The Bush administration seized mortgage giants Fannie Mae and Freddie Mac with potentially a $200 billion price tag. With that kind of cash, we could fight a significant fraction of a war in the Middle East. So, what are we getting for our money?
Officials announced that both giant institutions were being placed in a government conservatorship, a move that could end up costing taxpayers billions of dollars. Treasury Secretary Henry Paulson said allowing the companies to fail would have extracted a far higher price on consumers by driving up the cost of home loans and all other types of borrowing because the failures would “create great turmoil in our financial markets here at home and around the globe.”
Mark Zandi, chief economist at Moody’s Economy .com, predicted that 30-year mortgage rates, currently averaging 6.35 percent nationwide, could dip to close to 5.5 percent. That’s because investors will be more willing to buy the debt issued by Fannie and Freddie — and at lower rates — since the federal government is now explicitly standing behind that debt.
So, we have (hopefully) added stability to the market and lower mortgage rates. However, being an American with a deep Puritan heritage, my question is “who will be punished for this?” Will it be those who profited from poor decisions? My heathen Magic 8-ball indicates “Outlook not so good.”
Sarah Palin said Fannie and Freddie have become too big and too expensive for the taxpayers. Hmmm…. I think they just got too expensive for the taxpayers when the Bush Administration signed us up to bail them out, this weekend.
I’m neutral on the administration’s move until more info is known. In the “for” column is that it may bring some calm to the financial and housing markets and bring a pause during which time maybe they’ll figure out what to do longterm. So no opinion yet.
But it sounds like Ms. Palin is against the President’s move. I would LOVE to hear more about that. A lot more. Maybe a whole press conference more.
In truth, it sounds like she just doesn’t know what she’s talking about.
I’m not neutral on it. Big, gigantic mistake. The old economic saw is that we get more of anything we subsidize. Here, it is seen that we are subsidizing reckless lending.
Best thing would be to let it crash if it will, and put a few unscrupled lenders in prison. That would let others know that bad decision making is not to be rewarded, but punished.
What a financial catastrophe it would be if people were forced to pay less for gas and lower interest rates on thier homes. I think politicians (all of them) believe Americans are that stupid. Let it crash, no one in my whole family makes enough money to give a crap about Wall Street anyway