Tuesday, September 09, 2008

Fannie and Freddie

Do you think yesterday’s announcement by the U.S. government that they are bailing out Fannie and Freddie is a big deal?  If you don’t, it is a very big deal.

This morning I heard an economics professor from Hamlin University say that the expected tax burden will be in excess of $200 billion.  Assuming their are 200 million tax payers (there are probably fewer), that’s $1000 for each of us.  Now do you think it’s a big deal?  The government just sent you a bill for $1000.  Pay up.

While I’m a bit miffed by all the mortgage insouciance, I think the government is doing the right thing.  Fannie and Freddie are most likely too big to fail.  If they went under, the already fragile housing industry would suffer an ugly fait.  We had to do something.

However, I want to make sure everyone understands the consequences of this housing bubble we went through.  The ignorance and carelessness of the mortgage industry has cost tax payers billions.

3 comments:

David said...

Bailing them out ensures that this will happen again. Who says they are too big? No one knows what would happen if they failed. Probably less dire than we would think.

The whole idea of Fannie and Freddie is flawed. They borrowed at sub-market rates because the market knew thew would possibly get bailed out. This is a direct handout to the shareholders of said corporations.

Jennifer said...

Good points. You mean "direct handout to the debt holders" right?

As of 9/10/08, 10:46AM.

Freddie


Fannie

Mac Noland said...

The previous post was from Mac not Jenny. Also, the links are stock price links. I didn't do a very good job explaining that.