Government Rescues Fannie and Freddie
The federal government will take over Fannie Mae and Freddie Mac, our largest and most troubled mortgage finance companies, with an estimated taxpayer price tag of $25 billion (one source told the New York Times that the number was a modest guestimate, though). In one of the county’s most expensive bailouts, the government can put…
The federal government will take over Fannie Mae and Freddie Mac, our largest and most troubled mortgage finance companies, with an estimated taxpayer price tag of $25 billion (one source told the New York Times that the number was a modest guestimate, though). In one of the county’s most expensive bailouts, the government can put up $100 billion for each company should they need cash — they handle about half of the country’s mortgages — and will encourage them to shrink their holdings; the Treasury can buy the two companies outright for a small pricetag, and is already changing the management team. The Fed sees the buyout as the silver bullet for the housing crisis, and already foreign markets have rallied since the announcement. Will it work, do you think?
In Rescue, U.S. Takes Over Mortgage Finance Titans [NY Times]
Fannie Mae. Photo by NCinDC.
This is the latest and most egregious example of “Privatize the profits; socialize the losses.”
As with prior bailouts (LTC, RTC) – I predict the Gov’t will make a fortune on this one as well.
That being said – the whole necessity of the thing demonstrates the complete and total failure of the Bush Administration over the last 8 years.
It looks like they’ve been spending the cash keeping the lawn green to judge from the tinder grass on the nearside of the the wall.
wasder….I have none. I only meant to present the data. The significance is that the First America data is of many more cities (950 vs. 20)and more broadly representative of the country as a whole and therefore more representative of the “market” in economic terms
Dave–what is your explanation for the divergence of First America and Case-Shiller? I am wondering how they come to such different conclusions.
Sorry PS….I know you’re not. But you sounded so with that post.
dave,
I am not “What-like”.
Ouch that hurts!
The now almost universally accepted
S&P/Case-Shiller index for housing has been falling
relentlessly since mid-’05. Then, housing was rising on
average around the country by 18% on an annualised
basis. Now, it has had its sign reversed; housing is falling
18% on an annualised basis, and the speed with which it
has been falling has been increasing. It is not a pretty
sight, and in some instances it is sickening.
However, perhaps Case-Shiller over-states the situation.
We came across a chart of housing as measured by First
American CoreLogic, which apparently covers 950 cities
and towns around the country, giving each equal
weight. The Case-Shiller Index covers only 20
cities, and is focused primarily upon the coasts,
and as everyone everywhere knows it is
the coasts that are suffering the most severe
price declines in housing. The “red” states in the
midwest have seen prices fall, but not nearly as
precipitously as have those in California and Florida.
We note then that were First America CoreLogic’s index
at its height only had housing prices rising 15% in
mid-’05, they have had housing prices falling recently
only 11%… and they’ve stabilised there. Indeed First
America’s index has not worsened since January. Prices
are still falling, but they are falling less swiftly, and that is what must needs be done in any bear market of any
asset before prices can stop going down and eventually
can begin rising: the speed of the descent must halt.
Fist America CoreLogic would have us believe that that is
exactly what is happening. If FACL is right, and if the
past is any prologue to the future, prices might actually
begin to strengthen later this year…. and if the action
taken by Treasury over the weekend does what we think
it shall, price may begin rising this autumn.
From today’s Gartman letter.
Prodigal Son, you’re sounding very “What-like” today. Aren’t you too a taxpayer!!!!!???
correction:
It is not one of the most expensive bailouts. It is THE most expensive bailouts in the history of the world.
Thanks taxpayers!
SUCKERS!