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This will probably seem like a stupid question, but WHAT is Fannie Mae and Freddie Mac? Why is the government bailing them out financially?
No question is a stupid question. At least you are smart enough to ask.
That being said: Fannie Mae and Freddie Mac are the largest mortgage loan institutions in America. Because they hold the majority of home loans the bailout while costly to we the taxpayers, would be even more costly economically and individually to those whose homes are loosing value and those facing foreclosure, to not bail them out.
In light of the economic instability that is taking place all over this country, I actually believe that it's a wise and feasible move.
No question is a stupid question. At least you are smart enough to ask.
That being said: Fannie Mae and Freddie Mac are the largest mortgage loan institutions in America. Because they hold the majority of home loans the bailout while costly to we the taxpayers, would be even more costly economically and individually to those whose homes are loosing value and those facing foreclosure, to not bail them out.
In light of the economic instability that is taking place all over this country, I actually believe that it's a wise and feasible move.
Ah. Ok...lol I feel ashamed not knowing this, since business is my major, but they havent been mentioning it much. Thank you!
I thought Freddie Mac was Mark MacGuires little brother who once hit 90 home runs a season in the minor leagues. He never made it to the big leagues because he got caught using steriods. ( Congress subpeoned the wrong MacGuire brother into the congressional hearing. Big brother Mark belongs in the hall of fame. He hit all of his home runs by beefing up on an herbal supplement )
I also thought Fannie Mae was the sister of Mae West, the one with the B-I-G fannie ( also from taking steriods ).
IIRC - These institutions buy up mortgages so the lenders can lend more. They also control the terms and risk of the mortgages. In the last decade or so they allowed very risky loans, and as the slowing economy squeeze the debtors’ ability to pay, are left holding the bag of bad debt. If they were allowed to collapse then private banks would have to take the full risk of the loans and money would get very rare and expensive to borrow. Without money to borrow, except for some multiple of the available savings, the mortgages that support the speculative housing industry would be unavailable. Thus new housing would become less available and some unemployment would greatly increase with the result that there would be less money available to pay existing mortgages. There would also be less savings because if debtors cannot pay their mortgages they cannot afford to have any savings.
The natural analogy is the population collapse created when the primary producers in an ecosystem die out because of drought or frost. The mortgage industry is dying because the primary producers, well paid industrial workers, are dying of the exportation of their industries and jobs.
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