CATS: ALL YOUR MORTGAGE ARE BELONG TO US!!! Government takes control of Fannie Mae and Freddie Mac: "WASHINGTON - The Bush administration’s seizure of troubled mortgage giants Fannie Mae and Freddie Mac is potentially a $200 billion bet that it will help reverse a prolonged housing and credit crisis.
The historic move announced Sunday won support from both presidential campaigns, but private analysts worried that it may not be enough to stabilize the slumping housing market given the glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.
Officials announced that both giant institutions were being placed in a government conservatorship, a move that could end up costing taxpayers billions of dollars...The companies, which together own or guarantee about $5 trillion in home loans, about half the nation’s total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover.
The Treasury Department said it was prepared to put up as much as $100 billion over time in each of the companies if needed to keep them from going broke, in exchange for senior preferred stock."
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I think we can call this a massive deprivatization in the sense that Fannie Mae and Freddie Mac are no longer being operated as private companies. To say it "could" cost taxpayers "billions of dollars" is merely stating the obvious. Undoubtedly it will cost billions. If we start talking about what it"could" cost, think in terms of hundreds of billions. And this bailout gives the federal government more control over the housing market than they may know how to handle, if you ask me. I realize they had to do something because shares in these companies had plummeted from around $70 per share to about 5 bucks, and there was no end in sight. But I don't see this as a rescue. I see it is a desperation measure. The real fix here is for the housing market to level off, and I hope that the feds can make that happen, now that they have half of its value in their hands.
1 comment:
I don't see the problem. Freddy and Fannie's shareholders should bear 100% of the cost of their failed business. That means the federal government should offer them $0.02 a share or so to BUY their companies. Why give guarantees? CAPITALISM is quite clear - ya screw up so bad, ya lose your investment. Ker-DUH.
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