More psychological pain:
Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.
The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.
Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee — which could be staggering — would be paid by taxpayers.
Oil hit 145.98 a barrel, a new record. Clearly also psychological.
Yesterday John McCain was asked about equal pay for females and family leave. He was also asked about bailing out the auto companies. He explained his position which was big government was bad, yada, yada, yada. All Obama could preach was big government, yada, yada, yada. He was then asked about Fannie and Freddie and of course, McCain formerly of the Keating 5 and in favor of S & L bailouts hedged and said all options on the table. Earlier in the day he said that he thought the bailout might be appropriate. John McCain now drives the hypocritical express.
But the truly depressing thing is that on the issue of “let’s bail out the homeowners!” there’s no opposition anywhere, except some slight opposition from the Bush Administration. At least on FISA there’s a large number of Democrats in the right, and on other issues there’s a core of committed liberals.
On this issue, the only party I can find myself at all agreeing with is [gulp!] the Bush Administration. Yech.
In terms of bailing out homeowners, there’s no clear reason why people who didn’t foolishly invest in a home during the bubble (which includes a lot of renters too poor to buy in the first place) should be subsidizing (directly or indirectly) such moronic decisions.
More importantly, the party who’s really getting bailed out here are the banks. The main reason so many homeowners are in trouble is because the bubble popped, prices have gone down, and thus their equity is small or negative. While foreclosure or bankruptcy is a very distressing event for the homeowner, it’s not an event that will permanently destroy them. What will happen, of course, is that the banks that issued these crap loans will get socked.
And they should get socked. And if the banks actually fail, the financial system can be protected by putting them into receivership, wiping out shareholder equity and perhaps giving other parties a well-deserved deep haircut.
That way, justice is served—losses aren’t socialized—and moral hazard avoided.
But try telling it to Barney Frank. I don’t know whether the guy is stupid, or just on the take from the banks.
If my indebtedness is just in my head, I wonder if I can tell my creditors, “I thought about sending you a check–isn’t that enough?”
The Grand Panjandrum
Republicans interested in “socializing” risk but nothing else. No big surprise, eh? Jesus, they still support the War Criminals in the Executive Branch why should anything be a surprise anymore.
I think we can all agree that Gramm and McCain are both mental.
Philll Grammmm sez they’re all a bunch of cry babies. Then he heard the boards of the companies are McCainonauts and said these brave Americans need a bailout.
STOP WHINING AND START HORDING
I’m personally hoping for “lol Jerusalem Post” and hope this is wrong.
The Grand Panjandrum wrote,
But the Democrats are, too, through their attempts to help homeowners (which is more to help banks) and Fannie and Freddie.
My husband got laid off a month ago. I should remember to tell him its all in his head.
Free market? What free market?
This process of socializing risk while keeping profits private, which inevitably collapses eventually like it’s doing now, needs to be thrown in the face of each and every winger. Anyone who did not oppose every single inch of this garbage from Day One gets a preemptive STFU.