockholders. If no, then why on earth are they getting bailed out by the taxpayers?
2 comments:
If a bail out of Fannie Mae and Freddie Mac is really necessary, then why can't it be in the form of a loan from the taxpayers (i.e. government money). When an average taxpayer gets in over his or her head financially his or her only option is to borrow the money, often times from these very same institutions at a high interest rate and bail themselves out. Why should it be any different here? I understand the argument that if we don't bail out these agencies or banks like Bear Sterns their will be worse reprecussions in the country's overall economy. Well, if that is the truth and only the experts know if in fact that is the case, then why the free ride? President Bush said wallstreet got drunk, a reference to how much money was made at the expense of the average citizen. Well it is time for them and all other big business to sober up!!!! Don't throw away my money!!! If you need to use it to bail out financial institutions fine. I will agree to a reasonable interest rate.
If a bail out of Fannie Mae and Freddie Mac is really necessary, then why can't it be in the form of a loan from the taxpayers (i.e. government money). When an average taxpayer gets in over his or her head financially his or her only option is to borrow the money, often times from these very same institutions at a high interest rate and bail themselves out. Why should it be any different here? I understand the argument that if we don't bail out these agencies or banks like Bear Sterns their will be worse reprecussions in the country's overall economy. Well, if that is the truth and only the experts know if in fact that is the case, then why the free ride? President Bush said wallstreet got drunk, a reference to how much money was made at the expense of the average citizen. Well it is time for them and all other big business to sober up!!!! Don't throw away my money!!! If you need to use it to bail out financial institutions fine. I will agree to a reasonable interest rate.
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