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.
This week saw major retailers restricting commodity sales as supply lines crumpled in the face of rising demand. The Chicago Tribune warns that bakers are running low on rye flour, and the Wall Street Journal suggests “it’s time for Americans to start stockpiling food.” So what the hell is going on and how does it affect you?
Treasury Secretary Henry Paulson wants to consolidate the nation’s financial regulators into a tripartite gang that can save the economy from distress and doom. The plan to give the Federal Reserve broad new regulatory powers and streamline the regulatory community has been in the works since last March, before the start of the subprime meltdown. Paulson is worried that the U.S. markets are no longer competitive with maturing world markets, some of which aren’t hampered by nuisances like regulation. After the jump we’ll explain the consumer impact of the plan and introduce you to your three new regulators.
Bernanke encourages banks to offer “new” mortgage products to low income buyers, “Such products could be designed to avoid or mitigate the risk of prepayment shock and to be more transparent with respect to their terms,” Bernanke wrote. [Washington Post]