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Rescue Me
Now that President George Bush has dropped his veto threat, the gargantuan housing bailout is on the verge of becoming law, pending passage in the Senate. Thus, a housing bubble that has long been artificially inflated by the ever-growing presence of the government (and quasi-government) in the lending market, especially the lower-income segments; will now be artificially re-inflated, especially in the lower-income segments, by a government doubling down on its bad bets. Since Fannie Mae and Freddie Mac already have their federally guaranteed fingers in about half of all U.S. mortgages, what will be their market share at the end of this downturn/re-regulation process? Sixty percent? Eighty?
To see one reason why we got so quickly to this point, look no further than this objective news lede in the Washington Post.
The House yesterday easily approved legislation that seeks to slow the steepest slide in house prices in a generation, rescue hundreds of thousands of homeowners at risk of foreclosure and reassure global markets that mortgage-finance giants Fannie Mae and Freddie Mac will not be allowed to fail.
In other news, Jesus yesterday easily approved legislation that seeks to turn water into wine.
|7.24.08 @ 10:08AM|#
LOL, Welcome to the new Regime! All heil Dictator Bush!
LOL
JT
http://www.Ultimate-Anonymity.com
|7.24.08 @ 10:11AM|#
Matt, you think the housing bubble is going to reinflate as a
consequences of this bill?
Really?
You think home prices are going to start rising into another
bubble?
That's quite a prediction.
Nigel Watt|7.24.08 @ 10:20AM|#
Joe, that's really an extraordinary statement, and as somebody who lived through the housing crisis, I'd ask the troll to retract his remarks.
Elemenope|7.24.08 @ 10:29AM|#
In other news, Jesus yesterday easily approved legislation
that seeks to turn water into wine.
Huh. I thought the Sanhedrin slapped that one down on account of
sorcery and blasphemy.
Other Matt|7.24.08 @ 10:29AM|#
Matt, you think the housing bubble is going to reinflate as
a consequences of this bill?
Really?
Oh, he means it, joe, especially that last sentence part.
Idiots aside, I'm wondering if we'll see some kind of new
"mortgage" vehicle come out of this. Rationally, it would make
sense for the lenders to write down debt, as that's what they'll
end up with anyway at the end of the foreclosure. However, the
inequity of this is that they bear the downside risk (especially in
no recourse states such as CA), with no corresponding benefit on
the upside.
There may be such a hybrid beast out there already which allows a
mortgage to become a quasi "equity partner", though I'm not aware
of it if so. If it's not, it's a natural growth pattern out of
this.
I don't know what form it would take, though. Perhaps you take an
80% mortgage, and pay down based on the original amount, but you
pay down to a percentage of that original amount, not a cash value.
So, if you pay it down to, say, 75% and sell the
house/condo/timeshare whatever flavor for a price, the mortgage
company gets 75% of the net sale price after commissions, transfer
fees, and whatever else can't be gamed, regardless.
Obviously it would entail a dramatic shift in the secondary market
as people would not be buying debt instruments so much as something
akin to a REIT, but it's an interesting concept.
Then again, I also hold delusions that we all may walk on water
some day, there may actually be "world peace" which doesn't involve
totalitarian regimes, DC may actually some day conform to the
intent of the Heller ruling, and joe may become an ethical,
intelligent, skin color loving, respectful person. So, on second
thought, just ignore all the above as pure fantasy.
|7.24.08 @ 10:35AM|#
Holy crap. We are so fucked. They're turning a recession into a depression. And they'll use that to expand the reach of the state, thus deepening and lengthening the economic hard times. And even when we come out the other side, the beast's tentacles will still be wrapped around our throat.
Russ 2000|7.24.08 @ 10:36AM|#
Since Fannie Mae and Freddie Mac already have their
federally guaranteed fingers in about half of all U.S.
mortgages,
It's closer to 84% of all US mortgages.
|7.24.08 @ 10:37AM|#
I love the smell of bipartisan consensus in the morning.
Smells like...
money, burning.
TallDave|7.24.08 @ 10:40AM|#
So, now that we're incentivizing incompetence, isn't it time, in that same spirit, to give Congress a pay raise?
|7.24.08 @ 10:41AM|#
If I understand this bill correctly, it would give lenders an option to write down a present loan to 90% of its present value, and negotiate new terms with the homeowner, rather than foreclosing. How does this help a homeowner who's home is 50% of what it was when they bought at the top of the market? Seems to me that the homeowner is better off to let it go through foreclosure, then negotiate with the lender then to get it at something closer to market value. This delays the consequences of an already bad deal to a year or to in the future, when most of these people will be foreclosed on anyway. This is going to blow up in the government's face, big time. Seriously, people, you bought in a highly speculative market. You got burned. Walk away. Rent for a few years and then buy again when your credit gets better. It's not the end of your life, man.
T|7.24.08 @ 10:42AM|#
So basically I'm just a sucker for paying my mortgage on time
every month and not picking up a McMansion on an ARM? I love the
fact that I'm going to be called upon, yet again, to bail out the
stupid, feckless, and foolish and save them from the consequences
of their poor decisions.
Goddamn, but it's mornings like this that make me think Claire
Wolfe was wrong: it's not too early.
|7.24.08 @ 10:43AM|#
by a government doubling down on its bad bets.
This is like doubling down a sixteen with a ten showing; it's such
a bad idea, casinos won't even let you do it.
PFJ|7.24.08 @ 10:44AM|#
Joe, I don't think this is going to reinflate the bubble, but this is clearly going to slow down the correction of the high prices from the bubble. Agreed?
Russ 2000|7.24.08 @ 10:44AM|#
LMNOP,
I should qualify that as 84% of all first liens. Second
mortgages/HELOCs were never bought by Fannie and Freddie if I
understand correctly.
robc|7.24.08 @ 10:46AM|#
I guess all those people who were COUNTING on extreme price
depreciation in order to be able to buy their first house are
fucked.
Oh, and before joe misreads my comments: I think this just means
the fall back to normal prices will be slower and more painful.
Reinflating a bursted bubble doesnt mean "causing appreciation" its
means "work hard to hold in same place". This is a water treading
exercise hoping to hold prices in place until the underlying
fundamentals improve to support them.
If anyone read anything into Welch's comments other than that,
either you or Matt is an idiot. Possibly both. :)
Elemenope|7.24.08 @ 10:48AM|#
So basically I'm just a sucker for paying my mortgage on
time every month and not picking up a McMansion on an
ARM?
Well, duh. People who play by the rule always lose. People who get
caught cheating always lose. You must be feckless AND crafty to
win!
Elemenope|7.24.08 @ 10:50AM|#
I should qualify that as 84% of all first liens. Second
mortgages/HELOCs were never bought by Fannie and Freddie if I
understand correctly.
So, they're Two-face crazy, not Joker crazy.
Phew. I was worried there for a minute.
|7.24.08 @ 10:51AM|#
If I understand this bill correctly, it would give lenders
an option to write down a present loan to 90% of its present value,
and negotiate new terms with the homeowner, rather than
foreclosing.
Why can't they do this without the bill? Doesn't the lender always
have the option of agreeing to take it in the shorts?
|7.24.08 @ 10:51AM|#
Once again, the "reasonoids" show their
inablity to reflect reasonably on their
on their own statements. Perhaps if they
would take a careful look they would see
that it was a lack of government intervention
that caused the housing crisis, not
a surplus of it.
|7.24.08 @ 10:54AM|#
robc
I'm sure that you'll love it when house value depreciation and
foreclosures blight your neighborhood, raise the crime rate, and
destroy your own house's value. But don't worry, you can blame it
all on "teh gubmint".
Naga Sadow|7.24.08 @ 10:55AM|#
Stupid, feckless borrowers! Why didn't they get a magic 8ball like I did?
robc|7.24.08 @ 10:55AM|#
joe,
it was a lack of government intervention
that caused the housing crisis
Bullshit. Federal Reserve. Federal Reserve. Federal Reserve. Repeat
4000 more times until you understand. Fucking around with interest
rates was the biggest cause. (Much like the civil war, focusing on
a single cause is silly)
Personally, Ive never understood how speculators getting screwed
(flippers, people buying ARMs counting on price appreciation to
grow their way to affordable payments, banks, people who own bank
stocks) qualifies as a crisis anyway. Seems like justice to me.
Nigel Watt|7.24.08 @ 10:55AM|#
I'm sure that you'll love it when house value depreciation and foreclosures blight your neighborhood, raise the crime rate, and destroy your own house's value. But don't worry, you can blame it all on "teh gubmint".
Yes, yes you can.
robc|7.24.08 @ 10:56AM|#
joe,
There was only a bubblette in my market. To paraphrase a neighbor
or yours "All housing markets are local."
|7.24.08 @ 10:57AM|#
Now that the wizards at the Federal Reserve have finally
admitted interest rates are too low, the Congress is trying to
prevent interest rates from rising in the housing market. Because
they just realized they fell down on the job, and didn't meddle
enough, previously.
How's the price of gold doing?
|7.24.08 @ 11:00AM|#
Joe, is it possible to have the viewpoint that we are not, in
fact, in a crisis but merely undergoing a correction?
With that perspective in mind, would it be possible to see that the
lack of government intervention allowed for the circumstances for
the correction to be necessary, true... but government intervention
at this point will only prolong the correction rather than, you
know, provide it?
|7.24.08 @ 11:01AM|#
Fannie & Freddie got out of the business of writing high
risk mortgages earlier this year. Actually, the PMI companies
forced them to by refusing to insure those programs any longer. FHA
(govt mortgage insurance)has actually lowered their standards and
are insuring (with taxpayer guarantees) the highest risk loans
now.
How does this help a homeowner who's home is 50% of what it was
when they bought at the top of the market?
There's a real estate market that's fallen by half?
|7.24.08 @ 11:03AM|#
that old hand gaius marius has had some interesting, if gloomy posts on this lately.
|7.24.08 @ 11:05AM|#
I've only written one comment on this thread.
Somebody sure is confident in his ability to hold up his position
in battle of ideas.
|7.24.08 @ 11:07AM|#
gaius has been correctly predicting the burst of the housing
bubble for years.
This legislation is even worse than the farm bill. I didn't think
that was possible.
robc|7.24.08 @ 11:08AM|#
I've only written one comment on this thread.
So, is someone spoofing you or are you a Big 8 football
official?
Matt Welch|7.24.08 @ 11:09AM|#
Joe -- I meant re-inflation compared to what would happen
without said intervention, more than as a prediction of what will
happen to prices short-term compared to recent highs.
I wouldn't be surprised if housing prices reach new highs
within five years, but as I've written previously, I almost always
predict worse economic outcomes than what actually transpire, and
in this case I don't think Fannie/Freddie/Feddie have enough to
power to magically convince buyers and sellers to believe in prices
that -- even while considerably lower -- would have looked
ludicrously high six years ago.
Elemenope|7.24.08 @ 11:11AM|#
Personally, Ive never understood how speculators getting
screwed (flippers, people buying ARMs counting on price
appreciation to grow their way to affordable payments, banks,
people who own bank stocks) qualifies as a crisis anyway. Seems
like justice to me.
It isn't a crisis until the effects domino and all of a sudden my
savings are worthless and nobody will loan even a good credit risk
some credit.
It's like drunk driving; you drink and drive and plow into a tree,
It's hard to cry overmuch. (I'm not totally insensitive; I care
about the tree.) On the other hand, you drink and drive and plow
into my younger brother, I'll kill you.
Episiarch|7.24.08 @ 11:16AM|#
It's The Joker (Professor Chaos) again, joe. I find that I like his work.
|7.24.08 @ 11:18AM|#
Jaybird, robc,
When an event as large and dramatic as this housing/financial
market plummet occurs, the extent and suddenness of the correction
can, themselves, have effects beyond the correction itself. It's
analogous to metal which can easily hold its strenght at 120
degrees and 0 degrees, but which would crack if heated and then
blasted with a very clod liquid.
It's inarguable that we're going throgh a price correction brought
on by a bubble, but that's not the same thing as saying that the
movement of prices back to a rational level is the only
consequence. One possibility would be mortgage lenders going out of
business and other mortgage lenders being so undercapitalized that
it becomes very difficult to get a mortgage. Another is a severe
economic downturn, particularly in areas like Florida and Vegas
that have so much of their economies tied up with home building,
that the demand for housing plummets.
In short, not all price drops, particularly in the short term, can
be assumed to be a rational (in the aggregate) correction back to a
rational level. More likely, we'd be seeing an overcorrection by
the market, which could itself cause the market such damage that it
takes longer to reach that comfortable equilibrium.
So I'm not quite convinced that any intervention that has the
effect of limiting the price drop is, necessarily, delaying the
return to a healthy economy.
|7.24.08 @ 11:20AM|#
Matt Welch,
Joe -- I meant re-inflation compared to what would happen
without said intervention, more than as a prediction of what will
happen to prices short-term compared to recent highs. OK, that
makes sense. I read that line as your prediction of a new housing
bubble.
Warty|7.24.08 @ 11:22AM|#
Excellent, this means I'll be ready to buy a house right at the top of the next bubble.
Warty|7.24.08 @ 11:24AM|#
Er, by the time I can afford a house, the next bubble will be inflating nicely. Stupid bad-at-words-ing.
Rimfax|7.24.08 @ 11:25AM|#
I love how gaius's prescriptions are essentially "we either nationalize this or we nationalize that". I had forgotten about his complete lack of imagination. Does he dream of a federal sandman that tucks him in at night?
robc|7.24.08 @ 11:27AM|#
joe,
It is possible to create a "solution" that merely dampens the
oscillations, to stick with the geeky metaphors. Without it, I
would expect a negative overshoot, followed by a dead cat bounce,
and slowly dampen back to correct. Sure, it is theoretically
possible for the government to dampen the oscillations. However,
that takes energy, to extend the metaphor. In the governments case,
the energy is money.
So, assuming the goverment gets the plan right, it will still cost
something. If I put on my pure pragmatists hat, I might find that
acceptable. However, the pure pragmatist looks at past government
actions and finds it unlikely they will get the plan right. My
theorist hat says its possible for the government to get it right,
but it shouldnt spend other peoples money on it.
I dont have a hat that likes this idea. My illogic hat is at the
cleaners.
BTW, my crazy hat refuses to sell my WaMu stock I somehow forgot I
owned until too late (If you read above, this puts me in the idiot
speculator who deserves to be screwed category). At this point, I
figure I might as well hold and maybe get some benefit out of the
government bailoout.
Episiarch|7.24.08 @ 11:30AM|#
Whoa, thanks, Rimfax. I missed that "p" entirely.
I thought you were doing that intentionally, but that didn't really
jibe with you doing everyone else's exactly. But that's what The
Joker does: create confusion.
|7.24.08 @ 11:33AM|#
I might as well hold and maybe get some benefit out of the
government bailoout.
In the old days, you could take physical possession of the
beautifully engraved certificates, and wallpaper your bathroom with
them.
robc|7.24.08 @ 11:34AM|#
In the old days, you could take physical possession of the
beautifully engraved certificates, and wallpaper your bathroom with
them.
That would go nicely with the Worldcom papered guest bedroom.
Rimfax|7.24.08 @ 11:34AM|#
Hey, Joker, stop stuffing straw in joe's shirt!! Please.
Unlike the relentlessly insulting gaius marius, joe often provides
constructive representations of nonlibertarian viewpoints, and
often demonstrates avenues for agreement. Unless you'd like to turn
this into even more of a libertarian circle jerk, please cut it
out. Or, at least, make it more obvious that you're mocking
him.
By the way, "joe's law" was already invented as "Muphry's Law"
Brian Defferding|7.24.08 @ 11:36AM|#
I can't think of a more wrong thing for the federal government
to do. The beauty of the free market is when a company makes
mistakes, their losses help them learn and avoid it in the future.
This bailout removes that incentive. Along with our deficit
spending the dollar value decreases even more in the future.
I've been dumbfounded before when I see people supporting solutions
that haven't worked in the past, but this one is certainly up there
as one of the worst ideas ever.
Let Fannie Mae, Freddie Mac and Indy Mac suffer from their
mistakes.
Libertarianism is Dead, aka Pe|7.24.08 @ 11:36AM|#
Treasury Secretary Paulson was on CNBC the other day. He said,
"Fannie and Freddie fund 70% of our mortgages."
I don't understand Fannie and Freddie's role in the mortgage
market, but I understand they're unfathomably important. From what
I gather, banks sell mortgages to them and they in turn peddle the
mortgages to America's clientele of bond buyers. They've raked in
trillions of dollars in bonds, I'm guessing.
You can't say that Fannie and Freddie are in a mess because of the
government. If they hadn't been privatised, they wouldn't be
subject to the speculation and vicissitutes of the stock exchange;
and regulations would keep them from reckless loaning. But as it is
Fannie and Freddie are perfectly beyond any ideology: they are a
perfect hybrid of government stupidity and free-market stupidity,
and no one - neither Democrat, Republican, nor Libertarian - knows
what to do with them. Except try like hell to get the water off the
decks with buckets.
There's a good reason we're bailing out these companies. If we
don't, the economy will fail. Fail completely.
Russ 2000|7.24.08 @ 11:40AM|#
More likely, we'd be seeing an overcorrection by the
market...
I agree with that possibility, but we aren't even CLOSE to an
overccorection yet. By overcorrection, I mean falling to standards
tighter than traditional.
And by "traditional", I mean 30-year fixed loans at 7.5% - 8%, 20%
down, purchase price no greater than 3x annual income, and DTI
ratios around 35% or less. Every person who meets these traditional
qualifications has ZERO problem getting a mortgage today - and the
rates for that type of loan are still below 7%.
The problem here is more apt to be that the definition of
"traditional" is much more generous than say 30 years ago. If
traditional today means 10% down, DTI ratio of 40%, and purchase
price of 4x income, then there is a likelihood of an
overcorrection.
But what that means is "overcorrection" is a rather meaningless
concept.
Elemenope|7.24.08 @ 11:48AM|#
I can't think of a more wrong thing for the federal
government to do. The beauty of the free market is when a company
makes mistakes, their losses help them learn
die screaming and avoid so be
unable to do it in the future. This bailout removes that
incentive. Along with our deficit spending the dollar value
decreases even more in the future.
Fixed that for ya.
Otherwise, good point.
|7.24.08 @ 11:55AM|#
robc,
I agree with you about It is possible to create a "solution"
that merely dampens the oscillations, to stick with the geeky
metaphors. I think that an effort deliberately aimed at
"dampening the oscillations," which then looks for ways to
accomplish that purpose and sets price goals and whatnot would be a
terrible idea..
What I wrote was "...that has the effect of" dampening the
oscillations. What I'm saying is, if saving some people's homes and
keeping some lenders in business and other actions done to avoid
major economic harm has the effect of attenuating the price drop,
I'm not just going to assume that any such attenuation moves us
father away from a rational recovery.
Russ2000,
I agree with that possibility, but we aren't even CLOSE to an
overccorection yet.
True, but 1) we haven't hit the bottom of the housing market, and
2) Big Shitpile hasn't really collapsed yet, in the sense of the
big financial houses actually taking their losses rather than
delaying the day of reckoning through creating accounting. Not to
mention, the mortgage-company responses you describe are going to
lag the economic conditions that drive them by some weeks or
months.
|7.24.08 @ 11:57AM|#
I dont have a hat that likes this idea. My illogic hat is at the cleaners.
Awesome.
iowan|7.24.08 @ 12:04PM|#
My house is worth more this year than last year. You can bitch
all you want about corn subsidies, but we're not as totally fucking
crazy as those "sophisticated" buyers and lenders in the bubble
zones.
I say Fuck'em.
tarran|7.24.08 @ 12:09PM|#
Actually, Penn, Fannie May and Freddie mac are a mess
because of the government.
Do you think that the shareholders and the board of directors were
concerned about risk? From their inception, they taxpayer was on
the hook to supply them with an emergency line of credit.
Now, if you cannot lose money, what happens to your willingness to
take risk?
In the free market, bad business decisions manifest themselves in
losses - losses that are hard to recover from. Businessmen who are
afraid of such losses tend to be more conservative and careful in
their decisionmaking.
When you have a speculative bubble, invariably you have some entity
financing the bubble with newly "created" money (this included
things like the King of Mali blowing a whole bunch of gold in egypt
while on Hajj).
The U.S. has a central bank called the Federal Reserve which ran
the printing presses like crazy since Greenspan took the helm. This
supplied newly created money that went to people selling assetts to
the federal Reserve. These guys looked for some place to invest
their money and settled on the mortgage industry. The new money
they invested allowed the banks to offer cheaper and cheaper loans.
This allowed people to pay more for limited housing stock. They bid
up prices on the houses. The lenders and buyers all thought that
these price increases would continue indefinitely and thus
encouraged the buyers to buy more than they could afford, on the
premise they could sell the house in a few years and make a lot of
money.
Eventually, though, panicking at the price increases accross the
board from Greenspan's inflation of the U.S. dollar, his successor
started slowing the printing presses. And boom. The money available
for new loans started to dry up, people stopped buying houses and
high prices. The prices started falling, and people who had counted
on those high prices found themselves facing financial ruin.
Now, do you know what the secret to solving the problem as quickly
and with as little damage to the rest of the economy is?
For the government to do nothing, and allow the bad loans to be
liquidated, the bankrupt businesses to be liquidated and release
their asetts for use by firms conducting profitable business. The
borrowers who lived for a time in houses they couldn't afford to
move into properties within their means.
Of course, this won't happen. The federal government extended what
should have been a 2 year depression (oh I'm sorry we call them
recessions now don't we) into a 18 year one by their desperate
attempts to prop up prices and production levels at the 1920
levels, and it looks like it's going to repeat all the mistakes
again.
BTW, How exactly will the economy fail completely if a giant
mortgage company goes bankrupt?
Will factories be destroyed? Croplands have salt sown on them? The
workforce die horribly of plague?
What will happend is that a bunch of people will have their savings
wiped out (because they invested unwisely). A bunch of people will
have to move into smaller houses or apartments. The price of
housing will decline until it is at the level where the number of
buyers matches the number of sellers.
And that's it.
robc|7.24.08 @ 12:14PM|#
tarran
A bunch of people will have to move into smaller houses or
apartments.
So, are the apt owners who (in my area) were giving away first 3
months free on a 1 year lease pissed at this bailout? This was
their chance to profit after getting killed the last decade.
Brian Defferding|7.24.08 @ 12:19PM|#
Libertarianism is Dead, aka Penn (nice username): It's pretty
easy to know what to do with Fannie Mae, Freddie Mac and Indy Mac -
let them suffer. The borrowers made bad decisions on getting
balloon-rate ARM's and the lenders made bad decisions approving
them. They need to learn. There is no regulation or bailout that
will prevent a future crisis - if anything, an argument can be made
it will only prolong the problem and we'll see history repeat
itself - but when the companies look at their bottom line after
years of bad practices, they'll realize what they did wrong.
I don't think the economy will sink at all without this bailout
bill. We'll be fine. This doesn't really affect responsible
borrowers much, it only affects the irresponsible ones, as it
should be.
|7.24.08 @ 12:26PM|#
I would be with iowan on this one (I bought a house this year
which had been foreclosed and vacant since 2006, for half the price
most of my neighbors have paid over the last decade) except for my
fear that Penn was correct <
href="http://www.reason.com/blog/show/127721.html#1041195">above.
I'm afeared that my ideology may not be sufficient to outweigh my
pragmatism (hey, it's for my kids!)
Mostly I'm just scared about the possibility of a coming
depression; OTOH, I already live in Michigan. How could it get any
worse?
(answer: I could move to East Michigan).
|7.24.08 @ 12:30PM|#
BTW, How exactly will the economy fail completely if a giant
mortgage company goes bankrupt?
In the same way that every bettor at the track that day lost money
when Big Brown lost.
Right?
tarran|7.24.08 @ 12:46PM|#
economist,
Sorry, but I had to make it long. Lest night Penn revealed that he
learned economics from reading Galbraith.
We're not starting with a virgin brain, but one packed with all
sorts of misconceptions here.
robc|7.24.08 @ 1:07PM|#
From the Belmont Stakes Chart:
6 (5) Da' Tara 79.00 28.00 14.80
4 (4) Denis of Cork 5.40 4.10
8 (8) Anak Nakal 7.60
9 (7) Ready's Echo 6.20
Daily Double (10-6) $1,574.00
Daily Double (BROOKLYN/BELMONT) 2-6 $550.00
Exacta (6-4) $659.00
Superfecta (6-4-8-9) $48,637.00
Superfecta (6-4-9-8) $47,309.00
Trifecta (6-4-8) $3,703.00
Trifecta (6-4-9) $3,954.00
Consolation Double (BROOKLYN/BELMONT) 2-5 $7.30
Pick 3 5-10-6 (3 correct) $6,475.00
Pick 4 1-5-10-6 (4 correct) $34,287.00
Pick 6 3/7-4-1-5-10-6 (5 correct) $1,106.00
|7.24.08 @ 1:56PM|#
tarran,
Excellent comment!
That both Fannie Mae and Freddie Mac are by law "Federally
Guaranteed" we the taxpayers have always been on the hook for their
actions. If they act conservatively, we see no benefit, if they act
irrationally we pay the price. Privatized corporation my ass. True
privatization would have opened them up to the full brunt of market
forces with no safety net.
BTW, the same principal applies to the "privatized" Postal Service
and all major US Banks thanks to the resurrection of the FDIC after
the S&L bailout. Though the FDIC isn't quite the same, it still
amounts to taxpayers footing the bill for stupid moves on the part
of companies.
Rimfax|7.24.08 @ 2:42PM|#
Cuz everyone knows that the Hoover and FDR administrations took far too much of a "hands off" approach with their economic crisis.
Russ 2000|7.24.08 @ 7:11PM|#
True privatization would have opened them up to the full
brunt of market forces with no safety net.
Well their market share dropped like a rock 5 years ago. Then they
decided to get in on the "shitty mortgages" bandwagon which was the
perfect cue for all their competitors to get off said
bandwagon.
Their shareholders sort of forced them to, but then again their
biggest shareholders are government pension schemes like CALPERS,
etc. We're just stacking the pyramids.
highnumber|7.24.08 @ 8:58PM|#
My house is worth more this year than last year. You can
bitch all you want about corn subsidies, but we're not as totally
fucking crazy as those "sophisticated" buyers and lenders in the
bubble zones.
Oh, yeah? You must mean your old house, because, unless you bought
your house last year and then sold it this year, you have no idea.
Appraisers did help inflate the bubble to begin with, ya
know.
Other Matt,
I do recall hearing of such a product as you write of. I do not
recall the exact terms, and I can't find the article I read about
it. Might have been in Newsweek or Time.
JB|7.24.08 @ 10:12PM|#
I can't wait to buy my $10 million house and get bailed out by
suckers like Joe. In fact, I can't wait until Obama is in the
Whitehouse and waves his magic Obama-wand and gives everyone free
money.
No one will have to work anymore! Livin' in a gangster's (ahem,
socialist's) paradise!
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