Battle begins over future of mortgage giants

[AlphaCentauri]

Source: IHT

Now that the government has seized control of the two largest U.S. mortgage finance companies, policy makers and Congress have begun what promises to be an epic political fight over how to restructure them once the current crisis ends.

Democratic lawmakers and Bush administration officials are also engaged in finger-pointing over who should take the most blame for the crisis at Fannie Mae and Freddie Mac.

Even before going into conservatorship, Fannie Mae and Freddie Mac were unique hybrids - and the envy of their rivals - since they enjoyed the benefits of being publicly traded corporations with a taxpayer subsidy because of an implicit government guarantee of their obligations.

Supporters said the hybrid structure harnessed money from private investors to make mortgages more affordable, while critics maintained that the structure simply privatized their profits and socialized their risks.



Read more: http://www.iht.com/articles/2008/09/09/business/future.php

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From the article,

"Finally, there are the free-market theorists, including some in the Bush administration. They favor the ultimate liquidation or break-up of the two companies after the crisis has passed. Under this scenario, the companies would disappear, to be replaced by private-sector institutions that do not enjoy the support of the government."


these suckers wants the government to fix the problem and then they will pick up the profits.

[Joanne98]

1. Re-structure them but keep them nationalized.

[pattmarty]

2. Amen. After we end up paying for them, we (the people)......

.....should end up keeping them.

[phantom power]

3. If they do ever re-privatize...

I hope that

(a) all original shares disappear. All share-holders eat a total loss.

(b) The new companies are "small enough to fail."

(c) They no longer enjoy "federally backed" status. If they ever buy up Big Shitpile again, they can live with their "ccc" rating, instead of some puffed-up "AAA" rating because they're "federally backed"

[On the Road]

4. If They're Too Big to Fail, They Should Stay Nationalized

when conditions improve, the federal government can get the benefit of the interest payments.

The competitive aspects are the secondary mortgage companies are nowhere near large enough to justify socializing the risk. Plus I would rather have a government economist on the GS scale making decisions as opposed to one who can make a six- or seven-figure bonus from being more aggressive.