Any Late Night Economists Up ??? - Re: Fannie Mae\Freddie Mac ???

[WillyT]

Government Plans Takeover Of Fannie Mae, Freddie Mac

Link: http://www.huffingtonpost.com/2008/09/05/government-nears-deal-to_n_124405.html

Would the return to enforceable Anti-Trust Laws in some form or another, prevent future tax-payer bailouts???

IOW... if I remember correctly.., one of the excuses for bailing out Chrysler back in the 80's, was that it was too big, too important, and would cost too many jobs to let fail.

It seems that nowadays... we are bailing out companies that, if they failed, could lead to a complete meltdown of the entire market .

Question: Should any company be allowed to get to that potentiality?

:shrug:

[still_one]

1. It will cost tax payers billions. Stockholders most likely will lose everything

bond holders most likely will be OK

[WillyT]

2. Could You...

Please explain that in the simplest terms, for us simpletons???

And again... would anti-trust laws help???

:shrug:

[still_one]

5. In simple terms too many loans fannie and freddie bought have defaulted

Oversight was provided through HUD on the mortgages Fannie Mae could buy. The problem is that oversight and lack of regulation has been whittled away through the years, and credit quality of the mortages they were buying should NOT have been allowed

http://www.fanniemae.com/aboutfm/index.jhtml;jsessionid=ZZKXBNXE4RB1PJ2FECHSFGA?p=About+Fannie+Mae

http://www.fanniemae.com/aboutfm/charter.jhtml?p=About+Fannie+Mae

[girl gone mad]

11. billions if we're lucky. n/t

[WCGreen]

3. Fannie and Freddie are quasi public sector institutions.

Look, the loans that Fannie and Freddie are backing were strong, they had to go through a whole vetting process in order to qualify for these loans.

The foreclosures in other higher risk area, the sub prime loans, for instance, are putting such a strain on the housing market that people can't get out from under their legitimate mortgages. This is a real problem and has nothing to do with Freddie and Fannie being reckless. It's the cowboy mentality of these predatory lenders that caused all the problems.

[WillyT]

4. OK... I'm With Ya...

Still does not address the apparent reality that if these fuckers were to fail, the entire market could go into meltdown!!!

Would breaking them up\anti-trust laws, fix that problem???

:shrug:

[WCGreen]

6. The worst thing to do would be to shut them down.

The feds will back them until the housing market stabilizes then they should be okay.

[TwixVoy]

7. No

because this was not just one "big boy" playing the game. Tons of institutions were in on it.

And this is just the start. Credit cards and other loans are next to start defaulting in mass numbers.

[TreasonousBastard]

8. That's not an easy question to answer...

because it's not just about stockholders or jobs.

In Chrysler's case, it was about a large percentage of American factories that would be closed down in one fell swoop. Chrysler didn't just make pickups for urban cowboys and ugly cars-- it was a major military, government and industrial supplier. It may even still have been in the air conditioner and refigerator business at the time. Closing down something that big would have ripples throughout the entire economy. It would have also left us with a lower manufacturing base if we needed one, like another major war or some foriegn suppliers being closed off. At least those were the arguments made at the time.

So, should the country be held hostage because of bad management or bad luck in one huge company? To what extent should regulators tell the company how it should be run? Regulation is necesary, but do you draw the line at accurate financial reporting or passing judgment on new car models?

Fannie and Freddie are essentially the worst downside of democracy or government ownership, and might end up as the libertarians' poster kiddies. The bosses of Enron were crooks under deregulation, but Fannie and Freddie are going down because Congress gave them special treatment. They were excused from even the tepid regulation of the times because they were too close to the government and were "special"-- gummint sponsored entities that could do no wrong because they were sorta gummint. Congress fell way down on the job with oversight here.

When we talk about "bailouts" we have to be careful about just who we're bailng out. In Enron's case, the stockholders got squat, but the powerlines still had to be up and gas had to move through the pipes, so whatever money had to be spent got spent. With bank failures (except for the lucky and connected like the smart Bush brother) stockholders get wiped out, as they should, but depositors get their money, or most of it.

With investment banks, it's pretty much the same thing-- you can't just let them fail because they happen to hold trillions of investor money in their accounts-- certificates, bearer bonds, mortgages... all sorts of things are lying around and if you just let a Wall Street pig fail, all this stuff gets lost.

Sometimes, the crooks get away with it. Well, if the choice is nailing the crook and taking thousands down with him or saving the thousands and letting the crook go-- ya just gotta do what you gotta do.

[A HERETIC I AM]

10. It should be noted that Chrysler paid all that money back.

What Chrysler got back in the 1980's was loan guarantees from the US Government. They paid those loans back, with interest, in full.

BTW, the legislation that authorized those loans was signed by President Carter.

[JDPriestly]

9. Supply side economics.

It's trickle down, except what is trickling down isn't what was promised.

High unemployment, scarce money supply -- it's the worst of all possible worlds.

And you can't blame Congress. They have acquiesced to all of Bush's demands. They haven't rocked the boat. The problem is that the extremist economic views of the Republicons just don't work. They never have. Lower taxes on the rich, my eye. Outsource jobs, my eye. Import junk, my eye. Keep wages low, my eye. The Republicons are just stupid. That's the problem.

It's 1929 all over.