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Bailout Time for Fannie and Freddie

Posted on Jul 28, 2008
Fannie Mae

Congress to the rescue! Mortgage lending giants Fannie Mae and Freddie Mac are being propped up in their time of dire need, thanks to a bill passed Saturday that will lift the world’s two largest financial institutions out of immediate danger and help some homeowners handle mortgage crises.

The Telegraph:

World markets are poised for a major relief rally today [Monday] after the US Congress met in a rare weekend session to pass the most far-reaching rescue package for America’s financial system since Franklin Roosevelt’s New Deal.

The emergency bail-out gives the US Treasury sweeping authority to inject capital into the giant mortgage lenders Fannie Mae and Freddie Mac, which together own or guarantee half the country’s $12 trillion stock of home loans.

The ceiling on the US national debt has been lifted by a further $800bn, giving the Treasury almost unlimited resources to prop up the two lenders.

In parallel, the Federal Housing Authority (FHA) is to guarantee up to $300bn of fresh mortgages for struggling homeowners trapped with soaring loan costs, often the result of “honeytrap” contracts.

The scheme aims to avoid an avalanche of fresh defaults as the housing market continues to deteriorate. Over 740,000 homes fell into foreclosure in the second quarter.

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By Glen Owen, July 28, 2008 at 11:08 pm Link to this comment

I find it curious that in all the news about IndyMac Bank failing, I saw no mention that Mozillo founded IndyMac as well as Countrywide.

I worked at Countrywide when they were running three shifts a day to jam $14 billion a month into the new loan hopper.

Why Mozillo is still walking free is anybody’s guess.

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By Reubenesque, July 28, 2008 at 3:36 pm Link to this comment
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More wars, more baleouts, more stimulus checks.  If the country’s money printing shops break down from overuse what will we burn to stay warm this winter?

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By Dr. Knowitall, PhD, PhD, July 28, 2008 at 3:09 pm Link to this comment

This is laughable.  $300B in “fresh mortgages?”  What’s that?  A few months in Eyerack?

The US gov. enables usurers and predatory lenders and then, when things backfire, our gov. comes to their rescue, at the expense of the taxpayer.

One has to wonder how the Hell the mechanism to do such a thing was ever conceived and refined to its so highly sophistocated level in only a couple hundred years.  And we thought the invention of the wheel was monumental. 

Didn’t Ben Franklin say, “Neither a borrower nor a lender be.”?  Most of us have succeeded quite admirably practicing half of his admonishment.

BTW, congratulations to middle-classers who might—but probably won’t—benefit from this.  We’re led, and we want to believe that, for once, people who work hard to build a life in this country might be given some small consideration from their government.  I’m not holding my breath.

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