Bailout Watch 26: Feds Take Over Fannie Mae and Freddie Mac
The Washington Post reports that Uncle Sam is set to take yank the chain of Fannie Mae and Freddie Mac. “The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives, and use government funds to prop them up, government officials told the two companies yesterday, according to sources familiar with the conversations.” It’s a bailout, but not as we know it. “Under the plan, the federal government would place the firms in a legal state known as conservatorship, the sources said. The value of the company’s common stock would be diluted but not wiped out while the holdings of other securities, including company debt and preferred shares, would be protected by the government.” To avoid sticker shock, the feds will “invest” your money in stages. “Instead of giving each company a big capital infusion up front, the government plans to make quarterly infusions as the companies’ losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue.” Clearly, this is the template for the “real” Detroit bailout, once they piss-away $50b in federal low-interest loans. Either that, or it will lead to “bailout fatigue” that will torpedo the D2.8’s chances of taxpayer rescue.
This is the moment to reduce the influence of the government in housing, but instead the Feds are increasing it. When the loan amounts covered should slowing by going down to cover only the least expensive of entry-level homes, now the massive loans are being covered by... basically the value of the currency. Everyone paid in dollars is footing this bill. Too bad I can't be paid in Euros, I might be able to buy that BMW my daughter wants, and go to Europe for vacation to see it role off the assembly line. As it is, my worthless dollars mean she drives our used Sienna to school. The Horror! I hear about it from her every day.
sounds like state control of business . . . i.e. communism - to me. Isn't it funny, that as the economy keeps losing jobs, the government adds 60,000 new jobs PER MONTH.