Is the government really going to bail out f***y Mae & Freddie Mac?

Question

I've been trying to follow the news about this and it seems the bill will pass. What does that mean for the rest of us who aren't part of the irresponsible lenders and homebuyers? Can we expect the gov't to bail us out if we are struggling to make ends meet- through now fault of our own? And what about this report that the Feds are going to put an end to the abuse of investors buying the stock short and thus causing further problems in the market? Does the little guy(myself included) have a chance to make a little money in the process of investing in these stocks now?

Answer 1

no, they are not bailing them out.  they are bailing out national home prices which probably is beneficial for your well being and investors in fannie and freddie's 5 trillion dollar debts.  the stocks can go to zero.

Answer 2

The government is basically doing this because if these company's fail, we're done for.  I read somewhere that Fannie Mae holds the mortgage for 1 in every 5 houses in the United States - thats alot of people.  Another reason for the bail out is because of the fact that so many mutual funds own shares of these two companies.  So many people would be affected by the loss of these giants that its not something the government is worth risking.  And chances are, the government won't bail out individuals failing to meet their mortgage payments.  

As for the part about ending "short selling" i have not heard of this and i doubt that it will end.  Investing in these two stocks may be a good idea in the long run, but im not sure about right now

Answer 3

Yes the Feds are bailing out Fannie Mae and Freddie Mac. The reason is that they guarantee the mortgages of millions of Americans.  Were they to go under, our economy would be in an extreme depression.  

I think it's pretty disgusting that we all have to pay for the greed of a few multi-millionaires.  This is why I would never vote Republican.  It's more about taking care of business than people.

Answer 4

I was watching this fiasco on CSPAN and my blood pressure went up so high I had to go back to work to clam down.

Yes, the House passed this horrendous bill.  It goes to the Senate.  It is slated as an emergency vote, so they only allow minimum debate and then take the vote.

What I understood today is that this is not just a bail out.  They will be giving the Treasury Department unlimited authority to buy bad investments as well as bad loans.

Local government entities will be allowed to buy foreclosed homes and fix them up and sell them at "fair market" value as determined by your trustworthy local officials.

Some of it will be paid by upping our national debt, but a lot of it will be recovered by Fannie and Freddie in the form of higher loan fees for medium residential loans for the next 10 years.  Anyone wishing to buy a house will have to pay fees to fund another entity to over see all residential loans, thus making loans even more expensive for the common person.

There is a whole bunch of attachments to this bail out that sounds like any shaky loan could be foreclosed on and turned into the Treasury Department for reimbursement, ruining the credit of the lender, but insuring a profit to Freddie and Fannie, with no strings attached.  The boards and the Presidents of Fannie Mae and Freddie Mac don't have to take a cut in pay, don't have to be replaced, and will be immune to any prosecution.

And from what I can see, they own less than half of the residential home loans and mutual funds investments, most of which are totally solvent and in no need of rescue.  In fact, from their own numbers, this bail out may not even be needed.

I

With the lousy War accounting and annual budgets, why on earth are we allowing our elected officials do do this without even checking their facts and figures??   This isn't just a bailout, this is a blank check.

Answer 5

As a little guy worried about making a little money investing in these stocks right now, I would say no. However if you want to invest in stocks in the US in general this is an awesome time to get in if you can stay in the market for the next 3-5 years. Stocks as a whole are cheap in the US market right now, so if you buy an index fund that tracks the entire US market and wait for the US to recover from this depression you could do really good. I recommend the S&P 1500 index fund from ishares (ISI)

As for f***y Mae & Freddie Mac yes the Feds will bail them out, but do you really want to think about what would happen to the price of your house if the fed didn't and every 5th house on your street was empty? You'd have a $300,000 mortgage on a $40,000 house. How responsible would you feel when that happens knowing you could just walk away and out of $260,000 worth of debt or so?