Freddie....then Fannie....What's Next?

Freddie Mac…..Fannie Mae……What’s Next?


Is anyone else concerned about the recent announcement that the Federal Government has seized Freddie Mac and Fannie Mae? I mean a few weeks ago they announced that the good ‘ole Feds had “shored up” the lending institutions. Now, almost overnight, the Feds announce that that have taken control of the two largest lending institutions in America…..I guess the shoring up didn’t work so well….

Kinda sounds like what happened to Bear Stearns. Remember them? Their employees show up on a Monday morning to find out that the company was sold, the Government was stepping in, and their stocks were worth $2 per share. The whole country found out that Bear Stearns had failed that Monday morning…..only, they didn’t really fail….they just had some back room dealings with the government to bail themselves out of the problem. It seems that the government had to guarantee the buyer of Bear Stearns that they would not lose money on the deal. Nice.

What’s going on when major, major decisions are being made by our Government that seem to be, for all intents and purposes, in the dark to the average person on the street?

What angers me is that I have heard Republicans speaking about the mortgage crisis and say that they weren’t inclined to help homeowners who were behind on their adjustable rate mortgages because they didn’t feel like they should “step in and relieve the consumer of the consequences of their bad contract.” They are spouting the “free market” mantra when it comes to the home buyer.

BUT, when it comes to the large lending institution, all of a sudden it is all right to come in and relieve the lender of the consequences of their bad decision-making. Maybe this shows the hypocrisy of the free market crowd, but it certainly shows that the free market, which eschews regulation, hasn’t been doing that great a job recently. I mean, if we’re going to believe in free market economics, why should the government even step in to “shore up” failing institutions, much less take them over to guarantee that they stay in business.

You see, we can either spend money regulating or we can spend money bailing out failing companies. Either way, we get to spend money. It seems to me it would have been better to regulate the industry in the first place. Failing that, it would be better to work out a deal to keep homeowners in their homes and spend the money to refinance people who had gotten behind on their mortgages. Obviously, the Government’s choice not to provide help to those homeowners hasn’t been a good idea because it has lead to the collapse of Bear Stearns, Freddie Mac, and Fannie Mae.

Ironically, the poor people who lost their homes and possibly much more are now going to be called upon to share in the tax burden of paying for the bail out of the very people who kicked them out of their houses.

Seeing Red,

Blawgerman