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)
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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.
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.
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.
“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.
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!