Government bailout of Fannie Mae, Freddie Mac, etc .?

Question

Hi everyone. How are you? I was thinking about the economy. And I have wondered about one topic- the housing market...do you think the government should bailout companies? I'm kinda wary of these bailouts because they cost so much. Yet I keep hearing some say that its necessary because the companies collapsing would harm our economy. What do you think? And whether or not you think the government is doing the right thing- what do you think should be done? Or do you believe the government should have a 'hands off' approach to the housing problems and other economic issues.

Answer 1

~~I know it would be devastating if these two companies went out. However! There has to be repercussions to the shady business practices that were being done  on loans for which all taxpayers are now going to have to pay back on. Loan processors and CEO's were making a  killing and the homeowners trusting these professionals to be giving them honest and above board loans, have been bankrupt and now homeless. It's white collar crime at it's fines hour and now we the tax payers will pay. It use to be if you were given mortgages or loans above your means you could sue your bank-they are the professionals that know better and consumers are suppose to be protected so they weren't taken advantage of. What happened to those policies. When it's taxpayers bailing out these messes-then stringent guidelines should always keep the system safe. This whole white collar crime spree that's been going on for the last 8 years nauseates me. I'd like to see all these people who pushed these loans have to pay their salaries back towards helping compensate for their underhanded business practice.~~

Answer 2

I don't think the government should be bailing out companies, but if the economic fallout would be greater than the cost of the bailout, the government has a responsibility to prevent that from happening.  However, doing so could create a precedent for companies taking ridiculous risks, because they wouldn't have to pay for the losses.  So the government also has a responsibility to the taxpayers to prevent this sort of behavior.  So they have to punish Fannie and Freddie somehow, either by nationalizing them or instituting strict regulations.  Nationalizing them might sound really socialist, but it could keep the economy from becoming more socialist because it sends the message to companies that if they take crazy risks and lose, they can't rely on the government to bail them out and let them go; they will pay for their mistakes.  It also gives the government the future profits.  The other option, strict regulation, doesn't send as strong a message as nationalization, but it can allow the government to tackle the root of the problem, by, say forbidding Fannie and Freddie from taking subprime mortgages, instituting more accountability for management, punishing management and shareholders, and banning them from lobbying.  

But the current plan is really bad.  It creates a 'heads they win, tails we lose' situation for the taxpayers.

Answer 3

The short term it looks good, but over the longer term it will cost us a lot more.  

It was a problem brought on by the democrats who wanted everybody to buy a home.  They had to lower lending standards for this to happen.  Now that we have the problem, I can't really comprehend how badly it will affect us and wheather or not it is a good idea.  Because we are still in the middle of it, there can be more bailouts to come, but the dollar will be lower over the longer term and that is not good for the American people.