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Feds bailout Freddie and Fannie Mac

Original post made by Left of Boom, Another Palo Alto neighborhood, on Sep 7, 2008

The Federal government officially took over Freddie and Fannie Mac, two companies which guarantee almost half of the $12 trillion in outstanding mortgage debt. Placing these two companies into conservatorship is potentially the largest bailout in U.S. history. Combined they have $1.6 trillion in debt. This bailout dwarfs the earlier bailout of the savings and loan industry after deregulation.

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Comments (19)

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Posted by Greg K
a resident of Downtown North
on Sep 7, 2008 at 10:58 am

Fannie and Freddie have been criminally corrupt for several years. Incompetent regulation has led to this mess. Now the tax payers have to bail them out. Hopefully the bail out will not cost as much as the Iraq war.


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Posted by Left of Boom
a resident of Another Palo Alto neighborhood
on Sep 7, 2008 at 3:43 pm

Left of Boom is a registered user.

If you mean Greenspan's failure to curb illegal lending practices, then I agree. The Federal Reserve could have regulated sub-prime loan practices and did not.

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Posted by OhlonePar
a resident of Duveneck/St. Francis
on Sep 7, 2008 at 4:17 pm

This is going to hurt no matter what happens. I've read some stats saying we've got a house surplus of millions of units. So huge inventory combined with tighter lending practices . . . must go light candles and mutter incantations for the continued well-being of the Mighty Google and its little buddy Facebook.


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Posted by Gary
a resident of Downtown North
on Sep 7, 2008 at 4:28 pm

"I've read some stats saying we've got a house surplus of millions of units"

OhlonePar,

Translation: There are millions of houses to move into, when the price is right.

It may be too difficult for you to understand, OP, but supply and demand rules the world of economics. There are both winners and losers that fill gap between the two. Another word for it is: Freedom!


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Posted by OhlonePar
a resident of Duveneck/St. Francis
on Sep 7, 2008 at 4:39 pm

Gary,

If you can't get a mortgage, you're not moving in. Stuff is just sitting right now. There are far more houses than buyers.

A lot of those developments are in places that don't have a local economy that supports that kind of population. They were built with long-distance commuters in mind. With oil being so high, the commute's not worth it. Between that and the tightening of mortgages, the demand is gone. If you work in Sunnyvale and can now afford Fremont, you're not moving out to Merced.

Some of these houses are never going to be worth it. By the time there's demand, newer, probably greener, homes will be bought instead.


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Posted by Gary
a resident of Downtown North
on Sep 7, 2008 at 4:48 pm

"Stuff is just sitting right now. There are far more houses than buyers."

OhlonePar,

Translation: Prices will fall, until there is a buyer. It is the second oldest negotiation method known to mankind.


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Posted by OhlonePar
a resident of Duveneck/St. Francis
on Sep 7, 2008 at 7:45 pm

Or they will deteriorate until no one wants to buy them.

Or the owners, not wanting to lose their shirts, will start renting them. The empty houses and low rental will then make the developments even less desirable, while their relatively poor quality of construction in many cases will make for

Read an interesting article in Harpers some months ago how the exurbs are our future slums. Made a good case for it. It's a huge surplus.

There are plenty of places that were simply deserted historically. No reason why this won't happen with these developments--particularly the ones with no amenities and in the middle of nowhere.


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Posted by OhlonePar
a resident of Duveneck/St. Francis
on Sep 7, 2008 at 7:49 pm

Oops, incomplete sentence.

The relatively poor quality on construction will result in relatively rapid deterioration.

One of the costs of "freedom" is bankruptcy. Which is what we're basically seeing. Unfortunately, regulation didn't keep up with changes in the market, which means that no one's quite sure how widespread the potential damage is to the economy.

I don't quite think you get how really, really big the problem is.


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Posted by Outside Observer
a resident of another community
on Sep 7, 2008 at 8:14 pm

OhlonePar,

When I see abandoned and bulldozed Eichlers in PA, then I'll believe you.

I'm not saying that in spite, but believe it's a necessary part of a "correction" decades overdue.


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Posted by OhlonePar
a resident of Duveneck/St. Francis
on Sep 7, 2008 at 10:32 pm

Outside,

I'm not talking about Palo Alto. We weren't overbuilt here and we have more jobs than residents. We're not the exurbs, we're in an urban area that can't readily expand.


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Posted by charles
a resident of Professorville
on Sep 7, 2008 at 11:06 pm

OhlonePar,


I suggest that you take a course in economics and read less from that insect scientist @ Stanford who has been wrong about every prediction he made, he clings to Malthus and Marx, I know I had the unfortunate experience of having him as a professor.

Have you been to Holland or Singapore ? Palo Alto has lots and lots of space by comparison.
Development decisions should driven by economics, who do we want here and how can they add value.

I realize that there is a diminishing base of socialists in this town, but they will soon be gone to retirement.


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Posted by Jed Cooper
a resident of Barron Park
on Sep 8, 2008 at 8:04 am

The missing part is the FBI and Treasury Department along with the Justice Department bringing charges to the management jackals of both these loan agencies.

The perp-walk is good exercise and necessary to keep people honest.



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Posted by FM
a resident of another community
on Sep 8, 2008 at 11:40 am

Criminally corrupt, Now the taxpayers have to bail them out. Like the City of Palo Alto? By passing bonds?


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Posted by More of Our Money
a resident of Another Palo Alto neighborhood
on Sep 8, 2008 at 11:46 am

As the crime wave crumbles---

Fannie Mae CEO Daniel Mudd and Freddie Mac CEO Richard Syron are top white collar crime wave makers.

Both were heavy congressional lobbying organizations that funneled tremendous amounts of money to Democrat causes.

Fannie and Freddie were "Kings Of The Hill," according to NPR Web Link " Noted that the mortgage giants had $170 million in lobbying bills in the past decade and spent $3.5 million on lobbying just in this year's first quarter, spreading their largesse among 42 outside lobbying firms.

Ouch who do you think was paying for this? Check out that mortgage you have, is it with Fannie Mae or Freddie Mac? Do you think it could be because of all the money they're allowed to give to the Democratic party via lobbying that you have to pay and pay and pay?

Way to go Democrats.


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Posted by Sharon
a resident of Midtown
on Sep 8, 2008 at 12:07 pm



Basically, the feds are taking Fannie and Freddie over in a conservatorship, which is less than a receivership and full nationalization, but does cut out private investors by dissing the common-stock and preferred-stock shareholders.

The most important development is that all the bonds are now totally covered by the U.S. government.
So stocks soared this morning by over 300 points, though the gain is only 160 as of this writing.

Speaking of Ms. Palin and her sidekick John McCain, polls are showing a huge Big Mac surge. Even Intrade shows a virtual dead heat. Maybe that's what drove stocks up today!


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Posted by Left of Boom
a resident of Another Palo Alto neighborhood
on Sep 8, 2008 at 2:03 pm

Left of Boom is a registered user.

More of Our Money,

While I'm sure your News Sources are claiming that Freddie Mac and Fannie Mae are lobbying the Democrats, since the Republicans have been in power for almost 8 years, this seem highly counterproductive. It's also not born out by actual funding records. The actual record of lobbying payments show a pretty even pattern of throwing money at politicians while favoring the party who holds the most influence.

Web Link

Web Link



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Posted by Perspective
a resident of Midtown
on Sep 8, 2008 at 2:29 pm

I can only hope that we hand Fannie and Freddie back to the private sector as quickly as possible, with the absolutely, written in stone, guarantee that we will never, ever, bail 'em out again, that it is NOT backed by the taxpayer.

Most of the ills stem from the (apparently not erroneous since it happened) belief that F and F were backed by the taxpayer, though they were NOT. This led to a shoulder shrugging approach to lending, "Why not? Not our problem if we blow it" which led to most of the troubles we have now.

If it doesn't go back to completely private..we will see more of the same.

Hey OP, guess what? People who couldn't afford houses before are now buying them at basement prices. That's good, right?

Word of advice..if you can do it, now is the time to buy investment property....Sort of like buying Tampax stock when it bottomed out from the TSS scare turned out to be magic money.


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Posted by More of Our Money
a resident of Another Palo Alto neighborhood
on Sep 8, 2008 at 3:02 pm

My source is NPR (hardly a right wing media outlet) states that; past executives include Democratic operatives and appointees. Former CEO Jim Johnson made headlines last month after reports that he may have received preferential treatment in real estate deals forced him out as head of Illinois Sen. Barack Obama's vice presidential search team.

What is wrong is that these people were running a GSE (government sponsored enterprise) a corporation set-up by congress. I am sure everyone can see the problem with political operatives funneling cash via lobbyist to congress.

Talk about prime-time corruption. My argument is that this operation needs to be dismantle and quickly. And all guilty parties both at Fannie Mae and Freddie Mac, the lobbyists and the congressional overseers need to be cleaned out.

I know that will never happen because all the people with weak knowledge in economics with loose faith in the "government structure" and yet again the crooks guarding the hen house will pillage away.

The big looser is all Americans both Democrat, Republican and Independents.


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Posted by OhlonePar
a resident of Duveneck/St. Francis
on Sep 8, 2008 at 8:53 pm

Perspective,

People who couldn't afford to buy houses got subprime loans, couldn't afford the adjustable and walked out on their mortgages.

That's been part of the problem.

So, do you think Palin's finally figured out what Fannie Mae and Freddie Mac?


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