Nobody Panic: Government Seizes Freddie Mac, Fannie Mae

Oh dear, all that talk about Freddie and Fannie being “adequately capitalized” was utter bullshit and the government has now announced plans to place the failed government sponsored enterprises into conservatorship. That means the fate of the housing market and the global economy rest squarely on the shoulders of U.S. taxpayers.

Here’s how it went down:

  • Treasury Secretary Henry Paulson told Fannie Mae CEO Daniel Mudd (whose name is good as…) and Freddie Mac CEO Richard Syron that they and their boards were fired.
  • The companies will be placed into conservatorship of the Federal Housing Finance Agency.
  • Common shareholders will be virtually wiped out. Preferred shareholders (banks) will be protected.
  • Instead of providing a massive headline-grabbing infusion of cash upfront, the government will provide quarterly subsidies to cover losses.
  • Freddie and Fannie will continue to operate normally, except taxpayers will be on the hook for future losses.

The two companies collectively back almost half of the nation’s $12 trillion mortgages, and 70% of new mortgages. They have lost $14 billion over the past year.

Both Obama and McCain announced that they support the plan, not that either of them can veto the Bush Administration’s takeover.

The Treasury made its move now partly to reassure Mexico, Japan, and China that their central banks’ shares of the Depression-era institutions will be backed by you.

Isn’t that great?!

U.S. Rescue Seen at Hand for 2 Mortgage Giants [The New York Times]
U.S. Near Deal on Fannie, Freddie [The Wall Street Journal]
Fannie, Freddie’s boards meet Saturday to mull government plan [Reuters]
PREVIOUSLY: U.S. Treasury Attempts To Save Freddie, Fannie, Avert Apocalypse
Bush Administration Considering A Takeover Of Freddie And Fanny
(Photo: Getty)

Comments

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  1. “Instead of providing a massive headline-grabbing infusion of cash upfront, the government will provide quarterly subsidies to cover losses.”

    We’re pretty much screwed, aren’t we?

  2. Argh, I hate this economy. Not only does it suck, but it keeps making me learn lots of economics to decide how panicked I should be!

    How big a sign of the apocalypse is this?

  3. c_green38 says:

    WOO-HOO. Another business the government had to stick their noses into. YAY. We are one step closer to becoming “ameriKa”.

  4. Sandtiger says:

    Isn’t the taxpayer always screwed?
    What I find hilarious is that they overstated the capital assets in the case but they aren’t going after the CEO. Why not? If it was one of us we’d already be in prison.

    • tricky69 says:

      @Sandtiger: The reason CEO’s can get away with it is because they make contracts that allow them to get away it; plus they are the most likely to adequately fund the right people in the government, to me primarily Republican but also many Democrats as well.

  5. MakGeek says:

    ARFGHHHHHHHHSJKDHSKJDHSKLFHSLKJFHSLKFJHS!!!!!!!$@^%$@^%$!^%!#!

    I worked hard not to get in debt, and now I get to bail out the assholes who were too stupid to only borrow what they could, not what they were TOLD they could. If any of you reading this are in hardship and not paying your mortgage, barring any job loss or family matters, I hope you rot in hell one day (period)

    • synergy says:

      @MakGeek: Agreed.

    • ARP says:

      @MakGeek: So if a homeless guy off the street asks to borrow $25k from you, and you lend him the money, who’s fault is it when he doesn’t pay you back?

      What I’m saying is that there’s plenty of blame to go around. But the taxpayers are now asorbing their losses. So, who has the gains from all those years? Also, if they ever become profitable, will the taxpayers get that profit to pay us back for the fact that we subsidized their losses? Nope. So we have a situation where we pay for the losses but the shareholders/head officiers who are at least partially to blame for this mess get off scot free. In fact, they probably will get paid MORE once this turns around.

  6. eddmel says:

    This will be good for PIMCO and the Chinese banks…large holders of the bonds. Tomorrow night here we can see how the Asian markets are doing (Monday am their time)

    • lars2112 says:

      @eddmel: There is a lot of thought that the Chinese were putting a lot of pressure on the Fed to do this since they own a large amount of fannie/freddie debt. One of their strong arm tools would be to flood the market with the treasuries to lower the value of the dollar. I hope they spin off fannie/freddie they are too bloated with over capacity and dead beats.

  7. UnStatusTheQuo says:

    Living outside your means, supporting troops in 90% of all countries in the world, and fighting wars in 2 countries.

    TO DO: Add bailout massive bank failures to the list.

    Ron Paul 2008. Sad to have to say it again, but he called these events in his books.

  8. junkmail says:

    Massive request:

    Can somebody that knows what the hell they’re talking about PM me about this? I don’t have a lot of experience in these matters. My wife’s grandmother has over $75K wrapped up in these assholes through Edward Jones. When things initially started looking bad, my wife and I advised her to contact EJ immediately to find the consequences of these events, and if necessary/possible, to pull her money out. It goes without saying that the EJ rep told her to “settle down” and “ride it out”. “Everything will be fine.” Now this happens, and they’re saying the stockholders are screwed.

    What are her options at this point? Even if every cent is still there, she’s going to be penalized 25K for pulling out her money early, or whatever. Losing that 25K is obviously better than losing everything, but I don’t know what to tell her now. Help?

    • the-perfect-face-for-radio says:

      @junkmail:

      if your wife’s gran had 75k worth of fannie and freddie common stock, it might not be worth diddly when the market opens monday morning. being an edward jones rep means never having to say you’re sorry. as woody allen observed, a broker is someone who invests your money until it’s all gone.

  9. ARP says:

    So if they become profitable again do the taxpayers get the profits too? Thought not.

    I’m so sick of this neoconservative approach of private profits and public losses. And yet, they talk about the “market” “capitalism” and all the other buzzwords to scare you into thinking that socialism is just around the corner. Socialism has been here for a while, just not in the way they’ve scared you into thinking. Our version of socialism just for the wealthy and “can’t fail” corporations, so regular peopel get zero benefit from it like other countries do (e.g. healthcare, education, infrastructure, etc). So my opinion is that we either become partially socialist a la Canada, UK, etc. or we become more capitalist and let shitty businesses fail.

    /rant

    • randombob says:

      @ARP: Agreed.
      Mostly.

      People on that side of the fence (who don’t know) will look at this and tout it as eveidence that gov’t should just privatize everything, because then the losses wouldn’t be spread to everyone else. Which is true, but…

      What happens is that (as is evidenced here) when you lift regulations and turn a blind eye, bad things happen (good-bye mortgage market!). THEN, since they don’t want the rich people who are responsible to foot the bill for their mistakes, they send in the same gov’t that they had stop regulate things to save them and put the financial burden on US, collectively. US who are not typically as well-off.

      Say one thing, do another, right?

      Check, and check.

  10. tcarreon says:

    let’s not forget that syron (ceo of freddie) took home $19.8m in compensation in 2007. he’ll be just fine…

  11. nicemarmot617 says:

    You know what the worst part is? I’m absolutely terrified that we’re about to get 4 more years of the same – or worse, should McCain die in office. I will come right out and say that my bf is a hedgie and he made a lot of money from some of Bush’s deregulations. However, we also witnessed the utterly absurd real estate boom in California that resulted and have been discussing the possible implications for years. Yeah, plenty of people saw this coming, us included. He got his money out where he could, but it didn’t matter. He will get zero bonus this year, leaving our combined income less than 1/4 what it was in 2007. There are plenty of people on Wall Street suffering from the same fate right now. We were smart and planned ahead – we’ll be fine. But the dumbass investment bankers who spent all of 2007′s bonus? They’re nearly as screwed as the retarded homeowners who bought more than they could afford.

    You know who’s the only ones making serious money now? CEOs who don’t need to worry about making mistakes, because if they do, the government will bail them out and they won’t lose a penny of those pretty bonuses they get paid no matter what happens to their company. And you know who’s paying the CEOs of all these companies bailed out by the government? Us.

    I just laughed hysterically through the entire RNC. People really buy their BS, especially in the middle of the country, where they play to the fact that people in NYC and the “ruling” areas of the country routinely ridicule, mock, and generally treat the residents of the “flyover states” as ignorant hicks who don’t deserve any consideration.

    Your prize for acting this way, coastal people? Bush ’00. Bush ’04. And if we’re unlucky…McCain ’08.

  12. Mfalconieri says:

    Bush was video taped saying “Wall Street got drunk”, which mean basically they are unsupervised. Who is suppose to supervise them? Either way we are screwed.

  13. Brontide says:

    Realistically this will cost taxpayers close to a trillion dollars before the deal is done. While the subprime meltdown is peaking the prime meltdown is just starting. Subprime homes are generally less expensive and owner occupied, prime homes are generally larger and many are investments that are quickly loosing value.

    It’s gonna get messy.

    @junkmail: If your grandmother has 75K in common stock Edward Jones should be sued for negligence since most of her investments should be in bonds.

  14. laserjobs says:

    As a taxpayer I now own most of the houses in the US. This is going to be fun.

  15. eddmel says:

    To Junkmail…your wife’s grandmother very likely has debt, not equity and would be made whole.

  16. jimmydeweasel says:

    All you peoples are morons. Sarah Palin has the plan. As soon as she closes down the museum of natural history and the Smithsonian. (Satan put those dinosaur bones there)and takes Huck Finn and those other dirty books out of the library. She has a plan.

  17. JayDeEm says:

    These threads inevitably lead to the ‘buy within your means’ comments, which are valid but raise a question that I rarely see answered: How did you come to define what exactly was within *your* means? Was it a realtor? Loan Officer? Friends or Relatives? Yourself with no outside input whatsoever?

    It’s a real question, no snark intended. I’m not trying to dismiss the common sense element of the decision, I just want know how much the ‘responsible’ folks out there relied on advice from others.

    • pecan 3.14159265 says:

      @JayDeEm: I have often wondered that myself, but the answer I came up with was that “within your means” broke down to looking at how much you make in a month after taxes, your fixed bills, and what you can afford based on need vs. want.

      A lot of personal finance articles focus on cutting out the excess things, which in many cases means cable, internet, phone, etc. But not very many of them consider that to cancel those services before a contract is up would be a lot in fees. I know, I considered canceling my satellite service today and it would have been about $340 in fees.

      So to me, at least, living within my means is NOT canceling things prematurely, and to suck up the fact that I wanted internet, satellite television and a place with pool and gym access. It’s okay, because I’m not wallowing in debt, but for others, a drastic move like actually moving might be warranted.

      So I suppose being within your own means includes having the discipline to not go nuts with credit cards and to pay off your debt, whether you want to or not. And you should want to. Smart people realize most kinds of debt are very, very bad.

    • xsmasherx says:

      @JayDeEm: No man is an island, suer, but seriously – a bank approved me for a $450,000 loan, on my salary alone. That would have been a payment almost $4k a month (once you add taxes, insurance etc.) I am not a financial genius, but one look at my take-home pay told me that we couldn’t afford that, so we only spent half of that. (Sounds like a lot, but we’re in an expensive market.)

      The person selling us that loan (and trust me, the loan is a product which they are selling) asked if we were interested in a 5-year ARM, “because rates could come down in a few months” (that was when rates were 5-6%.) I figured rates are at historically comical lows, why would we get an ARM? We got a 30 year fixed.

      When the Realtor and Loan Officer are both getting a percentage of the sale, of *course* they don’t have your best interests at heart – no more than the salesman and loanie at a car dealership do. You have to look out for yourself.

      That being said, not everyone is good with numbers, and many honest and hardworking people were taken advantage of.

    • @JayDeEm: “How did you come to define what exactly was within *your* means? Was it a realtor? Loan Officer? Friends or Relatives? Yourself with no outside input whatsoever?”

      Luckily we defined our “means” by 1950s standards. :D We knew we didn’t want to be house-poor, and we knew that we wanted to pay even less than 1/3 of take-home, if possible, because we had student loans to pay off.

      Our realtor was an older woman who raised ELEVEN CHILDREN on one salary (AND WITH ONE BATHROOM!!!!!) for most of her life before going into real estate, so she was with us on the whole frugality thing and helped us find inexpensive, cute houses in safe neighborhoods. But we were APPALLED by what the bank approved us for, assuring us we’d have no trouble paying it. It would have been around 75% of our takehome, which would have left us with just enough to pay student loans and starve with no heat.

      (We do not live in an overheated market. I know that 1/3 is not reasonable in overheated markets.)

      • BillsBurg says:

        @Eyebrows McGee: So what happens when your income increases in the future? When we bought our current home 5 years ago our gross income was about $55K, now we are at $105K.

        We has a $145K mortgage now, but hindsight being what it is, we probably should have bought more house since we now have 3 kids and the house is too small. Average increase of comps in my neighborhood had been about $100K, now it is about $75K, not bad, but still not enough for me to sell and get a better house in the market I’m in.

        • @BillsBurg: “So what happens when your income increases in the future?”

          Um … I get more money?

          It’s already increased. I’m paying off my student loans faster!

          I don’t know if this is a starter house or if we’ll be here for the long haul — it could probably fit two kids but would be pretty crowded at three — but we’ve already been here for four years, and moving isn’t the end of the world. As I’m not planning on having sextuplets, I’m probably set for another 6 years or so. If I have to move then, I have to move then. Maybe I’ll be done paying off my student loans!

          But we’re big believers in the “not so big house” philosophy anyway. We’ll probably be in a smaller house than most people think we “need” anyway.

    • chrylis says:

      It should be pointed out that “preferred” stock doesn’t mean “big evil bank” like implied by the article summary. “Preferred” means that in the case of insolvency (ahem), the preferred shareholders are in line before the common shareholders to get their capital back–but preferred shareholders also get a fixed return, while common shareholders get all the remaining profits.

      @JayDeEm: In my case, I decided what was “within my means” by comparing what the monthly cost for buying a house would be with what market rents are. My mortgage rep got my documents and said that I could qualify for a $200k house (pretty much anything in the area) with 20% down, and I simply decided not to spend every last cent I had available.

      @ARP: To be fair, they always announce this kind of news over the weekend so that everyone can get have their sell orders entered when the market opens…

    • ab3i says:

      @JayDeEm:
      i recently purchased a condo, and “within my means” was calculated by me as:
      1) 401k contributions continue @ maximum limit
      2) No credit card debt should be incurred due to picking up the mortgage (based on spending habits history)
      3) 20% of my take home salary goes into savings.
      4) Whatever is left ( After 401K, Savings, Spending), is my maximum permissible mortgage payment, after a 10% buffer.

      Sounds silly, but it really helped me to chart all this out, Especially since my utility bills are a lot more, and i had to put in a lot of money into appliances/furniture etc.

    • ameyer says:

      @JayDeEm: OK, I’ll throw this out there:
      If you can’t afford it when the teaser rate expires, you need an option ARM to be able to initially pay the payment, or the loan goes from interest-only to interest+principal, you bought too much home.
      Also, for purposes of this, if you have to go into credit card debt to pay the mortgage, you can’t afford it.

  18. junkmail says:

    Thanks for the responses, guys. I don’t know exactly what she has, and I won’t find out until Monday. I sincerely hope you’re right about the bonds as opposed to common stock.

  19. ARP says:

    BTW- I don’t think it was an accident that this was announced late friday/over weekend and after the RNC convention had completed. I’m sure they sat on this information for bit.

  20. Coles_Law says:

    “That means the fate of U.S. taxpayers rests squarely on the shoulders of the housing market and the global economy.”

    Fixed it.

  21. 11hawkinst says:

    So, basically, we’re paying for other people’s mortgages huh?

  22. tankertodd says:

    Didya feel good as people like Bush bragged about record home ownership? Well now you’re gonna pay for that warm little fuzzy.

    Did you sell your home in California or Florida at the height of the bubble, thus making a huge profit? That extra money came from the taxpayers, essentially. Your welcome.

    This is what you get when you infuse Democratic market manipulation into the free market. Why we needed these outfits when we had functioning capital markets is beyond me. Those who advocate Obama-like policies, take note that if the free market isn’t doing it already it probably isn’t a good idea. Kinda like loaning your sketchy cousin Eddie money when no one else will. You got to ask if those folks know something you don’t.

  23. whiteguy8055 says:

    It’s driving me crazy, but what movie is the header pick from? I know it’s not “Network”

    [consumerist.com]

  24. iMe2 says:

    Settle people, settle.

    This should have happened five years ago and in some ways was an inevitability. The system was flawed from the get go – you do not finance a mortgage market with private institutions set up by government. What you might expect to happen did indeed happen – those institutions took part in an orgy of speculation, got caught and hid the mess until the government had no choice but to step in.

    What sucks is that it didn’t happen until now, when things are seriously F****ED.

  25. pinkbunnyslippers says:

    I hate to say it, but this was needed some time ago. The market was in a state of speculation and it needed the correction that we’re seeing now. The “meltdown” that we’re experiencing is being sensationalized by a media that’s got everyone in a tizzy over something that unfortunately HAS to happen after the way the market was 5-7 yrs ago. Anyway, Freddie and Fannie’s CEOs make a boatload of money – way more than they should – but that’s what you get when your company cooks the books. The gov’t saw this coming a mile away at least 3-4 yrs ago which is why they both went thru massive federally mandated restatement periods. This shouldn’t be news, but it IS to the generally mal-informed public who gets all in an uproar because the news reports on it purposely to get you that way.

    And I think the idea that taxpayers are *now* paying for the people who overextended themselves is grossly generalized. Why don’t you do some research on what other things your taxes go toward these days and THEN get your panties in a wad. If you are JUST getting upset NOW at the fact that your hard earned dollars are going to “bail out” people, then you obviously don’t have a good understanding of how your money gets distributed in this country, regardless of the President in office.

  26. johnnya2 says:

    First off to bloame people for having medical bills, or a job loss or divorce which causes them to not be aboe to pay their mortgage is ridiculous. MANY of these mortgages were obtained with the help of the mortgage companies providing fraudulent appraisals because the value of houses would always go up in their eyes. Guess what? THEY DIDNT!!! The government under the republicans has failed to regulate an industry that was filled with corruption. Check out Countrywide, Ameriquest, etc, and realize these companies deserve what they get, as does Bear Sterns, and Fannie and Freddie. Let them rot as far as I am concerned. If I were upside down on my house right now, I would stop paying an dwalk away as well.

  27. speedwell (propagandist and secular snarkist) says:

    My fiance and I have been together for more than ten years. We haven’t ever bought a house because the prices have been too high for us (that is to say, we have an idea how much they should cost and they’re far in excess of that). Now it looks like we’ll never have one because our taxes will go up to protect the greedy bastards who live way beyond their means and are now whining about being homeless. Makes me want to kick a fricking whiner out of their house and move in, since I’m paying for it anyway.

  28. AgentTuttle says:

    I keep saying it: Buy GOLD. Not certificates or BS like that, COINS. This economy is crashing.

  29. Invective says:

    I put up an explanation here and warned about this when the first story broke. To reiterate, nobody knows how bad, bad will be. We do know that it isn’t over by a long shot. Not only are banks going to fail, but also Insurance companies as well. States will also be affected, this truly is a big deal that’s been coming for a while.

  30. zymase says:

    “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” – Ronald Reagan

    An Obama supporter and voter and lifelong progressive quoting Reagan. These are interesting times.

    • grossmont says:

      @zymase:

      That’s a little out of context. Ronald Regan actually said:

      Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. “

  31. EightIsEnough says:

    “EIGHT is enough”.

  32. canuckistani says:

    I for one welcome our new taxpaying overlords

  33. xkevin108x says:

    The federal government got us into this mess. Why does anybody think the federal government can fix things?

  34. Optimistic Prime says:

    I can’t believe a government that supposedly believes in a “Free Market” won’t just let them die. That’s one of the fundamentals of a free market economy, businesses that can’t cut it wither and die.

    • chauncy that billups says:

      @Optimistic Prime: The problem is that the way these things are set up precludes that normal response. They are unprecedented public/private institutions. just letting them die would basically destroy the economy.

      • ARP says:

        @bilups: So, isn’t that the “market” sorting things out? I thought people were capitalists? Yes, a little snark. But the people who are supposedly capitalists seem to have no problem letting shareholders reap profits and the public take on debt with any “can’t fail” business. This encourages any large company to take any risks it wants, it’s got a safety net. Combine that with the largest expansion of government in recent history (let alone the contractors) and who is the soclialist? Geez, at least in other socialist countries, I get healthcare, education, regulated cable prices, etc. Here I get none of the benefits all of the bad stuff.

    • Trai_Dep says:

      @Optimistic Prime: That’s because, again and again and again, believe what The Big Bad Conservative Wolf tells you, no matter how many houses he blows down. Observe their actions, not their words. Talk is pretty darned cheap among that crowd yet you guys continue lining up every time a new guy saunters in, preaching “limited government”, “free market”, “lower taxes while cutting spending”… Wake up. :)

    • lightaugust says:

      @Optimistic Prime: This government/administration believes in a free market about as much as I believe that you’re actually a Transformer. They say it because it’s got the word ‘free’ in it, and everybody likes that.

  35. laserjobs says:

    HERE IT IS!!!

    Statement by Secretary Henry M. Paulson, Jr. on Treasury and Federal Housing Finance Agency Action to Protect Financial Markets and Taxpayers

    [www.treasury.gov]

  36. Paytriot says:

    It must be nice. Start a business. make tons of money in our current Gekko greed fashion off American consumers. As the business starts to meltdown get saved by an infusion of tons of money from American consumers (taxpayers.)

    I say if people have to suffer foreclosure and doom, so should the business’ responsible. It’s funny how individuals are just now seeing how skewed “Capitalism” really is……

  37. holocron says:

    @speedwell: Yeah, I hear ya. We’re in exactly the same place.

    I am so frackin’ P.O.ed about this. Case in point, a now former neighbor was a “developer”. About 2 years ago he re-mortgaged his house to finance the purchase and construction of a “Monster” Million Dollar House here in Southwest Minneapolis. When I first heard of his plan, I knew it was going to end badly. Well, they finally let the bank take control of their old house. They’re living in a rental now. And I hear that they are negotiating with the bank to let them take over the Monster House.

    And in the end this neighbor is going to walk away without owning anything and no responsibility for his bad planning. No, now I’m going to be stuck covering the bill for his ineptitude. Feh!

  38. coreyp319 says:

    Question: Are these companies associated or owned by sallie mae?

    Wondering if I could consolidate my student loans at a decent rate. Thanks.

  39. bohemian says:

    In a way this is almost a silver lining. How much is getting wasted on CEO packages? I hope the govt. overseers do something to put some sane controls on where the profits are going.

    BTW, most federal backed loans have income limits and purchase price limits that are supposed to stop this from happening. Why people are defaulting on these loans I am guessing have more to do with house prices tanking than poorly written loans.

    • ARP says:

      @bohemian: I don’t mean for this to be rude, but you’ve been around the last 8+ years, right? CEO isn’t going to change in the next 6 months or so. And depending on who’s elected president, it will change a small amount or none at all.

      I think we’re too quick to default to blame the speculators. They account for some of these problems, not all. This is very similar to the 80′s where Reagan talked about “welfare queens” when the actual number of these was probably less than 1%. But it got everyone riled up just like they wanted you to. Same here, they’re going to conveniently blame speculators for the bulk of the problem when the real source of the problem is nuanced. That’s right, it won’t fit on a bumper sticker, so you’ll have to think about it a bit:

      1) Regulators not watching the banks loan standards carefully enough.
      2) Banks dropping any real standards for loans. As I’ve suggested above, if you loaned $25k to a homeless person, who’s at fault if they don’t pay you back.
      3) Housing price bust. This is a bit of a feedback loop as some of the pricing bust is caused by the loan defaults, which causes excess inventory.
      4) Speculators
      5) Irresponsible borrowers who thought they could refinance or “grow into” in their mortgage.
      6) Gas prices, inflation, etc.
      7) People being lured into a false sense of security about the market since stocks, productivity, consumer spending, and CEO pay were up, but wages and employment rates were down. So if Faux News can blame the alarmists for the slow-down, we can blame them for their false sense of security about the economy. F-U Cavuto.
      8) People relying on credit cards and equity in their home to finance their lifestyle since wages weren’t going up.

  40. Angryrider says:

    Great… Whoever wins, the malicious Republicans or the sloven Democrats, the taxpayer is screwed.
    It’s sad to see that the only on with the right solution, is deemed crazy and stupid and will be ignored. Where are you?

  41. billbobbins says:

    Screw Freddie and Fannie. Let them take a total loss and let the borrowers (homeowners) keep their houses for free. The government didn’t bail me out of my bad stock investments. These lenders made BAD decisions and they should be the ones eating the losses.

  42. stuny says:

    “Privatize the profits and socialize the costs!”

    How the taxpayers don’t get a cut of the huge Wall Street bonuses, but when they screw up, we have to pay to bail them out?!

  43. ninabi says:

    I’d joke, “Put it on my tab and my kids and grandkids will pick up the bill later” but this is awful.

    My grandmother was always paranoid that the Depression would return. I don’t think she’d roll over in her grave over this current economic horror story. She’d rise up and moan,
    I…told..you….so!

    • Mysterry says:

      @ninabi: hehe…

      What you say is true though. Our kids WILL be picking up the bill later. So will our Grandkids. Maybe not on this, but more then likely on something else.

      We better start learning how to cook potatoes 101 ways!

  44. gibbersome says:

    I had a friend graduate college in 2004. He got offered a job at a mortgage broker and worked there for a year and a half before the sub-prime crash. His job was to sell mortgages to would-be home buyers, and he noted how gradually the requirements for loans were relaxed. He said that at his peak he was making between $75,000-$100,000 a month, off commissions.

    Well the broker went out of business, and he had enough cash saved up to pay for Medical School, he’s at Northwestern now. Those of you in the Chicago area should watch out for him. :)

  45. EightIsEnough says:

    Funny how the government (the BUSH Government) can get in the Home Mortgage business at tax payer expense, because it’ll be “good for the taxpayers” and save the folks who invested….but mention National Health Care…and the Bush and McBush folks yell hell no…it’ll cost the taxpayers too much.

    Yeah, right!

  46. Friday’s events represent the (inevitable) end of a long experiment in, as another poster said, “privatizing profits and socializing costs.” If you don’t like the government lining the pockets of fat cats, this is a good day for you. The shareholders are getting their payback for years of government support. In the future risky mortgages will be underwritten by risky private companies and carry the appropriately high(er) interest rate. Marginal home buyers will have to remain renters. The people getting foreclosed on today would be much happier if they had remained renters in the first place.

    Whether you are “fat cat” or a grandmother in FNMA stock or, for that matter, an Obama supporter, you are looking for the government to redistribute income to you. Sometimes it doesn’t work out. Obviously, my opinion is it shouldn’t.

    The GSE’s were monsters at birth. If you want to blame somebody for this mess, blame FDR, who created them, or LBJ who turned them into quasi-private mutants. They’re already dead so that’s no fun though.

  47. incognit000 says:

    Good:
    Idiots responsible were fired.
    Fannie and Freddy won’t collapse, resulting in a collapse of US currency and a global recession.

    Bad:
    We’re on the hook for when the next round of idiots come in, and since they know that no matter how badly they fuck up they will still be bailed out, odds are they won’t care too much about doing a good job.
    Freddie and Fannie were foundes specifically so that the government doesn’t have to hold the hand of the mortgage indistry, and this proves that 60 years of great leadership can be undone by the Idiot in Chief and his deregulation pen, leading me to doubt that this bailout is well thought out.

    In Carthage, when a businessman who ran a business that was “critical to the state” happened to go under or experience a great financial loss, he was put on trial. If it was found that his business failure was the direct result of his own negligence or incompetence, he was crucifed.

    Maybe we should bring that idea back.

    • ARP says:

      @incognit000: “If it was found that his business failure was the direct result of his own negligence or incompetence, he was crucifed.”

      I would like to subscribe to your newsletter.

      (Somewhat) Seriously, what if “C level” officers could be personally liable for the damage they caused the general economy for government backed companies (e.g. mortgage companies, large banks, airlines, etc.) if they acted negligently. It’s a litigation slippery slope, but the foundation is good- Through insuring, backing, subsidizing, etc. these companies, these companies have an obligation to the taxpayers to run their company in a competent manner that doesn’t trade short term profitability for larger long term losses.

  48. vladthepaler says:

    Crap. I have a hard enough time paying my mortgage, now I have to pay everyone else’s?

  49. NotATool says:

    Well, this makes a lot more sense than, say, the gov’t bailing out the airline industry…

  50. SpdRacer says:

    I read most of the posts and no one has mentioned this, and I have heard this several times over the weekend. The initial idea was that just announcing that the government would make funds available to FanMac would hopefully shore them up, but what actually happened was that investors took this as a sign of an inevitable take-over and started dumping their shares to make as much money as they could (cause they knew that once a take-over took place they wouldn’t get a anything) this led to a rapid decline in what was left of FanMac’s value and this led to the government having to take-over.

  51. GoVegan says:

    It is too bad that we are trying to bail out the banks more than the homeowners. The fact is that a lot of banks and homeowners got stuck in the positions they are in today through greed. You have people taking out massive home equity loans to buy new cars and remodel their homes and the banks more then willing to finance this regardless of the persons actual finances. I do wish we would do more to help out the homeowners though. Perhaps we should like at refinancing people into 40 or 50 year loans (like in Japan) to lower their payments and maybe encouraging banks to do short sales to the original owners themselves. I think it would be a much wiser way to spend our tax dollars on stabilizing communities and trying to keep homeowners in their homes rather than a program that is essentially a bail out package for investors.

  52. u1itn0w2day says:

    Don’t worry,buy on impulse and keep up with the Jone’s all you want.Uncle Sam will save YOUR ass by saving his corporate buddy’s at the sametime.But he’ll also raise your taxes and cut out other programs and projects YOU need more than a house you “own” instead of rent.

    I’ve been living life all wrong living with-in means,looking for sales,using budgets,buying generic,getting the lastest craze 10 years later,thinking about the consequences of my decisions.

    I think they call it blissfull ignorance.Well you know what it literally pays to go through life blissfully ignorant without a care or thought in the world.

  53. cozynite says:

    Great… I am SO glad that the government is stepping in to clean up someone else’s disaster. Does this mean that I am basically screwed out of ever being able to buy a home because I’ve been saving and know how to live within my means? I’m just so thrilled by this. Really.

  54. Jack_Ruby says:

    “The Treasury made its move now partly to reassure Mexico, Japan, and CHINA that their central banks’ shares of the Depression-era institutions will be backed by you.”

    And guess where the US will borrow the money from to out lay all that cash…

    China
    [en.wikipedia.org]
    they get us both ways.

    I guess that’s the problem of racking up trillions in debt funding wars.

  55. Anonymous says:

    Try this on for size. We were trying to get a contract on a foreclosure that is owned by Fannie Mae. The asking price for the home was $290,000. The home had no appliances, holes in the walls, exposed wiring, etc. We fell in love with the home and most of the things wrong we could repair ourselves. So we made some offers on the home. Our final offer was $278,500. Well, they declined all of our offers wanting $290,000 for the home. (all of this took place over the last few weeks – April 2009). I went and looked to see if the home is still up for sale (we are under contract on another home now) and they are asking $268,900 for the home! This is almost $10,000 less than our last offer. We were already pre approved for more than what we were offering on the home, but Fannie Mae obviously has some kind of problem on accepting offers on this particular home. It has been on the market for almost 2 years and they decline offers on the home but then turn around and drop the homes price to below what the last counter offer was. Can you say discrimination! We are white middle class Military family. Why would Fannie Mae decline an offer of $278,500 and then turn around and lower the price to $268,900??? Kind of makes you wonder how many other families they have done this to just to keep homes on their books. No wonder they needed a Federal Bailout! To top this off I have been trying to contact Fannie Mae to find out the reason behind this but of course you never get to speak to a representative and they NEVER return phone calls! Something is obviously very fishy with Fannie Mae. Maybe the government needs to take an even closer look!