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This is another right pocket left pocket story from our incompetent federal government. They have taken huge amounts and are now spinning a dividend...
'Since the third quarter of 2008, FHFA, as conservator of the GSEs, has asked Treasury for a total
of $116.1 billion to increase Fannie Mae’s assets to offset its liabilities and a total of $71.3 billion
for Freddie Mac. '
So lets say $200 billion loaned/given to the GSEs to fund the "hole" in their balance sheets. Assuming the money is never recovered it would take taxes on about $800 billion of economic output as taxes as a % of GDP is usually around 25% in the US. In a $15 trillion economy its not a stretch to think a functioning housing market is worth say 10% or $150 billion. So in about 5 years the government gets made about whole. Now lets say housing would still function without GSEs now, but at 50% of the level we see. Can always play with assumptions but seems a neutral level. So lets say 10 or 11 years to fill the whole assuming its all never going to come back. I'd say its an even result in all fairness. Without GSE activity at the moment its hard to see any true residential sales, just a lot of fire sales to investors. If things are at a fire sale level it puts a even bigger hole in the portfolio.
Sure no bailout would have been nice and I totally get the moral hazard concept, but really would we be better off obliterating the housing market just to claim purity in a free market sense? Is 5 years of hell and then a strong recovery better than a year of difficulty followed by say 7-10 years of sluggish recovery? I'd side with what we have and I think what is happening with GSEs and much of the financial sector will eventually appear to be more logical choices. The money put into GSEs may not be totally recovered directly, but few things as big as the housing market or the investment market just pay for themselves directly.
It might be roaring back in certain zip codes, after real estate has always been about location, but here (FL) there are still a ton of people who haven't made a mortgage payment in 4 years and still in their homes. Factor in the already foreclosed on and things look very bleak.
Sure no bailout would have been nice and I totally get the moral hazard concept, but really would we be better off obliterating the housing market just to claim purity in a free market sense?
I don't think you "totally" get the moral hazard concept?! Moral Hazard is a chronically festering situation that affects current & future generations. Your quote implies status quo, kick the can down the road, hope for the best, & let future generations deal with purity.
A myriad of statist manipulations, fake money being printed out of thin air and at times not even money, just more zeros being added to spreadsheets on computers, an endless charade and facade - all just a game with ever changing rules as the shells move faster and faster, until the mystics of the temple (Federal Reserve) cannot fool anyone anymore and the crash course straight into reality becomes inevitable.
Yay!! Freddie Mac Posts Gains !!!
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