The Treasury Department is putting the finishing touches to a plan designed to shore up Fannie Mae and Freddie Mac, according to people familiar with the matter, a move that would essentially result in a government takeover of the mortgage giants.
The plan is expected to involve putting the two companies into the conservatorship of their regulator, the Federal Housing Finance Agency, said several people familiar with the matter. That would mean the government would take the reins of the companies, at least temporarily.
It is also expected to involve the government injecting capital into Fannie and Freddie. That could happen gradually on a quarter-by-quarter basis, rather than in a single move, one person familiar with the matter said.
Update: The Washington post has more there.
Don’t you love deregulation? Yup, let’s get government off our backs.
Fannie and Freddie were never regulated enough, and then possessed a government guarantee of their liabilities. I have no idea what #1 is talking about. Now they are broken, they are the government’s to fix. What is the question of the day isn’t whether the government should make good on its promises, but rather whether the shareholders should be taking a severe dilution (a “short haircut”) to their equity interests as a result of their mismanagement of these “companies”.
Tom, What I am talking about is the Great Republican Principle — Deregulate as long as the profits come, Socialize when the resultant losses hit.
We’ve been there before, of course, with the bank bailout under a prior Bush presidency. Rather remember it even involved one of his kid’s Savings and Loans. Funny about that.
Yup, let’s get government off our backs — until its time to pay the piper. Then let’s look for the nearest tax payer. That’s the Republican way.
#4 History doesn’t support your contention of a one-party prediliction for corporate welfare:
Lockheed bailout 1971 (Nixon, Democrat Congress)
Chrysler bailout 1979 (Carter, Democrat Congress)
Penn Central was nationalized, eliminating shareholders’ equity, creating Conrail 1976 (Ford, Democrat Congress)
US Airline Industry bailouts denied 2002-6 (GWB, Republican Congress)
I could go back further, into the S+L crisis which was complex due to the government guarantees through the FSLIC (Reagan, Split Congress), or even to the amazing history of both the US banking system in the 1930’s and the railroads in the 1800’s, both of which were subsidized by the government under a variety of administrations and congressional political party controls.
[blockquote]Yup, let’s get government off our backs—until its time to pay the piper. Then let’s look for the nearest tax payer. That’s the Republican way. [/blockquote]
Except Fannie and Freddie are stacked to the ceiling with plugged-in Democrats who have grown quite wealthy off of their connections.
Hardly bastions of the free-market, the [url=http://www.cato.org/pub_display.php?pub_id=9557]Cato Institute[/url] argues these corrupt political behemoths ought to be “cut down and cut loose.” Exactly so.
As a rule, Democratic “bailouts” result from concern for workers while Republican bailouts are for Country Club cronies.
As for #5’s assertion, it appears Fannie Mae and Freddie are just following the trend. Could you be clearer how it is a Democratic problem?
The vast majority of American’s own equity interests in corporations, either through direct investments, mutual funds, or pension plans. I think your analysis theme is dated, from sometime in the 1930’s.
[blockquote]Could you be clearer how it is a Democratic problem?[/blockquote]
Franklin Raines, until recently CEO of Fannie Mae, was OMB director under Clinton. James Johnson, former CEO, was the fellow who enthusiastically wrapped the government around Fannie Mae. He’s a longtime Democrat insider and was to spearhead Obama’s VP selection process until Countrywide Mortgage, also under his direction, imploded rather publicly.
Democrats run Congress now. Let’s see if they refuse to bail out their pals at these two state-larded white elephants.
#8 Thank you, but I truly fail to see how that’s responsive. Ordinary investors cause exactly what problems? If I have a savings account, I’m now responsible for the mortgage meltdown?
#9. Thank you. Clearly not good.
No, it’s not, and regrettably, this is a bipartisan problem. You are absolutely right in your criticism of businesses privatizing their profits and socializing their losses. If there’s a larger, more dire market effect from these businesses collapsing, then let’s try to wall that off, if possible, but the guys who caused it should be living in the streets, IMHO.
#10 Indirectly, through various regulatory subsidies which make your savings account a loss-proof investment, yes. Of course, savings accounts are not considered as investments in any equity sense. They are a liability of the bank, and purchase no say over how the bank runs (unless it is a credit union, but let’s keep things simple).
Perhaps you missed my point: the country club members no longer own the majority of equity shares anymore. This is a huge change in economic and political circumstances over the past 60 years, similar in importance to the elimination of serfdom in Europe or the establishment of public equity markets in the Netherlands and England in the 17th and 18th centuries. We might be still oppressed by the capitalist class, but to quote Pogo “we have met the enemy and they is us”.
#12. Thanks you. I certainly agree the enemy is us. Some of us, though, have better body armor for a host of reasons that have little to do with economic fair play. I guess I’m just an old-fashioned social contract type.