Should we, the taxpayers, guarantee the investments of stockholders...?

[kentuck]

...in Freddie Mac and Fannie Mae? Even if they thought or assumed that their investments were guaranteed by the Federal government? They never imagined that they would be subject to the same rules as other investors in the market. They had a no-lose taxpayer-backed stock deal. What could be better?

They were like the middle-man for banks, hedge fund operators, and other lending institutions where they would accept all the bad paper that these people would make on sub-prime loans and just bad credit deals with credit risky customers. So we ended up with a huge housing bubble and they ended up with a trainload of bad mortgages. So now, after they sold the rope with which to hang themselves, they want us, the taxpayers, to bail them out.

After all, they are too big to fail. So we have the Treasury Secretary on TV this morning re-assuring the American people that our banking system is sound. Yeah, it's about as sound as a big stick of cotton candy. And the stockholders in these banks want us to guarantee all their stocks at a guaranteed price.
Doesn't this sound like a really super deal to you? :mad:

[Taverner]

1. To me, the bailout is better than the subsidies they already get

I would rather end the subsidies and keep the bailouts.

But you can't have both.

[Bluzmann57]

2. No

Nobody guarantees my investments so why should others be guaranteed? Well, let me correct myself, the FDIC guarantees things up to $100,000 and I am nowhere near that range. But people should realize that that is the max and should figure out some way to not lose their asses.
Yes, I am poor and quite possibly do not know what I am talking aboout. Neither the first or the last time for that scenario.

[mmonk]

7. If the mortgages aren't guaranteed, more failures will happen

and there won't be mortgage money for others to buy a home as well as total collapse in equity that will spare no American.

[gateley]

3. Doesn't "guaranteed by the Federal government"

essentially mean guaranteed by the taxpayers?

[mmonk]

21. Of course. But I prefer the pain of guarantee than the pain of further collapse

[kentuck]

24. I would prefer "shared" pain...

And not let bad investors off the hook without a penalty. They should be treated just like any other person who loses in the stock market. I lost a bunch of money when the tech stocks went under and no one offered me the price of the original stock.

[stray cat]

30. Absolutely agree - look at the poor workers who invested in Enron...

They were hung out to dry.

[mmonk]

4. We have to save the mortgage market or there won't be

the capital guarantee. Whether this is the best method is debatable but to save it isn't. Since the 90's, non bank or non regulated mortgage entities increased to 70% of the market. We need to reinstate the FHA guidelines and sound regulations while insuring the coverage.

[kentuck]

10. It's not going to be painless...

That's for sure. The question is, should these stockholders feel some of the pain also?

[mmonk]

26. That may well be the remedy but the idea of all the stockholders

being rich gamblers rather than common people with vested retirement money and such or being broader based isn't necessarily true. I think the best solution is to limit the damage as to not be far reaching. We'll see what action is taken and how painful. The real culprits are the issuers of sub prime mortgages or non conforming loans and secondly, those that continued to buy them on the secondary market. The common stockholder of Fannie Mae stock is not.

[kentuck]

28. Why should Fannie Mae stockholders be any different from say....

K-Mart stockholders? Or Enron stockholders? Why?

[loveable liberal]

5. not for the idle rich. If you are living off dividends then tough hop..

A robust social security system would ensure no one would live in abject poverty. But Vegas doesnt return your gambling losses, neither should the american taxpayer.

[ikojo]

41. I have a friend who earns about $14k a year

as a result of paid work but made over $100k in 2007 because of investments and a trust fund started by daddy. No, I don't think people like this need to be bailed out. This friend told me that GENERATIONS in the family will not have to work for a wage because of trust funds.

[PDJane]

6. No.

What should be done is to nationalize the asset. Bailing out the shareholders is dumb; they're not the ones who are going to suffer most.

[mmonk]

9. I agree in principle but many retirement fund portfolios will

collapse on people that didn't invest directly but through funds.

[kentuck]

12. Did they invest with the understanding that there was no risk?

The stock market is a sure bet?

[PDJane]

16. That's the problem, isn't it?

the stock market is a big risk.

I agree that these corporations will have too much effect if they are allowed to crash. However, if the taxpayer is going to pay for the assets, then the taxpayer should own the assets, and the loans should be made to the benefit of the taxpayer.

[mmonk]

17. No. But the premise of not helping the stockholders

avoid heavy loss would be limited is not real. Many of the Commercial Banks themselves are heavily vested in mortgage backed securities. How many employees and depositors does that subset represent?

[kentuck]

18. Where does it stop?

Do we guarantee every stock in the market? Or should we simply tell folks that they invest at their own risk. It's a crap shoot. It is not a guaranteed investment for retirement. It's a gamble. You bet on the wrong horse and you lose your money. Period.

[A HERETIC I AM]

8. It would be a super deal, if that's what was actually proposed.

Nothing I've read even remotely suggests the government is going to "guarantee all their stocks at a guaranteed price."

[kentuck]

13. From what I have seen from the FED and the Treasury Secretary.....

They want the taxpayers to guarantee these stocks with an "undefined backstop", meaning unlimited. Since the exposure could go as high as $5 trillion dollars, that would be quite a giveaway by taxpayers, in my opinion.

[A HERETIC I AM]

38. First, I think what the guarantee is on is the Bonds, NOT the shares of stock.

Which is quite a different animal altogether.

2nd, the "exposure" could only reach $5 trillion if a shitload more people stopped making mortgage payments. The default rate on Fannie and Freddie mortgages is somewhere below 1%, currently.

But if I'm wrong, I would be happy to read an authoritative article to the contrary.

[kentuck]

39. Yes, I think that is correct.

Only on the bonds. Sell now on the stocks.

[Trillo]

11. We should Guarantee a LIVING WAGE to every worker. nt

[Deja Q]

14. To everyone who WANTS to work, contribute, and grow.

[PDJane]

15. To anyone who can work.......

[stray cat]

19. Why should I send my money to millionaire investors who might suffer a loss in the stock market?

[kentuck]

22. Because they are better than you are...

And they are smarter. They found a scheme to get rich and now that their bubble has burst, they want you, poor taxpayer, to guarantee the price of their stocks. Of course, the brilliant statesmen in the Senate will find a way to "help" them.

[stray cat]

23. Oh yeah - I forgot I'm a worthless drone for a minute here to support the wealthy

sorry, I forgot my place.....

[stray cat]

20. My retirement portfolio is decreasing but the government isn't going to bail me out

[Gold Metal Flake]

25. No, unless they are nationalized again.

Privatization of Freddie Mac and Fannie Mae has been a failure.

[kentuck]

27. Usually if it sounds too good to be true...

It is. When someone says they can get you that $500,000 home with your 20,000 income, then something is not right with that picture? When they say they can get you a sub-prime rate or an interest-only rate, then something is not right with that picture? If you bite on this scam, you pay the price. Let the buyer beware.

[RC]

31. Let the buyer beware even when the seller is a con man?

Don't think so. Most people are not very up in the intricacies of home buying.

[kentuck]

32. In this case, it is also let the seller beware.

The buyer may not be able to afford it and Uncle Sam may not cover for him.

[RC]

29. What needs to be done is to reinstate the law Bill Clinton signed away and

strip the wealth from and send to prison the perpetrators of the sub prime loans. While this is going on we also need to work with the victims so they don't lose their homes if possible. there needs to be a class action law suit against the money companies doing the sub prime loans. Let the share holders take their lumps. Most of them knew what was going on anyway.

[Thothmes]

33. On the surfact, I would probably say no, but

Who are the stockholders. How many Union pension funds hold multimillion dollars worth of these shares to ensure their retirees have a pension when they retire. How many mutual funds hold multimillion dollars worth of these shares These funds were bought are largely supported by mainly small town Americans trying to make more than 2.5% that a bank will offer on their savings. Should we allow these hundreds of thousands of people to get flushed down the toilet because we would might feel good and gloat that a few CEO's & other financial fat cats may also take a bath when the bottom falls out.

[kentuck]

36. I think, by law, all deposits are guaranteed up to $100,000 in banking institutions

After that, and beyond that, you're on your own.

[Thothmes]

40. That is true for cash deposits in bank account.

It does not apply to shares of stock owned by an individual. Nor does it apply to blocks of shares of stock owned by Union pension funds or mutual funds. They are on their own, it the corp collapses.

[MadMaddie]

34. No!! The Rethuglicans wanted a Free Market economy without

regulation and that's exactly what they got!!

This has been a long time coming, just as we the taxpayers bailed out the Airline industry after 9/11, the airline industry is falling appart despite that rescue, their leadership did not change the way they ran things. So shall Fannie Mae/Freddie Mac go ....what makes anyone think that by infusing billions of dollars in these companies that the management of the companies will change the way they do business in a still unregulated or very limited regulated industry?

They won't bail the average citizen out because the citizen shouldn't have overextended himself, why should we bail out two failed companies.

Yes the economy will take a horrible hit but "Free Market baby, Free Market"!!

My grandmother who passed away last October, always said, "A hard head, makes a soft butt"!! And she was right!!

[MasonJar]

35. If the biggest and the greediest always get bailed out, what incentive

is there to ever be honest? We have found out again that honesty does not come naturally to the parasites. Let them take the fall this time.

[KoKo]

37. K&R....