Comments on: Fannie and Freddie more important than the disposal of flags http://www.whyweworry.com/2008/09/08/fannie-and-freddie-more-important-than-the-disposal-of-flags/ Let's toast to my success Mon, 08 Mar 2010 18:44:37 +0000 http://wordpress.org/?v=2.8.4 hourly 1 By: Chris http://www.whyweworry.com/2008/09/08/fannie-and-freddie-more-important-than-the-disposal-of-flags/#comment-57226 Chris Mon, 08 Sep 2008 20:19:57 +0000 http://www.whyweworry.com/blog/?p=351#comment-57226 Ian, That sounds about right to me. It's probably not wise to let the economy crash down just so leftwingers could make a point about free markets. But at the same time, when we do nationalize companies like this, it needs to be done in such a way that punishes the perpetrators and benefits the public. It's almost inconceivable to think that the terms of this deal aren't designed to help the wealthy and powerful first and foremost. Ian,
That sounds about right to me. It’s probably not wise to let the economy crash down just so leftwingers could make a point about free markets.

But at the same time, when we do nationalize companies like this, it needs to be done in such a way that punishes the perpetrators and benefits the public. It’s almost inconceivable to think that the terms of this deal aren’t designed to help the wealthy and powerful first and foremost.

]]> By: Ian http://www.whyweworry.com/2008/09/08/fannie-and-freddie-more-important-than-the-disposal-of-flags/#comment-57225 Ian Mon, 08 Sep 2008 18:33:03 +0000 http://www.whyweworry.com/blog/?p=351#comment-57225 Chris, read "Personal Finance for Dummies" or something. Seriously, it gives a decent introduction on bonds and similar financial terms. I have mixed feelings about all of this. I don't like that the American taxpayer has to bail out these companies who behaved so irresponsibly. On the other hand, I worry about what would happen if we didn't. Would it trigger a domino effect that brings the whole economy crashing down a la the 1920s? Probably not, but it could be really bad and I think that's one reason the federal government stepped in. Companies like Bear Sterns and Fannie and Freddie deserve to go the way of the dinosaur. That's supposed to be how the GOP sees economics right? Let the market sort it all out. I think that the bail out is OK, but we have to enact some more regulation to make sure that nothing like this ever happens again. I don't want the board's of Fannie and Freddie to get golden parachutes on the taxpayers dime either, but I bet they will. Chris, read “Personal Finance for Dummies” or something. Seriously, it gives a decent introduction on bonds and similar financial terms.

I have mixed feelings about all of this. I don’t like that the American taxpayer has to bail out these companies who behaved so irresponsibly. On the other hand, I worry about what would happen if we didn’t. Would it trigger a domino effect that brings the whole economy crashing down a la the 1920s? Probably not, but it could be really bad and I think that’s one reason the federal government stepped in. Companies like Bear Sterns and Fannie and Freddie deserve to go the way of the dinosaur. That’s supposed to be how the GOP sees economics right? Let the market sort it all out. I think that the bail out is OK, but we have to enact some more regulation to make sure that nothing like this ever happens again. I don’t want the board’s of Fannie and Freddie to get golden parachutes on the taxpayers dime either, but I bet they will.

]]> By: Chris http://www.whyweworry.com/2008/09/08/fannie-and-freddie-more-important-than-the-disposal-of-flags/#comment-57224 Chris Mon, 08 Sep 2008 15:56:32 +0000 http://www.whyweworry.com/blog/?p=351#comment-57224 Thanks for the comment Sheepy... I wish I understood it ;-) Thanks for the comment Sheepy… I wish I understood it ;-)

]]> By: Sheepywoman http://www.whyweworry.com/2008/09/08/fannie-and-freddie-more-important-than-the-disposal-of-flags/#comment-57223 Sheepywoman Mon, 08 Sep 2008 12:58:46 +0000 http://www.whyweworry.com/blog/?p=351#comment-57223 This is what it means: You don't have great credit but you get a home loan from your local bank. Your local bank sells that loan to Fannie Mae. Fannie Mae collects all these loans into a pool and secures them with bonds where the interest on the bond is paid from your mortgage payments. One problem with the credit crisis was the ratings of these bonds was valued way to high (B+ or better) given the riskiness of the underlying mortgages. Fannie Mae and Freddie Mac provide liquidity on the mortgage market and are willing to buy less desirable mortgages. If they fail, it will be increasingly harder for all individuals to receive loans and the credit market will tighten. Rates on loans will also go up b/c banks are compensating for the loss of liquidity on the loans (right now, if WaMu needs to, they can sell their loans in the secondary market and get the debt off their books very easily). However, I think it's absolute bullshit that taxpayers are paying for these bailouts without any consequences administered to managers. This is what it means: You don’t have great credit but you get a home loan from your local bank. Your local bank sells that loan to Fannie Mae. Fannie Mae collects all these loans into a pool and secures them with bonds where the interest on the bond is paid from your mortgage payments. One problem with the credit crisis was the ratings of these bonds was valued way to high (B+ or better) given the riskiness of the underlying mortgages. Fannie Mae and Freddie Mac provide liquidity on the mortgage market and are willing to buy less desirable mortgages. If they fail, it will be increasingly harder for all individuals to receive loans and the credit market will tighten. Rates on loans will also go up b/c banks are compensating for the loss of liquidity on the loans (right now, if WaMu needs to, they can sell their loans in the secondary market and get the debt off their books very easily). However, I think it’s absolute bullshit that taxpayers are paying for these bailouts without any consequences administered to managers.

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