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FORTUNE: Daily Briefing White House mulls Fannie and Freddie failure « (http://dailybriefing.blogs.fortune.cnn.com/2008/07/10/white-house-mulls-fannie-and-freddie-failure/ - broken link)
Peter Schiff predicted this more than two years ago in his book "Crash Proof". If you think inflation is bad now, wait until the FED attempts to bailout these two giants to the tune of several trillion dollars! The dollar will sink dramatically and we'll be on the verge of hyperinflation with regards to food and energy. This, in turn, will result in asset deflation and housing will take another huge hit.
The Federal Reserve, along with the bystanders in Congress, are destroying our currency and our standard of living in this country.
you know, this does not surprise me one bit. They are taking up all this highly suspect debt under the ludicrous guise of "helping more people become homeowners" and that of course has predictable consequences.
so what's the takeaway... run away from real estate for the short term? do you think the government bailout/subsidy will stabilize the uncertianty? i am concerned b/c i am set to close on a home in 2 weeks...
so what's the takeaway... run away from real estate for the short term? do you think the government bailout/subsidy will stabilize the uncertianty? i am concerned b/c i am set to close on a home in 2 weeks...
what's the call...
All. or most of, the bad money will have to be purged from the system before the markets can stabilize. So the foreclosures will have to work through the system, the broken mortgage lenders will have to be disassembled, and the investment banks will have to take huge writeoffs, or go under themselves. It's like cleaning out a junkyeard. Better to take out and recycle what you can, cleaning it up piece by piece, rather than bulldozing it under, where it creates toxic waste. The alternative is to pretend the problem will just go away; Japan tried that trick, and we all know how well that turned out. Or not.
I personally have decided to sit this one out, and wait for the dust to settle. It's crazy out there. But it's not time to panic, just make sure you know where your towel is.
FORTUNE: Daily Briefing White House mulls Fannie and Freddie failure (http://dailybriefing.blogs.fortune.cnn.com/2008/07/10/white-house-mulls-fannie-and-freddie-failure/ - broken link)
Our government will not let Fannie Mae or Freddie Mac fail anytime soon.
so what's the takeaway... run away from real estate for the short term? do you think the government bailout/subsidy will stabilize the uncertianty? i am concerned b/c i am set to close on a home in 2 weeks...
what's the call...
As long as you have this things you should be fine…
FORTUNE: Daily Briefing White House mulls Fannie and Freddie failure (http://dailybriefing.blogs.fortune.cnn.com/2008/07/10/white-house-mulls-fannie-and-freddie-failure/ - broken link)
Our government will not let Fannie Mae or Freddie Mac fail anytime soon.
I agree that it's unimaginable the Government Spnsored Enterprises would be allowed to fail.
There is not a pension/retirement plan and nary a mutual fund that is not chock full of their mortgage-backed security paper.
Without FNMA/FHLMC, there is no secondary market for mortgage-backed securities. Without a secondary market, there is virtually no money for mortgage financing.
Fannie Mae and Freddie Mac are not "government backed" at all. Go read the Wikipedia article on this. There is no guarantee against their collapse, no reason to think it "can't happen here." If these entities are generating a lot of worthless paper, they'll have to be drastically reformed, at the very least. And if all that worthless mortgage paper has infected a significant percentage of portfolios around the world, then things are going to get very bad indeed before they get better. Sorry, but the worst case scenarios must be faced, no matter how unpleasant. Still not time to panic, though.
FORTUNE: Daily Briefing White House mulls Fannie and Freddie failure « (http://dailybriefing.blogs.fortune.cnn.com/2008/07/10/white-house-mulls-fannie-and-freddie-failure/ - broken link)
Peter Schiff predicted this more than two years ago in his book "Crash Proof". If you think inflation is bad now, wait until the FED attempts to bailout these two giants to the tune of several trillion dollars! The dollar will sink dramatically and we'll be on the verge of hyperinflation with regards to food and energy. This, in turn, will result in asset deflation and housing will take another huge hit.
The Federal Reserve, along with the bystanders in Congress, are destroying our currency and our standard of living in this country.
One of the reasons the great depression lasted as long as it did was lack of credit. Credit is essential in order to ensure that this does not happen again.
The secondary mortgage market is essential. Otherwise the loan originators have to hold all of their loans, which means they can't issue new ones. The government will bail them out in order to keep credit flowing. It will be ugly though. I agree, ugly, but no need to panic.
The government will bail them out in order to keep credit flowing.
I'm not so sure. That would make interest rates go through the roof, which would be just like "tight money" in some of its effects. And even if the Fed did a bailout, that wouldn't reassure the markets, which now think that the underlying paper is worthless. So the Freddies and Fannies wouldn't be able to pick their stock price off the floor, which is what really needs to happen, and then get some serious regulators in there to start cleaning up the really stinky loans. The cleanup has to happen anyway, and that costs money. Adding bailout money to the mix just makes it that much more expensive while leaving the markets skeptical and confused.
In any case, if banks could not re-package loans, they might actually have to hold them in their own portfolios, which is what my bank does with our mortgage. Would that mean that the banks would scrutinize loans very carefully for quality? Yes. Would that mean a lot of people would not qualify for loans? Probably. Would that make house prices go way down, and therefore make homes more affordable, in the long run, and reward people who have had the fiscal discipline to save 20% down? I think so. Would this be the end of the world as we know it? Nah. We'd just be back to the "olden days" before Fannie and Freddie and the other repackagers got into the game. That's not so bad. There would be fewer lenders, fewer title companies, fewer investors, and fewer realtors, etc., but there would be far greater trust in the market, and sounder money. I'm thinking Ron Paul was right about all this.
If I were the Treasury Secretary, I'd be making some frantic phone calls to some rich people around the world right now, asking them to buy Freddie, Fannie et.al., and make some warm fuzzy noises for the press. It has worked before, and this situation does remind me of the banking crises of the 19th c., more than the Depression. That would be better than a bailout, for the time being.
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