Saturday, February 27, 2010

The Illogical and Economically Damaging Policies of Fannie Mae and Freddie Mac

There are illogical and economically damaging policies of the government run Fannie Mae and Freddie Mac mortgage giants which will impact taxpayers for years to come. Washington in its quest to buy votes by placing everyone they possibly could in a home must now face the economically damaging policies set forth by these two agencies. Fannie and Freddie own well over $5 trillion dollars in mortgages in our credit markets. How much of that $5 trillion is good or bad is truly unknown to the taxpayers who are underwriting them. You see there is no accounting of the actual exposure to the mortgages for taxpayers. Is $4 trillion bad debt? $3 trillion? Pick a number and your guess is as good as mine. Taxpayers have no idea how much of their monies have been wasted by these two agencies of economic liberalism. My realistic guess is that half of their portfolio will be written off as either bad debt or drop in value over the next five years. In other words taxpayers will be out $2.5 trillion dollars of their monies.
I wonder why the Obama administration is afraid of accounting for our monies? Would it be damaging? These failed housing policies continue to go unchecked in Washington. Taxpayers need to demand to see where our monies are being spent once and for all.


SJ Reidhead said...

Excellent post, but it does anger me. I keep thinking we are going to hear more about Fannie & Freddie, yet we do not.

Rather makes one wonder what shoe will fall next.

The Pink Flamingo

David X said...

These are government guaranteed securities and Freddie/Fanny are broke. They can't even pay the interest on the debt they owe, which means that the debt at these two GSEs can only grow larger. How are they supposed to wind these down?

Speculation is that the Fed will purchase all the mortgage paper and make Freddie/Fannie whole prior to the GSE being reduced to administering the mortgages on behalf of the Fed (no new underwriting).

If the above is true, pull a bill out of your wallet and read what is says across the top: "Federal Reserve Note". Soon, your greenback will be backed by trillions of toxic mortgage paper. If true, gold is the only defense, God help us.

More here.