The collapse of Fannie Mae and Freddie Mac is the collapse of the U.S. home mortgage market.

[No DUplicitous DUpe]

Posted with permission from http://www.saneramblings.com

Dear Reader,

The collapse of Fannie Mae and Freddie Mac is the collapse of the U.S. home mortgage market. If they don't keep buying mortgages from lenders, most lenders will cease to loan and real estate values will collapse as well.

And it won't stop there. If Fannie and Freddie collapse, U.S. and global financial markets will topple with them because so many banking and investment firms in Europe, Asia and the Middle East also own huge portfolios of mortgage-backed securities.

A collapse would force Fannie and Freddie to quickly liquidate their mortgage backed securities at fire sale prices. As that happens, a panic would spread among the banks and investment firms for who would buy their portfolios and at what price? Many of them would be insolvent.

The U.S. government can't let Fannie and Freddie fail and will make massive taxpayer guarantees. But that may not be enough. The U.S. government is by far the biggest debtor nation in the world as it constantly borrows money to fight its wars, build new weapons and run 747 military bases.

It already depends on China, Japan, South Korea, Russia, Saudi Arabia and many other nations to help pay its bills. Because the U.S. dollar is the weakest it has ever been and falling, those who loan to the U.S. government are paid back in dollars losing their value.

These nations may not want to provide more money to what most view as a grossly mismanaged U.S. government. If it comes to it, this means like any good junk dealer, they will purchase U.S. assets for so many cents on the dollar, as they acquire America.

From your perspective, if the U.S. goverment makes guarantees and Fannie and Freddie falter, your tax bill could jump sharply. And if you have a home to sell, you'll sell it at a big discount to attract a buyer. Because most buyers borrow to buy a home, you'll have to be the lender.

Even that won't guarantee a sale, because most buyers have to sell a home to buy your home. That means they too will have to discount their price and very likely become a lender.

So please brace yourself for a very bumpy ride, for even if Fannie and Freddie are bailed out, this is just the beginning.

The good news is we have each other and together we will get through this financial crisis. And like those who grew up during the Great Depression, we will become far wiser in managing our money.

For smart savings tips you can use today, please scroll through "How To Protect Yourself From The Coming Financial Crisis," on this website, http://www.saneramblings.com.

[Better Believe It]

1. K&R

[No DUplicitous DUpe]

2. Thank you for keeping this visible.

[indepat]

3. Well, by nab, we might not have houses, jobs, or food, but we are fighting perpetual pre-emptive

wars, have the biggest stockpile of the most sophisticated weaponry the world has ever known, and 747 military bases. So who is worrying about the economy, working, eating, having a roof over his/her head, the infrastructure, pubic health, or the environment when junior is keeping us safe from terra, so all the rest of that stuff having nothing to do with national security will just have to take care of itself. :D

[kestrel91316]

4. Goodbye, middle class. Wow, Bushie, ANOTHER Mission Accomplished (TM)!!

[Blackhatjack]

5. Fannie and Freddie CANNOT FAIL .... think of all the ultra-rich people losing their $$$$

You can kiss the dollar good-bye if Fannie and Freddie Mac are allowed to fail, because that means the last firewall has been breached.

IF we can give no-bid Billion Dollar contracts to Halliburton and Blackwater, surely Fannie and Freddie will get what they need to remain in business.