Bailout for Fannie Mae and Freddie Mac??

July 10, 2008

Are Fannie Mae and Freddie Mac headed for a bailout ??

fannie mae and freddie mac bailout

According to former St. Louis Federal Reserve President William Poole, …. Fannie Mae and Freddie Mac don’t have enough capital to weather the worst housing slump since the Great Depression after the stock shares of the two biggest providers of financing for U.S. home loans, fell to the lowest levels in 17 years.

The government sponsored private agencies (GSE ’s) were created to boost home-ownership and together own or guarantee about half the $12 trillion in U.S. home loans in the market.

Treasury Secretary Henry Paulson announced that he’s been assured by the regulator for Fannie Mae and Freddie Mac that the companies have enough capital. Further, our current administration is definitely not inclined towards discussing a ‘bailout‘.

Personally, I am not a fan of bailouts either.

However, as a result, Fannie Mae and Freddie Mac ’s massive position in consumer confidence and its actual dollars in the US credit markets,  their success are critical to any hope of a near-term real estate market stabilization from the recent free fall in home price and over-supply of homes.

If these firms become insolvent, meaning there is virtually no money for mortgage lenders to provide even the most qualified home buyers, I fear that property values will plummet sharply and foreclosure rates could skyrocket.

Just like one analyst noted, “The government can stop the bleeding if they take immediate action”

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Copyright © 2008 By James Wexler, All Rights Reserved. *Bailout for Fannie Mae and Freddie Mac??*

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Written by James Wexler · Filed Under Articles, Lending / mortgages 

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