Sunday, September 7, 2008

Federal Bailout of Mortgage Finance Giants Fannie Mae and Freddie Mac

We are all familiar (at least those who read this blog) with the chaos in the mortgage market and its deleterious effect on the economy as a whole. Well, today's New York Times reports that the "Treasury Department on Sunday seized control of the quasi-public mortgage finance giants, Fannie Mae and Freddie Mac, and announced a four-part rescue plan."

Another article in the Times speculates on what will happen next in the economy, I think the following quote applies to many who tightened their belts and made responsible home buying decisions:
If you already have a fixed-rate mortgage, nothing will change, except perhaps your profound moral outrage that you as a taxpayer are footing the bill for the mistakes of borrowers who got in over their heads and the lenders who let them.
It's especially frustrating knowing that Freddie and Fannie are government sponsored enterprises (GSE) of the United States, yet it allowed loose lending rules driven by speculation, detract them from their primary mission which is to, inter alia, provide stability, liquidity, and affordability to the nation's housing finance system under all economic conditions.

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