Freddie’s decision to tap the $200bn facility pledged by the Treasury when it seized the company and its peer, Fannie Mae, will add to the government’s bill for rescuing the battered financial sector.
I got an idea. Let Fannie and Freddie go under.
Spend the billions instead to sponsor new entities to do the exact same thing as Fannie and Freddie.
Let the investors in Fannie and Freddie eat the losses, not the taxpayers.
Let the taxpayers front the money to create new entities with clean slates. It will be far cheaper.
{ 8 comments… read them below or add one }
Philip 11.16.08 at 1:18 pm
Agreed. And the automakers? Not a dime until they put together a plan that reasonably spells long term “profitability” rather than quarterly earnings.
ks 11.17.08 at 12:40 pm
It is too late.
In Washington the debate is over on bailing out Fannie/Freddie.
I agree: no bailout for automakers. However, a bailout for automakers is no worse than a bailout of AIG, Fannie/Freddie, etc.
Once the bailout train leaves the station it is hard to stop.
The most rational response of any individual or company is to try and grab as much bailout as possible. Personaly, I want a whole lot of bailout money. I want ALL of it. Gimmie Gimmie Gimmie my bailout cash! Now!
Flower Mound Real Estate Blog 11.17.08 at 2:38 pm
I agree that fannie and freddie should go down. By saving them from failing we are only artificially inflating home prices. This is unfair to the young couple that is wanting to buy their first home and have to do it with inflated homes.
Brian McMorris 12.07.08 at 12:22 am
John
I missed your post here on Nov. 16 as I have been traveling quite a bit.
You said, “Let the investors in Fannie and Freddie eat the losses, not the taxpayers.”
Just so you know, I did hold Fannie as an investor (in a fund, not directly, which I would not have done had I known) and I lost all my investment in Fannie when it was nationalized back in October. I am not sure what you mean then by your statement. The investors now in November are us taxpayers, one and the same. And we will eat more losses as taxpayers too, lots of them, to solve this economic and housing crisis.
I think people need to start wrapping their brains around this fact. The Congress is wiping out “the investors” whenever it “bails out” some company. It does so by taking the assets of the company in return for money to prop up the company’s balance sheet, which is the right thing to do to save the company and economy, but is hardly some windfall for “investors”. Just the opposite.
These supposed bailouts are like having a nice meal at your execution. You eat and then you die. This is what will happen to GM and Chrysler investors, and probably Ford as well. We need to stop wishing for the death of all investors because them is us.
John Wake 12.07.08 at 2:23 pm
Brian, thanks. It’s hard to tell the players apart without a program, who’s getting billions in loans and who’s getting wiped out.
It’s confusing. I thought the government was still backing some investors in Fannie and Freddie. You need a PhD in Finance to figure this stuff out.
Brian 12.07.08 at 9:40 pm
John
This is a pretty good summary of the takeover of Fannie and Freddie by the Feds. I would think most any RE or Mortgage professionals would want to have a good take on what happened given the importance of Fannie and Freddie to the home markets.
http://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac
Brian 12.08.08 at 7:58 am
John, I also think your perspective is a common mispercption, even held by current automotive execs (as shown late last week and over the weekend). So far as I can tell, there are no financial (aka Wall Street) companies who have received a free handout from the Feds. Every one of the supposed “bailouts” was really a takeover. This has been very poorly communicated by the White House, which makes a habit of poor communications (Pres. Bush is the antithesis of Ronald Reagan, the Great Communicator). The past months the Feds either took over a large share (80%) of a company (AIG, Fannie, Freddie, Citi), or it forced the company into receivership (Lehman) and then arranged for the bankrupt company’s assets to be transferred to another sometimes in name (only) of a merger (Wachovia, Wamu, Countrywide, Morgan Stanley, Merrill Lynch, Bear Stearns). After the pre-arranged shotgun marriage, the Feds then have backstopped or guaranteed the assets of the bankrupt company, but have a claim on those assets by that guarantee.
The point is there is no free money. You want to dance with the Devil (the Feds) be prepared to give away your soul. This is a message for the auto industry and any other industry that thinks taxpayers are giving away money with no conditions. We aren’t!!!
Graham 12.26.08 at 12:28 pm
I agree. With everything here. What a lot of people don’t (or may be do) realize is that they don’t pay 5% or 6% or 7% for the mortgage interest they pay any where between 200% and 400% I am sick of working my but off just so these fat cat’s in the financial sector can have million dollar boats to play around with. These companies bought it on them selves. It the biggest Scam out there.