11 July 2008
To Bail or Not to Bail
Posted by Joy Bischoff under: World Economy .
Fannie, Freddie Too Critical to Fail, Lawmakers Say
By Dawn Kopecki
July 11 (Bloomberg) — Fannie Mae and Freddie Mac, the largest buyers of U.S. home loans, are too big for the government to allow them to fail, leading Republican and Democratic lawmakers said.
A government takeover of one or both companies is one of several options that have been considered by White House officials, according to a person familiar with the discussions who spoke on condition of anonymity. Senior Bush administration officials are considering placing either or both firms in a conservatorship if their problems get worse, the New York Times reported, citing people briefed on the plan whom it didn’t name.
The companies, which own or guarantee about half of the $12 trillion of U.S. mortgages, can count on a federal lifeline, said Republican Senator John McCain, and Democratic Senator Charles Schumer. The remarks by the presumptive Republican presidential candidate and head of the Joint Economic Committee indicate Congress would push the administration to use government funds to prevent the companies from failing.
“They must not fail,” McCain, of Arizona, said yesterday during a campaign stop in Belleville, Michigan. Fannie Mae and Freddie Mac “are vital to Americans’ ability to own their own homes,” he said at an earlier stop in the state, one of the worst affected by the surge in foreclosures.
8 Comments so far...
Cameron Says:
11 July 2008 at 9:30 am.
ck decline as Fannie, Freddie fall sharply
Friday July 11, 10:04 am ET
By Tim Paradis, AP Business Writer
Stocks tumble in early going amid worries about Fannie, Freddie; oil sets fresh records
NEW YORK (AP) — Stocks tumbled Friday as investors focused on troubles at mortgage companies Fannie Mae and Freddie Mac and watched oil prices climb further into record territory.
Fannie and Freddie at times each lost more than 40 percent on growing speculation that a government bailout is needed. A collapse of the two financiers would cause further shock to the financial system, and trigger more losses to banks and brokerages with significant holdings of mortgage-backed securities.
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Global banks and brokerages have scrambled to sell assets and raise capital in an effort to offset nearly $300 billion of write-downs linked to the credit crisis. Citigroup Inc. announced Friday it will sell its German retail banking operation to France’s Credit Mutuel for $7.7 billion.
Meanwhile, oil continued its ascent on supply concerns. A barrel of oil vaulted to a record of $147.27.
The confluence of negative news offset a mostly positive quarterly report from General Electric Co. The conglomerate that owns everything from television network NBC to jet engine plants reported second-quarter profits that met analysts’ expectations. However, the outlook across its business lines was mixed.
http://biz.yahoo.com/ap/080711/wall_street.html
T. Fan Says:
11 July 2008 at 12:25 pm.
Self corrections are necessary to help fix things but we don’t want lending institutions this powerful to completely crash. Others would follow.
SGS Says:
11 July 2008 at 2:25 pm.
Fannie/Freddie actually specialize in high-risk mortgages, like those with bad credit, jumbo mortgages and more. Of course, they are losing money at crazy pace, because of the risks involved. They never should have been formed in the first place, nor should they be regulated by the Congress. Read more about them here.
Jesse Says:
11 July 2008 at 3:23 pm.
SGS, good article. I didn’t know the situation and that cleared it up. No bailout please.
Joy Bischoff Says:
11 July 2008 at 4:48 pm.
If we bail out high risk loan companies, then what is to stop further abuse of the system in the future? High risk will not be so risky if they know there is a bail out coming, but it will be very risky to our whole economy because of the price tag.
THINKING Says:
11 July 2008 at 8:29 pm.
These drips have a larger agenda that Dr. Robert A Pastor has them working on. There is a 200 page document called the Blueprint that the Feds need a crisis to implement. This new world financial control agenda needs to be stopped. Our congressmen need to stop this and our congressmen need to hear from us.
http://www.treas.gov/press/releases/reports/Fact_Sheet_03.31.08.pdf
THINKING Says:
13 July 2008 at 10:45 am.
This is the better address for the 212 page report. Sorry,
Cavetrollhead Says:
18 September 2008 at 11:49 pm.
I think a self correction would be good but the republicans will get all the blame and this will cause the non-thinkers who blame or credit all to the president to install democrats, which will make things much worse.
People forget that the congress oversees these institutions and that congress has been dominated by the DEMS for two years and was more or less evenly split the two years before that. Just like with the price of oil, congress has the power to change it but will try to blame the party of the President.
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