Socializing Loss, Privatizing Gain
Jul 11th, 2008 at 8:48 am by Susie
WASHINGTON — Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.
The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.
Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee — which could be staggering — would be paid by taxpayers.
As much as that sucks, the losses it is also true that if Fannie and Freddie fail, it will be more difficult for anybody to finance real property. If people can’t finance a house, they can’t buy it, and demand plummets. And the resulting inevitable loss of value “would be paid by taxpayers” too. Either way it goes, we all pay. Thanks, Pwnership Society!
excellent headline…summed up well…linking
This is just another form of raising taxes, which Bushco swears it’s opposed to doing.