Does it make sense for the US Treasury to bailout Freddie Mac and Fannie Mae?

Question

Jim Rodgers of Rodgers Holdings, calls it an "unmitigated disaster" because Freddie and Fannie are "basically insolvent."

``I don't know where these guys get the audacity to take our money, taxpayer money, and buy stock in Fannie Mae,'' Rogers, 65, said in an interview from Singapore. ``So we're going to bail out everybody else in the world. And it ruins the Federal Reserve's balance sheet and it makes the dollar more vulnerable and it increases inflation.''

The U.S. economy is in a recession, possibly the worst since World War II, Rogers said.

``They're ruining what has been one of the greatest economies in the world,'' Rogers said. Bernanke and Paulson ``are bailing out their friends on Wall Street but there are 300 million Americans that are going to have to pay for this.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=av8pcGLz4lr8&refer=worldwide

Should we bailout Freddie Mac and Fannie Mae or allow them to fail?

Answer 1

It really doesn't. If we realize how debt is acquired, the financial system was set up to fall from the beginning of it's conception. If we have to borrow money and pay interest on the money we borrow, this cycle will just perpetuate itself until it collapse's. Ask your self this where will they get the money to pay off the interest on the money that is being borrowed when the person you borrow from are the same people your are in debt with. Now you see how we will never come up until a new system is set in place. i.e., barter system

Answer 2

Yeah, I hate to say it, but I think we should.  Those two firms are so huge that if they fail it will have a devastating effect on the economy.  Same reason we bailed out Mexico ten or so years ago.

That being said, I think it's time to re-evaluate the cushy deal they have with the government (low rates, federal protection).  They abused that privilege, they deserve to lose it.  And the gov needs to follow up with better regulation, oversight and even criminal indictments for this subprime mess we're in now.

Answer 3

So strange that Fannie and Freddie should be the names of banks that mark the day when the US shot itself in both feet.

There is no going back now. You have burnt your boats!

Answer 4

Granted it will cost a lot of money to bail them out, but that is just slightly better than letting them fail.  They hold TRILLIONS of dollars of loans from American homes.  Can you imagine if those loans were suddenly no longer guaranteed?  Millions of people would be out on the street.

Answer 5

Anyone who lied on their application should not be bailed out.

Any company that pushed mortgages to people who did not qualify for them should not be bailed out.

Let them all sink.

Instead, the people who lived under the rules get screwed and the scum get bailed out.

Answer 6

Yeah, if we were communist.  How come when you can't run your business the government gives you money, but if you are a loyal citizen they take it to give to s**+tty business owners?  Only in America.

Those who say it was because people lied on their applications are IDIOTS.  This is because of the adjustable rate mortgages and for no other reason.  They offered mortgages at 3% and approved them when people could barley afford the payments for that.  Then they raised the rates (they told everyone would stay that way for 3-5 years) after 6 months and doubled thier mortgage payments.  BTW when I say raised the rates I mean they met in a little marble room and decided to @55 rape those who were on adjustable rate mortgages.  This was on purpose, not on accident.  The only ones who lied were the government.  But that's ok they have a solution right?  Raise taxes to pay for it.  Cause the problem and offer the solution.  I can't believe I have to explain this.  Naive Naive.  Thank goodness for our leaders that those who they lead do not think.

I know 3 people who's mortgage payment went up from $900.00 or about that to well over 2400.00 a month.  Who can afford an increase like that?  Lying on thier application?  42% of mortgages were liars?  Sorry no don't believe it and if you do, you should shoot yourself.

"Tell a big enough lie and keep repeating it it will be believed."

Answer 7

Jeeze, the first thing we should do is to abolish the "teaser rate" mortgage.  All of these "losing the house" sob stories begin with "the monthly payments reset to the higher rate."

So -- whatever the government does will be completely useless unless they end the cause of this $tupid disaster.