The other shoe drops.
Oh, swell:
After months of speculation, the feds, under the direction of U.S. Secretary of Treasury Henry Paulson (a former CEO of Goldman Sachs), have taken over Fannie Mae and Freddie Mac.
As Dawn Kopecki and Alison Vekshin reported on Bloomberg.com an hour or so ago, "Paulson is seeking to end a crisis of confidence in the companies sparked by concern the companies didn't have enough capital to weather the biggest housing slump since the Great Depression."
They go on to note:
"Fannie and Freddie own or guarantee almost half of the $12 trillion in U.S. home loans and the government had been leaning on the companies to help pull the economy out of the housing crisis. Instead, they got caught in the same slump that left the world's banks with more than $500 billion of losses since the collapse of the subprime-mortgage market last year."
Meanwhile, over at The New York Times, Gretchen Morgenson and Charles Duhigg reported yesterday (Saturday, 6 September 2008):
"Investors who own the companies’ common and preferred stock will suffer. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives of both companies will be pushed out, according to those briefed on the plan.
"The cost of the government’s intervention could rise into tens of billions of dollars and will probably be among the most expensive rescues ever financed by taxpayers."
To no one's surprise, John McCain's running mate, Alaska governor Sarah Palin, "said at a rally in Colorado Springs that Fannie Mae and Freddie Mac have become too big and too expensive." The right wing in this country has been salivating to undo FDR's New Deal programs -- Fannie Mae was founded in 1938 in an attempt to resurrect the housing industry from the depths of the Great Depression (Freddie Mac was founded much later, in 1970) -- since before their actual inception; they called him "class traitor" and "Rosenfeld" (i.e., a crypto-Jew who was trying to foment a Bolshevik Revolution in the U.S.; for real down-home fun, take a squint at some of the publications of the Liberty League [in full, the American Liberty League], a sewing circle formed by Democratic luminaries such as the former governor of New York and the Democratic nominee for president in the 1928 election, Al Smith, and industrialists such as future Republican senator Prescott Bush [father of "Bush 41" -- George H.W. Bush -- and grandfather of "Bush 43," the current U.S. president] that supported the Republicans in the 1936 presidential elections and, according to the Marine Corps Major General Smedley Butler, plotted a coup against Roosevelt in the year of its founding, and asked Butler to serve as their commander-in-chief and, if necessary, dictator pro tem), in remarkable agreement with Nazi propaganda.
I'm really torn on this one: on the one hand, I don't like the idea of an even bigger taxpayer-funded bailout than the savings and loan ("S&L") crisis of the late 1980s and early 1990s (a crisis precipitated by Jimmy Carter's lifting of caps interest rate caps and raising of the amount of S&L accounts that were insured, and "Ronnie Ray-gun's" deregulation of the financial industry in 1982); on the other hand, much to my disgust, Fannie and Freddie really are "too big to fail," and their collapse could trigger an economic crisis so severe that no astrologer economist would hesitate to call it a recession (though very likely there would still be plenty of dickering as to whether it was a depression), to say nothing of drastically curtail the housing industry as we know it. An industry in which Your Correspondent has toiled in for more years (and to less reward) than he cares to acknowledge.
I think what tips me over into tentatively supporting it is the outrage I feel at the Grover Norquist types who actually believe that the 1920s were America's last golden age, and Warren G. Harding the best U.S. president before Reagan. May they all live in the "Hoovervilles" that sprung up with depressing frequency during the Great Depression, and will doubtless re-emerge in conjunction with their "businessman's paradise."
Still, is it really such a great idea to have Uncle Sam directly guaranteeing all of the mortgages backed by Fannie and Freddie?
And another point: shares in Fannie and Freddie are traded on the New York Stock Exchange. If investors don't back up Paulson's plan with their moolah (and one suspects that the late-breaking news that China's four largest banks stopped investing in Fannie and Freddie since last June -- reported on Wednesday, 3 September, on NPR's Day to Day programme -- had just a little something to do with the feds' takeover of the two mortgage giants this fine Sunday...), and Fannie & Freddie's stocks tumble even further, the Treasury will have to pump even more money into them, which could drive up the bail-out price tag even higher than the worst prophecies of the most ardent right-wing doomsayers.
Damn, damn damn. "I have a bad feeling about this."
After months of speculation, the feds, under the direction of U.S. Secretary of Treasury Henry Paulson (a former CEO of Goldman Sachs), have taken over Fannie Mae and Freddie Mac.
As Dawn Kopecki and Alison Vekshin reported on Bloomberg.com an hour or so ago, "Paulson is seeking to end a crisis of confidence in the companies sparked by concern the companies didn't have enough capital to weather the biggest housing slump since the Great Depression."
They go on to note:
"Fannie and Freddie own or guarantee almost half of the $12 trillion in U.S. home loans and the government had been leaning on the companies to help pull the economy out of the housing crisis. Instead, they got caught in the same slump that left the world's banks with more than $500 billion of losses since the collapse of the subprime-mortgage market last year."
Meanwhile, over at The New York Times, Gretchen Morgenson and Charles Duhigg reported yesterday (Saturday, 6 September 2008):
"Investors who own the companies’ common and preferred stock will suffer. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives of both companies will be pushed out, according to those briefed on the plan.
"The cost of the government’s intervention could rise into tens of billions of dollars and will probably be among the most expensive rescues ever financed by taxpayers."
To no one's surprise, John McCain's running mate, Alaska governor Sarah Palin, "said at a rally in Colorado Springs that Fannie Mae and Freddie Mac have become too big and too expensive." The right wing in this country has been salivating to undo FDR's New Deal programs -- Fannie Mae was founded in 1938 in an attempt to resurrect the housing industry from the depths of the Great Depression (Freddie Mac was founded much later, in 1970) -- since before their actual inception; they called him "class traitor" and "Rosenfeld" (i.e., a crypto-Jew who was trying to foment a Bolshevik Revolution in the U.S.; for real down-home fun, take a squint at some of the publications of the Liberty League [in full, the American Liberty League], a sewing circle formed by Democratic luminaries such as the former governor of New York and the Democratic nominee for president in the 1928 election, Al Smith, and industrialists such as future Republican senator Prescott Bush [father of "Bush 41" -- George H.W. Bush -- and grandfather of "Bush 43," the current U.S. president] that supported the Republicans in the 1936 presidential elections and, according to the Marine Corps Major General Smedley Butler, plotted a coup against Roosevelt in the year of its founding, and asked Butler to serve as their commander-in-chief and, if necessary, dictator pro tem), in remarkable agreement with Nazi propaganda.
I'm really torn on this one: on the one hand, I don't like the idea of an even bigger taxpayer-funded bailout than the savings and loan ("S&L") crisis of the late 1980s and early 1990s (a crisis precipitated by Jimmy Carter's lifting of caps interest rate caps and raising of the amount of S&L accounts that were insured, and "Ronnie Ray-gun's" deregulation of the financial industry in 1982); on the other hand, much to my disgust, Fannie and Freddie really are "too big to fail," and their collapse could trigger an economic crisis so severe that no astrologer economist would hesitate to call it a recession (though very likely there would still be plenty of dickering as to whether it was a depression), to say nothing of drastically curtail the housing industry as we know it. An industry in which Your Correspondent has toiled in for more years (and to less reward) than he cares to acknowledge.
I think what tips me over into tentatively supporting it is the outrage I feel at the Grover Norquist types who actually believe that the 1920s were America's last golden age, and Warren G. Harding the best U.S. president before Reagan. May they all live in the "Hoovervilles" that sprung up with depressing frequency during the Great Depression, and will doubtless re-emerge in conjunction with their "businessman's paradise."
Still, is it really such a great idea to have Uncle Sam directly guaranteeing all of the mortgages backed by Fannie and Freddie?
And another point: shares in Fannie and Freddie are traded on the New York Stock Exchange. If investors don't back up Paulson's plan with their moolah (and one suspects that the late-breaking news that China's four largest banks stopped investing in Fannie and Freddie since last June -- reported on Wednesday, 3 September, on NPR's Day to Day programme -- had just a little something to do with the feds' takeover of the two mortgage giants this fine Sunday...), and Fannie & Freddie's stocks tumble even further, the Treasury will have to pump even more money into them, which could drive up the bail-out price tag even higher than the worst prophecies of the most ardent right-wing doomsayers.
Damn, damn damn. "I have a bad feeling about this."