Should we just let Fannie and Freddie Mac fail without costing taxpayers a trillion dollars in more taxes?

Question

I don't want to sound like the proverbial party-pooper here, but with conservatives yanking and schmanking about having to pay more in taxes on just about EVERYTHING these days (and yet--you never hear us LIBERALS paying our share in taxes), how do you feel--as the American taxpayer--about getting stuck with a $1T dollar bill by the Bush government; in their attempts to shore up firms like Indymac, Freddie Mac, and Fannie Mae?

Now, this trillion dollar price tag isn't JUST for these few failed financial institutions, but the next 150 small and large banks/mortgage companies which will go six feet under in just a short amount of time--because of the 'domino effect' being felt by the mortgage and credit crisis. (You know: The one that investors THOUGHT was over 4 or 5 months ago?)

Do you think that we--the tax payer--should have to foot the bill every time something goes bottoms up in Corporate America?

Because this isn't their money you know.

BUT YOURS AND MINE.

Answer 1

No.  I don't like getting stuck with the bill, but I have already got stuck with a bill for a war I don' t support.  So that is beside the point.  What matters is that failure of these 2 lenders will hurt more than just the mortgage industry.  

On a prior question you asked about them I gave you a suggestion that the government could do and the cost would be a lot lower, but again everyone just wants to points fingers instead of fixing things ...

One possible solution:

In this world, where people take advantage of others and to keep interest rates from sky rocketing back to where they were in the 70s/80s ( good loans at 11% -- not sub prime), some kind of bail out may be needed. Not all mortgage lenders can be allowed to go under and not all the homes in foreclosure right now are sub prime.

I worked in the mortgage industry (bankruptcies/foreclosures) for 10 years in the 1992-2002. Alot people take arm loans and expect to refi before the first adjustment or never believe the first adjustment will be at the max amount. Today it appears alot of people aren't being able to refi or the adjustment is at its max. The government could easily help out by making the mortgage lenders freeze foreclosures on loans for 90 days - put the delinquent payments at the end of the loan -- remove the late fees and other foreclosure charges-- reduce the interest rate back to the original rate and make it fixed there for the remainder of the loan plus the delinquent payments -- then send an amendment to the home owner to sign with a notary and return to lender.

It is not profitable to take back the home, the bank/mortgage company always loses. The cost here would be in the processing and it couldn't cost anymore than the foreclosure... Overall it should help the real estate market and mortgage companies.. Most of all it would keep people in there homes.

Answer 2

Normally, I would agree, but these are mortgage companies chartered by the US Government.  To allow them to fail would be a very damaging event for the US economy and its credit standing with other nations.  That said, since it is a federal entity under the review of elected officials, how about we hold them accountable?  The head of the Senate banking committee, Democrat Christopher Dodd, who is responsible for overseeing these programs, should explain himself and take responsibility for his inept leadership instead of trying to blame the Bush administration for what has happened with these financial institutions.  Think that will happen???

Answer 3

I say hand the bill to the Oil companies. Let them spend their profits on all the termoil their high gas prices caused. Hand some of the bill to Saudi Arabia and have them handle about 500 billion. Then turn and have the rest of the oil companies in America pay the rest of the tab. Then as more and more things fail, have the people that cause the problem pay for the problem they caused.  Instead of making the people dealing with the problem pay for something they had nothing to do with, have the people who caused it fix it.  Lets sell Crawford Ranch and fix the budget with it.

Answer 4

These are government run institutions, that is why they are in trouble.

We are encouraging more bad behavior, by rewarding this with a bailout, but the alternative is not pretty either.

What do you expect from a government run entity.

Answer 5

Don’t forget, this is Mr. McCain’s second go-around with a collapse of the mortgage industry, he was also a bagman in the S & L collapse during the Reagan administration, winning fame as one of the “Keating 5″ senators. These guys are always ready to print money to bail out their own failures at regulation, notwithstanding all their bloviations to you about your obligation to take personal responsibility for your blunders.