The Eclectic One

…Because labels are a poor substitute for thinking

Fannie Mae and Freddie Mac taken over by the fed

Posted by Bill Nance on September 7, 2008

From the Washington Post:

The U.S. government on Sunday seized control of mortgage finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N) in an aggressive move to help the distressed U.S. housing market and economy.

Officials were concerned mounting losses at the two companies, which own or guarantee almost half of the country’s $12 trillion in outstanding home mortgage debt, was sapping their vitality and threatening to undermine them at a time other sources of housing finance have largely run dry.

In May, financial Guru and the world’s richest person, Warren Buffet, said the recession would likely be “deeper and longer lasting than many think.” Buffet has been prescient in his estimates for a long time. When I read the original article, I wondered if the Bush Administration was prepared to cope with the realities of the situation. Bush ’41 was certainly not. My family lost our shirts in the recession of the early 90s, as did many others.

In the late ’80s and early ’90s 747 Savings and Loans went under, requiring a bailout which cost taxpayers some $500 billion dollars. The resulting recession was bad and made much worse by the Bush ’41Administration, which essentially did nothing.

To put this in perspective, the entire budget of the United States recently has been around $3 trillion, and has included massive deficit spending. The potential cost to the taxpayers if these two companies have to write off even a quarter of their debt and guarantee commitments would be staggering.

I’m worried; VERY worried. I have a feeling this recession is going to get a lot worse before it gets better.

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One Response to “Fannie Mae and Freddie Mac taken over by the fed”

  1. […] I wrote last week, the government bailout of Fannie Mae and Freddie Mac was grim news. This looks to be quite a lot […]

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