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"Heretofore, if the treasury had a balance sheet there would have been a liability but there was never a taxpayer payment before [the bailout]," said Gerald P. O'Driscoll, an economist with the Cato Institute. "[Fannie and Freddie] were not taxpayer funded. They had taxpayer guarantee, which is worth something, especially in the stock market..."
I guess you weren't either. Freddie Mac and Fannie Mae are guaranteed by the govt just like student loans; always have been. Thus, TAXPAYER MONEY is used to pay the bank if the person doesn't pay. The bank assumes no risk because the govt guarantees that they get their money, no matter what. Just the same as student loans.
Wrong.
The "guarantee" is implied (aka NOT explicit), but the government has no money to back the guarantee. Did you read the prospectus I posted? In bold "NOT guaranteed by the US government". Since we run a deficit, the only way the US can fund current and future mortgage obligations is by begging central banks to buy our Treasuries, which is becoming harder and harder to accomplish, and the premiums demanded might go to Pluto, regardless of the Fed rate. It's also too big for the taxpayers to bail out. The $200B price tag is a joke and doesn't take into account the massive amount of defaults that are yet to come with Option ARMs and regular ARMs, as well as the prime market. The "fun" hasn't even started yet.
It's going to get REALLY hard to get a mortgage in the near future. If anyone thinks this is going to spur a refi boom or prop up house prices (real, not nominal) is sadly mistaken.
It's not wrong. You obviously don't understand how it works. It works the same way as student loans, backed by the govt. If the person doesn't pay, the govt pays the bank the money. That money that is used to pay the bank is taxpayer money.
Really? The Government pays the Bank loan off and the Bank sells the Foreclosure and makes money on that side too? What about the PMI? What happens to the Private Mortgage Insurance that's charged to the homeowner for the first five years and until a 20% equity position in the property is reached? Who get's that?
Doesn't the Government infuse Capital into the housing market to shore up the liquidity requirements on loans because foreclosures are hard assets that must be balanced by law by liquid assets held by the financial institution on a ratio basis?
The "guarantee" is implied (aka NOT explicit), but the government has no money to back the guarantee. Did you read the prospectus I posted? In bold "NOT guaranteed by the US government". Since we run a deficit, the only way the US can fund current and future mortgage obligations is by begging central banks to buy our Treasuries, which is becoming harder and harder to accomplish, and the premiums demanded might go to Pluto, regardless of the Fed rate. It's also too big for the taxpayers to bail out. The $200B price tag is a joke and doesn't take into account the massive amount of defaults that are yet to come with Option ARMs and regular ARMs, as well as the prime market. The "fun" hasn't even started yet.
It's going to get REALLY hard to get a mortgage in the near future. If anyone thinks this is going to spur a refi boom or prop up house prices (real, not nominal) is sadly mistaken.
If the government wants to be taken seriously about its backing, it will find money to back it. If not, the government bonds will be worthless. The two companies also get loans at favorable rates because of the government backing, which intends crowds out other private investments.
If the government wants to be taken seriously about its backing, it will find money to back it. If not, the government bonds will be worthless. The two companies also get loans at favorable rates because of the government backing, which intends crowds out other private investments.
"find" money? Where, under the couch cushions? The government has no money. That's the very definition of running a deficit. Tax rates would have to rise substantially for all tax brackets. You think either candidate will do so to risk their term?
It's inflation time! We will fund it with the printing press and much higher mortgage rates to entice foreign investment in Treasuries.
There are two independent discussions taking place. One on the role and burden of Freddie and Fannie to the American taxpayers and the other the comment of Palin. They are both appropriate in this thread and should be discussed together. Her comment was not a gaffe but rather her opinion which is shared by many. It boils down to the role of government in securing the American Dream and how extensive/intensive you believe that role to be. Neither is a gaffe and each perspective has historical legitmacy. This became a crisis when Freddie and Fannie were used to bolster banks that were in trouble from mortgage securities. Freddie and Fannie were used to bail them out with taxpayers being the ultimate guarantors as we can now see clearly. We got there by conscious government decisions either by Fed policy, Treasury policy or their collective decision making. This is a critical campaign issue for the eventual winner will inherit this mess.
There are two independent discussions taking place. One on the role and burden of Freddie and Fannie to the American taxpayers and the other the comment of Palin. They are both appropriate in this thread and should be discussed together. Her comment was not a gaffe but rather her opinion which is shared by many. It boils down to the role of government in securing the American Dream and how extensive/intensive you believe that role to be. Neither is a gaffe and each perspective has historical legitmacy. This became a crisis when Freddie and Fannie were used to bolster banks that were in trouble from mortgage securities. Freddie and Fannie were used to bail them out with taxpayers being the ultimate guarantors as we can now see clearly. We got there by conscious government decisions either by Fed policy, Treasury policy or their collective decision making. This is a critical campaign issue for the eventual winner will inherit this mess.
They most certainly will. The Treasury Sec. indicated in statements this wasn't a permanent thing, we'll see.
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